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Saint Louis University

School of Law
Department of Civil and Labor Laws

In partial fulfillment of the requirements in the subject Obligations and


Contracts

Submitted to:
Atty. Ma. Lulu G. Reyes

Submitted by:

Dexter Cayadan
Frederick Diong-an
Jonardo Jonel Dalimag
Andrew Gondayao
Sidney Kotoken
Novelyn Balgonia
Jenny A. Sagpa-ey
Marjoree Anne S. Sagsago

Page 1 of 745
No. Cases Page

GENERAL PRINCIPLES
1 Ocampo III v. People 11
2 Leung Ben v. OBrien 12
3 Pelayo v. Lauron 13
4 ASI Corporation v. Evangelista 14
5 Ramas v. Quiamco 15
6 Hotel Nikko v. Reyes 16
7 St. Marys Academy v. Carpitanos 17
8 Spouses Guanio v. Makati Shangri-la Hotel 18
9 TSPI, Inc. v. TSPOC Employees Union 19
10 Regino v. Pangasinan College 20
11 PSBA v. Court of Appeals 21
12 Cosmo Entertainment v. La Ville 22
13 Ayala Corporation v. Rosa Diana Realty 23
14 Bricktown Development v. Amor Tierra Development 24
15 Pilipinas Hino v. Court of Appeals 25
16 Philippine Realty and Holding Corporation v. Ley Construction and Development 26
17 Titan-Ikeda Construction v. Primetown Property 27
18 PADCOM v. Ortigas 28
19 MC Engineering v. Court of Appeals 29
20 Bank of the Philippine Islands v. Pineda 30
21 State Investment v. Court of Appeals 31
22 Abellana v. People 32
23 People v. Malicsi 33
24 People v. Sia 34
25 People v. Doctolero 35
26 People v. Abulencia 36
27 Bermudez v. Melecio-Herrera 37
28 People v. Relova 38
29 Manantan v. Court of Appeals 39
30 People v. Bayotas 40
31 Barredo v. Garcia 41
32 Philippine Hawk Corporation v. Lee 42
33 Dy Teban v. Ching 43
34 Safeguard Security v. Tiangco 44
35 Villanueva v. Domingo 45
36 Calalas v. Court of Appeals 46
37 Ludo & Luym Corporation v. Court of Appeals 47
38 Thermochem v. Naval 48
39 Picart v. Smith 49

NATURE AND EFFECTS OF OBLIGATIONS


40 Lagon v. Hooven Comalco 50
41 Francisco v. Court of Appeals 51
42 Tanguiling v. Court of Appeals 52
43 Periquet v. Court of Appeals 53
44 Legaspi oil v. Court of Appeals 54
45 Titan-Ikeda Construction v. Primetown Property 55
46 Philippine National Bank Madecor v. Uy 56
47 Barzaga v. Court of Appeals 57
48 Tanguiling v. Court of Appeals 58
49 Tayag v. Court of Appeals 59

Page 2 of 745
50 Periquet v. Court of Appeals 60
51 Raquel-Santos v. Court of Appeals 61
52 Rizal Commercial Banking Corporation v. Court of Appeals 62
53 Bank of the Philippine Islands v. Court of Appeals 63
54 Leano v. Court of Appeals 64
55 Heirs of Bacus v. Court of Appeals 65
56 Integrated Packing v. Court of Appeals 66
57 Laforteza v. Machuca 67
58 Regala v. Carin 68
59 International Corporate Bank v. Gucco 69
60 Republic v. Court of Appeals 70
61 Yambao v. Zuniga 71
62 Smith, Bell Dodwell v. Borja 72
63 Ilusorio v. Court of Appeals 73
64 National Power Corporation v. Court of Appeals 74
65 Muaje-Tuazon v. Wenphil 75
66 RCPI v. Verchez 76
67 Victory Liner v. Gammad 77
68 FGU v. Sarmiento 78
69 LRTA v. Natividad 79
70 Rodzssen v. Far East Bank 80
71 University of the East v. Jader 81
72 Bayne Adjusters v. Court of Appeals 82
73 Delsan Transport v. C & A Consortium 83
74 PCIB v. Court of Appeals 84
75 SMC and heirs of Ouana v. Court of Appeals 85
76 Pacis v. Morales 86
77 Philippine Hawk Corporation v. Tan Lee 87
78 Mercury Drug v. Spouses Huang 88
79 Mendoza v. Soriano 89
80 Cerezo v. Tuazon 90
81 Filipinas Synthetic v. De Los Santos 91
82 Viron v. De los Santos 92
83 Mercury Drug v. Baking 93
84 Safeguard Security v. Tangco 94
85 Pleyto v. Lomboy 95
86 Viron v. De los Santos 96
87 Sykl v. Begana 97
88 Yambao v. Zuniga 98
89 Regino v. Pangasinan College 99
90 YHT Realty v. Court of Appeals 100
91 Ramos v. Court of Appeals 101
92 Reyes v. Sisters of Mercy 102
93 Nogales v. Capitol Medical Center 103
94 Proffesional Services v. Agana 104
95 Professional Services v. Court of Appeals 105
96 Rubi Li v. Spouses Soliman 106
97 Diaz v. Davao Light 107
98 Yasonna v. De Ramos 108
99 People v. De los Santos 109
100 Magat v. Medialdea 110
101 Vda. De Mistica v. Naguiat 111
102 Co v. Court of Appeals 112
103 Reyes v. Tuparan 113
104 G.G. Sportswear Manufacturing v. World Class Properties, Inc. 114
105 UFC v. Court of Appeals 115
106 University of the Philippines v. Delos Angeles 116
107 Raquel-Santos v. Court of Appeals 117
108 Francisco v. DEAC Construction, Inc. 118
109 Cannu v. Galang 119

Page 3 of 745
110 Villanueva v. Estate of Gonzaga 120
111 Paguyo v. Astorga 121
112 Casino v. Court of Appeals 122
113 Carrascoso v. Court of Appeals 123
114 Goldenrod v. Court of Appeals 124
115 Serrano v. Court of Appeals 125
116 Gil v. Court of Appeals 126
117 Reyes v. Lim 127
118 Ong v. Tiu 128
119 Equatorial Realty v. Mayfair Theater 129
120 Velarde v. Court of Appeals 130
121 Asuncion v. Evangelista 131
122 Uy v. Court of Appeals 132
123 Tamayo, et. al. v. Abad Senora 133
124 Victory Liner v. Heirs 134
125 GSIS v. Labung Deang 135
126 BPI Investment v. D.G. Carreon 136
127 Khe Kong v. Court of Appeals 137
128 Philippine Realty and Holding Corp. v. Ley Construction and Devt. 138
129 Megaworld Globus Asia, Inc. v. Tanseco 139
130 Sicam v. Jorge 140
131 Huibonhoa v. Court of Appeals 141
132 Ace Agro v. Court of Appeals 142
133 Dioquino v. Laureano 143
134 Bachelor Express v. Court of Appeals 144
135 Vasquez v. Court of Appeals 145
136 Yobido v. Court of Appeals 146
137 Juntilla v. Fontanar 147
138 Philamgen Insurance v. MGG Marine 148
139 Mindez v. Morillo 149
140 NAPOCOR v. Phillip Bros. 150
141 Ong Genato v. Bayhon, et. al. 151
142 Union Bank v. Santibanez 152
143 San Agustin v. Court of Appeals 153
144 Project Builders, Inc. v. Court of Appeals 154

KINDS OF OBLIGATIONS
145 Development Bank of the Philippines v. Court of Appeals 155
146 Tomimbang v. Tomimbang 156
147 Gonzales v. Heirs 157
148 Insular Life v. Young 158
149 Direct Funders v. Lavina 159
150 Vda. De Mistica v. Naguiat 160
151 Hermosa v. Longara 161
152 Trillana v. Quezon Colleges 162
153 Visayan Sawmill v. Court of Appeals 163
154 Leano v. Court of Appeals 164
155 Heirs of Sandejas v. Lim 165
156 Commissioner of Internal Revenue v. Primetown 166
157 NAMARCO v. Tecson 167
158 Berg v. Magdalena Estates 168
159 Lirag v. Court of Appeals 169
160 Daguhoy v. Ponce 170
161 Victoria Planters v. Victoria Milling 171
162 Jespajo v. Court of Appeals 172
163 Morromeo v. Court of Appeals 173
164 Gonzales v. Jose 174
165 Baluyut v. Poblete 175
166 Malayan Realty v. Uy 176
167 Kasapian ng Manggagawa ng Coca-Cola v. Court of Appeals 177

Page 4 of 745
168 Santos v. Santos 178
169 Melotindos v. Tobias 179
170 LL and Company v. Huang 180
171 Brent School v. Zamora 181
172 Lim v. People 182
173 Pacific Banking v. Court of Appeals 183
174 Agoncillo v. Javier 184
175 Ong Guan v. Century 185
176 Legarda v. Miailhe 186
177 Reyes v. Martinez 187
178 Quizana v. Redugerio 188
179 Alipio v. Court of Appeals 189
180 PH Credit Corporation v. Court of Appeals 190
181 CDCP v. Estrella 191
182 Republic Glass Corporation v. Qua 192
183 Industrial Management v. NLRC 193
184 Metro Manila Transit v. Court of Appeals 194
185 Inciong v. Court of Appeals 195
186 Philippine Blooming Mills v. Court of Appeals 196
187 Asset Builders v. Stronghold 197
188 Esparwa Security v. Liceo de Cagayan 198
189 Dimayuga v. PCIB 199
190 Cerna v. Court of Appeals 200
191 Nazareno v. Court of Appeals 201
192 Alonzo v. San Juan 202
193 David v. Court of Appeals 203
194 Republic v. Thi Thu Thuy de Guzman 204
195 Marques v. far East Bank 205
196 Prisma Construction v. Menchavez 206
197 Macalalag v. People 207
198 Tan v. Court of Appeals 208
199 Eastern Shipping v. Court of Appeals 209
200 PCI v. Ng Sheung Ngor 210
201 NSBC v. Philippine National Bank 211
202 Polotan v. Court of Appeals 212
203 New Sampaguita v. Philippine National Bank 213
204 Prisma Construction v. Menchavez 215
205 Maceda, Jr. v. DBO/DBP 216
206 Philippine National Bank v. Encina 217
207 Imperial v. Jaucian 218
208 Pabugais v. Sahijwani 219
209 Lo v. Court of Appeals 221
210 Ligutan v. Court of Appeals 222
211 Pascual v. Ramos 223
212 First Metro Investment v. Este del Sol 224
213 Domel Trading v. Court of Appeals 225
214 Medel v. Court of Appeals 227
215 Reformina v. Tomol 228

EXTINGUISHMENT OF OBLIGATIONS
216 Lo v. KJH 229
217 Philippine National Bank v. Court of Appeals 230
218 Cathay Pacific v. Vasquez 231
219 Citibank v. Sabentiano 232
220 Telengton Bros. v. US Lines 233
221 CF Sharp v. Northwest Airlines 234
222 Padilla v. Paredes 235
223 Tibajia v. Court of Appeals 236
224 Development Bank of the Philippines v. Court of Appeals 237
225 Vitarich v. Locsin 238

Page 5 of 745
226 Metrobank v. Cabilzo 239
227 Almeda v. Bathala Marketing 240
228 PCI v. Ng Sheung Ngor 241
229 Palanca v. Guides 242
230 PCIB v. Court of Appeals 243
231 Lagon v. Hooven Comalco 244
232 Bank of the Philippine Islands v. Court of Appeals 245
233 Republic v. Thi Thu Thuy De Guzman 246
234 Audio Electric v. NLRC 247
235 Land Bank of the Philippines v. Ong 248
236 Binalbagan v. Court of Appeals 249
237 Lorenzo Shipping v. BJ Marthel 251
238 Luzon Development Bank v. Enriquez 252
239 Estanislao v. East-West Banking Corporation 253
240 Aquintey v. Tibong 254
241 Vda. De Jayme v. Court of Appeals 255
242 Caltex v. IAC 256
243 Lo v. Court of Appeals 257
244 ASI Corporation v. Evangelista 258
245 Paculdo v. Regalado 259
246 CBC v. Court of Appeals 260
247 Mobil v. Court of Appeals 261
248 Dalton v. FGR Realty and Development Corporation 262
249 Benos v. Lawilao 263
250 Peoples Industrial v. Court of Appeals 264
251 Eternal Gardens v. Court of Appeals 265
252 Rayos v. Reyes 266
253 Cebu International v. Court of Appeals 267
254 De Mesa v. Court of Appeals 268
255 Occena v. Court of Appeals 269
256 Ortigas v. Feati Bank 270
257 So v. Food Fest Land, Inc. 271
258 Magat v. Court of Appeals 272
259 PNCC v. Court of Appeals 273
260 NATELCO v. Court of Appeals 274
261 Reyna v. Commission on Audit 275
262 Trans Pacific v. Court of Appeals 276
263 Dalupan v. Harden 277
264 Lopez Vito v. Tambunting 278
265 Estate of Mota v. Serra 279
266 Yek Ton Lin v. Yusingco 280
267 EGV Realty v. Court of Appeals 281
268 Aerospace Chemical v. Court of Appeals 282
269 Apodaca v. NLRC 283
270 Spouses Chung v. Ulanday Construction 284
271 Lao, et. al. v. Special Plans, Inc. 285
272 United Planters Sugar v. Court of Appeals 286
273 PNB Management v. R&R Metal 287
274 Silahis v. IAC 288
275 Francia v. Court of Appeals 289
276 Trinidad v. Acapulco 290
277 Hernandez Nievera v. Hernandez 291
278 St. James College v. Equitable PCI Bank 292
279 Tomimbang v. Tomimbang 293
280 Mindanao Savings v. Willkom 294
281 Aquintey v. Tibong 295
282 Swagman v. Court of Appeals 296
283 Azolla Farms v. Court of Appeals 297
284 California Bus Lines v. State Investment 298
285 Ocampo-Paule v. Court of Appeals 299

Page 6 of 745
286 Reyes v. Court of Appeals 300
287 Bautista v. Pilar Development 301
288 Evadel Realty v. Soriano 302
289 B&I Realty v. Caspe 303
290 Mersina v. Garcia 304
291 Heirs of Gaudiane v. Court of Appeals 305
292 Laureano v. Court of Appeals 306
293 Banco Filipino v. Court of Appeals 307
294 Vda. De Delgado v. Court of Appeals 308
295 Maestrado v. Court of Appeals 309
296 Tanay Recreation v. Fausto 310
297 Mendoza v. Court of Appeals 311
298 Lim v. Queensland 312
299 Placewell v. Camote 313
300 Heirs of Ragua v. Court of Appeals 314
301 Metrobank v. Court of Appeals 315
302 Spouses Manuel v. Court of Appeals 316
303 Cuenco v. Cuenco 317
304 Laurel v. Desierto 318
305 Hanopol v. SM 319
306 Terminal Facilities v. PPA 320
307 Mendoza v. Court of Appeals 322
308 Roblett Construction v. Court of Appeals 325
309 Simedarby v. Goodyear 327
310 Kings Properties Corporation, Inc. v. Galido 328
311 Metrobank v. Cabilzo 330
312 Mesina v. Garcia 331
313 Pahamatong v. Philippine National Bank 322
314 Shoppers Paradise v. Roque 333
315 Meatmasters v. Lelis Integrated 335
316 Manipor v. Ricafort 337
317 Larena v. Mapili 338
318 Santos v. Santos 339
319 Villanueva Mijares v. Court of Appeals 341

CONTRACTS
320 Spouses Edralin v. Philippine Veterans Bank 342
321 Martin, et. al. v. DBS Bank Philippines 344
322 Heirs of Zabala, et. al. v. Court of Appeals 346
323 Star Paper v. Simbol 347
324 Tiu v. Platinum Plans 348
325 Avon Cosmetics v. Luna 349
326 Del Castillo v. Richmond 351
327 Arwood v. DM Consunji 352
328 Pascual v. Ramos 353
329 PUP v. Golden Horizon 355
330 Villegas v. Court of Appeals 357
331 Equatorial Realty v. Carmelo 358
332 PUP v. Court of Appeals 360
333 Litonjua v. L&R 362
334 Josefa v. Zhandong 363
335 Saludo v. Security Bank 364
336 PCI v. Ng Sheung Ngor 366
337 Dio v. St. Ferdinand Memorial 367
338 PILTEL v. Tecson 369
339 PAL v. Court of Appeals 370
340 Ermitano v. Court of Appeals 371
341 Uniwide v. Titan-Ikeda 372
342 Heirs of Salas v. Laperal 373
343 Medrano v. Court of Appeals 375

Page 7 of 745
344 Tan v. Gullas 376
345 Gozan v. Mercado 378
346 Sta. Lucia Realty v. Spouses Buenaventura 379
347 Chan v. Maceda 381
348 Baluyot v. Court of Appeals 383
349 Cuyco v. Cuyco 386
350 Go v. Cordero 388
351 Tayag v. Court of Appeals 390
352 So v. Court of Appeals 391
353 International Freeport v. Danzas 393
354 Rockland v. Mid Pasig Development 395
355 MMDA v. JANCOM 397

ESSENTIAL REQUISITES OF CONTRACTS


356 Rockland v. Mid Pasig Land Development 399
357 Manila Metal v. PNB 401
358 Montecillo v. Reynes 403
359 Soler v. Court of Appeals 405
360 Palattao v. Court of Appeals 407
361 ABS-CBN v. Court of Appeals 409
362 Limson v. Court of Appeals 411
363 Villanueva v. Philippine National Bank 412
364 Catalan v. Basa 114
365 Domingo v. Court of Appeals 416
366 Mendezona v. Ozamiz 417
367 Lim v. Court of Appeals 418
368 Ruiz v. Court of Appeals 419
369 Dela Cruz v. Sison 420
370 Rural Bank of Sta. Maria v. Court of Appeals 421
371 Carabeo v. Spouses Dingco 422
372 Chavez v. PEA 423
373 Melliza v. City of Ilo-Ilo 424
374 Catindig v. Vda. De Meneses 425
375 Orduna, et. al. v. Fuentebella 426
376 Askay v. Cosalan 428
377 Heirs of Balite v. Lim 429
378 Suntay v. Court of Appeals 431
379 Uy v. Court of Appeals 433
380 Catly v. Navarro, et. al. 434
381 Liguez v. Court of Appeals 436
382 Philbank v. Lui She 437

FORM OF CONTRACTS
383 Londres v. Court of Appeals 438
384 Spouses Vega v. SSS 440
385 Balatbat v. Court of Appeals 441
386 Universal Robina v. Heirs of Teves 442

REFORMATION OF INSTRUMENTS
387 Sarming v. Dy 444
388 Cebu v. Court of Appeals 445

INTERPRETATION OF CONTRACTS
389 ADR Shipping v. Gallardo 446
390 Movido v. Pastor 447
391 TSPIC Corp. v. TSPIC Employees Union 448
392 Estanislao v. East-West Banking Corporation 449
393 Aquintey v. Tibong 450
394 Cruz v. Court of Appeals 451
395 Gonzales v. Court of Appeals 453

Page 8 of 745
396 Almira v. Court of Appeals 454
397 Philbank v. Lim 455
398 Rigor v. Consolidated Leasing 456
399 Velasquez v. Court of Appeals 457

DEFECTIVE CONTRACTS
400 Heirs of Qurong v. Development Bank of the Philippines 458
401 Lee v. Bangkok Bank 460
402 Equatorial Realty v. Mayfair Theater 462
403 Siguan v. Lim 463
404 Khe Kong v. Court of Appeals 465
405 Suntay v. Court of Appeals 466
406 Brobio Mangahas v. Brobio 467
407 Hernandez v. Hernandez 469
408 Fuentes, et. al. v. Roca 471
409 Associated Bank v. Spouses Montano 472
410 Miailhe v. Court of Appeals 473
411 First Philippine Holdings v. Trans Middle East Equities, Inc. 474
412 Sanchez v. Malapad Realty 475
413 Oesmer v. PDC 476
414 Vda. De Ape v. Court of Appeals 477
415 Francisco v. Herrera 478
416 Braganza v. Villa Abrille 479
417 Katipunan v. Katipunan 480
418 Jumalon v. Court of Appeals 481
419 Cabales, et. al. v. Court of Appeals 482
420 Vda. De Ouano, et. al. v. Republic 483
421 Shoemaker v. La Tondena 484
422 PNB v. Philippine Vegetable Oil Company 485
423 Vda. De Ouano, et. al. v. Republic 486
424 Municipality of Hagonoy v. Dumdum 487
425 Tan v. Villapaz 488
426 Spouses David v. Tiongson 489
427 Cordial v. Miranda 490
428 Villanueva-Mijares v. Court of Appeals 491
429 Rosencor v. Inquing 492
430 Firme v. Buka 493
431 Heirs of M. Doronio v. Heirs of F. Doronio 494
432 Gurrea v. Suplico 495
433 Frenzel v. Catito 496
434 La Bugal Blaan v. Ramos 497
435 Agan v. PIATCO 498
436 COMELEC v. Quijano-Padilla 499
437 Jaworski v. PAGCOR 500
438 Oesmer v. PDC 501
439 Heirs of Balite v. Lim 502
440 Pineda v. Court of Appeals 503
441 Cruz v. Bancom 504
442 Cauton v. Salud 505
443 Infotech v. COMELEC 506
444 Pabugais v. Sahijwani 507
445 Liguez v. Court of Appeals 509
446 Philbank v. Lui She 510
447 Vigilar v. Aquino 511
448 EPG Construction v. Vigilar 512
449 Go Chan v. Young 513
450 Francisco v. Herrera 514
451 Mendezona v. Ozamiz 515

NATURAL OBLIGATIONS

Page 9 of 745
452 Manzanilla v. Court of Appeals 516
453 Rural Bank of Paranaque v. Remolado 517

TRUSTS
454 Cojuangco v. Republic 518
455 Ringor v. Ringor 519
456 Salvador v. Court of Appeals 520
457 Huang v. Court of Appeals 521
458 Vda. De Esconde v. Court of Appeals 522
459 Ancog v. Court of Appeals 523
460 Morales v. Court of Appeals 524
461 Tala Realty v. Banco Filipino 526
462 Medina v. Court of Appeals 529
463 Filipinas Port v. Go 532
464 Mendizabel v. Apao 534
465 Vda. De Alberto v. Go 536
466 Heirs of Yap v. Court of Appeals 538
467 Heirs of Kionisala v. Heirs of Dacut 539
468 Ramos v. Ramos 540
469 Intestate Estate of Ty v. Court of Appeals 541
470 Vda. De Reterto v. Barz 542
471 Chia Long Tan v. Cour of Appeals 543
472 Olaco v. Co Cho Chit 544

Page 10 of 745
OCAMPO III. VS. PEOPLE
G.R Nos. 156547-51. February 4, 2008

FACTS:

The Department of Budget and Management released the amount of Php 100 Million for
the support of the local government unit of the province of Tarlac. However, petitioner Ocampo,
governor of Tarlac, loaned out more than P 56.6 million in which he contracted with Lingkod
Tarlac Foundation, Inc.. thus, it was the subject of 25 criminal charges against the petitioner.

The Sandiganbayan convicted the petitioner of the crime of malversation of public funds.
However, the petitioner contended that the loan was private in character since it was a loan
contracted with the Taralc Foundation.

ISSUE:

Whether the amount loaned out was private in nature.

RULING:

Yes, the loan was private in nature because Art. 1953 of the New Civil Code provides
that a person who receives a loan of money or any other fungible thing acquires the ownership
thereof, and is bound to pay the creditor an equal amount of the same kind and quality.
The fact that the petitioner-Governor contracted the loan, the public fund changed its
nature to private character, thus it is not malversation which is the subject of this case, instead it
must be a simple collection of money suit against the petitioner in case of non payment .
therefore, the petitioner is acquitted for the crime of malversation.

Page 11 of 745
Leung Ben vs. OBrien
G.R. No. L-13602, April 6, 1918
38 Phil. 182

FACTS:

On December 12, 1917 an action was instituted in the CFI of Manila by OBrien to
recover from Leung Ben the sum of P15, 000.00 alleged to have been lost by the plaintiff to the
defendant in a series of gambling, banking and percentage games conducted during the two or
three months prior to the institution of the suit. In his verified complaint the plaintiff asked for
an attachment, under sections 424 and 412 (1) of the Code of Civil Procedure against the
property of the defendant on the ground that the latter was about to depart from the Philippine
Island with intent to defraud his creditors. The attachment was issued and acting on the authority
thereof, the sheriff attached the sum of P15, 000.00 which had been deposited by the defendant
with the International Banking Corporation.

The defendant moved to quash the attachment; the court however, dismissed said motion.
On January 8, 1918, petitioner Leung Ben, the defendant in that action filed his petition for writ
of certiorari directed against OBrien and the judges of CFI. The prayer is that, the honorable
James A. Ostrand be required to certify the records for review and that the order of attachment
that had been issued should be revoked and discharged with cost.

ISSUE:

The issue is whether or not the statutory obligation to restore money won at gaming is an
obligation from contract, express or implied.

HELD:

The duty of the defendant to refund the money which he won from the plaintiff at gaming
is not an obligation from contract, express or implied rather it is a duty imposed by statute.
Upon general principles, recognized both in civil and common law, money lost at gaming and
voluntarily paid by the loser to the winner cannot, in the absence of statute, be recovered in a
civil action. But Act No. 1757 of the Philippine Commission, which defines and penalizes
several forms of gambling, containing numerous provisions recognizing the right to recover
money lost in gambling or in the playing of certain games. The obligation of the defendant to
restore or refund the money which he won from the plaintiff at gaming therefore arises ex lege.

Page 12 of 745
Arturo Pelayo vs. Marcelo Lauron
G.R. No. L-4089, January 12, 1909
12 Phil. 453

FACTS:

On or about October 13, 1906, the plaintiff Arturo Pelayo was called to the house of the
defendants, Marcelo Lauron and Juana Abella situated in San Nicolas, and that upon arrival he
was requested by them to render medical assistance to their daughter-in-law who was about to
give birth to a child. After consultation with the attending physician, Dr. Escao, the plaintiff
found it necessary to remove the fetus by means of an operation, in which service he was
occupied until the following morning, and had visited the patient several times. The equitable
value of the services rendered by the plaintiff was P500.00, which the defendants refused to pay.
On November 23, 1906, the plaintiff filed a complaint against the defendants and prayed that the
judgment be rendered in his favor as against the defendants, or any of them, for the sum of P500
and costs, together with any other relief that may be deemed proper. In answer, the defendants
denied all allegations and alleged as a special defense, that their daughter-in-law died as a
consequence of the said childbirth, and when she was still alive she lived with her husband
independently and in a separate house and without any relation whatsoever with them, and on the
day she gave birth she was in the house of the defendants and her stay there was accidental and
due to fortuitous circumstances. Thus, the defendants prayed that they be absolved from the
complaint with costs against the plaintiff.

The plaintiff demurred the answer and that the lower court sustained the demurrer
directing the defendants to amend their answer. In compliance, the defendants amended their
answer denying each and every allegation contained in the complaint. The lower court rendered
judgment in favor of the defendants absolving them from the complaint.

ISSUE:
The issue is whether or not the parents-in-law are under any obligation to pay the fees claimed
by the plaintiff.

HELD:
The defendants were not, nor are they now, under any obligation by virtue of any legal
provision, to pay the fees claimed, nor in consequence of any contract entered into between them
and the plaintiff from which such obligation might have arisen.
The rendering of medical assistance in case of illness is comprised among the mutual
obligations to which spouses are bound by way of mutual support. When either of them by
reason of illness should be in need of medical assistance, the other is under the unavoidable
obligation to furnish the necessary services of a physician in order that the health may be
restored; the party bound to furnish such support is therefore, liable for all the expenses,
including the fees of the medical expert for his professional services. The liability arises from the
obligation, which the law has expressly established, between married couples. It is therefore the
husband of the patient who is bound to pay for the services of the plaintiff. The fact that it was
not the husband who called the plaintiff and requested the medical assistance for his wife is no
bar to his fulfillment of such obligation, as the defendants, in view of the imminent danger to
which the life of the patient was at that moment exposed, considered that the medical assistance
was urgently needed. Therefore, plaintiff should direct his action against the husband of the
patient, and not against her parents-in-law.

Page 13 of 745
ASI CORPORATION VS. EVANGELISTA
G.R No. 158086.
February 14, 2008

FACTS:

Private respondent Evangelista contracted Petitioner ASJ Corporation for the incubation
and hatching of eggs and by products owned by Evangelista Spouses. The contract includes the
scheduled payments of the service of ASJ Corporation that the amount of installment shall be
paid after the delivery of the chicks. However, the ASJ Corporation detained the chicks because
Evangelista Spouses failed to pay the installment on time.

ISSUE:

Was the detention of the alleged chicks valid and recognized under the law?

RULING:

No, because ASJ Corporation must give due to the Evangelista Spouses in paying the
installment, thus, it must not delay the delivery of the chicks. Thus, under the law, they are
obliged to pay damages with each other for the breach of the obligation.

Therefore, in a contract of service, each party must be in good faith in the performance of
their obligation, thus when the petitioner had detained the hatched eggs of the respondents
spouses, it is an implication of putting prejudice to the business of the spouses due to the delay of
paying installment to the petitioner.

Page 14 of 745
RAMAS VS. QUIAMCO
G.R No. 146322. December 6, 2006

FACTS:

Quiamco has amicably settled with Davalan, Gabutero and Generoso for the crime of
robbery and that in return, the three had surrendered to Quiamco a motorcycle with its
registration. However, Atty. Ramas has sold to Gabutero the motorcycle in installment but when
the latter did not able to pay the installment, Davalon continued the payment but when he
became insolvent, he said that the motorcycle was taken by Quiamcos men. However, after
several years, the petitioner Ramas together with policemen took the motorcycle without the
respondents permit and shouted that the respondent Quiamco is a thief of motorcycle.
Respondent then filed an action for damages against petitioner alleging that petitioner is liable
for unlawful taking of the motorcycle and utterance of a defamatory remark and filing a baseless
complaint. Also, petitioners claim that they should not be held liable for petitioners exercise of
its right as seller-mortgagee to recover the mortgaged motorcycle preliminary to the enforcement
of its right to foreclose on the mortgage in case of default.

ISSUE:

Whether the act of the petitioner is correct.

RULING:

No. The petitioner being a lawyer must know the legal procedure for the recovery of
possession of the alleged mortgaged property in which said procedure must be conducted
through judicial action. Furthermore, the petitioner acted in malice and intent to cause damage to
the respondent when even without probable cause, he still instituted an act against the law on
mortgage.

Page 15 of 745
Nikko Hotel Manila Garden vs. Roberto Reyes
G.R. No. 154259, February 28, 2005
452 SCRA 532

FACTS:

Respondent herein Roberto Reyes, more popularly known by the screen name Amay
Bisaya, alleged that while he was having coffee at the lobby of Hotel Nikko, he was spotted by
Dr. Violeta Filart, his friend of several years, invited him to join her in a party at the hotels
penthouse in celebration of the natal day of the hotels manager, Mr. Masakazu Tsuruoka. Mr.
Reyes asked if she could vouch for him for whom she replied: of course. Reyes then went up
with the party of Dr. Filart carrying the basket of fruits which was the latters present for the
celebrant. At the penthouse, they first had their picture taken with the celebrant after which
Reyes sat with the party of Dr. Filart. After a couple of hours, when the buffet dinner was ready,
Mr. Reyes lined-up at the buffet table but, to his great shock, shame and embarrassment, he was
stopped by Ruby Lim, the Executive Secretary of Hotel Nikko. Reyes alleged that Ruby Lim, in
a loud voice and within the presence and hearing of the other guests who were making a queue at
the buffet table, told him to leave the party because he was not invited. Mr. Reyes tried to
explain that he was invited by Dr. Filart but the latter, who was within hearing distance,
completely ignored him thus adding to his shame and humiliation. Afterwards, while he was still
recovering from the traumatic experience, a Makati policeman approached and asked him to step
out of the hotel. Like a common criminal, he was escorted out of the party by the policeman.
Claiming damages, Mr. Reyes asked for One Million Pesos actual damages, One Million Pesos
moral and/or exemplary damages and Two Hundred Thousand Pesos attorneys fees.

Petitioners Lim and Hotel Nikko contend that pursuant to the doctrine of volenti non fit
injuria, they cannot be made liable for damages as respondent Reyes assumed the risk of being
asked to leave (and being embarrassed and humiliated in the process) as he was a gate-crasher.

ISSUE:
Whether or not Hotel Nikko and Ruby Lim are jointly and severally liable with Dr. Filart
for damages under Articles 19 and 21 of the Civil Code.

HELD:
The doctrine of volenti non fit injuria (to which a person assents is not esteemed in law
as injury) refers to self-inflicted injury or to the consent to injury which precludes the recovery
of damages by one who has knowingly and voluntarily exposed himself to danger, even if he is
not negligent in doing so.

The Supreme Court agreed with the lower courts ruling that Ms. Lim did not abuse her
right to ask Mr. Reyes to leave the party as she talked to him politely and discreetly. Considering
the closeness of defendant Lim to plaintiff when the request for the latter to leave the party was
made such that they nearly kissed each other, the request was meant to be heard by him only and
there could have been no intention on her part to cause embarrassment to him. In the absence of
any proof of motive on the part of Ms. Lim to humiliate Mr. Reyes and expose him to ridicule
and shame, it is highly unlikely that she would shout at him from a very close distance. Ms. Lim
having been in the hotel business for twenty years wherein being polite and discreet are virtues to
be emulated, the testimony of Mr. Reyes that she acted to the contrary does not inspire belief and
is indeed incredible. Ms. Lim, not having abused her right to ask Mr. Reyes to leave the party to
which he was not invited, cannot be made liable to pay for damages under Articles 19 and 21 of
the Civil Code. Necessarily, neither can her employer, Hotel Nikko, be held liable as its liability
springs from that of its employee. Had respondent simply left the party as requested, there was
no need for the police to take him out.

Page 16 of 745
St. Marys Academy vs. William Carpitanos and Lucia S. Carpitanos
G.R. No. 143363, February 6, 2002
426 Phil 878

FACTS:

From 13 to 20 February 1995, St. Marys Academy of Dipolog City conducted an


enrollment drive for the school year 1995-1996. A facet of the enrollment campaign was the
visitation of schools from where prospective enrollees were studying. As a student of St. Marys
Academy, Sherwin Carpitanos was part of the campaigning group. Accordingly, on the fateful
day, Sherwin, along with other high school students were riding in a Mitsubishi jeep owned by
defendant Vivencio Villanueva on their way to Larayan Elementary School, Larayan, Dapitan
City. The jeep was driven by James Daniel II then 15 years old and a student of the same school.
Allegedly, the latter drove the jeep in a reckless manner and as a result the jeep turned
turtle.Sherwin Carpitanos died as a result of the injuries he sustained from the accident.

ISSUE:

Whether the petitioner is liable for damages for the death of Sherwin Carpitanos.

HELD:
For petitioner to be liable, there must be a finding that the act or omission considered as
negligent was the proximate cause of the injury caused because the negligence must have a
causal connection to the accident. In this case, the respondents failed to show that the negligence
of petitioner was the proximate cause of the death of the victim.

Respondents Daniel spouses and Villanueva admitted that the immediate cause of the
accident was not the negligence of petitioner or the reckless driving of James Daniel II, but the
detachment of the steering wheel guide of the jeep. Hence, liability for the accident, whether
caused by the negligence of the minor driver or mechanical detachment of the steering wheel
guide of the jeep, must be pinned on the minors parents primarily. The negligence of petitioner
St. Marys Academy was only a remote cause of the accident. Between the remote cause and the
injury, there intervened the negligence of the minors parents or the detachment of the steering
wheel guide of the jeep. Hence, with the overwhelming evidence presented by petitioner and the
respondent Daniel spouses that the accident occurred because of the detachment of the steering
wheel guide of the jeep, it is not the school, but the registered owner of the vehicle who shall be
held responsible for damages for the death of Sherwin Carpitanos.

Page 17 of 745
SPS. GUANIO v. MAKATI SHANGRI-LA HOTEL
GR No. 190601, February 7 2011

FACTS:

For their wedding reception on July 28, 2001, spouses Luigi M. Guanio and Anna
Hernandez-Guanio (petitioners) booked at the Shangri-la Hotel Makati.Prior to the event, Makati
Shangri-La Hotel & Resort, Inc. (respondent) scheduled an initial and final food tasting. The
parties eventually agreed on a final price P1,150 per person.On July 27, 2001, the parties
finalized and signed their contract.

Petitioners claim that during the reception, respondents representatives, Catering


Director Bea Marquez and Sales Manager Tessa Alvarez, did not show up despite their assurance
that they would; their guests complained of the delay in the service of the dinner; certain items
listed in the published menu were unavailable; the hotels waiters were rude and unapologetic
when confronted about the delay; and despite Alvarezs promise that there would be no charge
for the extension of the reception beyond 12:00 midnight, they were billed and paid P8,000 per
hour for the three-hour extension of the event up to 4:00 A.M. the next day. They further claim
that they brought wine and liquor in accordance with their open bar arrangement, but these were
not served to the guests who were forced to pay for their drinks.

Petitioners thus sent a letter-complaint to the Makati Shangri-la Hotel and Resort, Inc.and
received an apologetic reply from Krister Svensson, the hotels Executive Assistant Manager in
charge of Food and Beverage. They nevertheless filed a complaint for breach of contract and
damages before the RTC of Makati City. Respondents averred that it was the increase in number
of the unexpected guests that led to the shortage claimed by the petitioners.

The RTC rendered a decision in favor of the plaintiffs and was reversed by the CA, upon
appeal, the latter holding that the proximate cause of petitioners injury was an unexpected
increase in their guests.

ISSUE:

Whether or not the CA correctly held that the proximate cause of petitioners injury was
an unexpected increase in their guests.

HELD:

The Court finds that since petitioners complaint arose from a contract, the doctrine of
proximate cause finds no application to it, the latter applicable only to actions for quasi-delicts,
not in actions involving breach of contract.

Breach of contract is defined as the failure without legal reason to comply with the terms
of a contract. It is also defined as the failure, without legal excuse, to perform any promise which
forms the whole or part of the contract. The appellate court, and even the trial court, observed
that petitioners were remiss in their obligation to inform respondent of the change in the
expected number of guests. The observation is reflected in the records of the case. Petitioners
failure to discharge such obligation thus excused respondent from liability for any damage or
inconvenience occasioned thereby.

Page 18 of 745
TSPIC CORPORATION VS. TSPIC EMPLOYEES UNION
G.R No. 163419. February 13, 2008

FACTS:

TSPI Corporation entered into a Collective Bargaining Agreement with the corporation
Union for the increase of salary for the latters members for the year 2000 to 2002 starting from
January 2000. thus, the increased in salary was materialized on January 1, 2000. However, on
October 6, 2000, the Regional Tripartite Wage and production Board raised daily minimum
wage from P 223.50 to P 250.00 starting November 1, 2000. Conformably, the wages of the 17
probationary employees were increased to P250.00 and became regular employees therefore
receiving another 10% increase in salary. In January 2001, TSPIC implemented the new wage
rates as mandated by the CBA. As a result, the nine employees who were senior to the 17
recently regularized employees, received less wages. On January 19, 2001, TSPICs HRD
notified the 24 employees who are private respondents, that due to an error in the automated
payroll system, they were overpaid and the overpayment would be deducted from their salaries
starting February 2001. The Union on the other hand, asserted that there was no error and the
deduction of the alleged overpayment constituted diminution of pay.

ISSUE:

Whether the alleged overpayment constitutes diminution of pay as alleged by the Union.

RULING:

Yes, because it is considered that Collective Bargaining Agreement entered into by


unions and their employers are binding upon the parties and be acted in strict compliance
therewith. Thus, the CBA in this case is the law between the employers and their employees.

Therefore, there was no overpayment when there was an increase of salary for the
members of the union simultaneous with the increasing of minimum wage for workers in the
National Capital Region. The CBA should be followed thus, the senior employees who were first
promoted as regular employees shall be entitled for the increase in their salaries and the same
with lower rank workers.

Page 19 of 745
Regino vs. Pangasinan Colleges of Science and Technology
G.R. No. 156109
November 8, 2004

FACTS:

Petitioner Khristine Rea M. Regino was a first year computer science student of
Pangasinan Colleges of Science and Technology (PCST). Reared in a poor family, Regino went
to college mainly through the financial support of her relatives. She enrolled Logic and Statistics
subjects under Rachelle Gamurot and Elissa Baladad, respectively as teachers.

In February 2002, PCST held a fund raising campaign dubbed The Rave Party and
Dance Revolution the proceeds which were to go to the construction of the schools tennis and
volleyball courts. Each student was required to pay for two tickets at the price of P100.00 each.
The project was allegedly implemented by recompensing students who purchased tickets with
additional points in their test scores; those who refused to pay were denied the opportunity to
take the final examinations.

Financially strapped and prohibited by her religion from attending dance parties and
celebration, Regino refused to pay tickets. On March 14 and 15, 2002, the scheduled dates of
examinations in Logics and Statistics, the teachers allegedly disallowed her from taking the tests.
Petitioner then filed as pauper litigant, a complaint for damages against PCST. She prayed for
P500,000.00 as nominal; P500,000.00 as moral and at least P1,000,000.00 as exemplary
damages, P250,000.00 as actual damages & cost of litigation and attorneys fees.
The Regional Trial Court dismissed the complaint for lack of merit. It ruled that Commission on
Higher Education, not the court, has jurisdiction over the controversy.

ISSUES:

Whether or not court has jurisdiction over the controversy.


Whether or not there was a breach of contract and liability of tort.

HELD:

The doctrine of exhaustion of administrative remedies is basic. Court for reasons of law,
comity and convenience should not entertain suits unless the available administrative remedies
have first been resorted to and the proper authorities have been given the appropriate opportunity
to act and correct their alleged errors. Exhaustion of administrative remedies is applicable when
there is a competence on the part of the administrative bodies to act upon the matter complained
of.
The terms of the school-student contract are defined at the moment of its inception-upon
enrolment of the student.

PCST imposed the assailed revenue-raising measure belatedly in the middle of the
semester, It exacted the dance party fee as a condition for students in taking the final
examinations and ultimately for recognition of their ability to finish a course. The fee, however,
was not part of the school-student contract entered into at the start of the school year.

Wherefore, the petition is hereby granted, and the assailed orders reversed. The trial
court is directed to reinstate the complaint and with all deliberate speed, to continue the
proceedings in Civil Case No. U-7541. No costs.

Page 20 of 745
PSBA vs. Court of Appeals
G.R. No. 84698, February 4, 1992

FACTS:
A stabbing incident on 30 August 1985 which caused the death of Carlitos Bautista while
on the second-floor premises of the Philippine School of Business Administration (PSBA)
prompted the parents of the deceased to file suit in the Regional Trial Court of Manila for
damages against the said PSBA and its corporate officers. At the time of his death, Carlitos was
enrolled in the third year commerce course at the PSBA. It was established that his assailants
were not members of the school's academic community but were elements from outside the
school. Substantially, the plaintiffs (now private respondents) sought to adjudge them liable for
the victim's untimely demise due to their alleged negligence, recklessness and lack of security
precautions, means and methods before, during and after the attack on the victim.
Defendants a quo (now petitioners) sought to have the suit dismissed, alleging that since they are
presumably sued under Article 2180 of the Civil Code, the complaint states no cause of action
against them, as jurisprudence on the subject is to the effect that academic institutions, such as
the PSBA, are beyond the ambit of the rule in the afore-stated article.
The respondent trial court, however, overruled petitioners contention and thru an order dated 8
December 1987, denied their motion to dismiss. Said decision of the respondent appellate court
was primarily anchored on the law of quasi-delicts, as enunciated in Articles 2176 and 2180 of
the Civil Code.
Article 2180, in conjunction with Article 2176 of the Civil Code, establishes the rule of in
loco parentis. It had been stressed that the law (Article 2180) plainly provides that the damage
should have been caused or inflicted by pupils or students of the educational institution sought to
be held liable for the acts of its pupils or students while in its custody. However, this material
situation does not exist in the present case for the assailants of Carlitos were not students of the
PSBA, for whose acts the school could be made liable.

ISSUE:
Whether or not the appellate court's failure to consider such material facts means the exculpation
of the petitioners from liability.

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

Page 21 of 745
Cosmo Entertainment Management, Inc. vs. La Ville Commercial Corporation
G.R. No. 152801, August 20, 2004
437 SCRA 145

FACTS:

The respondent, La Ville Commercial Corporation, is the registered owner of a parcel of


land covered by TCT No. 174250 of the Registry of Deeds of Makati City together with the
commercial building thereon situated at the corner of Kalayaan and Neptune Streets in Makati
City.

On March 17, 1993, it entered into a Contract of Lease with petitioner Cosmo
Entertainment Management, Inc. over the subject property for a period of seven years with a
monthly rental of P250 per square meter of the floor area of the building and a security deposit
equivalent to three monthly rentals in the amount of P447, 000.00 to guarantee the faithful
compliance of the terms and conditions of the lease agreement. Upon execution of the contract,
the petitioner took possession of the subject property.

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

After negotiations between the parties failed, the respondent, on May 27, 1997, reiterated
its demand on the petitioner to pay the unpaid rentals as well as to vacate and surrender the
premises to the respondent. When the petitioner refused to comply with its demand, the
respondent filed with the Metropolitan Trial Court of Makati City a complaint for illegal
detainer. The petitioner, in its answer to the complaint, raised the defense that, under the
contract, it had the right to sublease the premises upon prior written consent by the respondent
and payment of transfer fees. However, the respondent, without any justifiable reason, refused to
allow the petitioner to sublease the premises.

ISSUE:

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

HELD:

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

Page 22 of 745
Ayala Corporation vs. Rosa Diana Realty
G.R. No. 134284, December 1, 2000
346 SCRA 663

FACTS:

Petitioner Ayala Corporation (Ayala) was the registered owner of a parcel of land located in
Alfaro Street, Salcedo Village, Makati City with an area of 840 square meters more or less and
covered by TCT no. 233435 of the Register of Deeds of Rizal.

On April 20, 1976, Ayala sold the lot to Manuel Sy married to Vilma Po and Sy Ka Kieng
married to Rosa Chan. The Deed of Sale executed between Ayala and the buyers contained Special
Conditions of Sale and Deed Restrictions. Manuel Sy and Sy Ka Kieng failed to construct the
building in violation of the Special Conditions of Sale. Notwithstanding the violation, Manuel Sy
and Sy Ka Kieng were able to sell the lot to respondent Rosa-Diana Realty and Development Corp.
with Ayalas approval. As a consideration for Ayala to release the certificate of title of the subject
property, Rosa-Diana, executed an undertaking promising to abide by said Special Condition of Sale
executed between Ayala and the original vendees. Upon the submission of the undertaking,
together with the building plans for a condominium project, known as the Peak, Ayala released title
to the lot, thereby enabling Rosa-Diana to register the Deed of Sale on its favor and obtain
certificate of Title in its name.

Thereafter, Rosa-Diana submitted to the building official of Makati another set of building
plans which were substantially different from those that it earlier submitted to Ayala for approval.
During the construction of Rosa-Dianas condominium project, Ayala filed an action with the RTC
of Makati for specific performance with application for a writ of preliminary injunction seeking to
compel the latter to comply with the contractual obligations under the Deed of Restriction
annotated on the title as well as with the building plans it submitted to the latter. In the alternative,
Ayala prayed for rescission of the sale of the subject lot to Rosa-Diana Realty. The lower court
denied Ayalas prayer for injunctive relief; thus, enabling Rosa-Diana to complete the construction
of the building. Ayala tried to cause the annotation a notice of lis pendens on Rosa-Dianas title but
the Register of Deed of Makati refused registration on the ground that the case pending before the
trial court being an action for specific performance and or rescission is an action in personam which
does not involve the title, use or possession of the property. The Land Registration Authority
reversed the ruling of the Register of Deeds. The decision of the LRA, however, was reversed by
the CA.

ISSUE:

The issue is whether or not respondent Rosa-Diana has the obligation to enforce the Deed
of Restrictions contained in the contract it entered with Ayala.

HELD:

Contractual obligations between parties have the force of law between them and absent any
allegation that the same are contrary to law, morals, good customs, public order or public policy,
they must be complied with in good faith. Hence, Article 1159 of the new Civil Code provides
obligations arising from contracts have the force of law between the contracting parties and should
be complied with in good faith.

Hence, respondent Rosa-Diana has the obligation to enforce the Deed of Restrictions
contained in the contract it entered with Ayala.

Page 23 of 745
Bricktown Development vs. Amor Tierra Development
G.R. No. 112182, December 12, 1994
239 SCRA 126

FACTS:

On 31 March 1981, petitioner Bricktown Development Corporation executed two contracts


to sell in favor of petitioner Tierra Corp. covering a total of 96 residential lots situated at the
Multinational Village Subdivision, La Huerta, Paraaque, Metro Manila. The total price of
P21,639,875.00 was stipulated to be paid by private respondent in such amount and maturity dates,
as follows; P2,200,000.00 on March 31, 1981, P3, 209, 965.75 on 30 June 1981, P4, 729, 906.25 on
31 December 1981, and the balance of P11, 500,000.00 to be paid by means of an assumption by
private respondent of petitioners corporations mortgage liability to the Philippine Saving Bank or,
alternatively, to be made payable in cash. On even date 31 March 1981, the parties executed a
supplemental agreement providing that private respondent would additionally pay to petitioner the
amount of P55, 364.68 or 21% interest on the balance of downpayment for the period from 31
March to 30 June 1981 and of P390, 367.37 representing interest paid by petitioner corporation to
the Philippine Savings Bank in updating the bank loan for the period from 1 February to 31 March
1981.

On 12 October 1981, Petitioner Corporation sent notice of cancellation of contract to


private respondent on account of the latters continued failure to pay the installment due 30 June
1981 and interest on the unpaid balance of the stipulated initial payment.

On 26 September 1983, private respondent demanded the refund of its various payment to
petitioner amounting to P2, 445, 497.71. However, petitioner did not heed the demand, so private
respondent filed an action with the court a quo.

The lower court ruled in favor of private respondent and it was affirmed in toto by the
appellate court.

ISSUE:

The issue is whether or not the contracts to sell were validly rescinded or cancelled by
Petitioner Corporation.

HELD:

The contracts to sell were validly rescinded by Petitioner Corporation. In fine, while we
must conclude that petitioner corporation still acted within its legal right to declare the contracts to
sell rescinded or cancelled, considering, nevertheless, the peculiar circumstances found to be extant
by the trial court, confirmed by the Court of Appeals, it would be unconscionable to likewise
sanction the forfeiture by petitioner corporation of payments made to it by private respondent.
Indeed, the Court has intimated that the relationship between parties in any contract must always be
characterized and punctuated by good faith and fair dealing. Judging from what the court below
have said, petitioners did fall well behind that standard. The Court does not find it equitable to
adjudge any interest payment by petitioners on the amount to be thus refunded computed from
judicial demand, for indeed, private respondent should not be allowed to totally free itself from its
own breach.

Page 24 of 745
Pilipinas Hino vs. Court of Appeals
G.R. No. 126570, August 18, 2000
338 SCRA 355

FACTS:
The plaintiff, Pilipinas Hino, Inc., is a corporation duly organized and existing under the
laws of the Philippines, with office address at PMI Building EDSA, Mandaluyong, Metro Manila,
The plaintiff filed an action for sum of money and damages against the defendants.
The contract of lease was entered into between herein parties, under which the defendants,
as lessor, leased real property located at Bigaa, Balagtas Bulacan, to plaintiff for a term of 2 years.
Pursuant to the contract of lease, plaintiff-lessee deposited with the defendants-lessor the amount of
P400, 000.00 to answer for repairs and damages that may be caused by the lessee on the leased
premises during the period of the lease. After the expiration of the lease contract, the plaintiff and
defendants made a joint inspection of the premises to determine the extent of the damages thereon.
Both agreed that the cost of repairs would amount to P60, 000.00 and that the amount of P340,
000.00 shall then be returned by the defendants to plaintiff. However, defendants returned to
plaintiff only the amount of P200, 000.00 still having a balance of P140, 000.00.
On August 10, 1990, plaintiff and defendants entered into a contract to sell denominated as
a memorandum of agreement to sell whereby the latter agreed to sell to the former the leased
property subject of this suit in the amount of P45, 611,000.00. The aforesaid memorandum of
agreement to sell granted the owner (defendants) the option to rescind the same upon failure of the
buyer (plaintiff) to pay any of the six installments with the corresponding obligation to return to the
buyer any amount paid by the buyer in excess of the down payment. Pursuant to the said
memorandum of agreement, plaintiff remitted on August 10, 1990 to the defendants the amount of
P1, 811,000.00 as down payment. Subsequently, plaintiff paid the first and second installments in the
amount of P1, 800,000.00 and P5, 250,000.00 with the total amount of P7, 050,000.00.
Unfortunately, plaintiff failed to pay the third and subsequent installments; and thereupon,
defendants decided to, and in fact did rescind and terminate, the contract promised to return to the
plaintiff all the amounts paid in excess of the down payment after deducting the interest due from
the third to sixth installments, inclusive.
The trial court rendered a decision ruling in favor of respondents Reyes, et. al. Petitioner
Pilipinas Hino elevated the case to the Court of Appeals. The appellate court, however, sustained the
findings of the trial court.

ISSUE:
Whether or not the private respondent has the right to retain the interest due for the unpaid
installments, despite the fact that the respondent has exercised his option to rescind the
memorandum of agreement.

HELD:
In justifying the withholding of the amount of P924, 000.00 representing the interest due of
the unpaid installments, both the trial and the appellate court relied on paragraph 6 of the
memorandum of agreement entered into by the parties. However, both courts failed to consider
paragraph 9 contained in the same memorandum of agreement which provides in very clear terms
that when the owners exercise their option to forfeit the down payment, they shall return to the
buyer any amount paid by the buyer in excess of the down payment with no obligation to pay
interest thereon. This should include all amounts paid, including interest. Had it been the intention
of the parties to exclude the interest from the amount to be returned to the buyer in the event that
the owner exercises its option to terminate or rescind the agreement, then such should have been
stated in categorical terms. Thus, there is no basis in the conclusion reached by the lower courts that
interest paid should not be returned to the buyer. Moreever, the private respondents withholding
of the amount corresponding to the interest violated the specific and clear stipulation in paragraph 9
of the memorandum of agreement that except for the down payment, all amounts paid shall be
returned to the buyer with no obligation to pay interest thereon. The parties are bound by their
agreement. Thus Article 1159 of the Civil Code expressly provides: Obligation arising from contracts have
the force of law between the contracting parties and should be complied with in good faith.

Page 25 of 745
PHILIPPINE REALTY and HOLDING CORP. v. LEY CONST. and DEV. CORP.
G. R. No. 165548, June 13, 2011

FACTS:
Ley Construction and Development Corporation (LCDC) was the project contractor for
the construction of several buildings for Philippine Realty & Holdings Corporation (PRHC), the
project owner. Engineer Dennis Abcede (Abcede) was the project construction manager of
PRHC, while Joselito Santos (Santos) was its general manager and vice-president for operations.
Sometime between April 1988 and October 1989, the two corporations entered into four
major construction projects, as evidenced by four duly notarized "construction agreements."
These were the four construction projects the parties entered into involving a Project 1, Project 2,
Project 3 (all of which involve the Alexandra buildings) and a Tektite Building. LCDC
committed itself to the construction of the buildings needed by PRHC, which in turn committed
itself to pay the contract price agreed upon. In the course of the construction of the Tektite
Building, it became evident to both parties that LCDC would not be able to finish the project
within the agreed period. LCDC explained that the unanticipated delay in construction was due
mainly to the sudden, unexpected hike in the prices of cement and other construction materials.
Both parties agreed to enter into another agreement. Abcede asked LCDC to advance the amount
necessary to complete construction. Its president acceded, on the absolute condition that it be
allowed to escalate the contract price. Abcede replied that he would take this matter up with the
board of directors of PRHC.The board of directors turned down the request for an escalation
agreement. However, On 9 August 1991 Abcede sent a formal letter to LCDC, asking for its
conformity, to the effect that should it infuse P36 million into the project, a contract price
escalation for the same amount would be granted in its favor by PRHC.
LCDC then proceeded with the construction of the Tektite Building, expending the entire
amount necessary to complete the project. From August to December 1991, it infused amounts
totaling P 38,248,463.92. These amounts were not deposited into the joint account of LCDC and
PRHC, but paid directly to the suppliers upon the instruction of Santos.LCDC religiously
submitted to PRHC monthly reports that contained the amounts of infusion it made from the
period August 1991 to December 1991. PRHC never replied to any of these monthly reports.On
20 January 1992, LCDC wrote a letter addressed to Santos stating that it had already complied
with its commitment as of 31 December 1991 and was requesting the release of P 2,248,463.92.
In a letter dated 18 January 1993, LCDC, through counsel, demanded payment of the
agreed escalation price of P 36 million. In its reply on 16 February 1993, PRHC suddenly denied
any liability for the escalation price. In the same letter, it claimed that LCDC had incurred 111
days of delay in the construction of the Tektite Building and demanded that the latter pay P
39,326,817.15 as liquidated damages.

ISSUE:
Whether or not LCDC was delayed in the performance of its obligation to construct the
buildings for PRHC .

HELD:
The Court held that A subsequent escalation agreement was validly entered into by the
parties, but only to the extent of P 36 million. LCDC was able to establish that Abcede and
Santos, on behalf of PRHC, had signed the letter-agreement containing the stipulation on the
escalation. PRHC does not question the validity of these agreements; it thereby effectively
admits that these two individuals had actual authority to sign on its behalf with respect to these
construction projects. Thus, the lack of authority on their part should not be used to prejudice it,
considering that the two were clothed with apparent authority to execute such agreements. In
addition, PRHC is allegedly barred by promissory estoppel from denying the claims of the other
corporation.
The Court further held that LCDC is not liable for liquidated damages for delay in the
construction of the buildings for PRHC. There is no question that LCDC was not able to fully
construct the Tektite Building and Projects 1, 2, and 3 on time. The shortage in supplies and
cement may be characterized as force majeure. In the present case, hardware stores did not have
enough cement available in their supplies or stocks at the time of the construction in the 1990s.

Page 26 of 745
TITAN-IKEDA VS. PRIMETOWN
G.R No. 158768
February 12, 2008

FACTS:

The respondent Primetown Property Corporation entered into contract weith the
petitioner Titan-Ikeda Construction Corporation for the structural works of a 32-storey prime
tower. After the construction of the tower, respondent again awarded to the petitioner the amount
of P 130,000,000.00 for the towers architectural design and structure. Howevere, in 1994, the
respondent entered inot a contract of sale of the tower in favor of the petitioner in a manner
called full-swapping. Since the respondent had allegedly constructed almost one third of the
project as weel as selling some units to third persons unknown to the petitioner. Integrated Inc.
took over the project, thus the petitioner is demanding for the return of its advanced payment in
the amount of P2, 000,000.00 as weel as the keys of the unit.

ISSUE:

Whether the petitioner is entitled to damages.

RULING:

No, because in a contract necessarily that there is a meeting of the minds of the parties in
which this will be the binding law upon them. Thus, in a reciprocal obligation. Both parties are
obliged to perform their obligation simultaneously and in good faith. In this case, petitioner,
Titan-Ikeda can not recover damages because it was found out there was no solutio indebiti or
mistake in payment in this case since the latter is just entitled to the actual services it rendered to
the respondent and thus it is ordered to return the condominium units to the respondent.

Page 27 of 745
PADCOM Condominium Corporation vs. Ortigas Center Association, Inc.,
G.R. No. 146807, May 9, 2002

FACTS:
Petitioner Padcom Condominium Corporation (hereafter PADCOM) owns and manages
the Padilla Office Condominium Building (PADCOM Building) located at Emerald Avenue,
Ortigas Center, Pasig City. The land on which the building stands was originally acquired from
the Ortigas & Company, Limited Partnership (OCLP), by Tierra Development Corporation
(TDC) under a Deed of Sale dated 4 September 1974. Among the terms and conditions in the
deed of sale was the requirement that the transferee and its successor-in-interest must become
members of an association for realty owners and long-term lessees in the area later known as the
Ortigas Center. Subsequently, the said lot, together with improvements thereon, was conveyed
by TDC in favor of PADCOM in a Deed of Transfer dated 25 February 1975.
In 1982, respondent Ortigas Center Association, Inc. (hereafter the Association) was organized
to advance the interests and promote the general welfare of the real estate owners and long-term
lessees of lots in the Ortigas Center. It sought the collection of membership dues in the amount
of two thousand seven hundred twenty-four pesos and forty centavos (P2, 724.40) per month
from PADCOM. The corporate books showed that PADCOM owed the Association P639,
961.47, representing membership dues, interests and penalty charges from April 1983 to June
1993. The letters exchanged between the parties through the years showed repeated demands for
payment, requests for extensions of payment, and even a settlement scheme proposed by
PADCOM in September 1990.
In view of PADCOM's failure and refusal to pay its arrears in monthly dues, including interests
and penalties thereon, the Association filed a complaint for collection of sum of money before
the trial court. The Association averred that purchasers of lands within the Ortigas Center
complex from OCLP are obligated under their contracts of sale to become members of the
Association. This obligation was allegedly passed on to PADCOM when it bought the lot from
TDC, its predecessor-in-interest.
The trial court dismissed the case. However, the Court of Appeals reversed the same in favor of
the Association.

ISSUE:
Whether or not PADCOM is a member of the Ortigas Center Association, Inc.

HELD:
As a lot owner, PADCOM is a regular member of the Association. No application for
membership is necessary. If at all, acceptance by the Board of Directors is a ministerial function
considering that PADCOM is deemed to be a regular member upon the acquisition of the lot
pursuant to the automatic membership clause annotated in the Certificate of Title of the property
and the Deed of Transfer. PADCOMs contention that the automatic membership clause is a
violation of its freedom of association because it was never forced to join the association is
likewise untenable. Nobody forced it to buy the land when it bought the building with the
annotation of the condition or lien on the Certificate of Title thereof and accepted the Deed.
PADCOM voluntarily agreed to be bound by and respect the condition, and thus to join the
Association.
Having ruled that PADCOM is a member of the Association, it is obligated to pay its dues
incidental thereto as mandated by Article 1159 of the Civil Code which states that obligations
arising from contracts have the force of law between the contracting parties and should be
complied with in good faith.
Assuming in gratis argumenti that PADCOM is not a member of the Association, it cannot
evade payment without violating the equitable principles underlying quasi-contracts. Article
2142 of the Civil Code provides that certain lawful, voluntary and unilateral acts give rise to the
juridical relation of quasi-contract to the end that no one shall be unjustly enriched or benefited
at the expense of another.

Page 28 of 745
MC Engineering, Inc., vs. Court of Appeals
G.R. No. 104047, April 3, 2002
380 SCRA 116

FACTS:
Mc Engineering, Inc. and Surigao Coconut Development Corporation signed a contract,
for the restoration of the latters building, land improvement, electrical, and mechanical
equipment located at Lipata, Surigao City, which was damaged by typhoon Nitang. Defendant
Mc Engineering and plaintiff Gerent Builders, Inc. entered into an agreement wherein defendant
subcontracted to plaintiff the restoration of the buildings and land improvement phase of its
contract with Sucodeco.
On January 2, 1985, plaintiff received from defendant the amount of P1, 339,720.00 as full
payment of the sub-contract price, after deducting earlier payments made by defendant to
plaintiff, as evidenced by the affidavit executed by plaintiffs president, Mr. Narciso C. Roque,
wherein the latter acknowledged complete satisfaction for such payment on the basis of the
Statement of Account which plaintiff had earlier forwarded to defendant.
Nevertheless, plaintiff is still claiming from defendant the sum of P632, 590.13 as its share in the
adjusted contract cost in the amount of P854, 851.51, alleging that the sub-contract is subject to
the readjustment provided for in Section VII of the agreement, and also the sum of P166, 252.00
in payment for additional electrical and civil works outside the scope of the sub-contract.
Petitioner refused to pay respondent Gerent. Thus, on March 21, 1985, respondent Gerent filed
the complaint against petitioner. On March 28, 1985, the trial court issued the corresponding
writ of preliminary attachment upon the filing by respondent Gerent of a P632, 590.13 bond
issued by respondent Surety. On April 24, 1985, petitioner moved to quash the writ on the
ground that it was improperly issued. The trial court denied the motion.
On July 13, 1987, the trial court ordered the return of petitioners properties that deputy sheriff
Cristobal C. Florendo attached and seized. The sheriff reported to the court that he never seized a
single property of petitioner but merely conducted a paper levy.
On January 5, 1988, petitioner filed an application against the attachment bond to recover
damages it suffered due to the wrongful issuance of the writ of attachment. Respondent Surety
opposed the application.
In its Answer, petitioner vigorously denied respondent Gerents causes of action. Petitioner
counterclaimed for damages and attorneys fees due to the improper issuance of the writ of
attachment.

ISSUE:
Whether or not petitioner is entitled to actual moral and exemplary damages due to the
wrongful issuance of the writ of preliminary attachment.

HELD:
Since no moral damages is due to appellee and it appearing that no actual damages was
awarded by the lower court, the grant of exemplary damages has no leg on which to stand (Art.
2234, Civil Code).
If at all, the wrongful issuance of the writ of attachment, as ruled out by this Court, merely
resulted in actual damages to appellee. But such is not automatically awarded for it is subject to
proof. Appellees claim that it lost major contracts after a credit investigation revealed that its
accounts were garnished is a bare allegation not merely unsupported by solid evidence but is also
speculative. The alleged $35,000.00 remittance refused by the Hongkong and Shanghai Bank
does not inspire belief for failure of appellee to produce documentary proof to buttress its claim.
We agree with the Court of Appeals that the trial court erred in awarding moral and exemplary
damages to petitioner. The mere fact that a complaint is dismissed for lack of legal basis will not
justify an award of moral damages to the prevailing party. Even the dismissal of a clearly
unfounded civil action or proceeding will not entitle the winning party to moral damages. For
moral damages to be awarded, the case must fall within the instances enumerated in Article
2219, or under Article 2220, of the Civil Code. Moreover, in the absence of fraud, malice,
wanton recklessness or oppressiveness, exemplary damages cannot be awarded.

Page 29 of 745
Bank of the Philippine Islands vs. Benjamin Pineda
G.R.No. L-62441, December 14, 1987
156 SCRA 404

FACTS:
Through financing of Peoples Bank and Trust Company, now BPI, three vessels were
bought by Southern Industrial Project (SIP) and/or Bacong Shipping Company. SIP is a
corporation whose majority stockholder belongs to Concon Family. Bacong Shipping Company
is a Panamanian corporation. The said vessels were mortgaged to the bank as a security of their
payment of their bank loans.
Interocean Shipping Corporation, a booking agency, handled the operation of said
vessels. It undertook the freight revenues from their charter and operation which shall be
deposited with Trust Department of PBTC and disbursements made therefrom shall be covered
by vouchers bearing the approval of SIP.
SIP and PBTC became doubtful of the amount of revenues being deposited with the bank
as diversions of payments were being made. Gregorio Concon of SIP and/or Bacong and Ramon
Azanza of PBTC organized SA Gacet Inc. to manage and supervise the vessels operation with
Ezekiel Toeg as its manager. A management contract was entered into between SIP and Gacet
Inc. placing the supervision and management of said vessels in the hands of Gacet for a specified
period, renewable at the will of the parties without however terminating the booking agency of
Interocean Shipping Corp. Gacet and Interocean, in accordance with the management contract,
contracted services of Benjamin Pineda doing business in the name and style Pioneer Iron Works
to carry out repairs, fabrication and installation of necessary parts in said vessels in order to
make them seaworthy and in good working condition.
Unable to pay their mortgage indebtedness to PBTC hich became past due, SIP and/or
Bacong sold said vessels to PBTC by way of dacion en pago.Pineda filed an action against SIP,
Gacet, Interocean and PBTC for payment and interest of the cost of repairs, fabrication and
installation of necessary parts of the vessels.

ISSUE:
Who should be liable for the payment of the cost of repairs undertaken in the subject
vessels?

HELD:
The Deed of Confirmation of Obligation is but a part or corollary to the Deeds of Sale of
the vessels. In fact, specific reference thereto was made by said Deeds of Sale as to the
settlement of obligations, among which are repairs in question. The stipulation with the Deed of
Confirmation leaves no room for doubt while the bank may indeed pay certain obligations. The
primary purpose of the contracts is the protection of the vessels. Among them are liens on the
same under which the obligation to private respondent properly belongs.
Private respondent was paid certain sum of money and its balance through the issuance of
three checks by Interocean. Under the circumstances, private respondent has no basis or
necessity at that time to exercise his right of retention under 1731 of the Civil Code. The checks
were dishonored thus the private respondent could not give validity to petitioners argument that
the former has waived or abandoned his liens on the vessels. To pursue such view would put a
premium on an act of deception which led private respondent to believe that he will be fully paid.
Furthermore, when the checks were dishonored, it was impossible for private respondent to
enforce his liens because the vessels were already in Japan, outside the territorial jurisdiction of
Philippine waters. If there was no intention on the part of PBTC (BPI) to assume responsibility
for these obligations at the time of the sale of the vessels, there is no sense in executing said
Deed of Confirmation together with the Deeds of Sale and the stipulations thereunder would be
pointless.
The repairs made on the vessels ultimately redounded to the benefit of the new owner
(BPI) for without said repairs, those vessels would not be seaworthy. Under Article 2124 of the
Civil Code, such acts give rise to the juridical relation of quasi-contract to the end that no one
shall be unjustly enriched or benefited at the expense of another.The petitioner bank is
answerable to Pineda for the services contracted on the vessels.

Page 30 of 745
State Investment vs. Court of Appeals
G.R. No. 90676, June 19, 1991
198 SCRA 392

FACTS:

Respondent spouses Rafael and Refugio Aquino pledged certain shares of stock to
petitioner State Investment House Inc. in order to secure a loan of P120, 000.00. Prior to the
execution of the pledge, respondent spouses Jose and Marcelina Aquino signed an agreement
with Petitioner for the latters purchase of receivables amounting to P375, 000.00. When the 1st
Account fell due, respondent spouses paid the same partly with their own funds and partly from
the proceeds of another loan which they obtained also from Petitioner designated as the 2nd
Account. This new loan was secured by the same pledge agreement executed in relation to the
1st Account. When the new loan matured, State demanded payment. Respondents expressed
willingness to pay, requesting that upon payment, the shares of stock pledged be released. State
denied the request on the ground that the loan which it had extended to the spouses Jose and
Marcelina Aquino has remained unpaid.

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

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

ISSUES:

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

HELD:

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

Page 31 of 745
ABELLANA V. PEOPLE
G.R. No. 174654, August 17, 2011

FACTS:

In 1985, petitioner Felixberto A. Abellana extended a loan to private respondents spouses


Diaga and Saapia Alonto (spouses Alonto), secured by a Deed of Real Estate Mortgage over Lot
Nos. 6471 and 6472 located in Cebu City.Subsequently, or in 1987, petitioner prepared a Deed
of Absolute Sale conveying said lots to him. The Deed of Absolute Sale was signed by spouses
Alonto in Manila. However, it was notarized in Cebu City allegedly without the spouses Alonto
appearing before the notary public. Thereafter, petitioner caused the transfer of the titles to his
name and sold the lots to third persons.On August 12, 1999, respondent spouses filed a
complaint charging petitioner with Estafa through Falsification of Public Document.

The RTC found that petitioner did not intend to defraud the spouses Alonto and
that petitioner can only be held guilty of Falsification of a Public Document by a private
individual under Article 172(1)in relation to Article 171(2) of the Revised Penal Code and not
Estafa through falsification of public document as charged in the Information.

Petitioner, upon appeal, raised the issue of whether an accused who was acquitted
of the crime charged may nevertheless be convicted of another crime or offense not specifically
charged and alleged and which is not necessarily included in the crime or offense charged. The
CA held that petitioner who was charged with and arraigned for estafa through falsification of
public document under Article 171(1) of the RPC could not be convicted of Falsification of
Public Document by a Private Individual under Article 172(1) in relation to Article 171(2). Thus,
the CA opined that the conviction of the petitioner for an offense not alleged in the Information
or one not necessarily included in the offense charged violated his constitutional right to be
informed of the nature and cause of the accusation against him. Nonetheless, the CA affirmed the
trial court's finding with respect to petitioner's civil liability.

ISSUE:
Whether or not petitioner could still be held civilly liable notwithstanding his
acquittal.

HELD:
NO. It is an established rule in criminal procedure that a judgment of acquittal
shall state whether the evidence of the prosecution absolutely failed to prove the guilt of the
accused or merely failed to prove his guilt beyond reasonable doubt. The "extinction of the penal
action does not carry with it the extinction of civil liability unless the extinction proceeds from a
declaration in a final judgment that the fact from which the civil liability might arise did not
exist."
Civil liability arises when one, by reason of his own act or omission, done
intentionally or negligently, causes damage to another. Hence, for petitioner to be civilly liable to
spouses Alonto, it must be proven that the acts he committed had caused damage to the
spouses.Based on the records of the case, we find that the acts allegedly committed by the
petitioner did not cause any damage to spouses Alonto.
Even assuming that the spouses Alonto did not personally appear before the
notary public for the notarization of the Deed of Absolute Sale, the same does not necessarily
nullify or render void ab initio the parties' transaction. Such non-appearance is not sufficient to
overcome the presumption of the truthfulness of the statements contained in the deed. And since
the defective notarization does not ipso facto invalidate the Deed of Absolute Sale, the transfer of
said properties from spouses Alonto to petitioner remains valid. Hence, when on the basis of
said Deed of Absolute Sale, petitioner caused the cancellation of spouses Alonto's title and the
issuance of new ones under his name, and thereafter sold the same to third persons, no damage
resulted to the spouses Alonto.

Page 32 of 745
PEOPLE VS. MALICSI
G.R No. 175833
January 29, 2008

FACTS:

The accused-appellant was accused for the crime of rape against his niece. The incident
was repeated trice by the appellant. The appellant contended that he and the victim were
sweethearts but the trial court did not give weight to that theory.

The trial court found appellant guilty of the crime of four counts of qualified rape and
was sentenced to suffer the penalty of death for each count of rape, to pay P300,000.00 as civil
indemnity (P75,000.00 for each count), and P200,000.00 as moral damages (P50,000.00 for each
count). The CA however modified the findings of the RTC declaring that appellant is guilty of
four counts of simple rape and to suffer the penalty of reclusion perpetua.

ISSUE:

Whether the award of damages was properly made.

RULING:

No, because the Supreme Court declared that the crime committed was four count of
simple rape only and not qualified rape because the special aggravating circumstances of
minority and relationship must be alleged in the information but the prosecution failed to do so.
Since it is not included, four counts of simple rape should be undertaken. The penalty imposed
then should be reclusion perpetua. The appellate court also correctly affirmed the award by the
trial court of P200,000.00 for moral damages. Moral damages are automatically granted to rape
victim. However, the award of civil indemnity is reduced to P200,000.00 in the amount of
P50,000.00 for each count of simple rape is automatically granted.

Page 33 of 745
People of the Philippines vs. Rosauro Sia
G.R. No. 137457, November 21, 2001
370 SCRA 123

FACTS:

This is an automatic review of a decision of the Regional Trial Court finding the accused
Johnny Balalio y Deza and Jimmy Ponce y Tol guilty beyond reasonable doubt as principals by
conspiracy for violation of RA 6539 (Anti- Carnapping law) as amended, and sentenced them to
suffer the penalty of death.

Accused are likewise adjudged jointly and severally liable to pay Agripina Bermudez, the
mother of the deceased Christian Bermudez the sums of: (a) P50, 000.00 as compensatory
damages for the death of Christian Bermudez; (b) P200, 000.00 as burial and other expenses
incurred in connection with the death of Christian; and (c) P3, 307,199.60 (2/3 x [80-27] x 300
per day x 26 days (excluding Sundays) x 12 months) representing the loss of earning capacity of
Christian Bermudez as taxi driver.

ISSUE:
The issue is whether or not the trial courts award for damages is proper.

HELD:

The decision is partly correct. The Court finds the amount of P50, 000.00 as death
indemnity proper, following prevailing jurisprudence, and in line with controlling policy. The
award of civil indemnity may be granted without any need of proof other than the death of the
victim. Though not awarded by the trial court, the victims heirs are likewise entitled to moral
damages, pegged at P50, 000.00 by controlling case law, taking into consideration the pain and
anguish of the victims family brought about by his death.
However, the award of P200, 000.00 as burial and other expenses incurred in connection
with the death of the victim must be deleted. The records are bereft of any receipt or voucher to
justify the trial courts award of burial and other expenses incurred in connection with the
victims death. The rule is that every pecuniary loss must be established by credible evidence
before it may be awarded. Credence can be given only to claims, which are duly supported, by
receipts or other credible evidence.
The trial court was correct in awarding damages for loss of earning capacity despite the
non-availability of documentary evidence. The court based on testimony in several cases has
awarded damages representing net earning capacity. However the amount of the trial courts
award needs to be re computed and modified accordingly.
In determining the amount of lost income, the following must be taken into account: (1)
the number of years for which the victim would otherwise have lived; and (2) the rate of the loss
sustained by the heirs of the deceased. The second variable is computed by multiplying the life
expectancy by the net earnings of the deceased meaning total earnings less expenses necessary in
the creation of such earnings or income less living and other incidental expenses considering that
there is no proof of living expenses of the deceased, net earnings are computed at fifty percent of
the gross earnings.
In this case, the court notes that the victim was 27 years old at the time of his death and
his mother testified that as a driver of the Tamaraw FX taxi, he was earning P650.00 a day.
Based on the foregoing computation, the award of the trial court with regard to lost income is
thus modified accordingly.
The court ordered the accused to pay the heirs of the victim Christian Bermudez the sum of P50,
000.000 as civil indemnity, the sum of P50, 000.00 as moral damages, and the sum of P2,
996,867.20 representing lost earnings. The award of P200, 000.00 as burial and other expenses is
deleted for lack of substantial proof.

Page 34 of 745
People of the Philippines vs. Carlos Doctolero, Sr
G.R. No. 131866, August 20, 2001
363 SCRA 404

FACTS:

This is an appeal of the accused from the decision of the Regional Trial Court of Baguio
City finding him guilty beyond reasonable doubt of the crime of murder and ordering him to
indemnify the heirs of the victim the sum of P50, 000.00 as indemnity for his death; the sum of
P227, 808.80 as actual damages for expenses incurred for hospitalization, doctors fees, funeral
expenses, vigil and burial as a result of his death, and P300, 000.00 as moral damages for the
pain and mental anguish suffered by the heirs by reason of his death, all indemnifications being
without subsidiary imprisonment in case of insolvency, and to pay the costs.

ISSUE:

Whether or not the trial courts award of damages is proper.

HELD:

The Supreme Court modified the award for damages by the trial court. It reduced the
award to P112, 413.40 representing funeral expenses, which were duly proven and covered by
receipts Expenses relating to the 9th day, 40th day and 1st year anniversaries cannot be
considered in the award of actual damages as these were incurred after a considerable lapse of
time from the burial of the victim. With respect to the award of moral damages, the same is
reduced to P50, 000.00 in accordance with existing jurisprudence.

Based on the above modifications the court ordered the accused to pay the heirs of the
victim P112, 413.40 as actual damages P50, 000.00 as civil indemnity, and P50, 000.00 as moral
damages plus costs.

Page 35 of 745
People of the Philippines vs. Rolly Abulencia
G.R. No. 138403, August 22, 2001
363 SCRA 496

FACTS:

This is an automatic review of a decision of the Regional Trial Court of Urdaneta City,
Pangasinan finding the accused guilty beyond reasonable doubt of the crime of Aggravated Rape
with Homicide sentencing the accused to suffer the penalty of death, and ordering him to
indemnify the heirs of the victim, the sum of P75, 000.00 damages, and another sum of P20,
000.00 for exemplary damages plus P6, 425.00 as actual damages.

ISSUE:

Whether or not the trial courts award for damages is proper.

HELD:

The Supreme Court modified the trial courts award for damages. The trial court awarded
only 75,000.00 as civil indemnity, but current jurisprudence has fixed at P100, 000.00 the civil
indemnity in cases of rape with homicide, which is fully justified and properly commensurate
with the seriousness of the special complex crime.

The trial court did not award moral damages to the victims family. Based on prevailing
jurisprudence, moral damages may be awarded to the heirs of the victim without need for
pleading or proof of its basis for their mental, physical and psychological sufferings are too
obvious to still require their recital at the trial. Hence, moral damages in the amount of P50,
000.00 must be awarded.

In People v. Lagarto, the court held that attendant circumstances may be considered to
determine civil liability. Thus, in view of the evident cruelty inflicted upon the victim, as shown
by the multiple burns and contusions on her body, the court granted the award of exemplary
damages in the amount of P25, 000.00.

Based on the above modifications, the Court ordered the accused to pay the heirs of the
victim P100, 00.00 as civil indemnity; P50, 000.00 as moral damages; P25, 000.00 as exemplary
damages; and P6, 425.00 as actual damages.

Page 36 of 745
Reynaldo Bermudez vs. Hon. Judge A. Melencio-Herrera
G.R. No. L-32055, February 26, 1988
158 SCRA 168

FACTS:

A cargo truck driven by Domingo Pontino and owned by Cordova Ng Sun Kwan bumped
a jeep on which Rogelio, a six-year old son of plaintiff-appellants, was riding. The boy sustained
injuries which caused his death. As a result, a criminal case for Homicide through Reckless
Imprudence was filed against Domingo Pontino by the Manila City Fiscals Office. Plaintiff-
appellants filed in the said criminal case A Reservation to File Separate Civil Action.

Subsequently, the plaintiff-appellants filed a civil case for damages with the Court of
First Instance of Manila. Finding that the plaintiffs instituted the action on the assumption that
defendant Pontinos negligence in the accident constituted a quasi-delict, the trial court stated
that the plaintiffs had already elected to treat the accident as a crime by reserving in the
criminal case the right to file a separate civil action. That being so, the trial court decided to
order the dismissal of the complaint against defendant Cordova Ng Sun Kwan and to suspend
the hearing of the case against Domingo Pontino until after the criminal case for Homicide
Through Reckless Imprudence is finally terminated. From said order, plaintiffs filed the present
appeal.

ISSUE:
Whether or not the plaintiff-appellants had already elected to treat the accident as a
crime by reserving in the criminal case the right to file a separate civil action.

HELD:

According to the Supreme Court, in case of negligence, the injured party or his heirs has
a right to choose between an action to enforce civil liability arising from crime under Article 100
of the Revised Penal Code and an action for quasi-delict under Article 2176-2194 of the Civil
Code. If the party chooses the latter, he may hold the employer solidarily liable for the negligent
act of his employee, subject to the employers defense of exercise of the diligence of a good
father of the family.

In the case at bar, the action filed by appellant was an action for damages based on quasi-
delict. The fact that appellants reserved their right in the criminal case to file an independent civil
action did not preclude them from choosing to file a civil action for quasi-delict.

Page 37 of 745
People of the Philippines vs. Relova
G.R. No. L-45129, March 6, 1987
148 SCRA 293

FACTS:

On February 1, 1975, members of the Batangas City Police together with personnel of the
Batangas Electric Light System, equipped with a search warrant, searched the premises of the
Opulencia Carpena Ice Plant and Cold Storage owned and operated by private respondent
Manuel Opulencia. The police discovered that electric wiring devices and contraptions had been
installed without the necessary authority from the city government. These electric devices were
designed purposely to lower or decrease the readings of electric consumption in the electric
meter of the said electric and cold storage ice plant.

Consequently, an Assistant City Fiscal of Batangas filed an information against


Opulencia for violation of Ordinance No. 1 Series of 1974, Batangas City. However,
subsequently, the accused filed a motion to dismiss the information upon the grounds that the
crime there charged had already prescribed.

Fourteen (14) days later, the Acting City Fiscal of Batangas filed before the Court of First
Instance of Batangas another information against Opulencia this time for theft of electric power
under Article 308 in relation to Article 309 of the Revised Penal Code. However, the case was
likewise dismissed on the ground of the constitutional right against double jeopardy. As regards
the civil aspect of the case, no right to file a separate civil action was filed by the Batangas City
Electric Light System.

ISSUE:
Whether or not the extinction of criminal liability whether by prescription or by the bar of double
jeopardy carries with it the extinction of civil liability based on the offense charged.

HELD:

In the present case, accused Opulencia freely admitted during the police investigation
having stolen electric current through the installation and use of unauthorized electric
connections or devices. While the accused pleaded not guilty before the City Court of Batangas
City, he did not deny having appropriated electric power. However, there is no evidence in the
record as to the amount or value of the electric power appropriated by the accused. Accordingly,
the civil action which has not been waived impliedly or expressly should be remanded to the
Court of First Instance of Batangas City for reception of evidence on the amount or value of the
electric power appropriated and converted by Manuel Opulencio and rendition of judgment
conformably with such evidence.

Page 38 of 745
Manantan vs. Court of Appeals
G.R. No. 107125, January 29, 2001
350 SCRA 387

FACTS:

After going from one place to another and consuming large amounts of beer, the accused,
the deceased, and two others boarded on the car of the accused where he was the driver. Driving
at a high speed at the middle portion of the highway and trying to overtake tricycle. At such
speed, the accused was not able to avoid the passenger jeepney and thus collided with it. The
accused immediately tried to swerve the car to the right and move his body away from the
steering wheel but he was not able to avoid the oncoming vehicle and the two vehicles collided
with each other at the center of the road.

The trial court decided in favor of the accused. However, the Court of Appeals modified
the decision of the lower court, in that defendant-appellee is held civilly liable for his negligent
and reckless act of driving his car which was the proximate cause of the vehicular accident and
sentenced to indemnify plaintiff-appellants in the amount of P174, 400.00 for the death of Ruben
Nicolas

ISSUES:
(1) Whether or not the trial court erred in finding that petitioners acquittal did not extinguish
his civil liability.
(2) Whether or not the Court a quo erred in finding that petitioners acquittal did not
extinguish his civil liability.
(3) Whether or not the appellate court committed reversible error in finding to apply the
Manchester doctrine.

HELD:

The court of appeals in determining whether Article 29 of the Civil Code applied was not
precluded by the petitioners acquittal, from looking into the question of petitioners negligence
or reckless imprudence. What was elevated to the Court of Appeals by private respondents was
the civil aspect of Criminal Case No. 066. Petitioner was not charged anew with a second
criminal offense identical to the first offense. Therefore, there was no second jeopardy to speak
of.

The decision in Criminal Case No 066 supports the conclusions of the appellate court that
the acquittal was based on reasonable doubt; hence, the civil liability was not extinguished by his
discharge. It clearly shows that petitioners acquittal was predicated on the conclusion that his
guilt had not been established with moral centainty.
At the time of the filing of the information in 1983, the implied institution of civil actions with
criminal actions was governed by Rule III, Section 1 of the 1964 Rules of Court. Where the civil
action is impliedly instituted together with the criminal action, the actual damages claimed by the
offended parties, as in this case, are not included in the computation of the filing fees. Filing
fees are to be paid only if other items of damages such as moral, nominal, temperate or
exemplary damages are alleged in the complaint or information, or if they are not so alleged,
shall constitute a first lien on the judgment. The filing fees are deemed paid from the filing of
the criminal complaint or information.
WHEREFORE, the instant petition is DISMISSED for lack of merit. The assailed decision of the
Court of Appeals in CA-G.R. CV No. 19240 promulgated on January 31, 1992, as well as its
resolution dated August 24, 1992, denying herein petitioner's motion for reconsideration, are
AFFIRMED. Costs against petitioner.

Page 39 of 745
People of the Philippines vs. Rogelio Bayotas
G.R. No. 102007, September 2, 1994
236 SCRA 239

FACTS:

Rogelio Bayotas was charged with rape and eventually convicted thereof on June 19,
1991 in a decision penned by Judge Manuel Autajay. Pending appeal of his conviction, Bayotas
died on February 4, 1992 at the National Bilibid Hospital due to cardio respiratory arrest.
Consequently, the Supreme Court in its resolution of May 20, 1992, dismissed the criminal
aspect of the appeal. However, it required the Solicitor General to file its comment with regard to
Bayotas civil liability arising from his commission of the offense charged.

In his comment, the Solicitor General expressed his view that the death of the accused did
not extinguish his civil liability as a result of his commission of the offense charged. The
Solicitor General insists that the appeal should still be resolved for the purpose of reviewing his
conviction by the lower court on which the civil liability is based.

Counsel of the accused, on the other hand, opposed the view of the Solicitor General
arguing that the death of the accused while pending appeal extinguishes both his criminal and
civil penalties. In support of his position, said counsel invoked the ruling of the Court of Appeals
in People v. Castillo and Ocfemia which held that the criminal liability in a criminal case takes
root in the criminal liability; and therefore, civil liability is extinguished if accused should die
before final judgment is rendered.

ISSUE:
Whether or not the death of the accused pending appeal of his conviction extinguishes his
civil liability.

HELD:

In People v. Castillo, The Court resolved this issue stating Article 89 of the Revised
Penal Code which states that criminal liability is totally extinguished by the death of the convict.
As to the personal penalties and as to the pecuniary penalties, liability therefore is extinguished
only when the death of the offender occurs before final judgment.

The legal import of the term final judgment is similarly reflected in the Revised Penal
Code. Articles 72 and 78 of the legal body mention the term final judgment in the sense that it
is already enforceable. This also brings to mind Section 7, Rule 116 of the Rules of Court which
states that the judgment in a criminal case becomes final after the lapse of the period for
perfecting an appeal or when the sentence has been partially or totally satisfied or served, or the
defendant has expressly waived in writing his right to appeal.

Since the death of the accused occurred while his appeal is pending, the decision has not
yet become final and executory; thus, his civil liability together with his criminal liability is
extinguished. However, if the civil obligation arises from other sources of obligation other than
the crime complained of, the civil liability of the accused survived in spite of his death pending
his appeal. A preponderance of evidence is sufficient to prove his civil liability.

Page 40 of 745
Fausto Barredo vs. Severino Garcia
G.R. No. L-48006, July 8, 1942
73 PHIL 607

FACTS:

At about half past one in the morning of May 3, 1936, on the road between Malabon and
Navotas, Province of Rizal, there was a head-on collision between a taxi of the Malate Taxicab
driven by Pedro Fontanilla and a carretela guided by Pedro Dimapilis. The carretela was
overturned, and one of its passengers, 16-year-old boy Faustino Garcia, suffered injuries from
which he died two days later. A criminal action was filed against Fontanilla in the Court of First
Instance of Rizal and he was convicted and sentenced to an indeterminate sentence of one year
and one day to two years of prision correctional. The court in the criminal case granted the
petition that the right to bring a separate civil action be reserved. The Court of Appeals affirmed
the sentence of the lower court in the criminal case. Severino Garcia and Timotea Almario,
parents of the deceased, brought an action in the Court of First Instance of Manila against Fausto
Barredo as the sole proprietor of the Malate Taxicab and employer of Pedro Fontanilla. On July
8, 1939, the Court of First Instance of Manila awarded damages in favor of the plaintiffs for P2,
000.00 plus legal interest from the time the action was instituted.

The main theory of the defense is that the liability of Fausto Barredo is governed by the
Revised Penal Code; hence, his liability is only subsidiary, as there has been no civil action
against Pedro Fontanilla, the person criminally liable, Barredo cannot be held responsible in
this case.

However, the decision of the Court of Appeals expressed that the liability sought to be
imposed against Fausto Barredo is not a civil obligation arising from a felony or a misdemeanor,
but an obligation imposed in Article 1903 of the Civil Code by reason of his negligence in the
selection or supervision of his servant or employee.

ISSUE:
Whether or not the plaintiffs may bring this separate civil action against Fausto Barredo, thus
making him primary and directly responsible under Article 1903 of the Civil Code as the
employer of Pedro Fontanilla.

HELD:

A quasi-delict or culpa aquiliana is a separate and distinct legal institution under the Civil
Code with substantivity of it own, and individuality that is entirely apart and independent from a
delict or crime. Upon this principle, the primary and direct responsibility of employers may be
safely anchored.

To hold that there is only one way to make the employers liability effective, and that is,
to sue the driver and exhaust his properties is tantamount to compelling the plaintiff to follow a
devious and cumbersome method of obtaining relief. True, there is such a remedy under our
laws, but there is also an expeditious way, which is based on the primary and direct
responsibility of the employer under Article 1903 of the Civil Code.

At this juncture, it should be said that the primary and direct responsibility of employers
and presumed negligence are principles calculated to protect society. Workmen and employees
should be carefully chosen and supervised in order to avoid injury to the public. It is the masters
or employers who principally reap the profits resulting from the services of their servants. It is
but right that they should guarantee the latters careful conduct for the personnel and patrimonial
safety of the others.

Page 41 of 745
PHILIPPINE HAWK CORP. v. TAN LEE
G.R. No. 166869
February 16, 2010

FACTS:

On March 15, 2005, respondent Vivian Tan Lee filed before the RTC of Quezon City a
Complaint against petitioner Philippine Hawk Corporation and defendant Margarito Avila for
damages based on quasi-delict, arising from a vehicular accident that occurred on March 17,
1991 in Barangay Buensoceso, Gumaca, Quezon. The accident resulted in the death of
respondent's husband, Silvino Tan, and caused respondent physical injuries. The accident
involved a motorcycle, a passenger jeep, and a bus with Body No. 119. The bus was owned by
petitioner Philippine Hawk Corporation, and was then being driven by Margarito Avila.

On June 18, 1992, respondent filed an Amended Complaint, in her own behalf and in
behalf of her children, in the civil case for damages against petitioner. Respondent sought the
payment of indemnity for the death of Silvino Tan, moral and exemplary damages, funeral and
interment expenses, medical and hospitalization expenses, the cost of the motorcycle's repair,
attorney's fees, and other just and equitable reliefs.

In its Answer, petitioner denied liability for the vehicular accident, alleging that the
immediate and proximate cause of the accident was the recklessness or lack of caution of Silvino
Tan. Petitioner asserted that it exercised the diligence of a good father of the family in the
selection and supervision of its employees, including Margarito Avila.

The trial court rendered judgment against petitioner and defendant Margarito Avila,
wherein it adjudged guilty of simple negligence. It further held petitioner bus company liable for
failing to exercise the diligence of a good father of the family in the selection and supervision of
Avila, having failed to sufficiently inculcate in him discipline and correct behavior on the road.
The CA affirmed the decision of the trial court with modification in the award of damages.

ISSUE:

Whether or not petitioner is liable to respondent for damages.

HELD:

YES. The Court upholds the finding of the trial court and the Court of Appeals that
petitioner is liable to respondent, since it failed to exercise the diligence of a good father of the
family in the selection and supervision of its bus driver, Margarito Avila, for having failed to
sufficiently inculcate in him discipline and correct behavior on the road. Indeed, petitioner's tests
were concentrated on the ability to drive and physical fitness to do so. It also did not know that
Avila had been previously involved in sideswiping incidents. The Court also affirmed the CA's
decision in awarding civil indemnity for the death of respondent's husband, temperate damages,
and moral damages for the physical injuries sustained by respondent in addition to the damages
granted by the trial court to respondent.

Page 42 of 745
DY TEBAN VS. LIBERTY FOREST
G.R No. 161803
February 4, 2008

FACTS:

A Prime Mover Trailer suffered a tire blow out during the night of its travel at a national
highway. The trailer was owned by the respondent Liberty Forest. The driver allegedly put earl
warning devices but the only evidence being witnessed was a banana trunks and candles. Since
the car was placed at the right wing of the road, thus it cause the swerving of a Nissan van owned
by the petitioner when a passenger bus was coming in between the trailer. The Nissan van owner
claimed for damages against the respondent. The trial court found that the proximate cause of the
three way accident is the negligence and carelessness of driver of the respondent . However
reversed the decision of the trial court.

ISSUE:
Whether there was negligence on the part of the respondent.

RULING:

Yes. There was negligence on the part of the respondent when the latter failed to put and
used an early warning device because it was found out that there was no early warning device
being prescribed by law that was used by the driver in order to warn incoming vehicle.
Furthermore, the proximate cause of the accident was due to the position of the trailer where it
covered a cemented part of the road, thus confused and made trick way for other vehicles to pass
by. Thus the respondent is declared liable due to violation of road rules and regulations.

Page 43 of 745
SAFEGUARD SECURITY VS. TANGCO
G.R No. 165732
December 14, 2006

FACTS:

The victim Evangeline Tangco was depositor of Ecology Bank. She was also a licensed-
fire arm holder, thus during the incident, she was entering the bank to renew her time deposit and
along with her was her firearm. Suddenly, the security guard of the bank, upon knowing that the
victim carries a firearm, the security guard shot the victim causing the latters instant death. The
heirs of the victim filed a criminal case against security guard and an action against Safeguard
Security for failure to observe diligence of a goof father implied upon the act of its agent.

ISSUE:

Whether Safeguard Security can be held liable for the acts of its agent.

RULING:

Yes. The law presumes that any injury committed either by fault or omission of an
employee reflects the negligence of the employer. In quasi-delicts cases, in order to overcome
this presumption, the employer must prove that there was no negligence on his part in the
supervision of his employees.

It was declared that in the selection of employees and agents, employers are required to
examine them as to their qualifications, experience and service records. Thus, due diligence on
the supervision and operation of employees includes the formulation of suitable rules and
regulations for the guidance of employees and the issuance of proper instructions intended for
the protection of the public and persons with whom the employer has relations through his
employees. Thus, in this case, Safeguard Security committed negligence in identifying the
qualifications and ability of its agents.

Page 44 of 745
VILLANUEVA VS. DOMINGO
G.R No. 144274
September 20, 2004

FACTS:

In 1991, a collision was made by a green Mitsubishi lancer owned by Ocfemia against a
silver Mitsubishi lancer driven by Leandro Domingo and owned by petitioner Priscilla Domingo.
The incident caused the car of Domingo bumped another two parked vehicles. A charged was
filed against Ocfemia and the owner Villanueva. Villanueva claimed that he must not be held
liable for the incident because he is no longer the owner of the car, that it was already swapped to
another car . however, the trial court ordered the petitioner to pay the damages incurred by the
silver Mitsubishi lancer car.

ISSUE:
Whether the owner Villanueva be held liable for the mishap.

RULING:

Under the Motor Vehicle law, it was declared that the registered owner of any vehicle is
primary land directly liable for any injury it incurs while it is being operated. Thus, even the
petitioner claimed that he was no longer the present owner of the car, still the registry was under
his name, thus it is presumed that he still possesses the car and that the damages caused by the
car be charge against him being the registered owner. The primary function of Motor vehicle
registration is to identify the owner so that if any accident happens, or that any damage or injury
is caused by the vehicle, responsibility therefore can be fixed on a definite individual, the
registered owner.

Page 45 of 745
CALALAS VS. COURT OF APPEALS
G.R No. 122039
May 31, 2000

FACTS:

Eliza Sunga was a passenger of a jeepney owned and operated by the petitioner Calalas.
Private respondent Sunga sat in the rear protion of the jeepney where the conductor gave Sunga
an extension seat. When the jeep stopped, Sunga gave way to a passenger going outside the jeep.
However, an Isuzu Truck driven by Verene and owned by Salva, accidentally hit Sunga causing
the latter to suffer physical injuries where the attending physician ordered a three months of rest.
Sunga filed an action for damages against the petitioner for breach of contract of common
carriage by the petitioner.

On the other hand, the petitioner Calalas filed an action against Salva, being the owner of
the truck. The lower court ruled in favor of ther petitioner, thus the truck owner is liable for the
damage to the jeep of the petitioner.

ISSUE:
Whether the petitionerr is liable.

RULING:

Yes. The petitioner is liable for the injury suffered by Sunga. Under Article 1756
of the New Civil Code, it provides that common carriers are presumed to have been at fault or to
have acted negligently unless they prove that they observed extraordinary diligence as defined in
Arts. 1733 and 1755 of the Code. This provision necessarily shifts to the common carrier the
burden of proof.

In this case, the law presumes that any injury suffered by a passenger of the jeep
is deemed to be due to the negligence of the driver. This is a case on Culpa Contractual where
there was pre-existing obligations and that the fault is incidental to the performance of the
obligation. Thus, it was clearly observed that the petitioner has negligence in the conduct of his
duty when he allowed Sunga to seat in the rear portion of the jeep which is prone to accident.

Page 46 of 745
LUDO AND LUYM CORPORATION vs. COURT OF APPEALS
G.R. No. 125483
FEBRUARY 1, 2001

FACTS:

Ludo & Luym Corporation is a domestic corporation engaged in copra processing.


Private Respondent Gabisan Shipping Lines was the registered owner and operator of the motor
vessel MV Miguela, while the other private respondent, Anselmo Olasiman, was its captain. On
May 21, 1990, while MV Miguela was docking at petitioners wharf, it rammed and destroyed a
fender pile cluster. Ireneo Naval, petitioners employee, guided the vessel to its docking place.
After the small rope was thrown from the vessel and while the petitioners security guard was
pulling the big rope to be tied to the bolar, MV Miguela did not slow down. The crew did not
release the vessels anchor. Naval shouted Reverse to the vessels crew, but it was too late
when the latter responded, for the vessel already rammed the pile cluster. Petitioner demanded
for damages but private respondents denied the incident and the damage. Their witnesses
claimed that the damage, if any, must have occurred prior to their arrival and caused by another
vessel or by ordinary wear and tear.

ISSUE:
Is the doctrine of res ipsa loquitur applicable to this case?

RULING:

The doctrine of res ipsa loquitor provides that where the thing which causes injury is
shown to be under the management of the defendant, and the accident is such as in the ordinary
course of things does not happen if those who have the management use proper care, it affords
reasonable evidence, in the absence of an explanation by the defendant, that the accident arose
from want of care. In this case, all the requisites for this doctrine exist. First, MV Miguela was
under the exclusive control of its officers and crew. Second, aside from the testimony that MV
Miguela rammed the cluster pile, private respondent did not show persuasively other possible
causes of the damage. There exists a presumption of negligence against private respondents
which they failed to overcome. Additionally, petitioner presented proof that demonstrated private
respondents negligence. As testified by Capt. Olasiman, from command of slow ahead to
stop engine, the vessel will still travel 100 meters before it finally stops. However, he ordered
stop engine when the vessel was only 50 meters from the pier. Further, he testified that before
the vessel is put to slow astern, the engine has to be restarted. However, Olasiman can not
estimate how long it takes before the engine goes to slow astern after the engine is restarted.
From these declarations, the conclusion is that it was already too late when the captain ordered
reverse. By then, the vessel was only 4 meters from the pier, and thus rammed it.

Respondent companys negligence consists in allowing incompetent crew to man its


vessel. As shown also by petitioner, both Captain Olasiman and Chief Mate Gabisan did not
have a formal training in marine navigation. The former was a mere elementary graduate while
the latter is a high school graduate. Their experience in navigationwas only as a watchman and a
quartermaster, respectively. Gabisan Shipping Lines and the ship captain are held jointly and
severally liable for damages caused to the petitioner.

Page 47 of 745
THERMOCHEM INCORPORATED vs. LEONORA NAVAL
G.R. No. 131541
OCTOBER 20, 2000

FACTS:

"On May 10, 1992, at around 12:00 o'clock midnight, Eduardo Edem was driving a
"Luring Taxi" along Ortigas Avenue, near Rosario, Pasig, going towards Cainta. Thereafter, the
driver executed a U-turn to traverse the same road, going to the direction of EDSA. At this point,
the Nissan Pathfinder traveling along the same road going to the direction of Cainta collided with
the taxicab. The point of impact was so great that the taxicab was hit in the middle portion and
was pushed sideward, causing the driver to lose control of the vehicle. The taxicab was then
dragged into the nearby Question Tailoring Shop, thus, causing damage to the said tailoring
shop, and its driver, Eduardo Eden, sustained injuries as a result of the incident."

Private respondent, as owner of the taxi, filed a damage suit against petitioner,
Thermochem Incorporated, as the owner of the Nissan Pathfinder, and its driver, petitioner
Jerome Castro. After trial, the lower court adjudged petitioner Castro negligent and ordered
petitioners, jointly and severally, to pay private respondent actual, compensatory and exemplary
damages plus attorney's fees and costs of suit.

ISSUE:
What are the liabilities of both parties?

RULING:

The driver of the oncoming Nissan Pathfinder vehicle was liable and the driver of the U-
turning taxicab was contributorily liable. It is established that Castro was driving at a speed
faster than 50 kilometers per hour because it was a downhill slope. But as he allegedly stepped
on the brake, it locked causing his Nissan Pathfinder to skid to the left and consequently hit the
taxicab. Malfunction or loss of brake is not a fortuitous event. Between the owner and his driver,
on the one hand, and third parties such as commuters, drivers and pedestrians, on the other, the
former is presumed to know about the conditions of his vehicle and is duty bound to take care
thereof with the diligence of a good father of the family. A mechanically defective vehicle
should avoid the streets. As petitioner's vehicle was moving downhill, the driver should have
slowed down since a downhill drive would naturally cause the vehicle to accelerate. Moreover,
the record shows that the Nissan Pathfinder was on the wrong lane when the collision occurred.

The taxi driver is contributorily liable since he took a U-turn where it is not generally
advisable. The taxi was hit on its side which means that it had not yet fully made a turn to the
other lane. The driver of the taxi ought to have known that vehicles coming from the Rosario
bridge are on a downhill slope. Obviously, there was lack of foresight on his part, making him
contributorily liable. Considering the contributory negligence of the driver of private
respondent's taxi, the award of P47,850.00, for the repair of the taxi, should be reduced in half.
All other awards for damages are deleted for lack of merit.

Page 48 of 745
AMADO PICART vs. FRANK SMITH, JR.
G.R. No. L-12219
MARCH 15, 1918

FACTS:

The plaintiff, riding on his pony was half way across the Carlatan bridge when the
defendant approached from the opposite direction in an automobile, going at the rate of about ten
or twelve miles per hour. As the defendant neared the bridge he saw a horseman on it and blew
his horn to give warning of his approach. He continued his course and after he had taken the
bridge he gave two more successive blasts, as it appeared to him that the man on horseback
before him was not observing the rule of the road. The plaintiff saw the automobile coming and
heard the warning signals. However, thinking that he has no sufficient time to go to the other
side of the road, he pulled the pony closely up against the railing on the right side of the bridge
instead of going to the left. The defendant, instead of veering to the right while yet some distance
away or slowing down, continued to approach directly toward the horse. When he had gotten
quite near, there being then no possibility of the horse getting across to the other side, the
defendant quickly turned his car sufficiently to the right to escape hitting the horse alongside of
the railing where it as then standing; but in so doing the automobile passed in such close
proximity to the animal that it became frightened and turned its body across the bridge with its
head toward the railing. In so doing, it as struck on the hock of the left hind leg by the flange of
the car and the limb was broken. The horse fell and its rider was thrown off with some violence.
As a result of its injuries the horse died. The plaintiff received contusions which caused
temporary unconsciousness and required medical attention for several days.

ISSUE:
Whether or not the defendant is guilty of negligence.

RULING:

As the defendant started across the bridge, he had the right to assume that the horse and
the rider would pass over to the proper side; but as he moved toward the center of the bridge he
clearly saw that this would not be done; and he must in a moment have perceived that it was too
late for the horse to cross with safety in front of the moving vehicle. The control of the situation
had then passed entirely to the defendant; and it was his duty either to bring his car to an
immediate stop or, seeing that there were no other persons on the bridge, to take the other side
and pass sufficiently far away from the horse to avoid the danger of collision. Instead of doing
this, the defendant ran straight on until he was almost upon the horse.

The plaintiff himself was not free from fault, for he was guilty of antecedent negligence
in planting himself on the wrong side of the road. But it was the defendant who had the last clear
chance to avoid the impending harm and when he failed to do so, he is deemed negligent, thus
liable to pay damages in favor of the plaintiff.

Page 49 of 745
JOSE V. LAGON vs. HOOVEN COMALCO INDUSTRIES, INC
G.R. No. 135657
JANUARY 17, 2001

FACTS:

Sometime in April 1981 Lagon, a businessman and HOOVEN entered into two (2)
contracts, denominated Proposal, whereby for a total consideration of P104,870.00 HOOVEN
agreed to sell and install various aluminum materials in Lagons commercial building in
Tacurong, Sultan Kudarat. HOOVEN filed an action against Lagon claiming that the latter failed
to pay his due despite HOOVENs performance of its obligation. Lagon, in his answer, denied
liability and averred that HOOVEN was the party guilty of breach of contract by failing to
deliver and install some of the materials specified in the proposals; that as a consequence he was
compelled to procure the undelivered materials from other sources; that as regards the materials
duly delivered and installed by HOOVEN, they were fully paid.

ISSUE:
Who among the parties is entitled to damages?

RULING:

HOOVEN's bad faith lies not so much on its breach of contract - as there was no showing
that its failure to comply with its part of the bargain was motivated by ill will or done with
fraudulent intent - but rather on its appalling temerity to sue petitioner for payment of an alleged
unpaid balance of the purchase price notwithstanding knowledge of its failure to make complete
delivery and installation of all the materials under their contracts. Although petitioner was found
to be liable to respondent to the extent of P6,377.66, petitioner's right to withhold full payment of
the purchase price prior to the delivery and installation of all the merchandise cannot be denied
since under the contracts the balance of the purchase price became due and demandable only
upon the completion of the project. Consequently, the resulting social humiliation and damage
to petitioner's reputation as a respected businessman in the community, occasioned by the filing
of this suit provide sufficient grounds for the award of P50,000.00 as moral damages. On the part
of Lagon, he is ordered by the court to pay HOOVEN the amount corresponding to the value of
the materials admittedly delivered to him.

Page 50 of 745
SPOUSES FRANCISCO vs. HONORABLE COURT OF APPEALS
G.R. No. 118749
APRIL 25, 2003

FACTS:

On 3 February 1984, the spouses Lorenzo and Lorenza Francisco and Engineer
Bienvenido C. Mercado entered into a Contract of Development for the development into a
subdivision of several parcels of land in Pampanga. Under the Contract, respondent agreed to
undertake at his expense the development work for the Franda Village Subdivision. Respondent
committed to complete the construction within 27 months. Respondent also advanced
P200,000.00 for the initial expenses of the development work. In return, respondent would
receive 50% of the total gross sales of the subdivision lots and other income of the subdivision.
Respondent also enjoyed the exclusive and irrevocable authority to manage, control and
supervise the sales of the lots within the subdivision. The Contract required respondent to submit
to petitioners, within the first 15 days of every month, a report on payments collected from lot
buyers with copies of all the contracts to sell. However, respondent failed to submit the monthly
report.

On 27 February 1987, respondent filed with the trial court an action to rescind the
Contract with a prayer for damages. Petitioners countered that respondent breached the Contract
by failing to finish the subdivision within the 27 months agreed upon, and therefore respondent
was in delay.

ISSUE:
Did Engr. Mercado incur delay in the case at bench?

RULING:

The petitioners breached the Contract by: (1) hiring Rosales to do development work on
the subdivision within the 27-month period exclusively granted to respondent; (2) interfering
with the latter's development work; and (3) stopping respondent from managing the sale of lots
and collection of payments. Because petitioners were the first to breach the Contract and even
interfered with the development work, respondent did not incur delay even if he completed only
28% of the development work. Further, the HSRC extended the Contract up to July 1987. Since
the Contract had not expired at the time respondent filed the action for rescission, petitioners'
defense that respondent did not finish the development work on time was without basis. The law
provides that delay may exist when the obligor fails to fulfill his obligation within the time
expressly stipulated. In this case, the HSRC extended the period for respondent to finish the
development work until 30 July 1987. Respondent did not incur delay since the period granted
him to fulfill his obligation had not expired at the time respondent filed the action for rescission
on 27 February 1987.

Moreover, since petitioners stopped respondent from selling lots and collecting payments
from lot buyers, which was the primary source of development funds, they in effect, rendered
respondent incapable, or at least made it difficult for him, to develop the subdivision within the
allotted period. In reciprocal obligations, neither party incurs in delay if the other does not
comply or is not ready to comply with what is incumbent upon him. It is only when one of the
parties fulfills his obligation that delay by the other begins.

Page 51 of 745
JACINTO TANGUILIG vs. COURT OF APPEALS and VICENTE HERCE JR.
G.R. No. 117190
JANUARY 2, 1997

FACTS:

Petitioner Jacinto M. Tanguilig proposed to respondent Vicente Herce Jr. to construct a


windmill system for him. After some negotiations they agreed on the construction of the
windmill for a consideration of P60,000.00. On 14 March 1988, due to the refusal and failure of
respondent to pay the balance, petitioner filed a complaint to collect the amount. Respondent
denied the claim saying that he had already paid this amount to the San Pedro General
Merchandising Inc. (SPGMI) which constructed the deep well to which the windmill system was
to be connected. According to respondent, since the deep well formed part of the system the
payment he tendered to SPGMI should be credited to his account by petitioner. Moreover,
assuming that he owed petitioner a balance of P15,000.00, this should be offset by the defects in
the windmill system which caused the structure to collapse after a strong wind hit their place.

Petitioner denied that the construction of a deep well was included in the agreement to
build the windmill system, for the contract price of P60,000.00 was solely for the windmill
assembly and its installation. He also disowned any obligation to repair or reconstruct the system
since its collapse was attributable to a typhoon, a force majeure, which relieved him of any
liability.

ISSUE:
Whether or not the payment for the deep well is part of the contract price.
Whether or not Tanguilig is liable to reconstruct the damaged windmill considering that its
collapse is due to a typhoon.

RULING:

There is absolutely no mention in the two (2) documents that a deep well pump is a
component of the proposed windmill system. The contract prices fixed in both proposals cover
only the features specifically described therein and no other. Respondent is directed to pay
petitioner Tanguilig the balance of P15,000.00 plus legal interest.

Regarding the second issue, the Supreme Court has consistently held that in order for a
party to claim exemption from liability by reason of fortuitous event under Art. 1174 of the Civil
Code four (4) requisites must concur: (a) the cause of the breach of the obligation must be
independent of the will of the debtor; (b) the event must be either unforeseeable or unavoidable;
(c) the event must be such as to render it impossible for the debtor to fulfill his obligation in a
normal manner; and, (d) the debtor must be free from any participation in or aggravation of the
injury to the creditor. Petitioner failed to show that the collapse of the windmill was due solely to
a fortuitous event. Petitioner merely stated that there was a "strong wind." But a strong wind in
this case cannot be fortuitous. On the contrary, a strong wind should be present in places where
windmills are constructed. Petitioner is ordered to "reconstruct subject defective windmill
system, in accordance with the one-year guaranty".

Page 52 of 745
DR. FERNANDO PERIQUET, JR. vs. THE COURT OF APPEALS
G.R. No. L-69996
DECEMBER 5, 1994

FACTS:

Spouses Fernando Periquet and Petra Francisco were left childless after the death of their
only child, Elvira, so they took in a son out of wedlock of Marta Francisco-Reyes, sister of Petra.
Though he was not legally adopted, the boy was given the name Fernando Periquet, Jr. and was
reared to manhood by the spouses Periquet. On March 20, 1966, Fernando Periquet died. When
Petra died, she was survived by her siblings, nieces and nephews and by the petitioner. But a few
days before her death, Petra asked her lawyer to prepare her last will and testament. However,
she died before she could sign it. In the said will, Petra left her estate to petitioner, Fernando
Periquet, Jr. and provided for certain legacies to her other heirs. Felix Franciso, brother of Petra,
assigned his hereditary rights to the petitioner. However, later on, he filed an action for
annulment of the Assignment of Hereditary Rights claiming "gross misrepresentation and fraud,"
"grave abuse of confidence," "mistake and undue influence," and "lack of cause and/or
consideration" in the execution of the challenged deed of assignment.

ISSUE:

Whether or not the Assignment of Hereditary Rights is tainted with fraud.

RULING:

The kind of fraud that will vitiate a contract refers to those insidious words or
machinations resorted to by one of the contracting parties to induce the other to enter into a
contract which without them he would not have agreed to. In the case at bench, no such fraud
was employed by herein petitioner. Resultantly, the assignment of hereditary rights executed by
Felix Francisco in favor of herein petitioner is valid and effective.

Felix Francisco could not be considered to have been deceived into signing the subject
deed of assignment for the following reasons: The assignment was executed and signed freely
and voluntarily by Felix Francisco in order to honor, respect and give full effect to the last
wishes of his deceased sister, Petra. The same was read by him and was further explained by
Atty. Diosdado Guytingco. Furthermore, witnesses for petitioner, who also served as witnesses
in the execution and signing of the deed of assignment, declared that Felix Francisco was neither
forced nor intimidated to sign the assignment of hereditary rights.

Page 53 of 745
LEGASPI OIL CO., INC. vs. THE COURT OF APPEALS
G.R. No. 96505
JULY 1, 1993

FACTS:

Bernard Oseraos had several transactions with Legaspi Oil Co. for the sale of copra to the
latter. The price at which appellant sells the copra varies from time to time, depending on the
prevailing market price when the contract is entered into. On February 16, 1976, appellant's
agent Jose Llover signed contract No. 3804 for the sale of 100 tons of copra at P82.00 per 100
kilos with delivery terms of 20 days effective March 8, 1976. After the period to deliver had
lapsed, appellant sold only 46,334 kilos of copra thus leaving a balance of 53,666 kilos.
Accordingly, demands were made upon appellant to deliver the balance with a final warning that
failure to deliver will mean cancellation of the contract, the balance to be purchased at open
market and the price differential to be charged against appellant. On October 22, 1976, since
there was still no compliance, appellee exercised its option under the contract and purchased the
undelivered balance from the open market at the prevailing price of P168.00 per 100 kilos, or a
price differential of P86.00 per 100 kilos, a net loss of P46,152.76 chargeable against appellant.

ISSUE:
Whether or not private respondent is guilty of breach of contact.

RULING:

Private respondent is guilty of fraud in the performance of his obligation under the sales
contract whereunder he bound himself to deliver to petitioner 100 metric tons of copra. However
within the delivery period, Oseraos delivered only 46,334 kilograms of copra to petitioner.
Petitioner made repeated demands upon private respondent to deliver the balance of 53,666
kilograms but private respondent ignored the same. Petitioner made a final demand with a
warning that, should private respondent fail to complete delivery of the balance of 53,666
kilograms of copra, petitioner would purchase the balance at the open market and charge the
price differential to private respondent. Still private respondent failed to fulfill his contractual
obligation to deliver the remaining 53,666 kilograms of copra and since there was still no
compliance by private respondent, petitioner exercised its right under the contract and purchased
53,666 kilograms of copra, the undelivered balance, at the open market at the then prevailing
price of P168.00 per 100 kilograms, a price differential of P46,152.76.

The conduct of private respondent clearly manifests his deliberate fraudulent intent to
evade his contractual obligation for the price of copra had in the meantime more than doubled
from P82.00 to P168 per 100 kilograms. Under Article 1170 of the Civil Code of the Philippines,
those who in the performance of their obligation are guilty of fraud, negligence, or delay, and
those who in any manner contravene the tenor thereof, are liable for damages. Pursuant to said
article, private respondent is liable for damages.

Page 54 of 745
TITAN-IKEDA CONSTRUCTION vs. PRIMETOWN
G.R. No. 158768
FEBRUARY 12, 2008

FACTS:

In 1992, respondent Primetown Property Group, Inc. awarded the contract for the
structural works of its 32-storey Makati Prime Tower (MPT) to petitioner Titan-Ikeda
Construction and Development Corporation. In September 1995, respondent engaged the
services of Integratech, Inc. (ITI), an engineering consultancy firm, to evaluate the progress of
the project. In its report, ITI informed respondent that petitioner, at that point, had only
accomplished 31.89% of the project (or was 11 months and six days behind schedule).
Meanwhile, petitioner and respondent were discussing the possibility of the latters take over of
the projects supervision. Despite ongoing negotiations, respondent did not obtain petitioners
consent in hiring ITI as the projects construction manager. Neither did it inform petitioner of
ITIs September 7, 1995 report.

Subsequently, both parties agreed that Primetown will take over the project.
Petitioner then demanded for the payment due him in relation to its partial performance of its
obligation. For failure of Primetown to pay despite repeated demands, petitioner filed a case for
specific performance against Primetown. Meanwhile, Primetown demanded reimbursement for
the amount it spent in having the project completed.

ISSUE:

Whether or not Titzn-Ikeda is responsible for the projects delay.

RULING:

It was found that because respondent modified the MPT's architectural design,
petitioner had to adjust the scope of work. Moreover, respondent belatedly informed petitioner of
those modifications. It also failed to deliver the concrete mix and rebars according to schedule.
For this reason, petitioner was not responsible for the project's delay. Mora or delay is the failure
to perform the obligation in due time because of dolo (malice) or culpa (negligence). A debtor is
deemed to have violated his obligation to the creditor from the time the latter makes a demand.
Once the creditor makes a demand, the debtor incurs mora or delay. Respondent never sent
petitioner a written demand asking it to accelerate work on the project and reduce, if not
eliminate, slippage. In view of the foregoing, we hold that petitioner did not incur delay in the
performance of its obligation.

Page 55 of 745
PNB MADECOR vs. GERARDO C. UY
G.R. No. 129598
AUGUST 15, 2001

FACTS:

Guillermo Uy assigned to respondent Gerardo Uy his receivables due from Pantranco


North Express Inc. (PNEI). The deed of assignment included sales invoices containing
stipulations regarding payment of interest and attorneys fees. On January 23, 1995, Gerardo Uy
filed with the RTC a collection suit against PNEI. He alleged that PNEI was guilty of fraud in
contracting the obligation sued upon, hence his prayer for a writ of preliminary attachment. The
sheriff issued a notice of garnishment addressed to the Philippine National Bank (PNB) and PNB
MADECOR attaching the goods, effects, credits, monies and all other personal properties of
PNEI in the possession of the bank. PNB MADECOR however claimed that the receivables of
Guillermo Uy have been applied to PNEIs unpaid rentals to the bank thru compensation, thus
private respondent is no longer entitled to such. Respondent pointed out that the demand letter
sent by PNEI to petitioner was made before petitioners obligation to PNEI became due. This
being so, respondent argues that there can be no compensation since there was as yet no
compensable debt in 1984 when PNEI demanded payment from petitioner.

ISSUE:
Whether or not PNB MADECOR is correct in its contention that compensation is
applicable to its receivables from and its payables to PNEI.

RULING:

Petitioners obligation to PNEI appears to be payable on demand. However, the Court


found that the letter sent by PNEI to PNB MADECOR was not one demanding payment, but one
that merely informed petitioner of the conveyance of a certain portion of its obligation to PNEI.
Since petitioners obligation to PNEI is payable on demand, and there being no demand made, it
follows that the obligation is not yet due. Therefore, this obligation may not be subject to
compensation for lack of a requisite under the law. Without compensation having taken place,
petitioner remains obligated to PNEI to the extent stated in the promissory note. This obligation
may undoubtedly be garnished in favor of respondent to satisfy PNEIs judgment debt.

As regards respondents averment that there was as yet no compensable debt when PNEI
sent petitioner a demand letter on September 1984, since PNEI was not yet indebted to petitioner
at that time, the law does not require that the parties obligations be incurred at the same time.
What the law requires only is that the obligations be due and demandable at the same time.

Page 56 of 745
IGNACIO BARZAGA vs. COURT OF APPEALS and ANGELITO ALVIAR
G.R. No. 115129
FEBRUARY 12, 1997

FACTS:

Barzaga went to the hardware store of respondent Alviar to inquire about the availability
of certain materials to be used in the construction of a niche for his wife. The following
morning, Barzaga went back to the store and told the employees that the materials he was buying
would have to be delivered at the Memorial Cemetery by eight o'clock that morning since his
hired workers were already at the burial site and time was of the essence. A store employee
agreed to deliver the items at the designated time, date and place. With this assurance, Barzaga
purchased the materials and paid in full. The construction materials did not arrive at eight
o'clock as promised. After follow-ups and several hours later, when there was yet no delivery
made, Barzaga went back to the store. He saw the delivery truck but the things he purchased
were not yet ready for loading. Distressed by the seeming lack of concern on the stores part,
Barzaga decided to cancel his transaction with the store and buy from another store.

Not being able to fulfill the scheduled burial of his wife, Barzaga demanded damages
from Alviar but the latter refused claiming that he is not liable for damages considering that he
did not incur legal delay since there was no specific time of delivery agreed upon.

ISSUE:
Whether or not the respondent incurred delay in the performance of his
obligation.

RULING:

Respondent Angelito Alviar was negligent and incurred in delay in the performance of
his contractual obligation. The niche had to be constructed at the very least on the twenty-
second of December considering that it would take about two (2) days to finish the job if the
interment was to take place on the twenty-fourth of the month. Respondent's delay in the
delivery of the construction materials wasted so much time that construction of the tomb could
start only on the twenty-third. It could not be ready for the scheduled burial of petitioner's wife.

This case is clearly one of non-performance of a reciprocal obligation. In their contract of


purchase and sale, petitioner had already complied fully with what was required of him as
purchaser, i.e., the payment of the purchase price of P2,110.00. It was incumbent upon
respondent to immediately fulfill his obligation to deliver the goods otherwise delay would
attach.

Page 57 of 745
JACINTO TANGUILIG vs. COURT OF APPEALS and VICENTE HERCE JR.
G.R. No. 117190
JANUARY 2, 1997

FACTS:

Petitioner Jacinto M. Tanguilig proposed to respondent Vicente Herce Jr. to construct a


windmill system for him. After some negotiations they agreed on the construction of the
windmill for a consideration of P60,000.00. On 14 March 1988, due to the refusal and failure of
respondent to pay the balance, petitioner filed a complaint to collect the amount. Respondent
denied the claim saying that he had already paid this amount to the San Pedro General
Merchandising Inc. (SPGMI) which constructed the deep well to which the windmill system was
to be connected. According to respondent, since the deep well formed part of the system the
payment he tendered to SPGMI should be credited to his account by petitioner. Moreover,
assuming that he owed petitioner a balance of P15,000.00, this should be offset by the defects in
the windmill system which caused the structure to collapse after a strong wind hit their place.

Petitioner refused to pay and argued that private respondent was already in default in the
payment of his outstanding balance of P15,000.00 and hence should bear his own loss.

ISSUE:
Whether or not petitioner is correct in his contention that respondent is already in
default thus he should bear the loss of the windmill.

RULING:

Petitioner's argument that private respondent was already in default in the payment of his
outstanding balance of P15,000.00 and hence should bear his own loss, is untenable. In
reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to
comply in a proper manner with what is incumbent upon him. When the windmill failed to
function properly it became incumbent upon petitioner to institute the proper repairs in
accordance with the guaranty stated in the contract. Thus, respondent cannot be said to have
incurred in delay; instead, it is petitioner who should bear the expenses for the reconstruction of
the windmill. Article 1167 of the Civil Code is explicit on this point that if a person obliged to
do something fails to do it, the same shall be executed at his cost.

Page 58 of 745
TAYAG vs. COURT OF APPEALS
G.R. No. 96053
MARCH 3, 1993

FACTS:

Juan Galicia, Sr. executed a deed of conveyance, prior to his demise in 1979 in favor of
Albrigido Leyva involving the undivided one-half portion of a piece of land situated at
Poblacion, Guimba, Nueva Ecija for the sum of P50,000.00. There is no dispute that the first
installment was received by Juan Galicia, Sr. And according to petitioners, of the P10,000.00 to
be paid within ten days from execution of the instrument, only P9,707.00 was tendered to, and
received by, them on numerous occasions from May 29, 1975, up to November 3, 1979. It was
also agreed upon that private respondent will assume the vendors' obligation to the Philippine
Veterans Bank, however, he paid only the sum of P6,926.41 while the difference of the
indebtedness was paid by Juan Galicia, Sr.s sister. Moreover, petitioners claimed that not a
single centavo of the P27,000.00 representing the remaining balance was paid to them.
Petitioners averred that private respondents failure to pay full consideration of the agreement to
sell gave them the right to have the contract rescinded.

ISSUE:
Whether or not the petitioners have the right to rescind the contract in the present case.

RULING:

Considering that the heirs of Juan Galicia, Sr. accommodated private respondent by
accepting the latter's delayed payments not only beyond the grace periods but also during the
pendency of the case for specific performance, petitioners' actuation is susceptible of but one
construction that they are now estopped from reneging from their commitment on account of
acceptance of benefits arising from overdue accounts of private respondent. Indeed, the right to
rescind is not absolute and will not be granted where there has been substantial compliance by
partial payments.

Private respondent is ordered to pay the balance of the purchase price and to reimburse
the sum paid by Juan Galicia Sr.s sister to the Philippine Veterans bank, minus the attorney's
fees and damages awarded in favor of private respondent.

Page 59 of 745
DR. FERNANDO PERIQUET, JR. vs. THE COURT OF APPEALS
G.R. No. L-69996
DECEMBER 5, 1994

FACTS:

Spouses Fernando Periquet and Petra Francisco were left childless after the death of their
only child, Elvira, so they took in a son out of wedlock of Marta Francisco-Reyes, sister of Petra.
Though he was not legally adopted, the boy was given the name Fernando Periquet, Jr. and was
reared to manhood by the spouses Periquet. On March 20, 1966, Fernando Periquet died. When
Petra died, she was survived by her siblings, nieces and nephews and by the petitioner. But a few
days before her death, Petra asked her lawyer to prepare her last will and testament. However,
she died before she could sign it. In the said will, Petra left her estate to petitioner, Fernando
Periquet, Jr. and provided for certain legacies to her other heirs. Felix Franciso, brother of Petra,
assigned his hereditary rights to the petitioner. However, later on, he filed an action for
annulment of the Assignment of Hereditary Rights claiming "gross misrepresentation and fraud,"
"grave abuse of confidence," "mistake and undue influence," and "lack of cause and/or
consideration" in the execution of the challenged deed of assignment.

ISSUE:
Whether or not the Assignment of Hereditary Rights is tainted with fraud.

RULING:

The kind of fraud that will vitiate a contract refers to those insidious words or
machinations resorted to by one of the contracting parties to induce the other to enter into a
contract which without them he would not have agreed to. In the case at bench, no such fraud
was employed by herein petitioner. Resultantly, the assignment of hereditary rights executed by
Felix Francisco in favor of herein petitioner is valid and effective.

Felix Francisco could not be considered to have been deceived into signing the subject
deed of assignment for the following reasons: The assignment was executed and signed freely
and voluntarily by Felix Francisco in order to honor, respect and give full effect to the last
wishes of his deceased sister, Petra. The same was read by him and was further explained by
Atty. Diosdado Guytingco. Furthermore, witnesses for petitioner, who also served as witnesses
in the execution and signing of the deed of assignment, declared that Felix Francisco was neither
forced nor intimidated to sign the assignment of hereditary rights.

Page 60 of 745
RACQUEL-SANTOS v. CA
G.R. No. 174986
July 7, 2009

FACTS:

Finvest is a stock brokerage corporation duly organized under Philippine laws and
is a member of the PSE with one membership seat pledged to the latter. Armand O. Raquel-
Santos (Raquel-Santos) was Finvests President and nominee to the PSE from February 20, 1990
to July 16, 1998. Annalissa Mallari (Mallari) was Finvests Administrative Officer until
December 31, 1998. In the course of its trading operations, Finvest incurred liabilities to PSE
representing fines and penalties for non-payment of its clearing house obligations. PSE also
received reports that Finvest was not meeting its obligations to its clients. Consequently, PSE
indefinitely suspended Finvest from trading. The Securities and Exchange Commission (SEC)
also suspended its license as broker. On June 17, 1998, PSE demanded from Finvest the payment
of its obligations to the PSE in the amount ofP4,267,339.99 and to its (Finvests) clients within
15 days. PSE also ordered Finvest to replace its nominee, Raquel-Santos. As of August 11,
1998, Finvests total obligation to PSE, representing penalties, charges and fines for violations of
pertinent rules, was pegged at P5,990,839.99. Finvest promised to settle all obligations to its
clients and to PSE subject to verification of the amount due, but Finvest requested a deadline of
July 31, 1999. PSE granted Finvests request, with the warning that, should Finvest fail to meet
the deadline, PSE might exercise its right to sell Finvests membership seat and use the proceeds
thereof to settle its obligations to the PSE, its member-brokers and its clients. On February 3,
1999, PSE inquired from Finvest if it had already settled all duly acknowledged claims of its
clients and its liabilities to PSE. PSE also demanded that Finvest settle its liabilities to it not later
than March 31, 1999.

PSE points out that it has made several demands on Finvest for the payment of its
obligations and the amount due has been computed after consultation with Finvests
representative, Mr. Ernesto Lee. Considering, therefore, that Finvest already acknowledged and
ascertained its obligations with PSE and yet it defaulted in the payment thereof, PSE had the
right to sell at public auction Finvests pledged seat pursuant to the Pledge Agreement and in
accordance with Article 2112 of the Civil Code.

ISSUE:
Whether or not Finvest incurred delay in its obligations.

HELD:
NO. Under the law on contracts, mora solvendi or debtors default is defined as a
delay in the fulfillment of an obligation, by reason of a cause imputable to the debtor. There are
three requisites necessary for a finding of default. First, the obligation is demandable and
liquidated; second, the debtor delays performance; and third, the creditor judicially or
extrajudicially requires the debtors performance. In the present petition, PSE insists that
Finvests liability for fines, penalties and charges has been established, determined and
substantiated, hence, liquidated. However, both trial court and CA have ruled otherwise. The
findings of fact of both the trial court and the CA are fully supported by the records and that they
plainly show that the parties were negotiating to determine the exact amount of Finvests
obligations to PSE, during which period PSE repeatedly moved the deadlines it imposed for
Finvest to pay the fines, penalties and charges, apparently to allow for more time to thresh out
the details of the computation of said penalties.
A debt is liquidated when the amount is known or is determinable by inspection
of the terms and conditions of relevant documents. Under the attendant circumstances, it cannot
be said that Finvests debt is liquidated. At the time PSE left the negotiating table, the exact
amount of Finvests fines, penalties and charges was still in dispute and as yet undetermined.
Consequently, Finvest cannot be deemed to have incurred in delay in the payment of its
bligations to PSE. It cannot be made to pay an obligation the amount of which was not fully
explained to it. The public sale of the pledged seat would, thus, be premature.

Page 61 of 745
RCBC vs. Court of Appeals
G.R. No. 133107, March 25, 1999
305 SCRA 449

FACTS:

Private respondent Atty. Felipe Lustre purchased a car from Toyota Shaw, Inc. for which
he made a down payment, the balance of which is to be paid in 24 equal monthly installments.
He then issued 24 postdated checks in the amount due for every month. To secure the balance,
private respondent executed a promissory note and a contract of Chattle Mortgage over the
vehicle in favor of Toyota Shaw. The contract of Chattle Mortgage provided for an acceleration
clause stating that if there be default on the part of the mortgagor to pay any of the installments,
the whole amount remaining shall become due.

Toyota Shaw then assigned all its rights and interest in the Chattle Mortgage to petitioner
Rizal Commercial Banking Corporation (RCBC). The problem arose when one check was not
signed by the private respondent. On the theory that the respondent defaulted in his payments,
petitioner demanded the payment of the debt including liquidated damages. Atty. Lustre refused,
prompting RCBC to file an action for replevin and damages before the Regional Trial Court of
Pasay City.
After trial, the RTC rendered a decision in favor of the private respondent, and held that
he was not in default. The Court of Appeals affirmed the decision of the lower court.

ISSUE:
Whether or not private respondent should be held in default.

HELD:

Article 1170 of the Civil Code states that those who in the performance of their
obligation are guilty of delay are liable for damages. The delay in the performance must be
malicious or negligent. There was no imputation, much less evidence, that private respondent
acted with malice or negligence in failing to sign the check. The Supreme Court agreed with the
Court of Appeals that such omission was mere inadvertence on the part of private respondent.

Page 62 of 745
STATE INVESTMENT HOUSE INC. vs. COURT OF APPEALS
G.R. No. 115548
MARCH 5, 1996

FACTS:

Spouses Oreta and the Solid Homes, Inc. (SOLID) entered into a Contract to Sell
involving a parcel of land for a consideration of P39,347.00. Upon signing of the contract, the
spouses Oreta paid the downpayment with the agreement that the balance shall be payable in
monthly installments of P45 1.70, at 12% interest per annum. On November 4, 1976, SOLID
executed several real estate mortgage contracts in favor of State Investment House Inc. (STATE)
over its subdivided parcels of land, one of which is the subject lot which is the one subject of the
above stated Contract to Sell. For failure of SOLID to comply with its mortgage obligations
contract, STATE extra-judicially foreclosed the mortgaged properties including the subject lot on
April 6, 1983. As a result of the foreclosure, the spouses filed a complaint against SOLID and
STATE for SOLIDs failure to execute the absolute deed of sale despite full payment of the
purchase price as of 1981.

ISSUE:
Who has the better right over the subject lot?

RULING:

Petitioner admits the superior rights of respondents-spouses Oreta over the subject
property as it did not pray for the nullification of the contract between respondents-spouses and
SOLID, but instead asked for the payment of the release value of the property in question, plus
interest, attorneys fees and costs of suit against SOLID or, in case of the latters inability to pay,
against respondents-spouses before it can be required to release the title of the subject property in
favor of the respondent spouses. And even if we were to pass upon the first assigned error, we
find respondent courts ruling on the matter to be well-founded. STATEs registered mortgage
right over the property is inferior to that of respondents-spouses unregistered right. The
unrecorded sale between respondents-spouses and SOLID is preferred for the reason that if the
original owner (SOLID, in this case) had parted with his ownership of the thing sold then he no
longer had ownership and free disposal of that thing so as to be able to mortgage it again.
Registration of the mortgage is of no moment since it is understood to be without prejudice to the
better right of third parties.

Page 63 of 745
BPI INVESTMENT CORPORATION vs. HON. COURT OF APPEALS
G.R. No. 133632
FEBRUARY 15, 2002

FACTS:

Frank Roa obtained a loan at an interest rate of 16 1/4% per annum from Ayala
Investment and Development Corporation (AIDC), predecessor of petitioner BPIIC for the
construction of a house on his lot. Said house and lot were mortgaged to AIDC to secure the
loan. Sometime in 1980, Roa sold the house and lot to private respondents ALS and Antonio
Litonjua. They paid P350,000 in cash and assumed the P500,000 balance of Roas indebtedness
with AIDC. The latter, however, was not willing to extend the old interest rate to private
respondents and proposed to grant them a new loan of P500,000 to be applied to Roas debt and
secured by the same property, at an interest rate of 20% per annum. In June 1984, BPIIC
instituted foreclosure proceedings against private respondents on the ground that they failed to
pay the mortgage indebtedness. Private respondents on the other hand alleged that they were not
in arrears in their payment, but in fact made an overpayment as of June 30, 1984.

ISSUE:
Whether or not petitioner may be held liable for moral and exemplary damages.

RULING:

Petitioner claims that it should not be held liable for moral and exemplary damages for it
did not act maliciously when it initiated the foreclosure proceedings. It merely exercised its right
under the mortgage contract because private respondents were irregular in their monthly
amortization. Private respondents counter that BPIIC was guilty of bad faith and should be liable
for said damages because it insisted on the payment of amortization on the loan even before it
was released. Further, it did not make the corresponding deduction in the monthly amortization
to conform to the actual amount of loan released, and it immediately initiated foreclosure
proceedings when private respondents failed to make timely payment. But as admitted by private
respondents themselves, they were irregular in their payment of monthly amortization. Thus, we
can not properly declare BPIIC in bad faith. Consequently, we should rule out the award of
moral and exemplary damages. However, in our view, BPIIC was negligent in relying merely on
the entries found in the deed of mortgage, without checking and correspondingly adjusting its
records on the amount actually released to private respondents and the date when it was released.
Such negligence resulted in damage to private respondents, for which an award of nominal
damages should be given in recognition of their rights which were violated by BPIIC. For this
purpose, the amount of P25,000 is sufficient. Lastly, we sustain the award of P50,000 in favor of
private respondents as attorneys fees since they were compelled to litigate.

Page 64 of 745
CARMELITA LEAO vs. COURT OF APPEALS
G.R. No. 129018
NOVEMBER 15, 2001

FACTS:

Hermogenes Fernando, as vendor and Carmelita Leao, as vendee executed a contract to


sell involving a piece of land. In the contract, Leao bound herself to pay Fernando P10,775.00
at the signing of the contract with the balance of P96,975.00 to be paid within a period of TEN
(10) years at a monthly amortization of P1,747.30. The contract also provided for a grace period
of one month within which to make payments, together with the one corresponding to the month
of grace. Should the month of grace expire without the installments for both months having been
satisfied, an interest of 18% per annum will be charged on the unpaid installments.

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

RULING:

On the issue of whether petitioner Leao was in delay in paying the amortizations, we
rule that while the contract provided that the total purchase price was payable within a ten-year
period, the same contract specified that the purchase price shall be paid in monthly installments
for which the corresponding penalty shall be imposed in case of default. Petitioner Leao cannot
ignore the provision on the payment of monthly installments by claiming that the ten-year period
within which to pay has not elapsed.

Article 1169 of the Civil Code provides that in reciprocal obligations, neither party incurs
in delay if the other does not comply or is not ready to comply in a proper manner with what is
incumbent upon him. From the moment one of the parties fulfills his obligation, delay by the
other begins. In the case at bar, respondent Fernando performed his part of the obligation by
allowing petitioner Leao to continue in possession and use of the property. Clearly, when
petitioner Leao did not pay the monthly amortizations in accordance with the terms of the
contract, she was in delay and liable for damages. However, we agree with the trial court that the
default committed by petitioner Leao in respect of the obligation could be compensated by the
interest and surcharges imposed upon her under the contract in question.

Page 65 of 745
HEIRS OF LUIS BACUS vs. HON. COURT OF APPEALS
G.R. No. 127695
DECEMBER 3, 2001

FACTS:

Luis Bacus leased to private respondent Faustino Duray a parcel of agricultural land. The
contract contained an option to buy clause. Under said option, the lessee had the exclusive and
irrevocable right to buy 2,000 square meters of the property within five years from a year after
the effectivity of the contract. Close to the expiration of the contract, Luis Bacus died.
Thereafter, the Duray spouses informed one of the heirs of Luis Bacus, that they were willing
and ready to purchase the property under the option to buy clause. Due to the refusal of
petitioners to sell the property, Duray filed a complaint for specific performance against the heirs
of Luis Bacus asking that he be allowed to purchase the lot specifically referred to in the lease
contract with option to buy. On the other hand, petitioners alleged that before Luis Bacus death,
private respondents conveyed to them the formers lack of interest to exercise their option
because of insufficiency of funds. They further alleged that private respondents did not deposit
the money as required by the Lupon and instead presented a bank certification which cannot be
deemed legal tender.

ISSUE:
Did private respondents incur in delay when they did not deliver the purchase price or
consign it in court on or before the expiration of the contract?

RULING:

Obligations under an option to buy are reciprocal obligations. The performance of one
obligation is conditioned on the simultaneous fulfillment of the other obligation. In other words,
in an option to buy, the payment of the purchase price by the creditor is contingent upon the
execution and delivery of a deed of sale by the debtor. In this case, when private respondents
opted to buy the property, their obligation was to advise petitioners of their decision and their
readiness to pay the price. They were not yet obliged to make actual payment. Only upon
petitioners actual execution and delivery of the deed of sale were they required to pay. Notice
of the creditors decision to exercise his option to buy need not be coupled with actual payment
of the price, so long as this is delivered to the owner of the property upon performance of his part
of the agreement. Consequently, since the obligation was not yet due, consignation in court of
the purchase price was not yet required.

Private respondents did not incur in delay when they did not yet deliver payment nor
make a consignation before the expiration of the contract. In reciprocal obligations, neither party
incurs in delay if the other does not comply or is not ready to comply in a proper manner with
what is incumbent upon him. Only from the moment one of the parties fulfills his obligation,
does delay by the other begin. In this case, as there was no compliance yet with what was
incumbent upon petitioners under the option to buy, private respondents had not incurred in
delay when the cashiers check was issued even after the contract expired.

Page 66 of 745
INTEGRATED PACKAGING CORP. vs. COURT OF APPEALS
G.R. No. 115117
JUNE 8, 2000

FACTS:

Petitioner and private respondent executed an order agreement whereby private


respondent bound itself to deliver to petitioner 3,450 reams of printing papers under specified
schedule of delivery. As of July 30, 1979, private respondent had delivered to petitioner 1,097
reams of printing paper out of the total 3,450 reams stated in the agreement. Petitioner alleged it
wrote private respondent to immediately deliver the balance because further delay would greatly
prejudice petitioner. From June 5, 1980 and until July 23, 1981, private respondent delivered
again to petitioner various quantities of printing paper amounting to P766,101.70. However,
petitioner encountered difficulties paying private respondent said amount. Accordingly, private
respondent made a formal demand upon petitioner to settle the outstanding account. Private
respondent filed a collection suit against petitioner for the sum of P766,101.70, representing the
unpaid purchase price of printing paper bought by petitioner on credit. In its answer, petitioner
denied the material allegations of the complaint. It alleged that private respondent was able to
deliver only 1,097 reams of printing paper which was short of 2,875 reams, in total disregard of
their agreement; that private respondent failed to deliver the balance of the printing paper despite
demand therefor, hence, petitioner suffered actual damages and failed to realize expected profits.

ISSUE:
Whether or not private respondent violated the order agreement.

RULING:

The transaction between the parties is a contract of sale whereby private respondent
(seller) obligates itself to deliver printing paper to petitioner (buyer) which, in turn, binds itself to
pay its equivalent (price). Both parties concede that the order agreement gives rise to a reciprocal
obligation such that the obligation of one is dependent upon the obligation of the other.
Reciprocal obligations are to be performed simultaneously, so that the performance of one is
conditioned upon the simultaneous fulfillment of the other. Thus, private respondent undertakes
to deliver printing paper of various quantities subject to petitioners corresponding obligation to
pay, on a maximum 90-day credit, for these materials. Clearly, petitioner did not fulfill its side of
the contract as its last payment in August 1981 could cover only materials covered by delivery
invoices dated September and October 1980. Thus, private respondent did not violate the order
agreement.

Page 67 of 745
LAFORTEZA vs. MACHUCA
G.R. No. 137552
JUNE 16, 2000

FACTS:

In the exercise of the Special Power of Attorney executed by their co-heirs, by Roberto Z.
Laforteza and Gonzalo Z. Laforteza, Jr. entered into a Memorandum of Agreement (Contract to
Sell) with the plaintiff over the subject house and lot for the sum of P630,000.00. On September
18, 1998, defendant heirs, through their counsel wrote a letter to the plaintiff furnishing the latter
a copy of the reconstituted title to the subject property, advising him that he had thirty (3) days to
produce the balance of P600,000.00 under the Memorandum of Agreement which plaintiff
received on the same date. The plaintiff requested a 30-day extension within which he would pay
the balance of the purchase price. This was granted by Roberto Laforteza but not by Gonzalo
Laforteza, the second attorney-in-fact.

On November 15, 1989, plaintiff informed the defendant heirs, through defendant
Roberto Z. Laforteza, that he already has the money. However, the defendants, refused to accept
the told him that the subject property was no longer for sale. Thereafter, plaintiff reiterated his
request to tender payment of the balance but the defendants insisted on the rescission of the
Memorandum of Agreement. Thereafter, plaintiff filed the instant action for specific
performance.

ISSUE:
Whether or not defendants may rescind the contract of sale entered with Machuca.

RULING:

Admittedly, the failure of the respondent to pay the balance of the purchase price was a
breach of the contract and was a ground for rescission thereof. The extension of thirty (30) days
allegedly granted to the respondent by Roberto Z. Laforteza was correctly found by the Court of
Appeals to be ineffective inasmuch as the signature of Gonzalo Z. Laforteza did not appear
thereon as required by the Special Powers of Attorney. However, the evidence reveals that after
the expiration of the six-month period provided for in the contract, the petitioners were not ready
to comply with what was incumbent upon them, i.e. the delivery of the reconstituted title of the
house and lot. It was only on September 18, 1989 or nearly eight months after the execution of
the Memorandum of Agreement when the petitioners informed the respondent that they already
had a copy of the reconstituted title and demanded the payment of the balance of the purchase
price. The respondent could not therefore be considered in delay for in reciprocal obligations,
neither party incurs in delay if the other party does not comply or is not ready to comply in a
proper manner with what was incumbent upon him.

Even assuming for the sake of argument that the petitioners were ready to comply with
their obligation, we find that rescission of the contract will still not prosper. Delay in payment
was only thirty days which was caused by the respondents justified but mistaken belief that an
extension to pay was granted to him. We agree with the Court of Appeals that the delay of one
month in payment was a mere casual breach that would not entitle the respondents to rescind the
contract. Rescission of a contract will not be permitted for a slight or casual breach, but only
such substantial and fundamental breach as would defeat the very object of the parties in making
the agreement.

Page 68 of 745
REGALA v. CARIN
G.R. No. 188715
April 6, 2011

FACTS:

Petitioner and respondent are adjacent neighbors at Spirig Street, BF Resort Village, Las
Pias City. When petitioner decided to renovate his one storey residence by constructing a
second floor, he under the guise of merely building an extension to his residence, approached
respondent sometime in May 1998 for permission to bore a hole through a perimeter wall shared
by both their respective properties, to which respondent verbally consented on condition that
petitioner would clean the area affected by the work.

As earlier indicated, petitioners real intention was to build a second floor, in fact with a
terrace atop the dividing wall. In the course of the construction of the second floor, respondent
and his wife Marietta suffered from the dust and dirt which fell on their property. As petitioner
failed to address the problem to respondents satisfaction, respondent filed a letter-complaint[3]
with the Office of the City Engineer and Building Official of Las Pias City on June 9, 1998.

ISSUE:

Whether or not the injuries sustained by respondent was done maliciously.

RULING:

Malice or bad faith implies a conscious and intentional design to do a wrongful act for a
dishonest purpose or moral obliquity; it is different from the negative idea of negligence in that
malice or bad faith contemplates a state of mind affirmatively operating with furtive design or ill
will. While the Court harbors no doubt that the incidents which gave rise to this dispute have
brought anxiety and anguish to respondent, it is unconvinced that the damage inflicted upon
respondents property was malicious or willful, an element crucial to merit an award of moral
damages under Article 2220 of the Civil Code.

Necessarily, the Court is not inclined to award exemplary damages.Petitioner, however, cannot
steer clear from any liability whatsoever. Respondent and his familys rights to the peaceful
enjoyment of their property have, at the very least, been inconvenienced from the incident borne
of petitioners construction work. Any pecuniary loss or damage suffered by respondent cannot
be established as the records are bereft of any factual evidence to establish the same. Nominal
damages may thus be adjudicated in order that a right of the plaintiff, respondent herein, which
has been violated or invaded by the defendant, petitioner herein, may be vindicated or
recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him.

Page 69 of 745
THE INTERNATIONAL CORPORATE vs. SPS. GUECO
G.R. No. 141968
FEBRUARY 12, 2001

FACTS:

The Gueco Spouses obtained a loan from petitioner International Corporate Bank (now
Union Bank of the Philippines) to purchase a car. In consideration thereof, the Spouses executed
promissory notes which were payable in monthly installments and chattel mortgage over the car
to serve as security for the notes. The Spouses defaulted in payment of installments. After some
negotiations and computation, the amount of car loan was lowered. Finally, Dr. Gueco
delivered a managers check in the amount of reduced car loan but the car was not released
because of his refusal to sign the Joint Motion to Dismiss. Petitioner, however, insisted that the
joint motion to dismiss is standard operating procedure in their bank to effect a compromise and
to preclude future filing of claims, counterclaims or suits for damages.

ISSUE:

Whether or not there was fraud in the part of herein petitioner.

RULING:

Fraud has been defined as the deliberate intention to cause damage or prejudice. It is the
voluntary execution of a wrongful act, or a willful omission, knowing and intending the effects
which naturally and necessarily arise from such act or omission. We fail to see how the act of the
petitioner bank in requiring the respondent to sign the joint motion to dismiss could constitute as
fraud. True, petitioner may have been remiss in informing Dr. Gueco that the signing of a joint
motion to dismiss is a standard operating procedure of petitioner bank. However, this can not in
anyway have prejudiced Dr. Gueco. The motion to dismiss was in fact also for the benefit of Dr.
Gueco, as the case filed by petitioner against it before the lower court would be dismissed with
prejudice. The whole point of the parties entering into the compromise agreement was in order
that Dr. Gueco would pay his outstanding account and in return petitioner would return the car
and drop the case for money and replevin before the Metropolitan Trial Court. Petitioner's act of
requiring Dr. Gueco to sign the joint motion to dismiss can not be said to be a deliberate attempt
on the part of petitioner to renege on the compromise agreement of the parties. It should,
likewise, be noted that in cases of breach of contract, moral damages may only be awarded when
the breach was attended by fraud or bad faith. The law presumes good faith. Dr. Gueco failed to
present an iota of evidence to overcome this presumption. Necessarily, the claim for exemplary
damages must fail. In no way, may the conduct of petitioner be characterized as wanton,
fraudulent, reckless, oppressive or malevolent.

Page 70 of 745
REPUBLIC OF THE PHILIPPINES vs. THE COURT OF TAX APPEALS
G.R. No. 139050
OCTOBER 2, 2001

FACTS:

On 12 December 1992, a shipment of bales of textile gray cloth arrived at the Manila
International Container Port (MICP). There has been a mistake in the name of the consignee
provided in the shipment's Inward Foreign Manifest. Forthwith, the shipping agent, FIL-JAPAN,
requested for an amendment of the Inward Foreign Manifest so as to correct the name of the
consignee from that of GQ GARMENTS, Inc., to that of AGFHA, Inc. Subsequently, FIL-
JAPAN forwarded to AGFHA, Inc., the amended Inward Foreign Manifest which the latter, in
turn, submitted to the MICP Law Division. The MICP indorsed the document to the Customs
Intelligence Investigation Services (CIIS). The CIIS placed the subject shipment under Hold
Order on the ground that GQ GARMENTS, Inc., could not be located in its given address and
was thus suspected to be a fictitious firm. Forfeiture proceedings under Section 2530(f) and (l)
(3-5) of the Tariff and Customs Code were initiated.

ISSUE:
Whether or not the private respondent is guilty of fraud in relation to the shipment subject
of the case at bench.

RULING:

Petitioner asserts that all of the requisites for forfeiture proceedings under the Tariff and
Customs Code are present in this case. Private respondent AGFHA, Inc., on the other hand,
maintains that there has only been an inadvertent error and not an intentional wrongful
declaration by the shipper to evade payment of any tax due.
Fraud must be proved to justify forfeiture. It must be actual, amounting to intentional wrong-
doing with the clear purpose of avoiding the tax. Forfeiture is not favored in law nor in equity.
Mere negligence is not equivalent to the fraud contemplated by law. What is here involved is an
honest mistake, not even directly attributable to private respondent, which will not deprive the
government of its right to collect the proper tax. The conclusion of the appellate court, being
consistent with the evidence on record and not contrary to law and jurisprudence, hardly can be
overturned by this Court.

Page 71 of 745
YAMBAO vs. ZUIGA
G.R. No. 146173 DECEMBER 11, 2003

FACTS:

At around 3:30 p.m. of May 6, 1992, the bus owned by the petitioner was being driven by
her driver, Ceferino G. Venturina along the northbound lane of Epifanio delos Santos Avenue
(EDSA). Suddenly, the bus bumped Herminigildo Zuiga, a pedestrian. Such was the force of
the impact that the left side of the front windshield of the bus was cracked. Zuiga was rushed to
the Quezon City General Hospital where he was given medical attention, but due to the massive
injuries sustained, he succumbed shortly thereafter.

Private respondents, heirs of the victim, filed a Complaint against petitioner and her
driver, Venturina, for damages. The complaint alleged that Venturina drove the bus in a reckless,
careless and imprudent manner, in violation of traffic rules and regulations, without due regard to
public safety, thus resulting in the victims premature death. In her Answer, the petitioner denied
the allegations of the complaint, trying to shift the blame to the victim, theorizing that
Herminigildo bumped into her bus, while avoiding an unidentified woman who was chasing him.
She further alleged that she was not liable for any damages because as an employer, she
exercised the proper diligence of a good father of a family, both in the selection and supervision
of her bus driver.

ISSUE:
Whether petitioner exercised the diligence of a good father of a family in the selection
and supervision of her employees, thus absolving her from any liability.

RULING:

Petitioner claimed that she exercised due diligence in the selection and supervision of her
driver, Venturina. Her allegation that before she hired Venturina she required him to submit his
drivers license and clearances is worthless, in view of her failure to offer in evidence certified
true copies of said license and clearances. Moreover, petitioner contradicted herself. She
declared that Venturina applied with her sometime in January 1992 and she then required him to
submit his license and clearances. However, the record likewise shows that Venturina submitted
the said requirements only on May 6, 1992, or on the very day of the fatal accident itself. In other
words, petitioners own admissions clearly and categorically show that she did not exercise due
diligence in the selection of her bus driver.

In any case, assuming arguendo that Venturina did submit his license and clearances
when he applied with petitioner in January 1992, the latter still fails the test of due diligence in
the selection of her bus driver. Petitioner failed to present convincing proof that she went to this
extent of verifying Venturinas qualifications, safety record, and driving history. Nor did
petitioner show that she exercised due supervision over Venturina after his selection. For as
pointed out by the Court of Appeals, petitioner did not present any proof that she drafted and
implemented training programs and guidelines on road safety for her employees. In fact, the
record is bare of any showing that petitioner required Venturina to attend periodic seminars on
road safety and traffic efficiency. Hence, petitioner cannot claim exemption from any liability
arising from the recklessness or negligence of Venturina.

Page 72 of 745
SMITH BELL DODWELL vs. CATALINO BORJA
G.R. No. 143008. JUNE 10, 2002

FACTS:

Smith Bell filed a written request with the Bureau of Customs for the attendance of the
latters inspection team on vessel M/T King Family which was due to arrive at the port of Manila
on September 24, 1987. In response, Catalino Borja was instructed to board the said vessel and
inspect the vessel. At about 11 oclock in the morning on September 24, 1987, while M/T King
Family was unloading chemicals unto two (2) barges owned by respondent ITTC, a sudden
explosion occurred setting the vessels afire. Upon hearing the explosion, Borja, who was at that
time inside the cabin preparing reports, ran outside to check what happened. Again, another
explosion was heard. Seeing the fire Borja hurriedly jumped over board to save himself.
However, the water was likewise on fire due mainly to the spilled chemicals. Despite the
tremendous heat, Borja swam his way until he was rescued by the people living in the squatters
area and sent to San Juan De Dios Hospital.

After weeks of intensive care at the hospital, Borja was diagnosed to be permanently
disabled due to the incident. Thus, he made demands against Smith Bell and ITTC for the
damages caused by the explosion. However, both denied liabilities and attributed to each other
negligence.

ISSUES:
Who, if any, is liable for Borjas injuries?

RULING:

Both the RTC and the CA ruled that the fire and the explosion had originated from
petitioners vessel. The attempts of Smith Bell to shift the blame on ITTC were all for naught.
First, the testimony of its alleged eyewitness was stricken off the record for his failure to appear
for cross-examination. Second, the documents offered to prove that the fire originated from
barge ITTC-101 were all denied admission by the court for being, hearsay. Thus, there is
nothing in the record to support petitioners contention that the fire and explosion originated
from barge ITTC-101.

The three elements of quasi delict are: (a) damages suffered by the plaintiff, (b) fault or
negligence of the defendant, and (c) the connection of cause and effect between the fault or
negligence of the defendant and the damages inflicted on the plaintiff. All these elements were
established in this case. Knowing fully well that it was carrying dangerous chemicals, petitioner
was negligent in not taking all the necessary precautions in transporting the cargo. As a result of
the fire and the explosion during the unloading of the chemicals from petitioners vessel,
Respondent Borja suffered severe injuries. Hence, the owner or the person in possession and
control of a vessel and the vessel are liable for all natural and proximate damage caused to
persons and property by reason of negligent management or navigation.

Page 73 of 745
RAMON K. ILUSORIO vs. HON. COURT OF APPEALS
G.R. No. 139130. NOVEMBER 27, 2002

FACTS:

Petitioner is a prominent businessman and was a depositor in good standing of


respondent bank, the Manila Banking Corporation. As he was then running about 20
corporations, and was going out of the country a number of times, petitioner entrusted to his
secretary, Katherine E. Eugenio, his credit cards and his checkbook with blank checks. Eugenio
was able to encash and deposit to her personal account about seventeen (17) checks drawn
against the account of the petitioner at the respondent bank, with an aggregate amount of
P119,634.34. Petitioner did not bother to check his statement of account until a business partner
apprised him that he saw Eugenio use his credit cards. Petitioner fired Eugenio immediately, and
instituted a criminal action against her for estafa thru falsification.

Petitioner then requested the respondent bank to credit back and restore to its account the
value of the checks which were wrongfully encashed but respondent bank refused. Hence,
petitioner filed the instant case.

ISSUE:
Is Manila Bank liable for damages for its negligence in failing to detect the discrepant
checks?

RULING:

Petitioners contention that Manila Bank was remiss in the exercise of its duty as drawee
lacks factual basis. Manila Bank employees exercised due diligence in cashing the checks. Its
verifiers first verified the drawers signatures thereon as against his specimen signature cards,
and when in doubt, the verifier went further, such as by referring to a more experienced verifier
for further verification. In some instances the verifier made a confirmation by calling the
depositor by phone. It is only after taking such precautionary measures that the subject checks
were given to the teller for payment.

Of course it is possible that the verifiers of TMBC might have made a mistake in failing
to detect any forgery -- if indeed there was. However, a mistake is not equivalent to negligence
if they were honest mistakes. In the instant case, we believe and so hold that if there were
mistakes, the same were not deliberate, since the bank took all the precautions. As borne by the
records, it was petitioner, not the bank, who was negligent. Negligence is the omission to do
something which a reasonable man, guided by those considerations which ordinarily regulate the
conduct of human affairs, would do, or the doing of something which a prudent and reasonable
man would do. In the present case, it appears that petitioner accorded his secretary unusual
degree of trust and unrestricted access to his credit cards, passbooks, check books, bank
statements, including custody and possession of cancelled checks and reconciliation of accounts.

Page 74 of 745
NATIONAL POWER CORPORATION vs. THE COURT OF APPEALS
G.R. No. 124378. MARCH 8, 2005

FACTS:

On 15 November 1973, the Office of the President of the Philippines issued


Memorandum Order No. 398 instructing the NPC to build the Agus Regulation Dam at the
mouth of Agus River in Lanao del Sur, at a normal maximum water level of Lake Lanao at 702
meters elevation. Pursuant thereto, petitioner built and operated the said dam in 1978. Private
respondents Hadji Abdul Carim Abdullah, Caris Abdullah, Hadji Ali Langco and Diamael
Pangcatan own fishponds along the Lake Lanao shore. In October and November of 1986, all the
improvements were washed away when the water level of the lake escalated and the subject
lakeshore area was flooded. Private respondents blamed the inundation on the Agus Regulation
Dam built and operated by the NPC in 1978. They theorized that NPC failed to increase the
outflow of water even as the water level of the lake rose due to the heavy rains.

ISSUE:
Whether or not the Court of Appeals erred in affirming the trial courts verdict that
petitioner was legally answerable for the damages endured by the private respondents.

RULING:

Memorandum Order No. 398 clothes the NPC with the power to build the Agus
Regulation Dam and to operate it for the purpose of generating energy. Twin to such power are
the duties: (1) to maintain the normal maximum lake elevation at 702 meters, and (2) to build
benchmarks to warn the inhabitants in the area that cultivation of land below said elevation is
forbidden.

With respect to its job to maintain the normal maximum level of the lake at 702 meters,
the Court of Appeals, echoing the trial court, observed with alacrity that when the water level
rises due to the rainy season, the NPC ought to release more water to the Agus River to avoid
flooding and prevent the water from going over the maximum level. And yet, petitioner failed to
do so, resulting in the inundation of the nearby estates. Consequently, even assuming that the
fishponds were erected below the 702-meter level, NPC must, nonetheless, bear the brunt for
such damages inasmuch as it has the duty to erect and maintain the benchmarks precisely to warn
the owners of the neighboring properties not to build fishponds below these marks. Without
such points of reference, the inhabitants in said areas are clueless whether or not their
improvements are within the prohibited area. Conversely, without such benchmarks, NPC has
no way of telling if the fishponds, subject matter of the present controversy, are indeed below the
prescribed maximum level of elevation. Due to NPCs negligence in the performance of its
duties, it shall be held liable for the resulting damages suffered by private respondents.

Page 75 of 745
MUAJE-TUAZON vs. WENPHIL
G.R. No. 162447. DECEMBER 27, 2006

FACTS:

Petitioners Annabelle M. Tuazon and Almer R. Abing worked as branch managers of the
Wendy's food chains. In Wendys Biggie Size It! Crew Challenge" promotion contest, branches
managed by petitioners won first and second places, respectively. Because of its success,
respondent had a second run of the contest from April 26 to July 4, 1999. The Meycauayan
branch won again. The MCU Caloocan branch failed to make it among the winners. Before the
announcement of the third round winners, management received reports that as early as the first
round of the contest, the Meycauayan, MCU Caloocan, Tandang Sora and Fairview branches
cheated. An internal investigation ensued. Petitioners were summoned to the main office
regarding the reported anomaly. Petitioners denied there was cheating. Immediately thereafter,
petitioners were notified, in writing, of hearings and of their immediate suspension. Thereafter,
petitioners were dismissed.

ISSUE:
Is the respondent guilty of illegal suspension and dismissal in the case at bench?

RULING:

There is no denying that petitioners were managerial employees. They executed


management policies, they had the power to hire personnel and assign them tasks; and discipline
the employees in their branch. They recommended actions on employees to the head
office.Article 212 (m) of the Labor Code defines a managerial employee as one who is vested
with powers or prerogatives to lay down and execute management policies and/or hire, transfer,
suspend, lay-off, recall, discharge, assign or discipline employees. Consequently, as managerial
employees, in the case of petitioners, the mere existence of grounds for the loss of trust and
confidence justify their dismissal. Pursuant to our ruling in Caoile v. National Labor Relations
Commission, as long as the employer has a reasonable ground to believe that the managerial
employee concerned is responsible for the purported misconduct, or the nature of his
participation renders him unworthy of the trust and confidence demanded by his position, the
managerial employee can be dismissed.

In the present case, the tape receipts presented by respondents showed that there were
anomalies committed in the branches managed by the petitioners. On the principle of respondeat
superior or command responsibility alone, petitioners may be held liable for negligence in the
performance of their managerial duties, unless petitioners can positively show that they were not
involved. Their position requires a high degree of responsibility that necessarily includes
unearthing of fraudulent and irregular activities. Their bare, unsubstantiated and uncorroborated
denial of any participation in the cheating does not prove their innocence nor disprove their
alleged guilt. Additionally, some employees declared in their affidavits that the cheating was
actually the idea of the petitioners.

Page 76 of 745
RCPI vs. VERCHEZ
G.R. No. 164349. JANUARY 31, 2006

FACTS:

Editha Hebron Verchez (Editha) was confined in the hospital due to an ailment. Her
daughter Grace immediately went to the Sorsogon Branch of RCPI whose services she engaged
to send a telegram to her sister Zenaida. As three days after RCPI was engaged to send the
telegram to Zenaida no response was received from her, Grace sent a letter to Zenaida, this time
thru JRS Delivery Service, reprimanding her for not sending any financial aid. Immediately after
she received Graces letter, Zenaida, along with her husband left for Sorsogon. On her arrival at
Sorsogon, she disclaimed having received any telegram.

The telegram was finally delivered to Zenaida 25 days later. On inquiry from RCPI why
it took that long to deliver it, RCPI claimed that delivery was not immediately effected due to the
occurrence of circumstances which were beyond the control and foresight of RCPI.

ISSUE:
Whether or not RCPI is negligent in the performance of its obligation.

RULING:

Article 1170 of the Civil Code provides: Those who in the performance of their
obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the
tenor thereof, are liable for damages. In culpa contractual, the mere proof of the existence of the
contract and the failure of its compliance justify, prima facie, a corresponding right of relief. The
law, recognizing the obligatory force of contracts, will not permit a party to be set free from
liability for any kind of misperformance of the contractual undertaking or a contravention of the
tenor thereof.

Considering the public utility of RCPIs business and its contractual obligation to
transmit messages, it should exercise due diligence to ascertain that messages are delivered to the
persons at the given address and should provide a system whereby in cases of undelivered
messages the sender is given notice of non-delivery. Messages sent by cable or wireless means
are usually more important and urgent than those which can wait for the mail. RCPI argues,
however, against the presence of urgency in the delivery of the telegram, as well as the basis for
the award of moral damages. RCPIs arguments fail. For it is its breach of contract upon which
its liability is, it bears repeating, anchored. Since RCPI breached its contract, the presumption is
that it was at fault or negligent. It, however, failed to rebut this presumption. For breach of
contract then, RCPI is liable to Grace for damages. RCPIs liability as an employer could of
course be avoided if it could prove that it observed the diligence of a good father of a family to
prevent damage.

Page 77 of 745
VICTORY LINER, INC. vs. GAMMAD
G.R. No. 159636. NOVEMBER 25, 2004

FACTS:

Marie Grace Pagulayan-Gammad was on board an air-conditioned Victory Liner bus


bound for Tuguegarao, Cagayan from Manila. At about 3:00 a.m., the bus while running at a
high speed fell on a ravine which resulted in the death of Marie Grace and physical injuries to
other passengers. On May 14, 1996, respondent heirs of the deceased filed a complaint for
damages arising from culpa contractual against petitioner. In its answer, the petitioner claimed
that the incident was purely accidental and that it has always exercised extraordinary diligence in
its 50 years of operation.

ISSUE:
Whether petitioner should be held liable for breach of contract of carriage.

RULING:

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

In the instant case, there is no evidence to rebut the statutory presumption that the
proximate cause of Marie Graces death was the negligence of petitioner. Hence, the courts
below correctly ruled that petitioner was guilty of breach of contract of carriage.

Page 78 of 745
FGU INSURANCE CORP. vs. G.P. SARMIENTO TRUCKING CORPORATION
G.R. No. 141910. AUGUST 6, 2002

FACTS:

G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver refrigerators aboard


one of its Isuzu truck, driven by Lambert Eroles, from the plant site of Concepcion Industries,
Inc. to the Central Luzon Appliances in Dagupan City. While the truck was traversing the north
diversion road along McArthur highway in Barangay Anupol, Bamban, Tarlac, it collided with
an unidentified truck, causing it to fall into a deep canal, resulting in damage to the cargoes. FGU
Insurance Corporation (FGU), an insurer of the shipment, paid to Concepcion Industries, Inc.,
the value of the covered cargoes. FGU, in turn, being the subrogee of the rights and interests of
Concepcion Industries, Inc., sought reimbursement of the amount it had paid to the latter from
GPS. Since the trucking company failed to heed the claim, FGU filed a complaint for damages
and breach of contract of carriage against GPS and its driver Lambert Eroles. Respondents
asserted that that the cause of damage was purely accidental.

ISSUE:
Whether or not GPS is liable for damages arising from negligence.

RULING:

In culpa contractual, upon which the action of petitioner rests as being the subrogee of
Concepcion Industries, Inc., the mere proof of the existence of the contract and the failure of its
compliance justify, prima facie, a corresponding right of relief. Respondent trucking corporation
recognizes the existence of a contract of carriage between it and petitioner and admits that the
cargoes it has assumed to deliver have been lost or damaged while in its custody. In such a
situation, a default on, or failure of compliance with, the obligation in this case, the delivery of
the goods in its custody to the place of destination - gives rise to a presumption of lack of care
and corresponding liability on the part of the contractual obligor the burden being on him to
establish otherwise. GPS has failed to do so.

Respondent driver, without concrete proof of his negligence or fault, may not himself be
ordered to pay petitioner. The driver, not being a party to the contract of carriage between
petitioner and defendant, may not be held liable under the agreement. A contract can only bind
the parties who have entered into it or their successors who have assumed their personality or
their juridical position. Petitioners civil action against the driver can only be based on culpa
aquiliana, which, unlike culpa contractual, would require the claimant for damages to prove
negligence or fault on the part of the defendant.

Page 79 of 745
LRTA vs. NAVIDAD
G.R. No. 145804. FEBRUARY 6, 2003

FACTS:

On 14 October 1993, in the evening, Nicanor Navidad, then drunk, entered the EDSA
LRT station. While Navidad was standing on the platform near the LRT tracks, Junelito Escartin,
the security guard assigned to the area approached Navidad. A misunderstanding or an
altercation between the two apparently ensued that led to a fist fight. No evidence, however, was
adduced to indicate how the fight started or who, between the two, delivered the first blow or
how Navidad later fell on the LRT tracks. At the exact moment that Navidad fell, an LRT train,
operated by petitioner Rodolfo Roman, was coming in. Navidad was struck by the moving train,
and he was killed instantaneously. The widow of Nicanor, along with her children, filed a
complaint for damages against Junelito Escartin, Rodolfo Roman, the LRTA, the Metro Transit
Organization, Inc. (Metro Transit), and Prudent for the death of her husband. LRTA and Roman
filed a counterclaim against Navidad and a cross-claim against Escartin and Prudent. Prudent, in
its answer, denied liability and averred that it had exercised due diligence in the selection and
supervision of its security guards.

ISSUE:
Who, if any, is liable for damages in relation to the death of Navidad?

RULING:

The foundation of LRTAs liability is the contract of carriage and its obligation to
indemnify the victim arises from the breach of that contract by reason of its failure to exercise
the high diligence required of the common carrier. In the discharge of its commitment to ensure
the safety of passengers, a carrier may choose to hire its own employees or avail itself of the
services of an outsider or an independent firm to undertake the task. In either case, the common
carrier is not relieved of its responsibilities under the contract of carriage.

Regrettably for LRTA, as well as perhaps the surviving spouse and heirs of the late
Nicanor Navidad, this Court is concluded by the factual finding of the Court of Appeals that
there is nothing to link Prudent to the death of Navidad, for the reason that the negligence of its
employee, Escartin, has not been duly proven. There being, similarly, no showing that petitioner
Rodolfo Roman himself is guilty of any culpable act or omission, he must also be absolved from
liability.

Page 80 of 745
RODZSSEN SUPPLY CO, INC. VS. FAR EAST BANK & TRUST CO.
GR No. 109087 May 9, 2001

FACTS:

Defendant Rodzssen Supply, Inc. opened with plaintiff Far East Bank and Trust Co. a 30-
day domestic letter of credit in the amount of P190,000.00 in favor of Ekman and Company, Inc.
(Ekman) for the purchase from the latter of five units of hydraulic loaders, to expire on February
15, 1979. Defendant refused to pay without any valid reason. Plaintiff prays for judgment
ordering defendant to pay the abovementioned P76,000.00 plus due interest thereon, plus 25% of
the amount of the award as attorneys fees. Knowing that the two units of hydraulic loaders had
been delivered to defendant after the expiry date of subject LC; and that in view of the breach of
contract, defendant offered to return to plaintiff the two units of hydraulic loaders, presently still
with the defendant but plaintiff refused to take possession thereof.

Under the contract of sale of the five loaders between Ekman and defendant, upon
Ekmans delivery to, and acceptance by, defendant of the two remaining units of the five loaders,
defendant became liable to Ekman for the payment of said two units. However, as defendant did
not pay Ekman, the latter pressed plaintiff for the payment of said two loaders in the amount of
P76,000.00. In the honest belief that it was still under obligation to Ekman for said amount,
considering that Ekman had presented all the necessary documents, plaintiff voluntarily paid the
said amount to Ekman.

The CA rejected petitioners imputation of bad faith and negligence to respondent bank
for paying for the two hydraulic loaders, which had been delivered after the expiration of the
subject letter of credit. To absolve defendant from liability for the price of the same," the CA
explained, "is to allow it to get away with its unjust enrichment at the expense of the plaintiff."

ISSUE:
Whether petitioner is liable to respondent.

RULING:

Petitioner claims that it accepted the late delivery of the equipment, only because it was
bound to accept it under the companys trust receipt arrangement with respondent bank.

Granting that petitioner was bound under such arrangement to accept the late delivery of
the equipment, we note its unexplained inaction for almost four years with regard to the status of
the ownership or possession of the loaders. Bewildering was its lack of action to validate the
ownership and possession of the loaders, as well as its stolidity over the purported failed sales
transaction. Significant too is the fact that it formalized its offer to return the two pieces of
equipment only after respondents demand for payment, which came more than three years after
it accepted delivery.

When both parties to a transaction are mutually negligent in the performance of their
obligations, the fault of one cancels the negligence of the other and, as in this case, their rights
and obligations may be determined equitably under the law proscribing unjust enrichment.

Petitioner Rodzssen Supply Co., Inc. is orderd to reimburse Respondent Far East Bank
and Trust Co., Inc. P76,000 plus interest thereon at the rate of 6 percent per annum computed
from April 7, 1983. After this judgment becomes final, the interest shall be 12 percent per
annum.

Page 81 of 745
UNIVERSITY OF THE EAST VS. JADER
GR. No. 132344 February 17, 2000

FACTS:

Plaintiff was enrolled in the defendants' College of Law from 1984 up to 1988. In the first
semester of his last year (School year 1987-1988), he failed to take the regular final examination
in Practice Court I for which he was given an incomplete grade. He enrolled for the second
semester as fourth year law student and on February 1, 1988 he filed an application for the
removal of the incomplete grade given him by Professor Carlos Ortega which was approved by
Dean Celedonio Tiongson after payment of the required fee. He took the examination on March
28, 1988. On May 30, 1988, Professor Carlos Ortega submitted his grade. It was a grade of five.
In the meantime, the Dean and the Faculty Members of the College of Law met to deliberate on
who among the fourth year students should be allowed to graduate. The plaintiff's name appeared
in the Tentative List of Candidates for graduation for the Degree of Bachelor of Laws (LL.B) as
of Second Semester (1987-1988). The plaintiff attended the investiture ceremonies at F. dela
Cruz Quadrangle, U.E., Recto Campus, during the program of which he went up the stage when
his name was called.

He thereafter prepared himself for the bar examination. He took a leave of absence
without pay from his job from April 20, 1988 to September 30, 1988 and enrolled at the pre-bar
review class in Far Eastern University. Having learned of the deficiency he dropped his review
class and was not able to take the bar examination. [A check with the Attorney's List in the Court
shows that private respondent is not a member of the Philippine Bar.]

ISSUE:

Whether petitioner is liable for damages under culpa contractual.

RULING:

When a student is enrolled in any educational or learning institution, a contract of


education is entered into between said institution and the student. The professors, teachers or
instructors hired by the school are considered merely as agents and administrators tasked to
perform the school's commitment under the contract. Since the contracting parties are the school
and the student, the latter is not duty-bound to deal with the former's agents, such as the
professors with respect to the status or result of his grades, although nothing prevents either
professors or students from sharing with each other such information. The Court takes judicial
notice of the traditional practice in educational institutions wherein the professor directly
furnishes his/her students their grades.

It is the contractual obligation of the school to timely inform and furnish sufficient notice
and information to each and every student as to whether he or she had already complied with all
the requirements for the conferment of a degree or whether they would be included among those
who will graduate. Prior or subsequent to the ceremony, the school has the obligation to
promptly inform the student of any problem involving the latter's grades and performance and
also most importantly, of the procedures for remedying the same.

Petitioner, in belatedly informing respondent of the result of the removal examination,


particularly at a time when he had already commenced preparing for the bar exams, cannot be
said to have acted in good faith.

WHEREFORE, Petitioner is ordered to pay respondent the sum of Thirty-five Thousand


Four Hundred Seventy Pesos (P35,470.00), with legal interest of 6% per annum computed from
the date of filing of the complaint until fully paid; the amount of Five Thousand Pesos
(P5,000.00) as attorney's fees; and the costs of the suit. The award of moral damages is deleted.

Page 82 of 745
BAYNE ADJUSTERS VS. CA
GR No. 116332 January 25, 2000

FACTS:

In May 1987 Colgate Palmolive Philippine, Inc., imported alkyl benzene from Japan
valued at US$255,802.88. The said liquid cargo was insured with herein private respondent
Insurance Company of North America against all risk for its full value. Petitioner Bayne
Adjusters and Surveyors Inc., was contracted by the consignee to supervise the proper handling
and discharge of the cargo from the chemical tanker to a receiving barge until the cargo is
pumped into the consignees shore tank. When the cargo arrived in Manila petitioners surveyor
supervised the transfer of the cargo from the chemical tanker to the receiving barge. Pumping
operation from the barge to the consignees shore tank commenced at 2020 hours of June 27,
1987. Pumping of the liquid cargo from the barge to the consignees tank was interrupted several
times due to mechanical problems with the pump. When the pump broke down once again at
about 1300 hours of June 29, 1987, the petitioners surveyor left the premises without leaving
any instruction with the barge foreman what to do in the event that the pump becomes
operational again. Petitioner sent Amado Fontillas, a cargo surveyor, not a liquid bulk surveyor,
to the premises and it was agreed that pumping operation would resume the following day at
1030 hours. Fontillas tried to inform both the barge men and the assigned surveyor of the
scheduled resumption of pumping operation but he could not find them so he left the premises.
When the barge men arrived in the early evening, they found the valves of the tank open and
resumed pumping operation in the absence of any instruction from the surveyor to the contrary.
The following morning it was found that an undetermined amount of alkyl benzene was lost due
to overflow.

The consignee filed a claim with the private respondent insurance corporation for the
value of the lost liquid cargo.

Both the trial court and the appellate court found the petitioners failure to comply with
the Standard Operating Procedure for Handling Liquid Bulk Cargo when pumping operation is
suspended as the proximate cause of the loss.

ISSUE:

Whether petitioner is liable for the damages incurred arising from culpa contractual.

RULING:

The negligence of the obligor in the performance of the obligation renders him liable for
damages for the resulting loss suffered by the obligee. Fault or negligence of the obligor consists
in his failure to exercise due care and prudence in the performance of the obligation as the nature
of the obligation so demands. The factual findings and conclusions of the trial and appellate
court when supported by substantial evidence are entitled to great respect and will not be
disturbed on appeal except on very strong and cogent grounds. Both parties agree that the
petitioner is bound to supervise the proper discharge of the liquid cargo from the chemical tanker
to the receiving barge and from the latter to the consignees shore tank.

It is clear that under the standard procedure the surveyor is required to seal all cargo
compartment manhole covers and the barge and manifold covers to avoid unsupervised discharge
of the liquid cargo and to avert loss or contamination thereof. The petitioners failure to closely
supervise the discharge of the cargo in accordance with accepted guidelines is the proximate
cause of the loss. We find no cogent reason to overturn the legal conclusion reached by the lower
courts that the petitioner is negligent in the performance of its duty as a marine superintendent
surveyor under the Standard Operating Procedure in handling liquid cargo and held the petitioner
liable for damages for the loss of the cargo.

Page 83 of 745
DELSAN TRANSPORT VS. C & A CONSORTIUM
GR No. 156034 October 1, 2003

FACTS:

On October 9, 1994, M/V Delsan Express, a ship owned and operated by petitioner
Delsan Transport Lines, Inc., anchored at the Navotas Fish Port for the purpose of installing a
cargo pump and clearing the cargo oil tank. At around 12:00 midnight of October 20, 1994,
Captain Demetrio T. Jusep of M/V Delsan Express received a report from his radio head operator
in Japan that a typhoon was going to hit Manila in about eight (8) hours. At approximately 8:35
in the morning of October 21, 1994, Capt. Jusep tried to seek shelter at the North Harbor but
could not enter the area because it was already congested. At 10:00 a.m., Capt. Jusep decided to
drop anchor at the vicinity of Vitas mouth, 4 miles away from a Napocor power barge. At that
time, the waves were already reaching 8 to 10 feet high. Capt. Jusep ordered his crew to go full
ahead to counter the wind which was dragging the ship towards the Napocor power barge. To
avoid collision, Capt. Jusep ordered a full stop of the vessel.[9] He succeeded in avoiding the
power barge, but when the engine was re-started and the ship was maneuvered full astern, it hit
the deflector wall constructed by respondent.
Respondent demanded payment of the damage from petitioner but the latter refused to
pay.

ISSUES:
1. Whether or not Capt. Jusep was negligent;
2. If yes, whether or not petitioner is solidarily liable under for the quasi-delict committed
by Capt. Jusep?

RULING:

In the case at bar, the Court of Appeals was correct in holding that Capt. Jusep was
negligent in deciding to transfer the vessel only at 8:35 in the morning of October 21, 1994. As
early as 12:00 midnight of October 20, 1994, he received a report from his radio head operator in
Japan that a typhoon was going to hit Manila after 8 hours. This, notwithstanding, he did
nothing, until 8:35 in the morning of October 21, 1994, when he decided to seek shelter at the
North Harbor, which unfortunately was already congested.
The finding of negligence cannot be rebutted upon proof that the ship could not have
sought refuge at the North Harbor even if the transfer was done earlier. It is not the speculative
success or failure of a decision that determines the existence of negligence in the present case,
but the failure to take immediate and appropriate action under the circumstances. Capt. Jusep,
despite knowledge that the typhoon was to hit Manila in 8 hours, complacently waited for the
lapse of more than 8 hours thinking that the typhoon might change direction. Furthermore, he did
not transfer as soon as the sun rose because, according to him, it was not very cloudy and there
was no weather disturbance yet.
Anent the second issue, we find petitioner vicariously liable for the negligent act of Capt.
Jusep. Under Article 2180 of the Civil Code an employer may be held solidarily liable for the
negligent act of his employee. Whenever an employees negligence causes damage or injury to
another, there instantly arises a presumption juris tantum that the employer failed to exercise
diligentissimi patris families in the selection (culpa in eligiendo) or supervision (culpa in
vigilando) of its employees. To avoid liability for a quasi-delict committed by his employee, an
employer must overcome the presumption by presenting convincing proof that he exercised the
care and diligence of a good father of a family in the selection and supervision of his employee.
There is no question that petitioner, who is the owner/operator of M/V Delsan Express, is
also the employer of Capt. Jusep who at the time of the incident acted within the scope of his
duty. The defense raised by petitioner was that it exercised due diligence in the selection of Capt.
Jusep because the latter is a licensed and competent Master. It is not enough that the employees
chosen be competent and qualified, inasmuch as the employer is still required to exercise due
diligence in supervising its employees.

Page 84 of 745
PCIB VS. CA
GR No. 121413 January 29, 2001

FACTS:

The plaintiff Ford drew and issued its Citibank Check No. SN-04867 in the amount of
P4,746,114.41, in favor of the Commissioner of Internal Revenue as payment of plaintiffs
percentage or manufacturers sales taxes for the third quarter of 1977. The aforesaid check was
deposited with the defendant IBAA (now PCIBank) and was subsequently cleared at the Central
Bank. Upon presentment with the defendant Citibank, the proceeds of the check was paid to
IBAA as collecting or depository bank. The proceeds of the same Citibank check of the plaintiff
was never paid to or received by the payee thereof, the Commissioner of Internal Revenue. As a
consequence, upon demand of the Bureau and/or Commissioner of Internal Revenue, the plaintiff
was compelled to make a second payment to the Bureau of Internal Revenue of its
percentage/manufacturers sales taxes for the third quarter of 1977 and that said second payment
of plaintiff in the amount of P4,746,114.41 was duly received by the Bureau of Internal Revenue.
The Acting Commissioner of Internal Revenue addressed to the plaintiff that its check in
the amount of P4,746,114.41 was not paid to the government or its authorized agent and instead
encashed by unauthorized persons, hence, plaintiff has to pay the said amount within fifteen days
from receipt of the letter. Upon advice of the plaintiffs lawyers, plaintiff paid to the Bureau of
Internal Revenue, the amount of P4,746,114.41, representing payment of plaintiffs percentage
tax for the third quarter of 1977. Plaintiff demanded defendant to reimburse him of the said
amount paid for the second time to BIR but the latter refused.

ISSUE:

Whether PCIB is liable to Ford Philippines the amount of several checks which were
allegedly embezzled by a syndicate group.

RULING:

The general rule is that if the master is injured by the negligence of a third person and by
the concurring contributory negligence of his own servant or agent, the latters negligence is
imputed to his superior and will defeat the superiors action against the third person, assuming,
of course that the contributory negligence was the proximate cause of the injury of which
complaint is made.
It appears that although the employees of Ford initiated the transactions attributable to an
organized syndicate, in our view, their actions were not the proximate cause of encashing the
checks payable to the CIR. The degree of Fords negligence, if any, could not be characterized as
the proximate cause of the injury to the parties.
Citibank should have scrutinized Citibank Check before paying the amount of the
proceeds thereof to the collecting bank of the BIR. One thing is clear from the record: the
clearing stamps at the back of Citibank Check Nos. SN 10597 and 16508 do not bear any initials.
Citibank failed to notice and verify the absence of the clearing stamps. Had this been duly
examined, the switching of the worthless checks to Citibank Check Nos. 10597 and 16508 would
have been discovered in time. For this reason, Citibank had indeed failed to perform what was
incumbent upon it, which is to ensure that the amount of the checks should be paid only to its
designated payee. The fact that the drawee bank did not discover the irregularity seasonably, in
our view, constitutes negligence in carrying out the banks duty to its depositors. The point is
that as a business affected with public interest and because of the nature of its functions, the bank
is under obligation to treat the accounts of its depositors with meticulous care, always having in
mind the fiduciary nature of their relationship.
Citibank must likewise answer for the damages incurred by Ford on Citibank Checks
because of the contractual relationship existing between the two. Citibank, as the drawee bank
breached its contractual obligation with Ford and such degree of culpability contributed to the
damage caused to the latter.

Page 85 of 745
SAN MIGUEL CORPORATION AND HEIRS OF OUANA VS. CA
GR No. 141716 July 4, 2002

FACTS:

San Miguel Corporation entered into a Time Charter Party Agreement with Julius Ouano,
doing business under the name and style J. Ouano Marine Services. Under the terms of the
agreement, SMC chartered the M/V Doa Roberta owned by Julius Ouano for a period of two
years, from June 1, 1989 to May 31, 1991, for the purpose of transporting SMCs beverage
products from its Mandaue City plant to various points in Visayas and Mindanao. On November
11, 1990, during the term of the charter, SMC issued sailing orders to the Master of the MN
Doa Roberta, Captain Sabiniano Inguito, to sail for Opol, Cagayan Nov. 12, 1990. Meanwhile,
at 4:00 a.m. of November 12, 1990, typhoon Ruping was spotted 570 kilometers east-southeast
of Borongan, Samar, moving west-northwest at 22 kilometers per hour in the general direction of
Eastern Visayas. The typhoon had maximum sustained winds of 240 kilometers per hour near the
center with gustiness of up to 280 kilometers per hour.At 7:00 a.m., November 12, 1990, one
hour after the M/V Doa Roberta departed from Mandaue City SMC Radio Operator Rogelio P.
Moreno contacted Captain Inguito through the radio and advised him to take shelter. Captain
Inguito replied that they will proceed since the typhoon was far away from them, and that the
winds were in their favor.At 1:15 a.m., November 13, 1990, Captain Inguito called Moreno over
the radio and requested him to contact Rico Ouano, son of Julius Ouano, because they needed a
helicopter to rescue them. The vessel was about 20 miles west of Sulauan Point.Upon being told
by SMCs radio operator, Rico Ouano turned on his radio and read the distress signal from
Captain Ingiuto. When he talked to the captain, the latter requested for a helicopter to rescue
them. Rico Ouano talked to the Chief Engineer who informed him that they can no longer stop
the water from coming into the vessel because the crew members were feeling dizzy from the
petroleum fumes.At 2:30 a.m. of November 13, 1990, the M/V Doa Roberta sank. Out of the 25
officers and crew on board the vessel, only five survived.

ISSUE:
Whether or nor Ouano is liable for the negligence of his employee.

RULING:
A charter party is a contract by virtue of which the owner or the agent of a vessel binds
himself to transport merchandise or persons for a fixed price. It has also been defined as a
contract by virtue of which the owner or the agent of the vessel leases for a certain price the
whole or a portion of the vessel for the transportation of goods or persons from one port to
another. If the charter is a contract of affreightment, which leaves the general owner in
possession of the ship as owner for the voyage, the rights and the responsibilities of ownership
rest on the owner. The charterer is free from liability to third persons in respect of the ship. SC
concur with the findings of the Court of Appeals that the charter party in these cases was a
contract of affreightment, contrary to petitioner Ouanos protestation that it was a demise charter.
It appearing that Ouano was the employer of the captain and crew of the M/V Doa
Roberta during the term of the charter, he therefore had command and control over the vessel.
His son, Rico Ouano, even testified that during the period that the vessel was under charter to
SMC, the Captain thereof had control of the navigation of all voyages. Under the foregoing
definitions, as well as the clear terms of the Charter Party Agreement between the parties, the
charterer, SMC, should be free from liability for any loss or damage sustained during the voyage,
unless it be shown that the same was due to its fault or negligence.
The evidence does not show that SMC or its employees were amiss in their duties. In the
assailed decision, the Court of Appeals found that the proximate cause of the sinking of the
vessel was the negligence of Captain Sabiniano Inguito. SC likewise agrees with the CA that
Ouano is vicariously liable for the negligent acts of his employee, Captain Inguito. Under
Articles 2176 and 2180 of the Civil Code, owners and managers are responsible for damages
caused by the negligence of a servant or an employee, the master or employer is presumed to be
negligent either in the selection or in the supervision of that employee.

Page 86 of 745
PACIS v. MORALES
G.R. No. 169467 : February 25, 2010

FACTS:

On 17 January 1995, petitioners Alfredo P. Pacis and Cleopatra D. Pacis (petitioners)


filed with the trial court a civil case for damages against respondent Jerome Jovanne Morales
(respondent). Petitioners are the parents of Alfred Dennis Pacis, Jr, a 17-year old student who
died in a shooting incident inside the Top Gun Firearms and Ammunitions Store in Baguio City.
Respondent is the owner of the gun store.The bullet which killed Alfred Dennis Pacis was fired
from a gun brought in by a customer of the gun store for repair.The gun, an AMT Automag II
Cal. 22 Rimfire Magnum with Serial No. SN-H34194, was left by defendant Morales in a drawer
of a table located inside the gun store.

Defendant Morales was in Manila at the time.Sales agents Matibag and Herbolario were
the ones left to look after the gun store. It appears that Matibag and Herbolario later brought out
the gun from the drawer and placed it on top of the table. Attracted by the sight of the gun, the
young Alfred Dennis Pacis got hold of the same. Matibag asked Alfred Dennis Pacis to return
the gun. The latter followed and handed the gun to Matibag. It went off, the bullet hitting the
young Alfred in the head.

A criminal case for homicide was filed against Matibag, but was however acquitted of the
charge against him because of the exempting circumstance of accident under Art. 12, par. 4 of
the Revised Penal Code. Petitioners opted to file an independent civil action for damages against
respondent whom they alleged was Matibag's employer. Petitioners based their claim for
damages under Articles 2176 and 2180 of the Civil Code.

The RTC however imposed a civil liability against repsondent.Upon appeal, the CA
absolved respondent from civil liability under Article 2180 of the Civil Code.

ISSUE:

Whether or not respondent Morales, as the employer is subsidiary liable.

HELD:

YES. The Court held that respondent did not exercise the degree of care and diligence
required of a good father of a family, much less the degree of care required of someone dealing
with dangerous weapons. For the subsidiary liability of the employer under Article 103 of the
Revised Penal Code, the liability of the employer, or any person for that matter, under Article
2176 of the Civil Code is primary and direct, based on a persons own negligence.

As a gun store owner, respondent is presumed to be knowledgeable about firearms safety


and should have known never to keep a loaded weapon in his store to avoid unreasonable risk of
harm or injury to others. For failing to insure that the gun was not loaded, respondent himself
was negligent. Furthermore, it was not shown in this case whether respondent had a License to
Repair which authorizes him to repair defective firearms to restore its original composition or
enhance or upgrade firearms.

Page 87 of 745
PHILIPPINE HAWK CORP. v. TAN LEE
G.R. No. 166869 : February 16, 2010

FACTS:

On March 15, 2005, respondent Vivian Tan Lee filed before the RTC of Quezon City a
Complaint against petitioner Philippine Hawk Corporation and defendant Margarito Avila for
damages based on quasi-delict, arising from a vehicular accident that occurred on March 17,
1991 in Barangay Buensoceso, Gumaca, Quezon. The accident resulted in the death of
respondent's husband, Silvino Tan, and caused respondent physical injuries. The accident
involved a motorcycle, a passenger jeep, and a bus with Body No. 119. The bus was owned by
petitioner Philippine Hawk Corporation, and was then being driven by Margarito Avila.

On June 18, 1992, respondent filed an Amended Complaint, in her own behalf and in
behalf of her children, in the civil case for damages against petitioner. Respondent sought the
payment of indemnity for the death of Silvino Tan, moral and exemplary damages, funeral and
interment expenses, medical and hospitalization expenses, the cost of the motorcycle's repair,
attorney's fees, and other just and equitable reliefs.

In its Answer, petitioner denied liability for the vehicular accident, alleging that the
immediate and proximate cause of the accident was the recklessness or lack of caution of Silvino
Tan. Petitioner asserted that it exercised the diligence of a good father of the family in the
selection and supervision of its employees, including Margarito Avila.

The trial court rendered judgment against petitioner and defendant Margarito Avila,
wherein it adjudged guilty of simple negligence. It further held petitioner bus company liable for
failing to exercise the diligence of a good father of the family in the selection and supervision of
Avila, having failed to sufficiently inculcate in him discipline and correct behavior on the road.
The CA affirmed the decision of the trial court with modification in the award of damages.

ISSUE:

Whether or not petitioner is liable to respondent for damages.

HELD:

YES. The Court upholds the finding of the trial court and the Court of Appeals that
petitioner is liable to respondent, since it failed to exercise the diligence of a good father of the
family in the selection and supervision of its bus driver, Margarito Avila, for having failed to
sufficiently inculcate in him discipline and correct behavior on the road. Indeed, petitioner's tests
were concentrated on the ability to drive and physical fitness to do so. It also did not know that
Avila had been previously involved in sideswiping incidents. The Court also affirmed the CA's
decision in awarding civil indemnity for the death of respondent's husband, temperate damages,
and moral damages for the physical injuries sustained by respondent in addition to the damages
granted by the trial court to respondent.

Page 88 of 745
MERCURY DRUG CORPORATION VS. HUANG
GR No. 172122 June 22, 2007

FACTS:

Petitioner Mercury Drug is the registered owner of a six-wheeler 1990 Mitsubishi Truck.
It has in its employ petitioner Rolando Del Rosario as driver. Respondent spouses Richard and
Carmen Huang are the parents of respondent Stephen Huang and own the red 1991 Toyota
Corolla. These two vehicles figured in a road accident. At the time of the accident, petitioner Del
Rosario only had a Traffic Violation Receipt. A drivers license had been confiscated because he
had been previously apprehended for reckless driving. Respondent Stephen Huang sustained
massive injuries to his spinal cord, head, face and lung. He is paralyzed for life from his chest
down and requires continuous medical and rehabilitation treatment. Respondents fault petitioner
Del Rosario for committing gross negligence and reckless imprudence while driving, and
petitioner Mercury Drug for failing to exercise the diligence of a good father of a family in the
selection and supervision of its driver.

The trial court found Mercury Drug and Del Rosario jointly and severally liable to pay
respondents. The Court of Appeals affirmed the said decision.

ISSUE:

Whether or not petitioner Mercury Drug is liable for the negligence of its employee.

RULING:

Article 2176 and 2180 of the Civil Code provide:


Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damages done. Such fault or negligence, if there is no pre-
existing contractual relationship between the parties, is called a quasi-delict and is governed by
the provisions of this Chapter.
The obligation imposed by article 2176 is demandable not only for ones own
acts or omissions, but also for those of persons for whom one is responsible.

The liability of the employer under Article 2180 is direct and immediate. It is not
conditioned on a prior recourse against the negligent employee, or a prior showing of insolvency
of such employee. It is also joint and solidary with the employee. To be relieved f the liability,
petitioner should show that it exercised the diligence of a good father of a family, both in the
selection of the employee and in the supervision of the performance of his duties.

In this case, the petitioner Mercury Drug does not provide for back-up driver for long
trips. As the time of the accident, Del Rosario has been driving for more than thirteen hours,
without any alternate. Moreover, Del Rosario took the driving test and psychological exam for
the position of Delivery Man and not as Truck Man.

With this, petitioner Mercury Drug is liable jointly and severally liable to pay the
respondents.

Page 89 of 745
MENDOZA VS. SORIANO
GR No. 164012 June 8, 2007

FACTS:

Sonny Soriano, while crossing Commonwealth Avenue near Luzon Avenue, was hit by a
speeding Tamaraw FX driven by Lomer Macasasa. Soriano was thrown five meters away, while
the vehicle stopped some 25 meters from the point of impact. Gerard Villaspin, one of Sorianos
companions, asked Macasasa to bring Soriano to the hospital, but the first flee. Respondents
wife and daughter filed a complaint for damages against Macasasa and petitioner Flordeliza
Mendoza, the registered owner of the vehicle.

Petitioner Mendoza contends that she was not liable since as owner of the vehicle, she
had exercised the diligence of a good father of a family over her employee. Macasas.

The trial court dismissed the complaint against Macasasa and Mendoza. It found Soriano
negligent for crossing not in the pedestrian overpass. The Court of Appeals, on the other hand,
reversed the assailed decision of the lower court.

ISSUE:

Whether or not petitioner is liable for damages.

RULING:

While the appellate court agreed that Soriano was negligent, it also found Macasasa
negligent for speeding, such that he was unable to avoid hitting the victim. It observed that
Sorianos own negligence did not preclude recovery for damages from Macasasas negligence. It
further held that since petitioner failed to present evidenced to the contrary and conformably with
Article 2180 of the Civil Code, the presumption of negligence of the employer in the selection
and supervision of employees stood.

The records show that Macasasa violated two traffic rules under the Land Transportation
and Office Code. Under Article 2185 of the Civil Code, a person driving a motor vehicle is
presumed negligent if at the time of the mishap, he was violating traffic regulations.

Further, under Article 2180, employers are liable for the damages caused by their
employees acting within the scope of their assigned tasks. The liability arises due to the
presumed negligence of the employers in supervising their employees unless they prove that they
observed all the diligence of a good father of a family to prevent the damage. In this case
petitioner is held primarily and solidarily liable for the damages caused by Macasasa.

However, Article 2179 states that when the plaintiffs own negligence was the
immediate and proximate cause of his injury, he cannot recover damages. But if his negligence
was only contributory, the immediate and proximate cause of the injury being the defendants
lack of due care, the plaintiff may recover damages, but the court shall mitigate the damages
awarded.

Ruling that Soriano was guilty of contributory negligence for not using the pedestrian
overpass, 20% reduction of the amount of the damages awarded was awarded to petitioner.

Page 90 of 745
CEREZO VS. TUAZON
GR No. 141538 March 23, 2004

FACTS:

Country Bus Lines passenger bus collided with a tricycle. Tricycle driver Tuazon filed a
complaint for damages against Mrs. Cerezo, as owner of the bus line, her husband Attorney Juan
Cerezo, and bus driver Danilo A. Foronda.

After considering Tuazons testimonial and documentary evidence, the trial court ruled
in Tuazons favor. The trial court made no pronouncement on Forondas liability because there
was no service of summons on him. The trial court did not hold Atty. Cerezo liable as Tuazon
failed to show that Mrs. Cerezos business benefited the family, pursuant to Article 121(3) of the
Family Code. The trial court held Mrs. Cerezo solely liable for the damages sustained by
Tuazon arising from the negligence of Mrs. Cerezos employee, pursuant to Article 2180 of the
Civil Code.

ISSUE:
Whether petitioner is solidarily liable.

RULING:

Contrary to Mrs. Cerezos assertion, Foronda is not an indispensable party to the case.
An indispensable party is one whose interest is affected by the courts action in the litigation, and
without whom no final resolution of the case is possible. However, Mrs. Cerezos liability as an
employer in an action for a quasi-delict is not only solidary, it is also primary and direct. Foronda
is not an indispensable party to the final resolution of Tuazons action for damages against Mrs.
Cerezo.
The responsibility of two or more persons who are liable for a quasi-delict is solidary.
Where there is a solidary obligation on the part of debtors, as in this case, each debtor is liable
for the entire obligation. Hence, each debtor is liable to pay for the entire obligation in full.
There is no merger or renunciation of rights, but only mutual representation. Where the
obligation of the parties is solidary, either of the parties is indispensable, and the other is not
even a necessary party because complete relief is available from either. Therefore, jurisdiction
over Foronda is not even necessary as Tuazon may collect damages from Mrs. Cerezo alone.
Moreover, an employers liability based on a quasi-delict is primary and direct, while the
employers liability based on a delict is merely subsidiary. The words primary and direct, as
contrasted with subsidiary, refer to the remedy provided by law for enforcing the obligation
rather than to the character and limits of the obligation. Although liability under Article 2180
originates from the negligent act of the employee, the aggrieved party may sue the employer
directly.
When an employee causes damage, the law presumes that the employer has himself
committed an act of negligence in not preventing or avoiding the damage. This is the fault that
the law condemns. While the employer is civilly liable in a subsidiary capacity for the
employees criminal negligence, the employer is also civilly liable directly and separately for his
own civil negligence in failing to exercise due diligence in selecting and supervising his
employee. The idea that the employers liability is solely subsidiary is wrong.
To hold the employer liable in a subsidiary capacity under a delict, the aggrieved party
must initiate a criminal action where the employees delict and corresponding primary liability
are established. If the present action proceeds from a delict, then the trial courts jurisdiction over
Foronda is necessary.
However, the present action is clearly for the quasi-delict of Mrs. Cerezo and not for the
delict of Foronda.
Thus, the petition was denied ordering the defendant Hermana Cerezo to pay the plaintiff.

Page 91 of 745
FILIPINAS SYNTHETIC v. DE LOS SANTOS
G.R. No. 152033, March 16, 2011

FACTS:

On the night of September 30, 1984, Teresa Elena Legarda-de los Santos, the wife of
respondent Wilfredo de los Santos ,performed at the Rizal Theater in Makati City, Metro Manila
as a member of the cast for the musical play, Woman of the Year.On that same night, at the
request of Wilfredo, his brother Armando de los Santos , husband of respondent Carmina Vda.
de los Santos, went to the Rizal Theater to fetch Teresa Elena after the latter's performance. He
drove a 1980 Mitsubishi Galant Sigma , a company car assigned to Wilfredo.Two other members
of the cast of Woman of the Year, namely, Annabel Vilches (Annabel) and Jerome Macuja,
joined Teresa Elena in the Galant Sigma.

Around 11:30 p.m., while travelling along the Katipunan Road (White Plains), the Galant
Sigma collided with the shuttle bus owned by petitioner and driven by Alfredo S. Mejia (Mejia),
an employee of petitioner. The Galant Sigma was dragged about 12 meters from the point of
impact, across the White Plains Road landing near the perimeter fence of Camp Aguinaldo,
where the Galant Sigma burst into flames and burned to death beyond recognition all four
occupants of the car.

A criminal charge for reckless imprudence resulting in damage to property with multiple
homicide was brought against Mejia, which was decided in favor of Mejia. The family of
Annabel filed a civil case against petitioner and Mejia.The RTC decided in favor of herein
respondents, and was affirmed by the CA with modifications in the awarding of damages.

ISSUE:

Whether or not Mejia is negligent and liable for damages including the bus company.

HELD:

YES. From those evidence, there was proof more than preponderant to conclude that
Mejia was travelling at an unlawful speed, hence, the negligent driver. The Court therefore
cannot find any error on the part of the trial court in concluding that Mejia was driving more than
his claim of 70 kilometres per hour. Significantly, the claimed speed of Mejia is still unlawful,
considering that Section 35 of RA 4136 states that the maximum allowable speed for trucks and
buses must not exceed 50 kilometres per hour. The excessive speed employed by Mejia was the
proximate cause of the collision that led to the sudden death of Teresa Elena and Armando.

As the negligence of the employee gives rise to the presumption of negligence on the part
of the employer, the latter has the burden of proving that it has been diligent not only in the
selection of employees but also in the actual supervision of their work. In order that the defense
of due diligence in the selection and supervision of employees may be deemed sufficient and
plausible, it is not enough to emptily invoke the existence of said company guidelines and
policies on hiring and supervision The mere allegation of the existence of hiring procedures and
supervisory policies, without anything more, is decidedly not sufficient to overcome such
presumption.

In the present case, Filsyn, the employer of Mejia merely presented evidence on the
alleged care it took in the selection or hiring of Mejia way back in 1974 or ten years before the
fatal accident. Neither did Filsyn present any proof of the existence of the rules and regulations
governing the conduct of its employees. It is significant to note that in employing Mejia, who is
not a high school graduate, Filsyn waived its long-standing policy requirement of hiring only
high school graduates. It insufficiently failed to explain the reason for such waiver other than
their allegation of Mejia's maturity and skill for the job.

Page 92 of 745
VIRON TRANSPORTATION CO., INC. VS. DELOS SANTOS
GR No. 54080 November 22, 2000

FACTS:

Defendant Alberto delos Santos was the driver of defendant Rudy Samidan of the latters
vehicle, a Forward Cargo Truck. At about 12:30 in the afternoon, he was driving said truck along
the National Highway within the vicinity of Gerona, Tarlac. The Viron Bus, driven by Wilfredo
Villanueva, tried to overtake his truck, and he swerved to the right shoulder of the highway, but
as soon as he occupied the right lane of the road, the cargo truck which he was driving was hit by
the Viron bus on its left front side, as the bus swerved to his lane to avoid an incoming bus on its
opposite direction. With the driver of another truck dealing likewise in vegetables, Dulnuan, the
two of them and the driver of the Viron bus proceeded to report the incident to the Police Station.

Both the RTC and the CA rendered its decision in favor of the private respondents.

ISSUE:

Whether the employer is liable to the negligence of his employee.

RULING:

As employers of the bus driver, the petitioner is, under Article 2180 of the Civil Code,
directly and primarily liable for the resulting damages. The presumption that they are negligent
flows from the negligence of their employee. That presumption, however, is only jusris tantum,
not juris et de jure. Their only possible defense is that they exercised all the diligence of a good
father of a family to prevent the damage.

In fine, when the employee causes damage due to his own negligence while performing
his own duties, there arises the juris tantum presumption that the employer is negligent,
rebuttable only by proof of observance of the diligence of a good father of a family.

Petitioner, through its witnesses, failed to rebut such legal presumption of negligence in
the selection and supervision of employees, thus, petitioner as the employer is responsible for
damages, the basis of the liability being the relationship of pater familias or on the employers
own negligence. Hence, with the allegations and subsequent proof of negligence against the bus
driver of petitioner, petitioner (employer) is liable for damages.

Page 93 of 745
MERCURY DRUG CORPORATION VS. BAKING
GR No. 57435 May 25, 2007

FACTS:

Sebastian Baking, respondent, went to the clinic of Dr. Cesar Sy for a medical check-up.
Dr. Sy gave respondent two medical prescriptions Diomicron for his blood sugar and Benalize
tablets for his triglyceride.

Respondent then proceeded to petitioner Mercury Drug Corporation (Alabang Branch) to


buy the prescribed medicines. However, the saleslady misread the prescription Diamicron as a
prescription for Dormicum. Unaware that what was given to him was the wrong medicine,
respondent took one pill of dormicum on three consecutive days. On the third day he took the
medicine, and he figured in a vehicular accident. The car he was driving collided with the car of
one Jose Peralta. Respondent fell asleep while driving he could not remember anything about the
collision nor felt its impact.

Suspecting that the tablet he took may have bearing on his physical and mental state at
the time of the collision, respondent returned to Dr. Sy. Upon being shown the medicine, Dr. Sy
was shocked to find that what was sold to him was Dormicum, instead of the prescribed
Diamicron

The RTC and CA rendered their decision in favor of respondent.

ISSUE:

Whether petitioner was negligent, and if so, whether such negligence was the proximate
cause of respondents accident.

RULING:

Article 2176 states that whoever by act or omission causes damage to another, there
being fault or negligence, is obliged to pay for the damages done. Such fault or negligence, if
there is no pre-existing contractual relationship between the parties, is called a quasi-delict

Obviously, petitioners employee was grossly negligent in selling respondent domicrum,


instead of the prescribed diamicron. Considering that a fatal mistake could be a matter of life and
death for a buying patient, the employee should have been very cautious in dispensing
medicines. Petitioner contends that the proximate cause of the accident was respondents
negligence in driving. The court disagrees. The accident could have not occurred had petitioners
employee been careful in reading the prescription.

Article 2180 in complementing the preceding article states that the obligation imposed
by articles 2176 is demandable not only for ones own acts or omissions, but also for those of
persons for whom one is responsible. It is thus clear that the employer of a negligent employee
is liable for the damages caused by the latter. When an injury is caused by the negligence of an
employee, there instantly arises a presumption of the law that there has been negligence on the
part of the employer either in the selection of the employee or the supervision over him, after
such selection. The presumption, however, may be rebutted by a clear showing on the part of the
employer that he has exercised the care and diligence of a good father of a family in the selection
and supervision of his employee.

In this case, petitioner failed to prove such exercised of due diligence of a good father of
a family in the selection and supervision of employee, thus making the petitioner solidarily liable
for the damages.

Page 94 of 745
SAFEGUARD SECURITY V. TANGCO
GR No. 165732 December 14, 2006

FACTS:

Evangeline Tangco (Evangeline) went to Ecology Bank, Katipunan Branch, Quezon City,
to renew her time deposit per advise of the bank's cashier as she would sign a specimen card.
Evangeline, a duly licensed firearm holder with corresponding permit to carry the same outside
her residence, approached security guard Pajarillo, who was stationed outside the bank, and
pulled out her firearm from her bag to deposit the same for safekeeping. Suddenly, Pajarillo shot
Evangeline with his service shotgun hitting her in the abdomen instantly causing her death.
Respondent filed a complaint for damages against Pajarillo for negligently shooting Evangeline
and against Safeguard for failing to observe the diligence of a good father of a family to prevent
the damage committed by its security guard.
Petitioners denied the material allegations in the complaint and alleged that Safeguard
exercised the diligence of a good father of a family in the selection and supervision of Pajarillo;
that Evangeline's death was not due to Pajarillo's negligence as the latter acted only in self-
defense.

ISSUES:
1. Whether Pajarillo is guilty of negligence in shooting Evangeline; and
2. Whether Safeguard should be held solidarily liable for the damages awarded to
respondents.

RULING:

Safeguard contends that it cannot be jointly held liable since it had adequately shown that
it had exercised the diligence required in the selection and supervision of its employees. It claims
that it had required the guards to undergo the necessary training and to submit the requisite
qualifications and credentials which even the RTC found to have been complied with; that the
RTC erroneously found that it did not exercise the diligence required in the supervision of its
employee. Safeguard further claims that it conducts monitoring of the activities of its personnel,
wherein supervisors are assigned to routinely check the activities of the security guards which
include among others, whether or not they are in their proper post and with proper equipment, as
well as regular evaluations of the employees' performances; that the fact that Pajarillo loaded his
firearm contrary to Safeguard's operating procedure is not sufficient basis to say that Safeguard
had failed its duty of proper supervision; that it was likewise error to say that Safeguard was
negligent in seeing to it that the procedures and policies were not properly implemented by
reason of one unfortunate event. The Supreme Court was not convinced. Article 2180 of the
Civil Code provides: The obligation imposed by Article 2176 is demandable not only for one's
own acts or omissions, but also for those of persons for whom one is responsible.
As the employer of Pajarillo, Safeguard is primarily and solidarily liable for the quasi-
delict committed by the former. Safeguard is presumed to be negligent in the selection and
supervision of his employee by operation of law. This presumption may be overcome only by
satisfactorily showing that the employer exercised the care and the diligence of a good father of a
family in the selection and the supervision of its employee. In the selection of prospective
employees, employers are required to examine them as to their qualifications, experience, and
service records. On the other hand, due diligence in the supervision of employees includes the
formulation of suitable rules and regulations for the guidance of employees and the issuance of
proper instructions intended for the protection of the public and persons with whom the employer
has relations through his or its employees and the imposition of necessary disciplinary measures
upon employees in case of breach or as may be warranted to ensure the performance of acts
indispensable to the business of and beneficial to their employer.

Page 95 of 745
PLEYTO VS. LOMBOY
GR No. 148737 December 16, 2004

FACTS:

Respondent Maria D. Lomboy of Calasiao, Pangasinan, is the surviving spouse of the late
Ricardo Lomboy, who died in Pasolingan, Gerona, Tarlac, in a vehicular accident. The accident
was a head-on collision between the PRBL bus driven by petitioner Pleyto and the car where
Ricardo was a passenger. Carmela suffered injuries requiring hospitalization in the same accident
which resulted in her fathers death.
According to Rolly Orpilla, a witness and one of the bus passengers, Pleyto tried to
overtake Esguerras tricycle but hit it instead. Pleyto then swerved into the left opposite lane.
Coming down the lane, some fifty meters away, was a southbound Mitsubishi Lancer car, driven
by Arnulfo Asuncion. The car was headed for Manila with some passengers. Seated beside
Arnulfo was his brother-in-law, Ricardo Lomboy, while in the back seat were Ricardos 18-year
old daughter Carmela and her friend, one Rhino Daba. PRBL Bus No. 1539 smashed head-on
the car, killing Arnulfo and Ricardo instantly. Carmela and Rhino suffered injuries, but only
Carmela required hospitalization.
The Court of Appeals found PRBL liable for Pleytos negligence pursuant to Article
2180 in relation to Article 2176 of the Civil Code. Under Article 2180, when an injury is caused
by the negligence of a servant or an employee, the master or employer is presumed to be
negligent either in the selection or in the supervision of that employee. This presumption may be
overcome only by satisfactorily showing that the employer exercised the care and the diligence
of a good father of a family in the selection and the supervision of its employee.

ISSUE:

Did petitioner observed the proper diligence of a good father of a family?

RULING:

The negligence and fault of appellant driver is manifest. He overtook the tricycle despite
the oncoming car only fifty (50) meters away from him. Defendant-appellants claim that he was
driving at a mere 30 to 35 kilometers per hour does not deserve credence as it would have been
easy to stop or properly maneuver the bus at this speed. The speed of the bus, the drizzle that
made the road slippery, and the proximity of the car coming from the opposite direction were
duly established by the evidence. The speed at which the bus traveled, inappropriate in the
light of the aforementioned circumstances, is evident from the fact despite the application of the
brakes, the bus still bumped the tricycle, and then proceeded to collide with the incoming car
with such force that the car was pushed beyond the edge of the road to the ricefield.

In the present case, petitioners presented several documents in evidence to show the
various tests and pre-qualification requirements imposed upon petitioner Pleyto before his hiring
as a driver by PRBL. However, no documentary evidence was presented to prove that petitioner
PRBL exercised due diligence in the supervision of its employees, including Pleyto. Citing
precedents, the Court of Appeals opined,

In order that the defense of due diligence in the selection and supervision of employees
may be deemed sufficient and plausible, it is not enough for the employer to emptily invoke the
existence of company guidelines and policies on hiring and supervision. As the negligence of
the employee gives rise to the presumption of negligence on the part of the employer, the latter
has the burden of proving that it has been diligent not only in the selection of employees but also
in the actual supervision of their work. The mere allegation of the existence of hiring procedures
and supervisory policies without anything more is decidedly not sufficient to overcome such
presumption.

Page 96 of 745
VIRON TRANSPORTATION CO., INC. VS. DELOS SANTOS
GR No. 54080 November 22, 2000

FACTS:

Defendant Alberto delos Santos was the driver of defendant Rudy Samidan of the latters
vehicle, a Forward Cargo Truck. At about 12:30 in the afternoon, he was driving said truck along
the National Highway within the vicinity of Gerona, Tarlac. The Viron Bus, driven by Wilfredo
Villanueva, tried to overtake his truck, and he swerved to the right shoulder of the highway, but
as soon as he occupied the right lane of the road, the cargo truck which he was driving was hit by
the Viron bus on its left front side, as the bus swerved to his lane to avoid an incoming bus on its
opposite direction. With the driver of another truck dealing likewise in vegetables, Dulnuan, the
two of them and the driver of the Viron bus proceeded to report the incident to the Police Station.
Both the RTC and the CA rendered its decision in favor of the private respondents.

ISSUE:

Whether the employer is liable to the negligence of his employee.

RULING:

As employers of the bus driver, the petitioner is, under Article 2180 of the Civil Code,
directly and primarily liable for the resulting damages. The presumption that they are negligent
flows from the negligence of their employee. That presumption, however, is only jusris tantum,
not juris et de jure. Their only possible defense is that they exercised all the diligence of a good
father of a family to prevent the damage.

In fine, when the employee causes damage due to his own negligence while performing
his own duties, there arises the juris tantum presumption that the employer is negligent,
rebuttable only by proof of observance of the diligence of a good father of a family.

Petitioner, through its witnesses, failed to rebut such legal presumption of negligence in
the selection and supervision of employees, thus, petitioner as the employer is responsible for
damages, the basis of the liability being the relationship of pater familias or on the employers
own negligence. Hence, with the allegations and subsequent proof of negligence against the bus
driver of petitioner, petitioner (employer) is liable for damages.

Page 97 of 745
SYKI VS. BEGASA
GR No. 149149 October 23, 2003

FACTS:

Respondent Salvador Begasa and his three companions flagged down a passenger
jeepney driven by Joaquin Espina and owned by Aurora Pisuena. While respondent was boarding
the passenger jeepney (his right foot already inside while his left foot still on the boarding step of
the passenger jeepney), a truck driven by Elizalde Sablayan and owned by petitioner Ernesto
Syki bumped the rear end of the passenger jeepney. Respondent fell and fractured his left thigh
bone. Respondent filed a complaint for damages for breach of common carriers contractual
obligations and quasi-delict against Aurora Pisuena, the owner of the passenger jeepney;, herein
petitioner Ernesto Syki, the owner of the truck;, and Elizalde Sablayan, the driver of the truck.
After hearing, the trial court dismissed the complaint against Aurora Pisuena, the owner
and operator of the passenger jeepney, but ordered petitioner Ernesto Syki and his truck driver,
Elizalde Sablayan, to pay respondent Salvador Begasa, jointly and severally

ISSUE:

1. Whether or not petitioner is liable for the act of his employee.


2. Whether he exercised the diligence of a good father of a family.

RULING:

Employers shall be liable for the damages caused by their employees and household
helpers acting within the scope of their assigned tasks, even though the former are not engaged in
any business or industry.
From the above provision, when an injury is caused by the negligence of an employee, a
legal presumption instantly arises that the employer was negligent, either or both, in the selection
and/or supervision of his said employee duties. The said presumption may be rebutted only by a
clear showing on the part of the employer that he had exercised the diligence of a good father of
a family in the selection and supervision of his employee. If the employer successfully
overcomes the legal presumption of negligence, he is relieved of liability. In other words, the
burden of proof is on the employer.
In the case at bar, while there is no rule which requires that testimonial evidence, to hold
sway, must be corroborated by documentary evidence, inasmuch as the witnesses testimonies
dwelt on mere generalities, we cannot consider the same as sufficiently persuasive proof that
there was observance of due diligence in the selection and supervision of employees. Petitioners
attempt to prove its deligentissimi patris familias in the selection and supervision of employees
through oral evidence must fail as it was unable to buttress the same with any other evidence,
object or documentary, which might obviate the apparent biased nature of the testimony.
In the selection of prospective employees, employers are required to examine them as to
their qualifications, experience, and service records. On the other hand, with respect to the
supervision of employees, employers should formulate standard operating procedures, monitor
their implementation, and impose disciplinary measures for breaches thereof. To establish these
factors in a trial involving the issue of vicarious liability, employers must submit concrete proof,
including documentary evidence.The employer must not merely present testimonial evidence to
prove that he had observed the diligence of a good father of a family in the selection and
supervision of his employee, but he must also support such testimonial evidence with concrete or
documentary evidence. The reason for this is to obviate the biased nature of the employers
testimony or that of his witnesses.
In sum, the sole and proximate cause of the accident was the negligence of petitioners
driver who, as found by the lower courts, did not slow down even when he was already
approaching a busy intersection within the city proper. Since the negligence of petitioners driver
was the sole and proximate cause of the accident, in the present case, petitioner is liable, under
Article 2180 of the Civil Code, to pay damages to respondent Begasa for the injuries sustained
by latter.

Page 98 of 745
YAMBAO VS. ZUNIGA
GR No. 146173 December 11, 2003

FACTS:

The bus owned by the petitioner was being driven by her driver, one Ceferino G.
Venturina along the northbound lane of Epifanio delos Santos Avenue (EDSA). With Venturina
was the bus conductor, Fernando Dumaliang. Suddenly, the bus bumped Herminigildo Zuiga, a
pedestrian. Such was the force of the impact that the left side of the front windshield of the bus
was cracked. Zuiga was rushed to the Quezon City General Hospital where he was given
medical attention, but due to the massive injuries sustained, he succumbed shortly thereafter.
Private respondents, as heirs of the victim, filed a Complaint against petitioner and her
driver, Venturina, for damages. The complaint essentially alleged that Venturina drove the bus in
a reckless, careless and imprudent manner, in violation of traffic rules and regulations, without
due regard to public safety, thus resulting in the victims premature death.
The petitioner vehemently denied the material allegations of the complaint. She tried to
shift the blame for the accident upon the victim, theorizing that Herminigildo bumped into her
bus, while avoiding an unidentified woman who was chasing him. She further alleged that she
was not liable for any damages because as an employer, she exercised the proper diligence of a
good father of a family, both in the selection and supervision of her bus driver.

ISSUE:

Whether or not petitioner observed the diligence of a good father of a family, so as not to
be liable for the act committed by her employee?

RULING:

It held that this was a case of quasi-delict, there being no pre-existing contractual
relationship between the parties. The court a quo then found the petitioner directly and primarily
liable as Venturinas employer pursuant to Article 2180 of the Civil Code as she failed to present
evidence to prove that she has observed the diligence of a good father of a family in the selection
and supervision of her employees.
Art. 2180 states that the obligation imposed by Article 2176 is demandable not only for
ones own acts or omissions, but also for those of persons for whom one is responsible
Employers shall be liable for the damages caused by their employees and household
helpers acting within the scope of their assigned tasks, even though the former are not engaged in
any business or industry.
Petitioner contends that as an employer, she observed the proper diligence of a good
father of a family, both in the selection and supervision of her driver and therefore, is relieved
from any liability for the latters misdeed. To support her claim, she points out that when
Venturina applied with her as a driver in January 1992, she required him to produce not just his
drivers license, but also clearances from the National Bureau of Investigation (NBI), the
Philippine National Police, and the barangay where he resides. She also required him to present
his Social Security System (SSS) Number prior to accepting him for employment. She likewise
stresses that she inquired from Venturinas previous employer about his employment record, and
only hired him after it was shown to her satisfaction that he had no blot upon his record.
In sum, petitioners liability to private respondents for the negligent and imprudent acts
of her driver, Venturina, under Article 2180 of the Civil Code is both manifest and clear.
Petitioner, having failed to rebut the legal presumption of negligence in the selection and
supervision of her driver, is responsible for damages, the basis of the liability being the
relationship of pater familias or on the employers own negligence.

Page 99 of 745
REGINO VS. PANGASINAN COLLEGES
GR No. 156109 November 18, 2004

FACTS:

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

ISSUE:

Whether or not the purchased of the tickets are mandatory and are part of the contract
between school and student.

RULING:

Reciprocity of the School-Student Contract


The school-student relationship is also reciprocal. Thus, it has consequences appurtenant
to and inherent in all contracts of such kind -- it gives rise to bilateral or reciprocal rights and
obligations. The school undertakes to provide students with education sufficient to enable them
to pursue higher education or a profession. On the other hand, the students agree to abide by the
academic requirements of the school and to observe its rules and regulations.
The terms of the school-student contract are defined at the moment of its inception --
upon enrolment of the student. Standards of academic performance and the code of behavior and
discipline are usually set forth in manuals distributed to new students at the start of every school
year. Further, schools inform prospective enrollees the amount of fees and the terms of payment.
In practice, students are normally required to make a down payment upon enrollment,
with the balance to be paid before every preliminary, midterm and final examination. Their
failure to pay their financial obligation is regarded as a valid ground for the school to deny them
the opportunity to take these examinations.
The foregoing practice does not merely ensure compliance with financial obligations; it
also underlines the importance of major examinations. Failure to take a major examination is
usually fatal to the students promotion to the next grade or to graduation. Examination results
form a significant basis for their final grades. These tests are usually a primary and an
indispensable requisite to their elevation to the next educational level and, ultimately, to their
completion of a course.
Thus, students expect that upon their payment of tuition fees, satisfaction of the set
academic standards, completion of academic requirements and observance of school rules and
regulations, the school would reward them by recognizing their completion of the course
enrolled in.
PCST imposed the assailed revenue-raising measure belatedly, in the middle of the semester. It
exacted the dance party fee as a condition for the students taking the final examinations, and
ultimately for its recognition of their ability to finish a course. The fee, however, was not part of
the school-student contract entered into at the start of the school year. Hence, it could not be
unilaterally imposed to the prejudice of the enrollees.

Page 100 of 745


YHT REALTY VS. CA
GR. No. 126780 February 17, 2005

FACTS:

McLoughlin arrived from Australia and registered with Tropicana. He rented a safety
deposit box as it was his practice to rent a safety deposit box every time he registered at
Tropicana in previous trips. As a tourist, McLoughlin was aware of the procedure observed by
Tropicana relative to its safety deposit boxes. The safety deposit box could only be opened
through the use of two keys, one of which is given to the registered guest, and the other
remaining in the possession of the management of the hotel. When a registered guest wished to
open his safety deposit box, he alone could personally request the management who then would
assign one of its employees to accompany the guest and assist him in opening the safety deposit
box with the two keys.
However, when he returned coming from a trip, he noticed that his money in the
envelope was lacking and that the jewelries were gone.

ISSUE:

Whether petitioner is liable for the loss of the personal properties of respondent.

RULING:

Under Article 1170 of the New Civil Code, those who, in the performance of their
obligations, are guilty of negligence, are liable for damages. Article 2180 provides that the
owners and managers of an establishment or enterprise are likewise responsible for damages
caused by their employees in the service of the branches in which the latter are employed or on
the occasion of their functions. Also, this Court has ruled that if an employee is found negligent,
it is presumed that the employer was negligent in selecting and/or supervising him for it is hard
for the victim to prove the negligence of such employer. Thus, given the fact that the loss of
McLoughlins money was consummated through the negligence of Tropicanas employees in
allowing Tan to open the safety deposit box without the guests consent, both the assisting
employees and YHT Realty Corporation itself, as owner and operator of Tropicana, should be
held solidarily liable.
Art. 2003. The hotel-keeper cannot free himself from responsibility by posting notices to
the effect that he is not liable for the articles brought by the guest. Any stipulation between the
hotel-keeper and the guest whereby the responsibility of the former as set forth in Articles
1998 to 2001 is suppressed or diminished shall be void.
The hotel business like the common carriers business is imbued with public interest. The
twin duty constitutes the essence of the business. The law in turn does not allow such duty to the
public to be negated or diluted by any contrary stipulation in so-called undertakings that
ordinarily appear in prepared forms imposed by hotel keepers on guests for their signature.
In the case at bar, the responsibility of securing the safety deposit box was shared
not only by the guest himself but also by the management since two keys are necessary to open
the safety deposit box. Without the assistance of hotel employees, the loss would not have
occurred.
Thus, Tropicana was guilty of concurrent negligence in allowing Tan, who was not the
registered guest, to open the safety deposit box of McLoughlin, even assuming that the latter was
also guilty of negligence in allowing another person to use his key. To rule otherwise would
result in undermining the safety of the safety deposit boxes in hotels for the management will be
given imprimatur to allow any person, under the pretense of being a family member or a visitor
of the guest, to have access to the safety deposit box without fear of any liability that will attach
thereafter in case such person turns out to be a complete stranger. This will allow the hotel to
evade responsibility for any liability incurred by its employees in conspiracy with the guests
relatives and visitors.

Page 101 of 745


RAMOS VS. CA
GR No. 124354 December 29, 1999

FACTS:

Plaintiff Erlinda Ramos was a robust woman Except for occasional complaints of
discomfort due to pains allegedly caused by the presence of a stone in her gall bladder. Because
the discomforts somehow interfered with her normal ways, she sought professional advice. She
was advised to undergo an operation for the removal of a stone in her gall bladder. At around
7:30 A.M. of June 17, 1985 and while still in her room, she was prepared for the operation by the
hospital staff. Her sister-in-law, Herminda Cruz, who was the Dean of the College of Nursing at
the Capitol Medical Center, was also there for moral support. Herminda was allowed to stay
inside the operating room.
At around 9:30 A.M., Dr. Gutierrez reached a nearby phone to look for Dr. Hosaka who
was not yet in Dr. Gutierrez thereafter informed Herminda Cruz about the prospect of a delay in
the arrival of Dr. Hosaka. Herminda then went back to the patient who asked, "Mindy, wala pa
ba ang Doctor"? The former replied, "Huwag kang mag-alaala, darating na iyon. Thereafter,
Herminda went out of the operating room and informed the patient's husband, Rogelio, that the
doctor was not yet around.
At about 12:15 P.M., Herminda Cruz, who was inside the operating room with the
patient, heard somebody say that "Dr. Hosaka is already here." She then saw people inside the
operating room "moving, doing this and that, preparing the patient for the operation" As she held
the hand of Erlinda Ramos, she then saw Dr. Gutierrez intubating the hapless patient. She
thereafter heard Dr. Gutierrez say, "ang hirap ma-intubate nito, mali yata ang pagkakapasok. O
lumalaki ang tiyan", because of the remarks of Dra. Gutierrez, she focused her attention on what
Dr. Gutierrez was doing. She thereafter noticed bluish discoloration of the nailbeds of the left
hand of the hapless Erlinda even as Dr. Hosaka approached her. She then heard Dr. Hosaka
issue an order for someone to call Dr. Calderon, another anesthesiologist.

ISSUE:

Whether the respondent doctors are negligent.

RULING:

Res ipsa loquitur is a Latin phrase which literally means "the thing or the transaction
speaks for itself." The phrase "res ipsa loquitur" is a maxim for the rule that the fact of the
occurrence of an injury, taken with the surrounding circumstances, may permit an inference or
raise a presumption of negligence, or make out a plaintiff's prima facie case, and present a
question of fact for defendant to meet with an explanation
At the time of submission, Erlinda was neurologically sound and, except for a few minor
discomforts, was likewise physically fit in mind and body. However, during the administration
of anesthesia and prior to the performance of cholecystectomy she suffered irreparable damage
to her brain. Thus, without undergoing surgery, she went out of the operating room already
decerebrate and totally incapacitated. Obviously, brain damage, which Erlinda sustained, is an
injury which does not normally occur in the process of a gall bladder operation. In fact, this kind
of situation does not happen in the absence of negligence of someone in the administration of
anesthesia and in the use of endotracheal tube. Normally, a person being put under anesthesia is
not rendered decerebrate as a consequence of administering such anesthesia if the proper
procedure was followed. Furthermore, the instruments used in the administration of anesthesia,
including the endotracheal tube, were all under the exclusive control of private respondents, who
are the physicians-in-charge. Likewise, petitioner Erlinda could not have been guilty of
contributory negligence because she was under the influence of anesthetics which rendered her
unconscious.

Page 102 of 745


REYES VS. SISTERS OF MERCY HOSPITAL
GR No. 130547 October 3, 2000

FACTS:

Jorge Reyes was taken to the Mercy Community Clinic. He was attended to by
respondent Dr. Marlyn Rico, a resident physician and admitting physician on duty, who gave
Jorge a physical examination and took his medical records. Typhoid fever was then prevalent in
the locality. Suspecting that Jorge could be suffering from this disease, Dr. Rico ordered a Widal
Test, a standard test for typhoid fever, to be performed on Jorge. The results of the test from
which Dr. Rico concluded that Jorge was positive for typhoid fever. As her shift was only up to
5:00 p.m., Dr. Rico indorsed Jorge to respondent Dr. Marivie Blanes. Dr. Blanes also took the
physical examination of Jorge. Antibiotics being the accepted treatment for typhoid fever, she
ordered that a compatibility test with the antibiotic chloromycetin be done on Jorge. As she did
not observe any adverse reaction, she ordered the first 500 mg. of said antibiotic. At around 1:00
in the morning, Dr. Blanes was called as Jorges temperature rose to 41 degrees and then valium
was administered. However, the patient did not respond to the treatment and slipped into
cyanosis, a bluish or purplish discoloration of the skin or mucous membrane due to deficient
oxygenation of the blood. At around 2:00 a.m. Jorge died.

ISSUES:

Whether the death of Jorge Reyes was due to or caused by the negligence, carelessness,
imprudence, and lack of skill or foresight on the part of the defendants.

RULING:
Petitioners action is for medical malpractice. It is a form of negligence which consists in
the failure of the physician or surgeon to apply to his practice of medicine that degree of care and
skill which is ordinarily employed by the profession. Four elements involve in medical
negligence cases, namely: duty, breach, injury, and proximate causation. In this case, there is no
doubt that physician-patient relationship existed between respondent doctors and Jorge Reyes. It
is breach of this duty which constitutes actionable malpractice. As to this aspect of medical
malpractice, the determination of reasonable level of care and breach thereof, expert testimony is
essential.
The petitioner presented Dr. Vacalares, Chief Pathologist of the Northern Mindanao
Training Hospital, Cagayan de Oro, who performed the autopsy of Jorge. He testified that Jorge
did not die of typhoid fever but of shock undetermined, which could be due to allergic reaction
or chloromycetin overdose. The court was not persuaded. Although Dr. Vacalares may have had
extensive experience in performing autopsies, he admitted that he had yet to do one on the body
of a typhoid victim at the time he conducted the post mortem of Jorge. It is also plain from his
testimony that he treated only about three cases of typhoid fever. On the other hand, the two
doctors presented by respondents clearly were experts on the subject. They vouched for the
correctness of Dr. Ricos diagnosis. Dr. Gotiong, a diplomate whose specialization is infectious
diseases and microbiology and an associate professor at the Southern University College of
Medicine and the Gullas College of Medicine, testified that he has already treated over a
thousand cases of typhoid fever. According to him a case of typhoid fever is suspected using the
widal test, if the 1:320 results of the said test has been presented to him. As to the treatment of
the disease, he stated that chloromycetin was the drug of choice. He also explained that despite
the measures taken by respondents and the intravenous administration of the two doses of
chloromycetin, complications of the disease could not be discounted.
Dr. Marilyn did not depart from the reasonable standard recommended by the experts as
she in fact observed the due care required under the circumstances. Though the widal test is not
conclusive, it remains a standard diagnostic test for typhoid fever and, in the present case, a
greater accuracy through repeated testing was rendered unobtainable by the early death of the
patient. The results of the widal test and the patients history of fever with chills for five days,
taken with the fact that typhoid fever was then prevalent, were sufficient to give upon any doctor
of reasonable skill the impression that the patient had typhoid fever.

Page 103 of 745


NOGALES VS. CAPITOL MEDICAL CENTER
GR No. 45641 December 19, 2006

FACTS:

Pregnant with her fourth child, Corazon Nogales was under the exclusive prenatal care of
Dr. Estrada. While Corazon was on her lat trimester of pregnancy, Dr. Estrada noted an increase
in her blood pressure and development of leg edema indicating preeclampsia, which is dangerous
complication of pregnancy. When Corazon started to experience mild labor, he and her husband,
prompted to see Dr. Estrada at his home. After examining Corazon, he advised her to immediate
admission to the Capitol Medical Center. Upon admission at the CMC, Rogelio Nogales
executed and signed the Consent on Admission and Agreement and Admission Agreement. Then
Corazon was brought to the labor room. Dr. Uy, a resident physician, conducted an internal
examination of Corazon and notified Dr. Estrada of her findings. Dr. Estrada ordered for 10 mg.
of valium to be administered immediately by intramascular injection. Later he ordered that start
of intravenous administration of syntocinon admixed with dextrose, 5% in lactated Ringers
solution, at the rate of eight to ten micro-drops per minute.
Dr. Enriquez, an anesthesiologist, was notified of Corazons admission. Subsequently he
asked if Dr. Estrada needed his service but the latter refused. Despite refusal he stayed to observe
Corazons condition. Corazons water bag ruptured spontaneously and started to experience
convulsions. Dr. Estrada ordered the injectionof ten grams of magnesium sulfate. However, Dr.
Villaflor, who is assisting Dr. Estrada, administered only 2.5 grams of magnesium sulfate. Dr.
Estrada applied low forceps to extract the baby. The baby came out in a weak and injured
condition and consequently had to be intubated and resuscitated. Corazon began to manifest
moderate vaginal bleeding which rapidly became profuse. Dr. Estrada ordered blood typing and
cross matching with bottled blood. Dr. Espinola, head of the Obstetrics-Gynecology Department
of the CMC, was apprised of Corazons condition by telephone. Upon being informed of
Corazons profuse bleeding, Dr. Espinola ordered immediate hysterectomy. Dr. Espinola, due to
the inclement weather, arrived about an hour late. he examined the patient but despite his efforts
Corazon died. Petitioners filed a case against CMC personnel and physicians on the ground that
they were negligent in the treatment and management of Corazons condition and charged CMC
with negligence in the selection and supervision of defendant physicians and hospital staff. After
more than 11 years the Trial Court rendered its judgment finding Dr. Estrada solely liable for
damages.

ISSUE:
Whether CMC is vicariously liable for the negligence of Dr. Estrada.

RULING:
Under the doctrine of apparent authority a hospital can be held vicariously liable for the
negligent act of a physician providing care at eh hospital, regardless of whether the physician is
an independent contractor, unless the patient knows, or should have known, that the physician is
an independent contractor. The doctrine of apparent authority involves two factors to determine
the liability of an independent contractor-physician. First factor focuses on the hospitals
manifestations and is sometimes described as an inquiry whether the hospital acted in a manner
which would lead a responsible person to conclude that the individual who was alleged to be
negligent was an employee or agent of the hospital. The second factor focuses on the patients
reliance. It is sometimes characterized as an inquiry on whether the plaintiff acted in reliance
upon the conduct of the hospital or its agent, consistent with ordinary care and prudence.
In this case, CMC impliedly held out Dr. Estrada as a member of its medical staff. First,
CMC granted staff privileges to Dr. Estrada when it extended its medical staff and facilities.
Upon request to admit Corazon, through its personnel, readily accommodated the patient and
updated Dr. Estrada of the patients condition. Second, CMC made Rogelio sign a consent forms
printed in CMC letterhead. And third, Dr. Estradas referral to Dr. Espinola, who then was the
Head of the Obstetrics and Gynecology Department of CMC.
Wherefore the court finds respondent Capitol Medical Center vicariously liable for the
negligence of Dr. Oscar Estrada.

Page 104 of 745


PROFESSIONAL SERVICES VS. AGANA
GR No. 126467 February 11, 2008

FACTS:

On April 04, 1984, Natividad Agana was admitted at the Medical City General Hospital
because of difficulty of bowel movement and bloody anal discharge. Dr. Ampil diagnosed her to
be suffering from cancer of the sigmoid. Thus, Dr. Ampil, assisted by the medical staff of
Medical City, performed a surgery upon her. During the surgery, he found that the malignancy in
her sigmoid area had spread to her left ovary, necessitating the removal of certain portions of it.
Thus, Dr. Ampil obtained the consent of Natividads husband to permit Dr. Fuentes to perform
hysterectomy upon Natividad. Dr. Fuentes performed and completed the hysterectomy.
Afterwards, Dr. Ampil took over, completed the operation and closed the incision. The
operation, however, appeared to be flawed as the attending nurses entered in the corresponding
Record of Operation that there were 2 lacking sponge and announced that it was searched by the
surgeon but to no avail.
After a couple of days, Natividad complained excruciating pain in her anal region. She
consulted both Dr. Ampil and Dr. Fuentes. They told her that the pain was the natural
consequence of the surgical operation performed upon her. Dr. Ampil recommended that she
consult an oncologist to treat the cancerous nodes which were not removed. Natividad and her
husband went to the US to seek further treatment. After 4 months she was told that she was free
of cancer. They then flew back to the Philippines. Two weeks thereafter , Natividads daughter
found a piece of gauze protruding from her vagina. Dr. Ampil saw immediately informed. He
proceeded to Natividads house where he extracted by hand a piece of gauze. Natividad sought
the treatment of Polymedic General Hospital thereat Dr. Gutierrez detected a foreign object in
her vagina - a foul-smelling gauze which infected her vaginal vault. A recto-vaginal fistula had
formed in her reproductive organ which forced stool to excrete in her vagina. Another surgical
operation was performed upon her.
Spouses Agana filed a complaint against PSI (owner of Medical City), Dr. Ampil and Dr.
Fuentes. The Trial Court found the respondents jointly and severally liable. The CA affirmed
said decision with modification that Dr. Fuentes was dismissed.

ISSUE:

Whether the Court of Appeals erred in absolving Dr. Fuentes of any liability.

RULING:

It was duly established that Dr. Ampil was the lead surgeon during the operation of
Natividad. He requested the assistance of Dr. Fuentes only to perform hysterectomy when he
(Dr. Ampil) found that the malignancy in her sigmoid area had spread to her left ovary. Dr.
Fuentes performed the surgery and thereafter reported and showed his work to Dr. Ampil. The
latter examined it and finding everything to be in order, allowed Dr. Fuentes to leave the
operating room. Dr. Ampil then resumed operating on Natividad. He was about to finish the
procedure when the attending nurses informed him that two pieces of gauze were missing. A
"diligent search" was conducted, but the misplaced gauzes were not found. Dr. Ampil then
directed that the incision be closed. During this entire period, Dr. Fuentes was no longer in the
operating room and had, in fact, left the hospital.
Under the "Captain of the Ship" rule, the operating surgeon is the person in complete
charge of the surgery room and all personnel connected with the operation. Their duty is to obey
his orders. As stated before, Dr. Ampil was the lead surgeon. In other words, he was the
"Captain of the Ship." That he discharged such role is evident from his following conduct.
Clearly, the control and management of the thing which caused the injury was in the hands of Dr.
Ampil, not Dr. Fuentes.
Here, the negligence was proven to have been committed by Dr. Ampil and not by Dr.
Fuentes.

Page 105 of 745


PROFESSIONAL SERVICES, INC. VS. COURT OF APPEALS
GR No. 126297 February 11, 2008

FACTS:

On April 04, 1984, Natividad Agana was admitted at the Medical City General Hospital
because of difficulty of bowel movement and bloody anal discharge. Dr. Ampil diagnosed her to
be suffering from cancer of the sigmoid. Thus, Dr. Ampil, assisted by the medical staff of
Medical City, performed a surgery upon her. During the surgery, he found that the malignancy in
her sigmoid area had spread to her left ovary, necessitating the removal of certain portions of it.
Thus, Dr. Ampil obtained the consent of Natividads husband topermit Dr. Fuentes to perform
hysterectomy upon Natividad. Dr. Fuentes performed and completed the hysterectomy.
Afterwards, Dr. Ampil took over, completed the operation and closed the incision. The
operation, however, appeared to be flawed as the attending nurses entered in the corresponding
Record of Operation that there were 2 lacking sponge and announced that it was searched by the
surgeon but to no avail.

After a couple of days, Natividad complained excruciating pain in her anal region. She
consulted both Dr. Ampil and Dr. Fuentes. They told her that the pain was the natural
consequence of the surgical operation performed upon her. Dr. Ampil recommended that she
consult an oncologist to treat the cancerous nodes which were not removed. Natividad and her
husband went to the US to seek further treatment. After 4 months she was told that she was free
of cancer. They then flew back to the Philippines. Two weeks thereafter , Natividads daughter
found a piece of gauze protruding from her vagina. Dr. Ampil saw immediately informed. He
proceeded to Natividads house where he extracted by hand a piece of gauze. Natividad sought
the treatment of Polymedic General Hospital thereat Dr. Gutierrez detected a foreign object in
her vagina - a foul-smelling gauze which infected her vaginal vault. A recto-vaginal fistula had
formed in her reproductive organ which forced stool to excrete in her vagina. Another surgical
operation was performed upon her.

Spouses Agana filed a complaint against PSI (owner of Medical City), Dr. Ampil and Dr.
Fuentes. The Trial Court found the respondents jointly and severally liable. The CA affirmed
said decision with modification that Dr. Fuentes was dismissed.

ISSUE:
Whether there is an employee-employer relationship in order to hold PSI solidary liable.

RULING:

In general, a hospital is not liable for the negligence of an independent contractor-


physician. However, the hospital may be held liable if the physician is the ostensible agent of
the hospital. This exception is also known as the doctrine of apparent authority. The doctrine
of apparent authority involves two factors to determine the liability of an independent contractor-
physician. First factor focuses on the hospitals manifestations and is sometimes described as an
inquiry whether the hospital acted in a manner which would lead a responsible person to
conclude that the individual who was alleged to be negligent was an employee or agent of the
hospital. The second factor focuses on the patients reliance. It is sometimes characterized as an
inquiry on whether the plaintiff acted in reliance upon the conduct of the hospital or its agent,
consistent with ordinary care and prudence. In this case, it has been proven that the two factors
were present. The hospital indeed made it appear that Dr. Ampil was its employee when they
advertise and displayed his name in the directory at the lobby of the said hospital and that
Natividad relied on such knowledge that Dr. Ampil was indeed an employee of the hospital.

Wherefore PSI and Dr. Ampil are liable jointly and severally.

Page 106 of 745


DR. RUBI LI v. SPS. SOLIMAN
G.R. No. 165279, June 07, 2011

FACTS:

On July 7, 1993, respondents' 11-year old daughter, Angelica Soliman, underwent a


biopsy of the mass located in her lower extremity at the St. Luke's Medical Center (SLMC).
Results showed that Angelica was suffering from osteosarcoma, osteoblastic type, a high-grade
cancer of the bone which usually afflicts teenage children. Following this diagnosis and as
primary intervention, Angelica's right leg was amputated by Dr. Jaime Tamayo in order to
remove the tumor. As adjuvant treatment to eliminate any remaining cancer cells, and hence
minimize the chances of recurrence and prevent the disease from spreading to other parts of the
patient's body (metastasis), chemotherapy was suggested by Dr. Tamayo. Dr. Tamayo referred
Angelica to another doctor at SLMC, herein petitioner Dr. Rubi Li, a medical oncologist.

On August 18, 1993, Angelica was admitted to SLMC. However, she died on September
1, 1993, just eleven (11) days after the administration of the first cycle of the chemotherapy
regimen.

On February 21, 1994, respondents filed a damage suit against petitioner, Dr. Leo
Marbella, Mr. Jose Ledesma, a certain Dr. Arriete and SLMC. Respondents charged them with
negligence and disregard of Angelica's safety, health and welfare by their careless administration
of the chemotherapy drugs, their failure to observe the essential precautions in detecting early the
symptoms of fatal blood platelet decrease and stopping early on the chemotherapy, which
bleeding led to hypovolemic shock that caused Angelica's untimely demise. Further, it was
specifically averred that petitioner assured the respondents that Angelica would recover in view
of 95% chance of healing with and when asked regarding the side effects, petitioner mentioned
only slight vomiting, hair loss and weakness. Respondents thus claimed that they would not
have given their consent to chemotherapy had petitioner not falsely assured them of its side
effects. In dismissing the complaint, the trial court held that petitioner was not liable for damages
as she observed the best known procedures and employed her highest skill and knowledge in the
administration of chemotherapy drugs on Angelica but despite all efforts said patient died.

ISSUE:
Whether or not Dr. Rubi Li is negligent and is liable for damages.

HELD:
NO. There are four essential elements a plaintiff must prove in a malpractice action based
upon the doctrine of informed consent: "(1) the physician had a duty to disclose material risks;
(2) he failed to disclose or inadequately disclosed those risks; (3) as a direct and proximate result
of the failure to disclose, the patient consented to treatment she otherwise would not have
consented to; and (4) plaintiff was injured by the proposed treatment." The gravamen in an
informed consent case requires the plaintiff to "point to significant undisclosed information
relating to the treatment which would have altered her decision to undergo it.

Examining the evidence on record, the Court held that there was adequate disclosure of
material risks inherent in the chemotherapy procedure performed with the consent of Angelica's
parents. Respondents could not have been unaware in the course of initial treatment and
amputation of Angelica's lower extremity, that her immune system was already weak on account
of the malignant tumor in her knee.On the other hand, it is difficult to give credence to
respondents' claim that petitioner told them of 95% chance of recovery for their daughter, as it
was unlikely for doctors like petitioner who were dealing with grave conditions such as cancer to
have falsely assured patients of chemotherapy's success rate. Besides, informed consent laws in
other countries generally require only a reasonable explanation of potential harms, so specific
disclosures such as statistical data, may not be legally necessary.

Page 107 of 745


DIAZ VS. DAVAO LIGHT
GR No. 160959 April 2, 2007

FACTS:

Plaintiff asks for damages for defendants alleged malicious prosecution of a criminal
case of theft of electricity against him, for plaintiffs filing of a charge of violation of P.D. 401 as
amended after dismissal of the theft case, the filing of a damage suit against him before the RTC
of Cebu City which was dismissed and the filing of another damage suit before the same Cebu
RTC which is still pending. Damages are also being sought for defendants removal of Electric
Meter, but this is a subject matter of a case pending before Branch 13 of this Court and therefore
said court retains jurisdiction over the said cause of action.
The RTC held that while the City Prosecutor, and later the Secretary of Justice,
concluded that there was no probable cause for the crime of theft, this did not change the fact
that plaintiff made an illegal connection for electricity. A persons right to litigate should not be
penalized by holding him liable for damages.
On October 1, 2003, the CA affirmed the decision of the RTC. It concluded that the
evidence on hand showed good faith on the part of DLPC in filing the subject complaints. It
pointed out that Diaz had been using the electrical services of DLPC without its consent. As to
the effect of the compromise agreement, the CA ruled that it did not bar the filing of the criminal
action. Thus, under the principle of damnum absque injuria, the legitimate exercise of a persons
right, even if it causes loss to another, does not automatically result in an actionable injury.
Diaz, now petitioner, comes before this Court in this petition for review on certiorari

ISSUES:

1. Whether or not the compromise agreement entered into between DLPC and Diaz
barred the former from instituting further actions; and
2. Whether or not DLPC acted in bad faith in instituting the criminal cases against Diaz

RULING:
Article 2028 of the Civil Code defines a compromise as a contract whereby the parties,
by making reciprocal concessions, avoid litigation or put an end to one already commenced. The
purpose of compromise is to settle the claims of the parties and bar all future disputes and
controversies. However, criminal liability is not affected by compromise for it is a public offense
which must be prosecuted and punished by the Government on its own motion, though complete
reparation should have been made of the damages suffered by the offended party. A criminal
case is committed against the People, and the offended party may not waive or extinguish the
criminal liability that the law imposes for the commission of the offense. Moreover, a
compromise is not one of the grounds prescribed by the Revised Penal Code for the extinction of
criminal liability. On the other hand, malicious prosecution has been defined as an action for
damages brought by or against whom a criminal prosecution, civil suit or other legal proceeding
has been instituted maliciously and without probable cause, after the termination of such
prosecution, suit, or other proceeding in favor of the defendant therein. It is an established rule
that in order for malicious prosecution to prosper, the following requisites must be proven by
petitioner: (1) the fact of prosecution and the further fact that the defendant (respondent) was
himself the prosecutor, and that the action finally terminated with an acquittal; (2) that in
bringing the action, the prosecutor acted without probable cause; and (3) that the prosecutor was
actuated or impelled by legal malice, that is, by improper or sinister motive. The foregoing are
necessary to preserve a persons right to litigate which may be emasculated by the undue filing
of malicious prosecution cases.
From the foregoing requirements, it can be inferred that malice and want of probable
cause must both be clearly established to justify an award of damages based on malicious
prosecution. DLPC was not motivated by malicious intent or by a sinister design to unduly
harass petitioner, but only by a well-founded anxiety to protect its rights. Respondent DLPC
cannot therefore be faulted in availing of the remedies provided for by law.

Page 108 of 745


YASOA VS. DE RAMOS
GR No. 156339 October 6, 2004

FACTS:

Aurea Yasoa and her son, Saturnino, went to the house of Jovencio de Ramos to ask for
financial assistance in paying their loans to Philippine National Bank (PNB), otherwise their
residential house and lot would be foreclosed. Inasmuch as Aurea was his aunt, Jovencio acceded
to the request. They agreed that, upon payment by Jovencio of the loan to PNB, half of Yasoas
subject property would be sold to him. Jovencio paid Aureas bank loan. As agreed upon, Aurea
executed a deed of absolute sale in favor of Jovencio over half of the lot consisting of 123 square
meters. Thereafter, the lot was surveyed and separate titles were issued by the Register of Deeds
of Sta. Cruz, Laguna in the names of Aurea and Jovencio
Twenty-two years later, in August 1993, Aurea filed an estafa complaint against brothers
Jovencio and Rodencio de Ramos on the ground that she was deceived by them when she asked
for their assistance in 1971 concerning her mortgaged property. In her complaint, Aurea alleged
that Rodencio asked her to sign a blank paper on the pretext that it would be used in the
redemption of the mortgaged property
On February 21, 1994, Assistant Provincial Prosecutor Rodrigo B. Zayenis dismissed the
criminal complaint for estafa for lack of evidence. On account of this dismissal, Jovencio and
Rodencio filed a complaint for damages on the ground of malicious prosecution. They alleged
that the filing of the estafa complaint against them was done with malice and it caused
irreparable injury to their reputation, as Aurea knew full well that she had already sold half of the
property to Jovencio.

ISSUE:

Whether or not the filing of the criminal complaint for estafa by petitioners against
respondents constituted malicious prosecution?

RULING:

To constitute malicious prosecution, there must be proof that the prosecution was
prompted by a sinister design to vex or humiliate a person, and that it was initiated deliberately
by the defendant knowing that his charges were false and groundless. Concededly, the mere act
of submitting a case to the authorities for prosecution does not make one liable for malicious
prosecution.
In this case, the records show that the sale of the property was evidenced by a deed of
sale duly notarized and registered with the local Register of Deeds. After the execution of the
deed of sale, the property was surveyed and divided into two portions. Separate titles were then
issued in the names of Yasoa and Jovencio. Since 1973, Jovencio had been paying the realty
taxes of the portion registered in his name. In 1974, Aurea even requested Jovencio to use his
portion as bond for the temporary release of her son who was charged with malicious mischief.
Also, when Aurea borrowed money from the Rural Bank of Lumban in 1973 and the PNB in
1979, only her portion was mortgaged.
All these pieces of evidence indicate that Aurea had long acknowledged Jovencios ownership of
half of the property. Furthermore, it was only in 1993 when petitioners decided to file the estafa
complaint against respondents. If petitioners had honestly believed that they still owned the
entire property, it would not have taken them 22 years to question Jovencios ownership of half
of the property.
Malicious prosecution, both in criminal and civil cases, requires the elements of (1) malice and
(2) absence of probable cause. These two elements are present in the present controversy. The
complaint for estafa was dismissed outright as the prosecutor did not find any probable cause
against respondents. A suit for malicious prosecution will prosper where legal prosecution is
carried out without probable cause.

Page 109 of 745


PEOPLE VS. DELOS SANTOS
GR No. 131588 March 27, 2001

FACTS:

Philippine National Police (PNP), undergoing a Special Training Course (Scout Class 07-
95), wearing black T-shirts and black short pants, performing an "Endurance Run" of 35
kilometers coming from their camp in Manolo Fortich, Bukidnon, heading to Regional Training
Headquarters in Camp Alagar, Cagayan de Oro City, running in a column of 3, with a distance of
two feet, more or less, from one trainee to another, thus forming a three lines, with a length of
more or less 50 meters from the 1st man to the last man, unable to defend themselves, because
the accused ran or moved his driven vehicle on the direction of the backs of the PNP joggers in
spite of the continuous warning signals made by six of the joggers, namely: PO1 Allan Tabacon
Espana, Waldon Sinda Sacro, Lemuel Ybanez Pangca, Artemio Jamil Villaflor, Nardo Omasas
Collantes and Joselito Buyser Escartin, who were at the rear echelon of said run, acting as
guards, by continuously waving their hands at the accused for him to take the left lane of the
highway, going to the City proper, from a distance of 100 meters away from the joggers rear
portion, but which accused failed and refused to heed; instead, he proceeded to operate his driven
vehicle (an Isuzu Elf) on high speed directly towards the joggers, thus forcing the rear hitting,
bumping, or ramming the first four (4) victims, causing the bodies to be thrown towards the
windshields of said Isuzu Elf, breaking said windshield, and upon being aware that bodies of the
victims flew on the windshield of his driven vehicle, instead of applying his brake, continued to
travel on a high speed, this time putting off its headlights, thus hitting the succeeding joggers on
said 1st line, as a result thereof killed them.

ISSUE:

Whether or not accused is guilty beyond reasonable doubt of the complex crime of
multiple murder, multiple frustrated murder, and multiple attempted multiple murder.

RULING:

It is a well-entrenched rule that if the inculpatory facts are capable of two or more
explanations one consistent with the innocence or lesser degree of liability of the accused, and
the other consistent with his guilt or graver responsibility the Court should adopt the explanation
which is more favorable to the accused.The test for determining whether a person is negligent in
doing an act whereby injury or damage results to the person or property of another is this: Could
a prudent man, in the position of the person to whom negligence is attributed, foresee harm to the
person injured as a reasonable consequence of the course actually pursued? If so, the law
imposes a duty on the actor to refrain from that course or to take precautions to guard against its
mischievous results, and the failure to do so constitutes negligence. Reasonable foresight of
harm, followed by the ignoring of the admonition born of this prevision, is always necessary
before negligence can be held to exist.
Accused showed an inexcusable lack of precaution. Article 365 of the Revised Penal
Code states that reckless imprudence consists in voluntarily, but without malice, doing or failing
to do an act from which material damage results by reason of inexcusable lack of precaution on
the part of the person performing or failing to perform such act, taking into consideration (1) his
employment or occupation; (2) his degree of intelligence; (4) his physical condition; and (3)
other circumstances regarding persons, time. Considering that the incident was not a product of a
malicious intent but rather the result of a single act of reckless driving, should be held guilty of
the complex crime of reckless imprudence resulting in multiple homicide with serious physical
injuries and less serious physical injuries. Article 48 of the Revised Penal Code provides that
when the single act constitutes two or more grave or less grave felonies, or when an offense is a
necessary means for committing the other, the penalty for the most serious crime shall be
imposed, the same to be applied in its maximum period. Since Article 48 speaks of felonies, it is
applicable to crimes through negligence in view of the definition of felonies in Article 3 as "acts
or omissions punishable by law" committed either by means of deceit {dolo) or fault (culpa).

Page 110 of 745


MAGAT VS. MEDIALDEA
L-37120 April 20, 1983

FACTS:

That sometime in September 1972, the defendant entered into a contract with the U.S.
Navy Exchange, Subic Bay, Philippines, for the operation of a fleet of taxicabs, each taxicab to
be provided with the necessary taximeter and a radio transceiver for receiving and sending of
messages from mobile taxicab to fixed base stations within the Naval Base at Subic Bay,
Philippines.

ISSUE:

Whether or not there is contravention of the terms.

RULING:

After a thorough examination of the complaint at bar, We find the test of legal sufficiency
of the cause of action adequately satisfied. In a methodical and logical sequence, the complaint
recites the circumstances that led to the perfection of the contract entered into by the parties. It
further avers that while petitioner had fulfilled his part of the bargain, private respondent failed
to comply with his correlative obligation by refusing to open a letter of credit to cover payment
of the goods ordered by him and that consequently, petitioner suffered not only loss of his
expected profits, but moral and exemplary damages as well. From these allegations, the essential
elements of a cause of action are present, to wit: the existence of a legal right to the plaintiff; a
correlative duty of the defendant and an act or omission of the defendant in violation of the
plaintiff's right, with consequent injury or damage to the latter for which he may maintain an
action for recovery of damages or other appropriate relief.

Indisputably, the parties, both businessmen, entered into the aforesaid contract with the
evident intention of deriving some profits therefrom. Upon breach of the contract by either of
them, the other would necessarily suffer loss of his expected profits. Since the loss comes into
being at the very moment of breach, such loss is real, "fixed and vested" and, therefore,
recoverable under the law.
Article 1170 of the Civil Code provides:
"Those who in the performance of their obligation are guilty of fraud, negligence, or
delay, and those who in any manner contravene the tenor thereof are liable for damages."

The phrase "in any manner contravene the tenor" of the obligation includes any illicit act
or omission which impairs the strict and faithful fulfillment of the obligation and every kind of
defective performance.

The damages which the obligor is liable for includes not only the value of the loss
suffered by the obligee [dao emergente] but also the profits which the latter failed to obtain
[lucro cesante]. If the obligor acted in good faith, he shall be liable for those damages that are the
natural and probable consequences of the breach of the obligation and which the parties have
foreseen or could have reasonably foreseen at the time the obligation was constituted; and in case
of fraud, bad faith, malice or wanton attitude, he shall be liable for all damages which may be
reasonably attributed to the nonperformance of the obligation

Page 111 of 745


VDA. DE MISTICA VS. NAGUIAT
GR. No 137909 December 11, 2003

FACTS:

Eulalio Mistica, predecessor-in-interest of herein petitioner, is the owner of a parcel of


land. A portion thereof was leased to [Respondent Bernardino Naguiat] sometime in 1970. On 5
April 1979, Eulalio Mistica entered into a contract to sell with Respondent Naguiat over a
portion of the aforementioned lot containing an area of 200 square meters.

Pursuant to said agreement, Respondent Bernardino Naguiat gave a downpayment of


P2,000.00. He made another partial payment of P1,000.00 on 7 February 1980. He failed to
make any payments thereafter. Eulalio Mistica died sometime in October 1986.

On 4 December 1991, petitioner filed a complaint for rescission alleging inter alia: that
the failure and refusal of respondents to pay the balance of the purchase price constitutes a
violation of the contract which entitles her to rescind the same; that [respondents] have been in
possession of the subject portion and they should be ordered to vacate and surrender possession
of the same to petitioner. Respondents contended that the contract cannot be rescinded on
the ground that it clearly stipulates that in case of failure to pay the balance as stipulated, a yearly
interest of 12% is to be paid. Likewise alleged that sometime in October 1986, during the wake
of the late Eulalio Mistica, he offered to pay the remaining balance to petitioner but the latter
refused and hence, there is no breach or violation committed by them and no damages could yet
be incurred by the late Eulalio Mistica, his heirs or assigns pursuant to the said document.

ISSUE:

Whether petitioner may rescind the contract.

RULING:

Disallowing rescission, the CA held that respondents did not breach the Contract of Sale.
It explained that the conclusion of the ten-year period was not a resolutory term, because the
Contract had stipulated that payment -- with interest of 12 percent -- could still be made if
respondents failed to pay within the period. According to the appellate court, petitioner did not
disprove the allegation of respondents that they had tendered payment of the balance of the
purchase price during her husbands funeral, which was well within the ten-year period.

Moreover, rescission would be unjust to respondents, because they had already


transferred the land title to their names. The proper recourse, the CA held, was to order them to
pay the balance of the purchase price, with 12 percent interest.

Petitioner claims that she is entitled to rescind the Contract under Article 1191 of the
Civil Code, because respondents committed a substantial breach when they did not pay the
balance of the purchase price within the ten-year period.

We disagree. The transaction between Eulalio Mistica and respondents, as evidenced by


the Kasulatan, was clearly a Contract of Sale. A deed of sale is considered absolute in nature
when there is neither a stipulation in the deed that title to the property sold is reserved to the
seller until the full payment of the price; nor a stipulation giving the vendor the right to
unilaterally resolve the contract the moment the buyer fails to pay within a fixed period. The CA
further ruled that rescission in this case would be unjust to respondents, because a certificate of
title had already been issued in their names.

Page 112 of 745


CO VS. CA
GR No. 112330 August 17, 1999

FACTS:

Plaintiff entered into a verbal contract with defendant for her purchase of the latters
house and lot located at 316 Beata St., New Alabang Village, Muntinlupa, Metro Manila, for and
in consideration of the sum of $100,000.00. One week thereafter, and shortly before she left for
the United States, plaintiff paid to the defendants the amounts of $1,000.00 and P40,000.00 as
earnest money, in order that the same may be reserved for her purchase, said earnest money to be
deducted from the total purchase price. The purchase price of $100,000.00 is payable in two
payments $40,000.00 on December 4, 1984 and the balance of $60,000.00 on January 5, 1985.
On January 25, 1985, although the period of payment had already expired, plaintiff paid to the
defendant Melody Co in the United States, the sum of $30,000.00, as partial payment of the
purchase price. Defendants counsel, Atty. Leopoldo Cotaco, wrote a letter to the plaintiff dated
March 15, 1985, demanding that she pay the balance of $70,000.00 and not receiving any
response thereto, said lawyer wrote another letter to plaintiff dated August 8, 1986, informing
her that she has lost her option to purchase the property subject of this case and offered to sell
her another property.

ISSUE:

Whether or not the Court of Appeals erred in ordering the COS to return the $30,000.00
paid by Custodio pursuant to the option granted to her over the Beata property?

RULING:

The COS main argument is that Custodio lost her option over the Beata property and
her failure to exercise said option resulted in the forfeiture of any amounts paid by her pursuant
to the August letter.

An option is a contract granting a privilege to buy or sell within an agreed time and at a
determined price.

Article 1479.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is
binding upon the promissor if the promise is supported by a consideration distinct from the
price.

However, the March 15, 1985 letter sent by the COS through their lawyer to the Custodio
reveals that the parties entered into a perfected contract of sale and not an option contract.
In the case at bar, the property involved has not been delivered to the appellee. She has
therefore nothing to return to the appellants. The price received by the appellants has to be
returned to the appellee as aptly ruled by the lower court, for such is a consequence of rescission,
which is to restore the parties in their former situations.

Page 113 of 745


REYES v. TUPARAN
G.R. No. 188064; June 1, 2011

FACTS:

In December 1989, respondent leased from petitioner a space on the ground floor of
the RBJ Building for her pawnshop business for a monthly rental of 4,000.00. A close
friendship developed between the two which led to the respondent investing thousands of pesos
in petitioners financing/lending business from February 7, 1990 to May 27, 1990, with interest
at the rate of 6% a month.
On June 20, 1988, petitioner mortgaged the subject real properties to the Farmers Savings
Bank and Loan Bank, Inc. to secure a loan of 2,000,000.00 payable in installments.
On November 15, 1990, petitioners outstanding account on the mortgage reached
2,278,078.13. Petitioner then decided to sell her real properties for at least 6,500,000.00 so she
could liquidate her bank loan and finance her businesses. As a gesture of friendship, respondent
verbally offered to conditionally buy petitioners real properties for 4,200,000.00 payable on
installment basis without interest and to assume the bank loan.
On November 26, 1990, the parties and FSL Bank executed the corresponding Deed of
Conditional Sale of Real Properties with Assumption of Mortgage.
Respondent, however, defaulted in the payment of her obligations on their due dates.
Instead of paying the amounts due in lump sum on their respective maturity dates, respondent
paid petitioner in small amounts from time to time. To compensate for her delayed payments,
respondent agreed to pay petitioner an interest of 6% a month. As of August 31, 1992,
respondent had only paid 395,000.00, leaving a balance of 805,000.00 as principal on the
unpaid installments and 466,893.25 as unpaid accumulated interest.
Since December 1990, respondent had taken possession of the subject real properties and
had been continuously collecting and receiving monthly rental income from the tenants of the
buildings and vendors of the sidewalk fronting the RBJ building without sharing it with
petitioner. On September 2, 1992, respondent offered the amount of 751,000.00 only payable
on September 7, 1992, as full payment of the purchase price of the subject real properties and
demanded the simultaneous execution of the corresponding deed of absolute sale.
On September 10, 1992, Mila A. Reyes filed a complaint for Rescission of Contract with
Damages against Victoria T. Tuparan before the RTC.

ISSUE:
Whether or not petitioner has the right to rescind of the Deed of Conditional Sale with
Assumption of Mortgage.

HELD:

The Court agrees with the ruling of the courts below that the subject Deed of Conditional
Sale with Assumption of Mortgage entered into by and among the two parties and FSL Bank
on November 26, 1990 is a contract to sell and not a contract of sale. Based on the stipulations of
the parties,the title and ownership of the subject properties remains with the petitioner until the
respondent fully pays the balance of the purchase price and the assumed mortgage obligation.
Thereafter, FSL Bank shall then issue the corresponding deed of cancellation of mortgage and
the petitioner shall execute the corresponding deed of absolute sale in favor of the respondent.

Accordingly, the petitioners obligation to sell the subject properties becomes


demandable only upon the happening of the positive suspensive condition, which is the
respondents full payment of the purchase price. Without respondents full payment, there can be
no breach of contract to speak of because petitioner has no obligation yet to turn over the title.
Respondents failure to pay in full the purchase price is not the breach of contract contemplated
under Article 1191 of the New Civil Code but rather just an event that prevents the petitioner
from being bound to convey title to the respondent.

Page 114 of 745


G.G. SPORTSWEAR MFG. CORP. v.WORLD CLASS PROPERTIES, INC.
G.R. No. 182720 March 2, 2010

FACTS:

GG Sportswear offered to purchase the 38th floor penthouse unit and 16 parking slots for 32 cars
in World Class's condominium project for the discounted, pre-selling price. After GG Sportswear
paid the reservation fee, the parties, signed a Reservation Agreement that provides for the
schedule of payments, including the stipulated monthly installments on the down payment and
the balance on the purchase price. From May to December 1996, GG Sportswear timely paid the
installments due.In a letter dated January 30, 1997, GG Sportswear requested the return of the
outstanding postdated checks it previously delivered to World Class because it (GG Sportswear)
intended to replace these old checks with new ones from the corporations new bank. World
Class acceded, but suggested the execution of a new Reservation Agreement to reflect the
arrangement involving the replacement checks, with the retention of the other terms and
conditions of the old Agreement.8 GG Sportswear did not object to the execution of a new
Reservation Agreement, but requested that World Class defer the deposit of the replacement
checks for 90 days. World Class denied this request, contending that a deferment would delay
the subsequent monthly installment payments. It likewise demanded that GG Sportswear
immediately pay its overdue January 1997 installment to avoid the penalties provided in the
Agreement. GG Sportswear did not sign the second Reservation Agreement. Instead, it sent a
letter to World Class, requesting that its check dated April 24, 1997 be deposited on May 15,
1997 because it was experiencing financial difficulties. When World Class rejected GG
Sportswears request, GG Sportswear sent another letter informing World Class that the second
Reservation Agreement was incomplete because it did not expressly provide the time of
completion of the condominium unit. World Class countered that the provisional Contract to Sell
it previously submitted to GG Sportswear expressly provided for the completion date (December
15, 1998) and insisted that GG Sportswear pay its overdue account.

ISSUE:
Whether there was no breach on the part of World Class to justify the rescission and
refund.

RULING:

GG Sportswear likewise has no legal basis to demand either the rescission of the Agreement or
the refund of payments it made to World Class under the Agreement.Unless the parties stipulated
it, rescission is allowed only when the breach of the contract is substantial and fundamental to
the fulfillment of the obligation. Whether the breach is slight or substantial is largely determined
by the attendant circumstances.GG Sportswear anchors its claim for rescission on two grounds:
(a) its dissatisfaction with the completion date; and (b) the lack of a Contract to Sell. As to the
first ground, World Class makes much of the fact that the completion date is not indicated in the
Agreement, maintaining that this lack of detail renders the Agreement void on the ground that
the intention of the parties cannot be ascertained. We disagree with this contention.In the first
place, GG Sportswear cannot claim that it did not know the time-frame for the projects
completion when it entered into the Agreement with World Class. As World Class points out, it
is absurd and unbelievable that Mr. Gidwani, the president of GG Sportswear and an experienced
businessman, did not have an idea of the expected completion date of the condominium project
before he bought the condominium units for P89,624,272.82. Even assuming that GG Sportswear
was not aware of the exact completion date, we note that GG Sportswear signed the Agreement
despite the Agreements omission to expressly state a specific completion date. This directly
implies that a specific completion date was not a material consideration for GG Sportswear when
it executed the Agreement. Thus, even if we believe GG Sportswears contention that it was
dissatisfied with the completion date subsequently indicated in the provisional Contract to Sell,
we cannot consider this dissatisfaction a breach so substantial as to render the Agreement
rescissible.

Page 115 of 745


UNIVERSAL FOOD CORPORATION VS. CA
L-29155 February 22, 1971

FACTS:

The petitioner contends that (a) under the terms of the Bill of Assignment, exh. A, the
respondent Magdalo V. Francisco ceded and transferred to the petitioner not only the right to the
use of the formula for Mafran sauce but also the formula itself, because this, allegedly, was the
intention of the parties; (b) that on the basis of the entire evidence on record and as found by the
trial court, the petitioner did not dismiss the respondent Francisco because he was, and still is, a
member of the board of directors, a stockholder, and an officer of the petitioner corporation, and
that as such, had actual knowledge of the resumption of production by the petitioner, but that
despite such knowledge, he refused to report back for work notwithstanding the petitioner's call
for him to do so; (c) that the private respondents are not entitled to rescind the Bill of
Assignment; and (d) that the evidence on record shows that the respondent Francisco was the one
not ready, willing and able to comply with his obligations under the Bill of Assignment, in the
sense that he not only irregularly reported for work but also failed to assign, transfer and convey
to the petitioner of the said deed of conveyance.

ISSUE:

Whether respondent Francisco ceded to the petitioner merely the use of the formula for
Mafran sauce and not the formula itself.

RULING:

The Court concluded that what was actually ceded and transferred was only the use of the
Mafran sauce formula. The fact that the trademark "Mafran" was duly registered in the name of
the petitioner pursuant to the Bill of Assignment, standing by itself alone, to borrow the
petitioner's language, is not sufficient proof that the respondent Francisco was supposedly
obligated to transfer and cede to the petitioner the formula for Mafran sauce and not merely its
use. For the said respondent allowed the petitioner to register the trademark for purposes merely
of the "marketing of said project."

Page 116 of 745


UNIVERSITY OF THE PHILIPPINES VS. DELOS ANGELES
L-28602 September 29, 1970

FACTS:

UP and ALUMCO entered into a logging agreement under which the latter was granted
exclusive authority, for a period starting from the date of the agreement to 31 December 1965,
extendible for a further period of five (5) years by mutual agreement, to cut, collect and remove
timber from the Land Grant, in consideration of payment to UP of royalties, forest fees, etc.; that
ALUMCO cut and removed timber therefrom but, as of 8 December 1964, it had incurred an
unpaid account of P219,362.94, which, despite repeated demands, it had failed to pay; that after
it had received notice that UP would rescind or terminate the logging agreement, ALUMCO
executed an instrument, entitled "Acknowledgment of Debt and Proposed Manner of Payments,"
dated 9 December 1964, which was approved by the president of UP. ALUMCO continued its
logging operations, but again incurred an unpaid account, for the period from 9 December 1964
to 15 July 1965, in the amount of P61,133.74, in addition to the indebtedness that it had
previously acknowledged.
That on 19 July 1965, petitioner UP informed respondent ALUMCO that it had, as of that
date, considered as rescinded and of no further legal effect the logging agreement that they had
entered in 1960.
That before the issuance of the aforesaid preliminary injunction UP had taken steps to
have another concessionaire take over the logging operation, and the concession was awarded to
Sta. Clara Lumber Company, Inc.

ISSUE:

Whether petitioner U.P. can treat its contract with ALUMCO rescinded, and may
disregard the same before any judicial pronouncement to that effect.

RULING:

Respondent ALUMCO contended, and the lower court, in issuing the injunction order of
25 February 1966. apparently sustained it (although the order expresses no specific findings in
this regard), that it is only after a final court decree declaring the contract rescinded for violation
of its terms that U.P. could disregard ALUMCO's rights under the contract and treat the
agreement as breached and of no force or effect.
UP and ALUMCO had expressly stipulated in the "Acknowledgment of Debt and
Proposed Manner of Payments" that, upon default by the debtor ALUMCO, the creditor (UP) has
"the right and the power to consider the Logging Agreement dated 2 December 1960 as
rescinded without the necessity of any judicial suit." "There is nothing in the law that prohibits
the parties from entering into agreement that violation of the terms of the contract would cause
cancellation thereof, even without court intervention. In other words, it is not always necessary
for the injured party to resort to court for rescission of the contract."
In other words, the party who deems the contract violated may consider it resolved or
rescinded, and act accordingly, without previous court action, but it proceeds at its own risk. For
it is only the final judgment of the corresponding court that will conclusively and finally settle
whether the action taken was or was not correct in law. But the 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.

Page 117 of 745


ARMAND O. RAQUEL-SANTOS v. COURT OF APPEALS
G.R. No. 174986 July 7, 2009

FACTS:

Finvest is a stock brokerage corporation duly organized under Philippine laws and is a member
of the PSE with one membership seat pledged to the latter. Armand O. Raquel-Santos (Raquel-
Santos) was Finvests President and nominee to the PSE from February 20, 1990 to July 16,
1998.3 Annalissa Mallari (Mallari) was Finvests Administrative Officer until December 31,
1998.In the course of its trading operations, Finvest incurred liabilities to PSE representing fines
and penalties for non-payment of its clearing house obligations. PSE also received reports that
Finvest was not meeting its obligations to its clients. Consequently, PSE indefinitely suspended
Finvest from trading. The Securities and Exchange Commission (SEC) also suspended its license
as broker.On June 17, 1998, PSE demanded from Finvest the payment of its obligations to the
PSE in the amount of P4,267,339.99 and to its (Finvests) clients within 15 days. PSE also
ordered Finvest to replace its nominee, Raquel-Santos.

ISSUE:
Whether or not rescission is the proper remedy.

RULING:

Clearly, Finvests failure to deliver the stock certificates representing the shares of stock
purchased by TMEI and Garcia amounted to a substantial breach of their contract which gave
rise to a right to rescind the sale.

Rescission creates the obligation to return the object of the contract. This is evident from Article
1385 of the Civil Code which provides:

ART. 1385. Rescission creates the obligation to return the things which were the object of the
contract, together with their fruits, and the price with its interest; consequently, it can be carried
out only when he who demands rescission can return whatever he may be obliged to restore.

Neither shall rescission take place when the things which are the object of the contract are legally
in the possession of third persons who did not act in bad faith.

In this case, indemnity for damages may be demanded from the person causing the loss.

To rescind is to declare a contract void at its inception and to put an end to it as though it never
was. Rescission does not merely terminate the contract and release the parties from further
obligations to each other, but abrogates it from the beginning and restores the parties to their
relative positions as if no contract has been made.79

Mutual restitution entails the return of the benefits that each party may have received as a result
of the contract. In this case, it is the purchase price that Finvest must return. The amount paid
was sufficiently proven by the buy confirmation receipts, vouchers, and official/provisional
receipts that respondents presented in evidence. In addition, the law awards damages to the
injured party, which could be in the form of interest on the price paid,80 as the trial court did in
this case.

Page 118 of 745


FRANCISCO VS. DEAC CONSTRUCTION, INC.
GR No. 171312 February 4, 2008

FACTS:

Spouses Francisco obtained the services of DEAC Construction, Inc. to construct a 3-


storey residential building with mezzanine and roof deck on their lot for a contract price of 3.5M.
as agreed upon, a downpayment of 2M should be paid upon signing of the construct of
construction, and the remaining balance of 1.5M was to be paid in two equal installments. To
undertake the said project, DEAC engaged the services of a sub-contractor, Vigor Construction
and Development Corporation, but allegedly without the spouses knowledge and consent.

Even prior to the execution of the contract, spouses Francisco had paid the downpayment.
However, the said construction commenced although DEAC had not yet obtained the necessary
building permit for the proposed construction and that the contractor deviated from the approved
plans.
Spouses Francisco demanded DEAC to comply with the approved plan, otherwise, they
would be compelled to invoke legal remedies. Work stoppage was issued against Lino Francisco
pursuant to the previous Notice of Violations. The plaintiffs then file civil case for Rescission of
Contract and Damages against DEAC.

ISSUE:
Whether or not spouses Francisco may rescind the contract.

RULING:

Article 1191 of the Civil Code provides that the power to rescind obligations is implied in
reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.
The rescission referred to in this article, more appropriately referred to a resolution, is not
predicated on injury to economic interests on the part of the party plaintiff, but of breach of faith
by the defendant which is violative of the reciprocity between the parties.

Given the fact that the construction in this case is already 75% complete, that trial court
was correct in ordering partial rescission of the portion of the construction. Equitable
considerations justify rescission of the portion of the obligation which has not been delivered.

Page 119 of 745


SPS. FELIPE AND LETICIA CANNU versus SPS. GIL AND FERNANDINA
GALANG AND NATIONAL HOME MORTGAGE FINANCE CORPORATION
G.R. No. 139523 2005 May 26

FACTS:

Respondents-spouses Gil and Fernandina Galang obtained a loan from Fortune


Savings & Loan Association for P173,800.00 to purchase a house and lot located at Pulang Lupa,
Las Pias, in the names of respondents-spouses. To secure payment, a real estate mortgage was
constituted on the said house and lot in favor of Fortune Savings & Loan Association. In early
1990, NHMFC purchased the mortgage loan of respondents-spouses from Fortune Savings &
Loan Association for P173,800.00. Petitioner Leticia Cannu agreed to buy the property for
P120,000.00 and to assume the balance of the mortgage obligations with the NHMFC and with
CERF Realty (the Developer of the property).

A Deed of Sale with Assumption of Mortgage Obligation dated 20 August 1990


was made and entered into by and between spouses Fernandina and Gil Galang (vendors) and
spouses Leticia and Felipe Cannu (vendees) over the house and lot and petitioners immediately
took possession and occupied the house and lot. However, despite requests from Adelina R.
Timbang and Fernandina Galang to pay the balance of P45,000.00 or in the alternative to vacate
the property in question, petitioners refused to do so. Because the Cannus failed to fully comply
with their obligations, respondent Fernandina Galang, on 21 May 1993, paid P233,957.64 as full
payment of her remaining mortgage loan with NHMFC.

From 1991 until the present, no other payments were made by plaintiffs-
appellants to defendants-appellees spouses Galang. Out of the P250,000.00 purchase price which
was supposed to be paid on the day of the execution of contract in July, 1990 plaintiffs-
appellants have paid, in the span of eight (8) years, from 1990 to present, the amount of only
P75,000.00. Plaintiffs-appellants should have paid the P250,000.00 at the time of the execution
of contract in 1990. Eight (8) years have already lapsed and plaintiffs-appellants have not yet
complied with their obligation.

ISSUE:

Whether or not the action for rescission was subsidiary, and that there was a
substantial breach of the obligation.

RULING:

Rescission or, more accurately, resolution, of a party to an obligation under


Article 1191 is predicated on a breach of faith by the other party that violates the reciprocity
between them. Art. 1191 states that the power to rescind obligations is implied in reciprocal
ones, in case one of the obligors should not comply with what is incumbent upon him. The
injured party may choose between the fulfillment and the rescission of the obligation, with the
payment of damages in either case. He may also seek rescission, even after he has chosen
fulfillment, if the latter should become impossible. The court shall decree the rescission claimed,
unless there be just cause authorizing the fixing of a period.

Rescission will not be permitted for a slight or casual breach of the contract.
Rescission may be had only for such breaches that are substantial and fundamental as to defeat
the object of the parties in making the agreement. The question of whether a breach of contract is
substantial depends upon the attending circumstances and not merely on the percentage of the
amount not paid.Thus, the petitioners failure to pay the remaining balance of P45,000.00 is
substantial. Even assuming arguendo that only said amount was left out of the supposed
consideration of P250,000.00, or eighteen percent thereof, this percentage is still substantial.
Their failure to fulfill their obligation gave the respondents-spouses Galang the right to
rescission.

Page 120 of 745


GENEROSO VILLANUEVA and RAUL VILLANUEVA JR.. versus ESTATE OF
GERARDO GONZAGA/ MA. VILLA GONZAGA in her capacity as Administratrix
G.R. No. 15731 2006 August 09

FACTS:
On January 15, 1990, petitioners Generoso Villanueva and Raul Villanueva, Jr., business
entrepreneurs engaged in the operation of transloading stations and sugar trading, and respondent
Estate of Gerardo L. Gonzaga, represented by its Judicial Administratrix, respondent Ma. Villa J.
Gonzaga, executed a MOA. As stipulated in the agreement, petitioners introduced improvements
after paying P291,600.00 constituting sixty (60%) percent of the total purchase price of the lots.
Petitioners then requested permission from respondent Administratrix to use the premises for the
next milling season. Respondent refused on the ground that petitioners cannot use the premises
until full payment of the purchase price. Petitioners informed respondent that their immediate use
of the premises was absolutely necessary and that any delay will cause them substantial
damages. Respondent remained firm in her refusal, and demanded that petitioners stop using the
lots as a transloading station to service the Victorias Milling Company unless they pay the full
purchase price. In a letter-reply dated April 5, 1991, petitioners assured respondent of their
readiness to pay the balance but reminded respondent of her obligation to redeem the lots from
mortgage with the Philippine National Bank (PNB). Petitioners gave respondent ten (10) days
within which to do so.
On April 10, 1991, respondent Administratrix wrote petitioners informing them
that the PNB had agreed to release the lots from mortgage. She demanded payment of the
balance of the purchase price. Enclosed with the demand letter was the PNBs letter of approval
dated April 8, 1991. Petitioners demanded that respondent show the clean titles to the lots first
before they pay the balance of the purchase price. Respondent merely reiterated the demand for
payment. Petitioners stood pat on their demand. On May 28, 1991, respondent Administratrix
executed a Deed of Rescission rescinding the MOA. In their Letter dated June 13, 1991,
petitioners, through counsel, formally demanded the production of the titles to the lots before
they pay the balance of the purchase price. The demand was ignored. Consequently, on June 19,
1991, petitioners filed a complaint against respondents for breach of contract, specific
performance and damages before the RTC-Bacolod City. The trial court decided the case in
favor of respondents. Petitioners filed a petition for review before the Court of Appeals. The
Court of Appeals affirmed the trial courts decision but deleted the award for moral damages on
the ground that petitioners were not guilty of bad faith in refusing to pay the balance of the
purchase price.

ISSUE:
Whether there is legal, or even a factual, ground for the rescission of the
Memorandum of Agreement.

RULING:
There is no legal basis for the rescission. The remedy of rescission under Art. 1191 of the
Civil Code is predicated on a breach of faith by the other party that violates the reciprocity
between them. The MOA between petitioners and respondents is a conditional contract to sell.
Ownership over the lots is not to pass to the petitioners until full payment of the purchase price.
Petitioners obligation to pay, in turn, is conditioned upon the release of the lots from mortgage
with the PNB to be secured by the respondents. Although there was no express provision
regarding reserved ownership until full payment of the purchase price, the intent of the parties in
this regard is evident from the provision that a deed of absolute sale shall be executed only when
the lots have been released from mortgage and the balance paid by petitioners. Since ownership
has not been transferred, no further legal action need have been taken by the respondents, except
an action to recover possession in case petitioners refuse to voluntarily surrender the lots.
The records show that the lots were finally released from mortgage in July 1991.
Petitioners have always expressed readiness to pay the balance of the purchase price once that is
achieved. Hence, petitioners should be allowed to pay the balance now, if they so desire, since it
is established that respondents demand for them to pay in April 1991 was premature.

Page 121 of 745


SPOUSES DOMINGO and LOURDES PAGUYO versus Pierre Astorga and St.
Andrew Realty, Inc.
G.R. No. 130982 2005 September 16

FACTS:

On 29 November 1988, in order to raise the much needed amount, petitioner Lourdes
Paguyo entered into an agreement captioned as Receipt of Earnest Money with respondent Pierre
Astorga, for the sale of the formers property consisting of the lot which was to be purchased
from the Armases, together with the improvements thereon, particularly, the existing building
known as the Paguyo Building. However, contrary to their express representation with respect to
the subject lot, petitioners failed to comply with their obligation to acquire the lot from the
Armas family despite the full financial support of respondents. Nevertheless, the parties
maintained their business relationship under the terms and conditions of the above-mentioned
Receipt of Earnest Money. On 12 December 1988, petitioners asked for and were given by
respondents an additional P50,000.00 to meet the formers urgent need for money in connection
with their construction business. Thus, on 5 January 1989, the parties executed the four
documents in question namely, the Deed of Absolute Sale of the Paguyo Building, the Mutual
Undertaking, the Deed of Real Estate Mortgage, and the Deed of Assignment of Rights and
Interest. Simultaneously with the signing of the four documents, respondents paid petitioners the
additional amount of P500,000.00. Thereafter, the respondents renamed the Paguyo Building
into GINZA Bldg. and registered the same in the name of respondent St. Andrew Realty, Inc. at
the Makati Assessors Office after paying accrued real estate taxes in the total amount of
P169,174.95.

ISSUE:
Did the Court of Appeals err in upholding the trial courts decision denying petitioners
complaint for rescission?

RULING:
No. The right to rescind a contract involving reciprocal obligations is provided for
in Article 1191 of the Civil Code. Article 1191 states: The power to rescind obligations is
implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent
upon him. The injured party may choose between the fulfillment and the rescission of the
obligation, with the payment of damages in either case. He may also seek rescission, even after
he has chosen fulfillment, if the latter should become impossible. The court shall decree the
rescission claimed, unless there be just cause authorizing the fixing of a period.

Moreover, Articles 1355 and 1470 of the Civil Code state: Art. 1355. Except in
cases specified by law, lesion or inadequacy of cause shall not invalidate a contract, unless there
has been fraud, mistake or undue influence. Art. 1470. Gross inadequacy of price does not affect
a contract of sale, except as may indicate a defect in the consent, or that the parties really
intended a donation or some other act or contract.

Petitioners failed to prove any of the instances mentioned in Articles 1355 and
1470 of the Civil Code, which would invalidate, or even affect, the Deed of Sale of the Building
and the related documents. Indeed, there is no requirement that the price be equal to the exact
value of the subject matter of sale. In sum, petitioners pray for rescission of the Deed of Sale of
the building and offer to repay the purchase price after their liquidity position would have
improved and after respondents would have refurbished the building, updated the real property
taxes, and turned the building into a profitable business venture. The court stated however that,
it will not allow itself to be an instrument to the dissolution of contract validly entered into, for a
party should not, after its opportunity to enjoy the benefits of an agreement, be allowed to later
disown the arrangement when the terms thereof ultimately would prove to operate against its
hopeful expectations.

Page 122 of 745


BIENVENIDO M. CASIO, JR. versus THE COURT OF APPEALS and
OCTAGON REALTY DEVELOPMENT CORPORATION
G.R. No. 133803 2005 September 16

FACTS:

In its complaint, respondent alleges that on December 22, 1989, it entered into a
contract with petitioner for the supply and installation by the latter of narra wood parquet (kiln
dried) to the Manila Luxury Condominium Project, of which respondent is the developer, for a
total price of P1,158,487.00; that the contract stipulated that full delivery by petitioner of labor
and materials was in May 1990; that in accordance with the terms of payment in the contract,
respondent paid to petitioner the amount P463,394.50, representing 40% of the total contract
price; that after delivering only 26,727.02 sq. ft. of wood parquet materials, petitioner
incurred in delay in the delivery of the remainder of 34,245.98 sq. ft.; that petitioner
misrepresented to respondent that he is qualified to do the work contracted when in truth and in
fact he was not and, furthermore, he lacked the necessary funds to execute the work as
he was totally dependent on the funds advanced to him by respondent; that due to petitioners
unlawful and malicious refusal to comply with its obligations, respondent incurred actual
damages in the amount of P912,452.39 representing estimated loss on the new price,
unliquidated damages and cost of money; that in order to minimize losses, the respondent
contracted the services of Hilvano Quality Parquet and Sanding Services to complete the
petitioners unfinished work, respondent thereby agreeing to pay the latter P1,198,609.30.

ISSUE:
Whether or not the rescission of the contract by the private respondent is valid.

RULING:

Under the contract, petitioner and respondent had respective obligations, i.e., the
former to supply and deliver the contracted volume of narra wood parquet materials and install
the same at respondents condominium project by May, 1990, and the latter, to pay for said
materials in accordance with the terms of payment set out under the parties agreement. But
while respondent was able to fulfill that which is incumbent upon it by making a downpayment
representing 40% of the agreed price upon the signing of the contract and even paid the first
billing of petitioner, the latter failed to comply with his contractual commitment. For, after
delivering only less than one-half of the contracted materials, petitioner failed, by the end of the
agreed period, to deliver and install the remainder despite demands for him to do so. Thus, it is
petitioner who breached the contract. The petitioner therefore, has failed to comply with his
prestations under his contract with respondent, the latter is vested by law with the right to rescind
the parties agreement, conformably with Article 1191 of the Civil Code.

However, the right to rescind a contract for non-performance of its stipulations is


not absolute. The general rule is that rescission of a contract will not be permitted for a slight or
casual breach, but only for such substantial and fundamental violations as would defeat the very
object of the parties in making the agreement. Contrary to petitioners asseveration, the breach he
committed cannot, by any measure, be considered as slight or casual. For petitioners failure to
make complete delivery and installation way beyond the time stipulated despite respondents
demands, is doubtless a substantial and fundamental breach, more so when viewed in the light of
the large amount of money respondent had to pay another contractor to complete petitioners
unfinished work.

Likewise, contrary to petitioners claim, it cannot be said that he had no inkling


whatsoever of respondents recourse to rescission. Petitioner cannot feign ignorance of
respondents intention to rescind, fully aware, as he was, of his non-compliance with what was
incumbent upon him, and not to mention the several letters respondent sent to him demanding
compliance with his obligation.

Page 123 of 745


FERNANDO CARRASCOSO JR. v. COURT OF APPEALS
G.R. No. 123672 & G. R. No. 164489 December 14, 2005

FACTS:

On February 15, 1972, at a special meeting of El Dorados Board of Directors, a


Resolution was passed authorizing Feliciano Leviste, then President of El Dorado, to negotiate
the sale of the property and sign all documents and contracts bearing thereon. El Dorado, through
Feliciano Leviste, sold the property to Fernando O. Carrascoso, Jr. Under the Deed of Sale,
Carrascoso was to pay the full amount of the purchase price on March 23, 1975. On March 24,
1972, Carrascoso and his wife Marlene executed a Real Estate Mortgage] over the property in
favor of Home Savings Bank (HSB) to secure a loan in the amount of P1,000,000.00. Of this
amount, P290,000.00 was paid to Philippine National Bank to release the mortgage priorly
constituted on the property and P210,000.00 was paid to El Dorado pursuant to the terms and
conditions of the Deed of Sale.

On May 18, 1972, the real estate mortgage in favor of HSB was amended to
include an additional three year loan of P70,000.00 as requested by the spouses Carrascoso.
However, the 3-year period for Carrascoso to fully pay for the property on March 23, 1975
passed without him having complied therewith. In the meantime, on July 11, 1975, Carrascoso
and the Philippine Long Distance Telephone Company (PLDT), through its President Ramon
Cojuangco, executed an Agreement to Buy and Sell whereby the former agreed to sell 1,000
hectares of the property to the latter at a consideration of P3,000.00 per hectare or a total of
P3,000,000.00.
Lauro Leviste, a stockholder and member of the Board of Directors of El Dorado,
called the attention of the Board to Carrascosos failure to pay the balance of the purchase price
of the property amounting to P1,300,000.00. Lauros desire to rescind the sale was reiterated in
two other letters addressed to the Board. Jose P. Leviste, as President of El Dorado, later sent a
letter of February 21, 1977 to Carrascoso informing him that in view of his failure to pay the
balance of the purchase price of the property, El Dorado was seeking the rescission of the March
23, 1972 Deed of Sale of Real Property. For the failure of Carrascoso to give his reply, Lauro
and El Dorado finally filed a complaint for rescission of the Deed of Sale. They also sought the
cancellation of TCT No. T-6055 in the name of Carrascoso and the revival of TCT No. T-93 in
the name of El Dorado, free from any liens and encumbrances.

ISSUE:
Whether or not the rescission is valid.

RULING:
The right of rescission of a party to an obligation under Article 1191 is predicated on a
breach of faith by the other party who violates the reciprocity between them. A contract of sale is
a reciprocal obligation. The seller obligates itself to transfer the ownership of and deliver a
determinate thing, and the buyer obligates itself to pay therefor a price certain in money or its
equivalent. The non-payment of the price by the buyer is a resolutory condition which
extinguishes the transaction that for a time existed, and discharges the obligations created
thereunder. Such failure to pay the price in the manner prescribed by the contract of sale entitles
the unpaid seller to sue for collection or to rescind the contract.

In the case at bar, El Dorado already performed its obligation through the execution of
the March 23, 1972 Deed of Sale of Real Property which effectively transferred ownership of the
property to Carrascoso. The latter, on the other hand, failed to perform his correlative obligation
of paying in full the contract price in the manner and within the period agreed upon. The terms of
the Deed are clear and unequivocal: Carrascoso was to pay the balance of the purchase price of
the property amounting to P1,300,000.00 plus interest thereon at the rate of 10% per annum
within a period of three (3) years from the signing of the contract on March 23, 1972. When Jose
Leviste informed him that El Dorado was seeking rescission of the contract by letter of February
21, 1977, the period given to him within which to fully satisfy his obligation had long lapsed.

Page 124 of 745


GOLDENROD, INC. vs. COURT OF APPEALS BARRETTO & SONS, INC., PIO
BARRETTO REALTY DEVELOPMENT, INC., and ANTHONY QUE
G.R. No. 126812 1998 Nov 24

FACTS:
When the term of existence of BARRETTO & SONS expired, all its assets and
liabilities including the property located in Quiapo were transferred to respondent Pio Barretto
Realty Development, Inc. Petitioner's offer to buy the property resulted in its agreement with
respondent BARRETTO REALTY that petitioner would pay P24.5 million representing the
outstanding obligations of BARRETTO REALTY with UCPB on 30 June 1988, the deadline set
by the bank for payment; and P20 million which was the balance of the purchase price of the
property to be paid in installments within a 3-year period with interest at 18% per annum.
However, petitioner did not pay UCPB the P24.5 million loan obligation of BARRETTO
REALTY on the deadline set for payment. It asked for an extension of one month or up to 31
July 1988 to settle the obligation, which the bank granted. Moreover, petitioner again requested
another extension of sixty days to pay the loan, but the bank demurred. In the meantime
BARRETTO REALTY was able to cause the reconsolidation of the forty-three titles covering
the property subject of the purchase into two titles covering Lots 1 and 2. The reconsolidation of
the titles was made pursuant to the request of petitioner in its letter to private respondents on 25
May 1988. Respondent BARRETTO REALTY allegedly incurred expenses for the
reconsolidation amounting to P250,000.00.

ISSUE:
Whether or not the petitioner's extrajudicial rescission of its agreement with private
respondents was valid.

RULING:
Under Art. 1482 of the Civil Code, whenever earnest money is given in a contract of
sale, it shall be considered as part of the purchase price and as proof of the perfection of the
contract. Petitioner clearly stated without any objection from private respondents that the earnest
money was intended to form part of the purchase price. It was an advance payment which must
be deducted from the total price. Hence, the parties could not have intended that the earnest
money or advance payment would be forfeited when the buyer should fail to pay the balance of
the price, especially in the absence of a clear and express agreement thereon. By reason of its
failure to make payment petitioner, through its agent, informed private respondents that it would
no longer push through with the sale. In other words, petitioner resorted to extrajudicial
rescission of its agreement with private respondents.
It was held in the case of University of the Philippines v. de los Angeles that the right to
rescind contracts is not absolute and is subject to scrutiny and review by the proper court. It was
held further that rescission of reciprocal contracts may be extrajudicially rescinded unless
successfully impugned in court. If the party does not oppose the declaration of rescission of the
other party, specifying the grounds therefor, and it fails to reply or protest against it, its silence
thereon suggests an admission of the veracity and validity of the rescinding party's claim. A
such, private respondents did not interpose any objection to the rescission by petitioner of the
agreement. As found by the Court of Appeals, private respondent BARRETTO REALTY even
sold Lot 2 of the subject consolidated lots to another buyer, ASIAWORLD, one day after its
President Anthony Que received the broker's letter rescinding the sale. Subsequently, on 13
October 1988 respondent BARRETTO REALTY also conveyed ownership over Lot 1 to UCPB
which, in turn, sold the same to ASIAWORLD.
Article 1385 of the Civil Code provides that rescission creates the obligation to return the
things which were the object of the contract together with their fruits and interest. Therefore, by
virtue of the extrajudicial rescission of the contract to sell by petitioner without opposition from
private respondents who, in turn, sold the property to other persons, private respondent
BARRETTO REALTY, as the vendor, had the obligation to return the earnest money of
P1,000,000.00 plus legal interest from the date it received notice of rescission from petitioner,
i.e., 30 August 1988, up to the date of the return or payment.

Page 125 of 745


LORETA SERRANO vs. COURT OF APPEALS and LONG LIFE PAWNSHOP, INC.
G.R. No. 45125 1991 Apr 22

FACTS:

Sometime in early March 1968, petitioner Loreta Serrano bought some pieces of jewelry
for P48,500.00 from Niceta Ribaya. However, when petitioner was in need of money, she
instructed her private secretary, Josefina Rocco, to pawn the jewelry. Josefina then went to
private respondent Long Life Pawnshop, Inc. ("Long Life"), pledged the jewelry for P22,000.00
with its principal owner and General Manager, Yu An Kiong, and then absconded with said
amount and the pawn ticket. The pawnshop ticket issued to Josefina Rocco stipulated that it was
redeemable "on presentation by the bearer." Three months later, Gloria Duque and Amalia
Celeste informed Niceta Ribaya that a pawnshop ticket issued by private respondent was being
offered for sale. They told Niceta the ticket probably covered jewelry once owned by the latter
which jewelry had been pawned by one Josefina Rocco. Suspecting that it was the same jewelry
she had sold to petitioner, Niceta informed the latter of this offer and suggested that petitioner go
to the Long Life pawnshop to check the matter out. Petitioner claims she went to private
respondent pawnshop, verified that indeed her missing jewelry was pledged there and told Yu
An Kiong not to permit anyone to redeem the jewelry because she was the lawful owner thereof.
Petitioner claims that Yu An Kiong agreed.

ISSUE:
Whether or not the Court of Appeals committed reversible error in rendering its Decision.

RULING:
Having been notified by petitioner and the police that jewelry pawned to it was either
stolen or involved in an embezzlement of the proceeds of the pledge, private respondent
pawnbroker became duty bound to hold the things pledged and to give notice to petitioner and
the police of any effort to redeem them. Such a duty was imposed by Article 21 of the Civil
Code. The circumstance that the pawn ticket stated that the pawn was redeemable by the bearer,
did not dissolve that duty. The pawn ticket was not a negotiable instrument under the Negotiable
Instruments Law nor a negotiable document of title under Articles 1507 et seq. of the Civil Code.
If the third person Tomasa de Leon, who redeemed the things pledged a day after petitioner and
the police had notified Long Life, claimed to be owner thereof, the prudent recourse of the
pawnbroker was to file an interpleader suit, impleading both petitioner and Tomasa de Leon. The
respondent pawnbroker was, of course, entitled to demand payment of the loan extended on the
security of the pledge before surrendering the jewelry, upon the assumption that it had given the
loan in good faith and was not a "fence" for stolen articles and had not conspired with the
faithless Josefina Rocco or with Tomasa de Leon.

Respondent pawnbroker acted in reckless disregard of that duty in the instant case and
must bear the consequences, without prejudice to its right to recover damages from Josefina
Rocco. Hence, the trial court correctly held that private respondent was liable to petitioner for
actual damages which corresponded to the difference in the value of the jewelry and the amount
of the loan, or the sum of P26,500.00. Petitioner is entitled to collect the balance of the value of
the jewelry, corresponding to the amount of the loan, in an appropriate action against Josefina
Rocco. Private respondent Long Life in turn is entitled to seek reimbursement from Josefina
Rocco of the amount of the damages it must pay to petitioner.

Page 126 of 745


PERLA PALMA GIL v. HON. COURT OF APPEALS
G.R. No. 127206 September 12, 2003

FACTS:
Concepcion Palma Gil, and her sister, Nieves Palma Gil, married to Angel Villarica, were
the co-owners of a parcel of commercial land with an area of 829 square meters, identified as Lot
No. 59-C, covered by Transfer Certificate of Title (TCT) No. 432 located in Davao City. The
spouses Angel and Nieves Villarica had constructed a two-storey commercial building on the
property. On October 13, 1953, Concepcion filed a complaint against her sister Nieves for
specific performance, to compel the defendant to cede and deliver to her an undivided portion of
the said property with an area of 256.2 square meters. After due proceedings, the court rendered
judgment on April 7, 1954 in favor of Concepcion, ordering the defendant to deliver to the
plaintiff an undivided portion of the said property with an area of 256.2 square meters.
Nieves appealed to the Court of Appeals which affirmed the assailed decision. In due
course, the decision became final and executory. On motion of the plaintiff (Concepcion), the
court issued a writ of execution. Nieves, however, refused to execute the requisite deed in favor
of her sister. In the interim, the spouses Angel and Nieves Villarica executed a real estate
mortgage over Lot 59-C-4 in favor of Prudential Bank as security for a loan. On August 4, 1959,
Concepcion died intestate and was survived by Nieves Villarica and her nephews and nieces.
Iluminada filed a motion for her substitution as party-plaintiff in lieu of the deceased
Concepcion. On August 2, 1961, the court issued an order granting the motion.

ISSUE:
Whether or not the rescission made was valid and binding upon the parties.

RULING:
Under the last paragraph of Article 1169 of the New Civil Code, in reciprocal obligations,
neither party incurs in delay if the other does not comply or is not ready to comply in a proper
manner with what is incumbent upon him. From the moment one of the parties fulfills his
obligation, delay in the other begins. Thus, reciprocal obligations are to be performed
simultaneously so that the performance of one is conditioned upon the simultaneous fulfillment
of the other. The right of rescission of a party to an obligation under Article 1191 of the New
Civil Code is predicated on a breach of faith by the other party that violates the reciprocity
between them. The deed of absolute sale executed by Concepcion Gil in favor of Iluminada
Pacetes is an executory contract and not an executed contract is a settled matter. In a perfected
contract of sale of realty, the right to rescind the said contract depends upon the fulfillment or
non-fulfillment of the prescribed condition. The court ruled that the condition pertains in reality
to the compliance by one party of an undertaking the fulfillment of which would give rise to the
demandability of the reciprocal obligation pertaining to the other party. The reciprocal obligation
envisaged would normally be, in the case of the vendee, the payment by the vendee of the agreed
purchase price and in the case of the vendor, the fulfillment of certain express warranties.
The vendee paid the downpayment of P7,500.00. By the terms of the contract, the
obligation of the vendee to pay the balance of the purchase price ensued only upon the issuance
of the certificate of title by the Register of Deeds over the property sold to and under the name of
the vendee, and the delivery thereof by the vendor Concepcion Gil to the latter. Concepcion
failed to secure a certificate of title over the property. When she died intestate on August 4, 1959,
her obligation to deliver the said title to the vendee devolved upon her heirs, including the
petitioners. The said heirs, including the petitioners failed to do so, despite the lapse of eighteen
years since Concepcions death.The petitioners, as successors-in-interest of the vendor, are not
the injured parties entitled to a rescission of the deed of absolute sale. It was Concepcions heirs,
including the petitioners, who were obliged to deliver to the vendee a certificate of title over the
property under the latters name, free from all liens and encumbrances within 120 days from the
execution of the deed of absolute sale on October 24, 1956, but had failed to comply with the
obligation.The consignation by the vendee of the purchase price of the property is sufficient to
defeat the right of the petitioners to demand for a rescission of the said deed of absolute sale.

Page 127 of 745


DAVID REYES vs. JOSE LIM, CHUY CHENG KENG and HARRISON LUMBER, INC.
408 SCRA 560

FACTS:

On 7 November 1994, Reyes as seller and Lim as buyer entered into a contract to sell a
parcel of land located along F.B. Harrison Street, Pasay City. Harrison Lumber occupied the
Property as lessee with a monthly rental of P35,000. The total consideration for the purchase of
the aforedescribed parcel of land together with the perimeter walls found therein P28,000,000.00
pesos.
The complaint claimed that Reyes had informed Harrison Lumber to vacate the Property
before the end of January 1995. Reyes also informed Keng and Harrison Lumber that if they
failed to vacate by 8 March 1995, he would hold them liable for the penalty of P400,000 a month
as provided in the Contract to Sell. The complaint further alleged that Lim connived with
Harrison Lumber not to vacate the Property until the P400,000 monthly penalty would have
accumulated and equaled the unpaid purchase price of P18,000,000.
On the other hand, Keng and Harrison Lumber denies that they connived with Lim to defraud
Reyes. Keng and Harrison Lumber alleged that Reyes approved their request for an extension of
time to vacate the Property due to their difficulty in finding a new location for their business.
Harrison Lumber claimed that as of March 1995, it had already started transferring some of its
merchandise to its new business location in Malabon.
Lim alleged that he was ready and willing to pay the balance of the purchase price on or before 8
March 1995, but Reyes kept postponing their meeting. On 9 March 1995, Reyes offered to return
the P10 million down payment to Lim because Reyes was having problems in removing the
lessee from the Property. Lim rejected Reyes offer and proceeded to verify the status of Reyes
title to the Property. Lim learned that Reyes had already sold the Property to Line One Foods
Corporation on 1 March 1995 for P16,782,840.

ISSUE:
Whether or not Reyes has the right to obje t to the deposit of the 10 million pesos
downpayment in court.

RULING:

There is also no plausible or justifiable reason for Reyes to object to the deposit of the
P10 million down payment in court. The Contract to Sell can no longer be enforced because
Reyes himself subsequently sold the Property to Line One. Both Reyes and Lim are seeking
rescission of the Contract to Sell. Under Article 1385 of the Civil Code, rescission creates the
obligation to return the things that are the object of the contract. Rescission is possible only when
the person demanding rescission can return whatever he may be obliged to restore. A court of
equity will not rescind a contract unless there is restitution, that is, the parties are restored to the
status quo ante.
Thus, since Reyes is demanding to rescind the Contract to Sell, he cannot refuse to deposit the
P10 million down payment in court. Such deposit will ensure restitution of the P10 million to its
rightful owner. Lim, on the other hand, has nothing to refund, as he has not received anything
under the Contract to Sell.

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

Page 128 of 745


ONG YONG et al., vs. DAVID S. TIU et al.
G.R. No. 144476 2002 Feb 1

FACTS:

Masagana Citimall was owned and managed by the First Landlink Asia Development
Corporation (FLADC). FLADC was fully owned by the Tiu Group. In order to recover from
floundering finances, the Tiu group entered into a Pre-Subscription Agreement with the Ong
group wherein both parties agreed to maintain equal shareholdings in FLADC the Ongs investing
cash, while the Tius contributing property. The Ongs gave P100M as payment of their 1 Million
subscription shares at a par value of 1 peso per share. Intraland Resources and Development
Corporation executed a requisite Deed of Assignment over a building it owned in favor of
FLADC and was duly credited with 200,000 shares in FLADC. Masagana Telamart transferred
titles of 2 properties in favor of FLADC. The Ongs had to pay P70M more, aside from their
P100M subscription payment in order to settle the P190M loan of FLADC from PNB. The Tius
also had to advance P20M, which amount was loaned to them by the Ongs. The Tius rescinded
the Pre-Subscription Agreement when the Ongs refused to credit the FLADC shares in the name
of Masagana Telamart commensurate to its 1, 902.30 square meter contribution and to credit the
number of FLADC shares in favor of the Tius commensurate to its 151 square meter property
contribution; and when David Tius and Cely Tiu were proscribed from assuming and performing
their duties as V-P and Treasurer, respectively. SEC confirmed the unilateral rescission of the
agreement.

ISSUE:

Whether the rescission applies only to reciprocal obligations and the Pre-Subscription
agreement does not provide for reciprocity.

RULING:

The Ongs illustrate reciprocity in the following manner: In a contract of sale, the
correlative duty of the obligation of the seller to deliver the property is the obligation of the
buyer to pay the agreed price. In the case, the correlative obligation of the Tius to let the Ongs
have and exercise the functions of the positions of President and Secretary is the obligation of the
Ongs to let the Tius have and exercise the functions of Vice-President and Treasurer. Petitioners
keep on harping for the Pre-Subscription Agreements specific performance yet they also
actually failed to give a legal basis therefor. They deny that the Tiu Group has a right to ask for
rescission of their agreement per Article 1191 of the Civil Code when they themselves invoke
the same law as basis for asking the specific performance of the same agreement.

The Courts of Appeals then correctly confirmed the rescission of the Pre-Subscription
Agreement on the basis of Art. 1191 of the Civil Code. It could have relied on the said
provision and nonetheless stood on valid ground. It, however, judiciously took into account the
special circumstances of the case and further justified its decision confirming the rescission of
the Pre-Subscription Agreement on the basis of its perception that the two groups "can no longer
work harmoniously together" and that "to pit them together in the management of FLADC will
only result to further squabbles and numerous litigation." As a legal consequence of rescission,
the order of the Court of Appeals to return the cash and property contribution of the parties is
based on law, hence, cannot be considered an act of misappropriation. In order for the rescission
of the Pre-Subscription Agreement be implemented, the returning to the two groups whatever
they delivered to the corporation in accordance with the Agreement is needed.

Page 129 of 745


EQUATORIAL REALTY DEVELOPMENT, Inc. vs. MAYFAIR THEATER, Inc.,
G.R. No. 133879 2001 Nov 21

FACTS:

Carmelo & Bauermann, Inc. (Carmelo) used to own a parcel of land, together with two 2-
storey buildings constructed thereon, located at Claro M. Recto Avenue, Manila, and covered by
TCT No. 18529 issued in its name by the Register of Deeds of Manila. On June 1, 1967,
Carmelo entered into a Contract of Lease with Mayfair Theater Inc. (Mayfair) for a period of 20
years. Two years later, on March 31, 1969, Mayfair entered into a second Contract of Lease
with Carmelo for the lease of another portion of the latters property -- namely, a part of the
second floor of the two-storey building, and two store spaces on the ground floor and the
mezzanine. In that space, Mayfair put up another movie house known as Miramar Theater. The
Contract of Lease was likewise for a period of 20 years. Both leases contained a provision
granting Mayfair a right of first refusal to purchase the subject properties. However, on July 30,
1978 - within the 20-year-lease term -- the subject properties were sold by Carmelo to Equatorial
Realty Development, Inc. (Equatorial) for the total sum of P11,300,000, without their first
being offered to Mayfair.

As a result of the sale of the subject properties to Equatorial, Mayfair filed a Complaint
before the Regional Trial Court of Manila for the annulment of the Deed of Absolute Sale
between Carmelo and Equatorial, specific performance, and damages. After trial on the merits,
the lower court rendered a Decision in favor of Carmelo and Equatorial. On appeal CA
completely reversed and set aside the judgment of the lower court. The decision of the Court
became final and executory on March 17, 1997. On April 25, 1997, Mayfair filed a Motion for
Execution, which the trial court granted. However, Carmelo could no longer be located. Thus,
following the order of execution of the trial court, Mayfair deposited with the clerk of court a
quo its payment to Carmelo in the sum of P11,300,000 less P847,000 as withholding tax. The
lower court issued a Deed of Reconveyance in favor of Carmelo and a Deed of Sale in favor of
Mayfair. On the basis of these documents, the Registry of Deeds of Manila cancelled
Equatorials titles and issued new Certificates of Title in the name of Mayfair.

ISSUES:

1. Whether or not the contract of sale is validly rescinded though there was no actual
delivery made.
2. Whether or not the rentals paid concede actual delivery.

RULING:

A contract of sale is valid until rescinded, and ownership of the thing sold is not acquired
by mere agreement, but by tradition or delivery. In the case, it shows that delivery was not
actually effected; in fact, it was prevented by a legally effective impediment. Not having been
the owner, petitioner cannot be entitled to the civil fruits of ownership like rentals of the thing
sold. Furthermore, petitioners bad faith, as again demonstrated by the specific factual milieu of
said Decision, bars the grant of such benefits.

In this case, it is clear that petitioner never took actual control and possession of the
property sold, in view of respondents timely objection to the sale and the continued actual
possession of the property. The objection took the form of a court action impugning the sale
which, as we know, was rescinded by a judgment rendered by this Court in the mother case. It
has been held that the execution of a contract of sale as a form of constructive delivery is a legal
fiction. It holds true only when there is no impediment that may prevent the passing of the
property from the hands of the vendor into those of the vendee. When there is such impediment,
fiction yields to reality - the delivery has not been effected. Hence, respondents opposition to
the transfer of the property by way of sale to Equatorial was a legally sufficient impediment that
effectively prevented the passing of the property into the latters hands.

Page 130 of 745


Spouses MARIANO Z. VELARDE and AVELINA D. VELARDE vs. COURT OF
APPEALS, DAVID A. RAYMUNDO and GEORGE RAYMUNDO
G.R. No. 108346 2001 Jul 11

FACTS:

David Raymundo is the absolute and registered owner of a parcel of land, together with
the house and other improvements thereon. Private Respondent George Raymundo is Davids
father who negotiated with plaintiffs Avelina and Mariano Velarde, the petitioners, for the sale of
said property, which was, however, under lease. On August 8, 1986, a Deed of Sale with
Assumption of Mortgage was executed by defendant David Raymundo, as vendor, in favor of
plaintiff Avelina Velarde, as vendee. It is further agreed and understood by the parties that the
capital gains tax and documentary stamps on the sale shall be for the account of the vendor;
whereas, the registration fees and transfer tax thereon shall be for the account of the vendee. On
the same date, and as part of the above-document, plaintiff Avelina Velarde, with the consent of
her husband, Mariano, executed an Undertaking.
It appears that the negotiated terms for the payment of the balance of P1.8 million was
from the proceeds of a loan that plaintiffs were to secure from a bank with defendants help.
Defendants had a standing approved credit line with the Bank of the Philippine Islands (BPI).
The parties agreed to avail of this, subject to BPIs approval of an application for assumption of
mortgage by plaintiffs. Pending BPIs approval of the application, plaintiffs were to continue
paying the monthly interests of the loan secured by a real estate mortgage. Pursuant to said
agreements, plaintiffs paid BPI the monthly interest on the loan secured by the aforementioned
mortgage for three (3) months, however, plaintiffs were advised that the Application for
Assumption of Mortgage with BPI was not approved, which prompted plaintiffs not to make any
further payment. On January 5, 1987, defendants, thru counsel, wrote plaintiffs informing the
latter that their non-payment to the mortgage bank constituted non-performance of their
obligation. Thereafter, defendants sent plaintiffs a notarial notice of cancellation/rescission of the
intended sale of the subject property allegedly due to the latters failure to comply with the terms
and conditions of the Deed of Sale with Assumption of Mortgage and the Undertaking.

ISSUE:
Whether or not the Court of Appeals erred in holding that the rescission (resolution) of
the contract by private respondents was justified.

RULING:
A substantial breach of a reciprocal obligation entitles the injured party to rescind the
obligation. Rescission abrogates the contract from its inception and requires a mutual restitution
of benefits received. The breach committed by petitioners was not so much their nonpayment
of the mortgage obligations, as their nonperformance of their reciprocal obligation to pay the
purchase price under the contract of sale. Private respondents right to rescind the contract finds
basis in Article 1191 of the Civil Code.
The right of rescission of a party to an obligation under Article 1191 of the Civil Code is
predicated on a breach of faith by the other party who violates the reciprocity between them. The
breach contemplated in the said provision is the obligors failure to comply with an existing
obligation. When the obligor cannot comply with what is incumbent upon it, the obligee may
seek rescission and, in the absence of any just cause for the court to determine the period of
compliance, the court shall decree the rescission. The private respondents therefore validly
exercised their right to rescind the contract, because of the failure of petitioners to comply with
their obligation to pay the balance of the purchase price.
The breach committed by petitioners was the nonperformance of a reciprocal obligation,
not a violation of the terms and conditions of the mortgage contract. Therefore, the automatic
rescission and forfeiture of payment clauses stipulated in the contract does not apply. Instead,
Civil Code provisions shall govern and regulate the resolution of this controversy. Considering
that the rescission of the contract is based on Article 1191 of the Civil Code, mutual restitution is
required to bring back the parties to their original situation prior to the inception of the contract.

Page 131 of 745


ALEXANDER G. ASUNCION vs. EDUARDO B. EVANGELISTA and COURT OF
APPEALS
G.R. No. 133491 1999 Oct 13

FACTS:

On September 9, 1980, private respondent borrowed P500,000 from Paluwagan ng Bayan


Savings and Loan Association to use as working capital for Embassy Farms. He executed a real
estate mortgage on three of his properties as security for the loan. On November 4, 1981, private
respondent mortgaged 10 titles more in favor of PAIC Savings and Mortgage Bank. Private
respondent obtained another loan in the amount of P844,625.78 from Mercator Finance
Corporation. The loan was secured by a real estate mortgage on five 5 other landholdings of
private respondent. Private respondents aggregate debt exposure totaled P3,056,625.78.
However, he defaulted in his loan payments. By June 1984, his aggregate debt had ballooned to
almost six million pesos.On August 2, 1984, petitioner and private respondent executed a
Memorandum of Agreement. Upon the execution of the Memorandum, petitioner paid private
respondent one million pesos, P500,000.00 within a ninety-day period in four disbursements.
The second installment, in the like amount of three hundred thousand pesos, was supposed to be
remitted by petitioner to private respondent for the purpose of financing the operations of the
piggery pursuant to the Memorandum. Instead, petitioner agreed to pay to PAIC Savings &
Mortgage Bank.
However, more than a year after the signing of the Memorandum of Agreement, the
landholdings of private respondent which were mortgaged to Paluwagan ng Bayan Savings and
Loan Association, PAIC Savings and Mortgage Bank and Mercator Finance Corporation still
remained titled in his name. Neither did he inform said mortgagees of the transfer of his lands.
As to the shares of stock, it was incumbent upon private respondent to endorse and deliver them
to petitioner so he could also have them transferred in his name, but private respondent never
did. He refused to honor his obligations under the Memorandum of Agreement and even
countered with a demand letter of his own.

ISSUES:
Whether the non-compliance of one party in a reciprocal obligation amounts to
rescission of the obligation.

RULING:

Petitioner and private respondent entered into what the law regards as reciprocal
obligations. Reciprocity arises from identity of cause, and necessarily the two obligations are
created at the same time. Reciprocal obligations, therefore, are those which arise from the same
cause, and in which each party is a debtor and a creditor of the other, such that the obligation of
one is dependent upon the obligation of the other. They are to be performed simultaneously, so
that the performance of one is conditioned upon the simultaneous fulfillment of the other.

Article 1191 of the Civil Code governs the situation where there is non-compliance by
one party in case of reciprocal obligations. The effect of rescission is also provided in the Civil
Code in Article 1385:

Private respondent admitted in open court that petitioner paid him the initial sum of one
million pesos upon the signing of the Memorandum of Agreement as well as various sums of
money as fees for the restructuring of his loans. Thereupon, private respondent was obligated to
execute a deed of sale with assumption of mortgage, both in compliance with the Memorandum
of Agreement and to ensure the legal efficacy of petitioner's promise to assume his loan
obligations. However, private respondent failed to perform his substantial obligations under the
Memorandum of Agreement. Hence, petitioner sought the rescission of the Memorandum of
Agreement and ceased infusing capital into the piggery business of private respondent.

Page 132 of 745


William Uy vs. Court of Appeals
G.R. No. 120465, September 9, 1999
314 SCRA 69

FACTS:

Petitioners William Uy and Rodel Roxas are agents authorized to sell eight parcels of
land by owners thereof. By virtue of such authority, they entered the contract of sale to
respondent National Housing Authority to be utilized in developing as a housing project.
However, due to the report of the DENR the three (3) parcels are located at an active landslide
area and not suitable for housing project, NHA issued a resolution canceling the sale of the three
(3) parcels of land but it offered the amount of P1.225 million to the land owners as danos
perjuicious.

Petitioners filed before the RTC a complaint for damages against NHA. The RTC
rendered a decision declaring the cancellation of contract to be justified. Nevertheless, it
awarded damages to plaintiff. Upon appeal by the petitioners, the Court of Appeals dismissed
the complaint and cancelled the award for damages.

ISSUE:
Whether or not the cancellation of the sale has sufficient justifiable basis.

HELD:

The cancellation of the sale was based on the negation of the cause arising from the
realization that the land, which were the object of the sale, were not suitable for housing cause is
the essential reason which moves the contracting parties to enter into a contract. The National
Housing Authority would not have entered into the contract were the lands not suitable for
housing. In other words, the quality of the land was an implied condition for the NHA to enter
into the contract. NHA was justified in canceling the contract.

Page 133 of 745


CONSTANCIA G. TAMAYO v. ROSALIA ABAD SEORA
G.R. No. 176946 November 15, 2010

FACTS:

On September 28, 1995, at about 11:00 a.m., Antonieto M. Seora (Seora), was riding a
motorcycle, when a tricycle allegedly bumped his motorcycle from behind. As a result, the
motorcycle was pushed into the path of an Isuzu Elf Van (delivery van). The delivery van ran
over Seora, while his motorcycle was thrown a few meters away. He was recovered underneath
the delivery van and rushed to the Medical Center of Paraaque, where he was pronounced dead
on arrival.The tricycle was driven by Leovino F. Amparo (Amparo), who testified that it was the
delivery van that bumped Seoras motorcycle.

The delivery van, on the other hand, was driven by Elmer O. Polloso (Polloso) and
registered in the name of Cirilo Tamayo (Cirilo). While trial was ongoing, Cirilo was suffering
from lung cancer and was bedridden. His wife, petitioner Constancia, testified on his behalf.
Constancia narrated that she and her husband were managing a single proprietorship known as
Tamayo and Sons Ice Dealer. She testified that it was Cirilo who hired their drivers. She claimed
that, as employer, her husband exercised the due diligence of a good father of a family in the
selection, hiring, and supervision of his employees, including driver Polloso. Cirilo would tell
their drivers not to drive fast and not to be too strict with customers.

ISSUE:
Whether or not damages for loss of earning capacity should be awarded.

RULING:
The award of damages for loss of earning capacity is concerned with the determination of
losses or damages sustained by respondents, as dependents and intestate heirs of the deceased.
This consists not of the full amount of his earnings, but of the support which they received or
would have received from him had he not died as a consequence of the negligent act. Thus, the
amount recoverable is not the loss of the victims entire earnings, but rather the loss of that
portion of the earnings which the beneficiary would have received.

Indemnity for loss of earning capacity is determined by computing the net earning capacity of
the victim.

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

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

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

On the other hand, gross annual income requires the presentation of documentary evidence for
the purpose of proving the victims annual income. The victims heirs presented in evidence
Seoras pay slip from the PNP, showing him to have had a gross monthly salary of P12,754.00.
Meanwhile, the victims net income was correctly pegged at 50% of his gross income in the
absence of proof as regards the victims living expenses.

Page 134 of 745


VICTORY LINER, INC. vs. HEIRS OF ANDRES MALECDAN
G.R. No. 154278 2002 Dec 27

FACTS:

Andres Malecdan was a 75 year-old farmer residing in Barangay Nungnungan 2,


Municipality of Cauayan, Province of Isabela. On July 15, 1994, at around 7:00 p.m., while
Andres was crossing the National Highway on his way home from the farm, a Dalin Liner bus on
the southbound lane stopped to allow him and his carabao to pass. However, as Andres was
crossing the highway, a bus of petitioner Victory Liner, driven by Ricardo C. Joson, Jr.,
bypassed the Dalin bus. In so doing, respondent hit the old man and the carabao on which he was
riding. As a result, Andres Malecdan was thrown off the carabao, while the beast toppled over.
The Victory Liner bus sped past the old man, while the Dalin bus proceeded to its destination
without helping him. Malecdan sustained a wound on his left shoulder, from which bone
fragments protruded. He was taken by Lorena, the witness, and another person to the Cagayan
District Hospital where he died a few hours after arrival The carabao also died soon afterwards.
Subsequently, a criminal complaint for reckless imprudence resulting in homicide and damage to
property was filed against the Victory Liner bus driver Ricardo Joson, Jr.
On October 5, 1994, private respondents brought suit for damages in the Regional Trial
Court, Branch 5, Baguio City, which, in a decision rendered on July 17, 2000, found the driver
guilty of gross negligence in the operation of his vehicle and Victory Liner, Inc. also guilty of
gross negligence in the selection and supervision of Joson, Jr. Petitioner and its driver were held
liable for damages. On appeal, the decision was affirmed by the Court of Appeals, with the
modification that the award of attorneys fees was fixed at P50,000.00.

ISSUE:
Whether or not the award of damages is valid.

RULING:
To justify an award of actual damages, there should be proof of the actual amount of loss
incurred in connection with the death, wake or burial of the victim. The court cannot take into
account receipts showing expenses incurred some time after the burial of the victim, such as
expenses relating to the 9th day, 40th day and 1st year death anniversaries. In this case, the trial
court awarded P88,339.00 as actual damages. While these were duly supported by receipts, these
included the amount of P5,900.00, the cost of one pig which had been butchered for the 9th day
death anniversary of the deceased. This item cannot be allowed. The court therefore, reduce the
amount of actual damages to P82,439.00.00. The award of P200,000.00 for moral damages
should likewise be reduced. The trial court found that the wife and children of the deceased
underwent "intense moral suffering" as a result of the latters death. Under Art. 2206 of the Civil
Code, the spouse, legitimate children and illegitimate descendants and ascendants of the
deceased may demand moral damages for mental anguish by reason of the death of the deceased.
Under the circumstances of this case an award of P100,000.00 would be in keeping with the
purpose of the law in allowing moral damages. On the other hand, the award of P50,000.00 for
indemnity is in accordance with current rulings of the Court.
Art. 2231 provides that exemplary damages may be recovered in cases involving quasi-
delicts if the defendant acted with gross negligence. Exemplary damages are imposed not to
enrich one party or impoverish another but to serve as a deterrent against or as a negative
incentive to curb socially deleterious actions. In this case, petitioners driver Joson, Jr. was
grossly negligent in driving at such a high speed along the national highway and overtaking
another vehicle which had stopped to allow a pedestrian to cross. Worse, after the accident,
Joson, Jr. did not stop the bus to help the victim. Under the circumstances, the court believe that
the trial courts award of P50,000.00 as exemplary damages is proper.
Finally, private respondents are entitled to attorneys fees. Under Art. 2008 of the Civil
Code, attorneys fees may be recovered when, as in the instant case, exemplary damages are
awarded.

Page 135 of 745


GSIS vs. Labung-Deang
G.R. No. 135644, September 17, 2001
365 SCRA 431

FACTS:

December 1969, the spouses Deang obtained housing loan from the GSIS. The loan was
secured by a real estate mortgage constituted over the spouses property covered by TCT No.
14926-R. The spouses Deang settled their debt before the maturity date and requested for the
release of the owners duplicate copy of the title since they intended to secure a loan from a
private lender and use the land covered by it as a security but the same could not be found. In
1979 the spouses Deang filed with the CFI of Angeles City a complaint against GSIS for
damages. GSIS contended that it being a Government Owned and Controlled Corporation
(GOCC), primarily performing governmental functions, it could not be held liable. The CFI
found in favor of the petitioner, which was affirmed by the Court of Appeals on appeal by the
petitioner herein.

ISSUE:

Whether the GSIS as a GOCC primarily performing governmental functions, is liable for
a negligent act of its employees acting within the scope of the assigned task.

HELD:

GSIS is liable for damages. There was a preexisting contract between the parties. GSIS
and spouses Deang had a loan agreement secured by a real estate mortgage. The duty to return
the owners duplicate copy of the title arose as soon as the mortgage was settled. In a breach of
contract, moral damages are not awarded if defendant is not shown to have acted fraudulently or
with malice or bad faith. Actual damages to be compensable must be proved by clear evidence.
Temperate damages may be granted. The rationally behind temperate damages is precisely that
from the nature of the case, definite proof of pecuniary loss cannot be offered.

Page 136 of 745


BPI Investment Corporation vs. D. G. Carreon Commercial Corp.
G.R. No. 126524, November 29, 2001
371 SCRA 58

FACTS:

Petitioner BPI Investment Corp. (BPI), formerly known as Ayala Investment and
Development Corp, was engaged in money market operations. Respondent D. G. Commercial
Corp. was a client of petitioner. The individual respondents, spouses Daniel and Aurora Carreon
and Josefa Jaceil also placed with BPI their personal money in money market placements.
On April 21, 1982, petitioner wrote respondents Daniel Carreon, demanding the return of
an alleged overpayment amounting to P410, 937.09. The respondents, however, asserted that
there was no overpayment and asked for time to go over the documents and papers. Upon the
request of petitioners, the spouses Daniel and Aurora Carreon sent to BPI a proposed
memorandum of agreement dated May 7, 1982. The agreement provided that respondent
company, in the spirit of goodwill, agreed to temporarily reimburse BPI the amount of P410,
937.09 while the said controversy (transactions of the placement) would be checked within the
period of five years.
On May 10, 1982, petitioners without responding to the memorandum and proposal of
the respondent company filed with the Court of First Instance of Rizal, a complaint for recovery
of a sum of money against respondent D. G. Carreon with preliminary attachment. On May 14,
1982, the trial court issued an order of attachment and posting a bond in the amount of P200,
000. However, on October 8, 1982, the trial court lifted the writ of attachment. Petitioner moved
for reconsideration but was denied.
On July 30, 1982, respondents D. G. Carreon filed with the trial court an answer to the
complaint with counterclaim. D. G. Carreon asked for compensatory damages, spouses Daniel
and Aurora Carreon and Josefa Jeceil asked for moral damages because of the filing of complaint
and indiscriminate and wrongful attachment of their property. All respondents asked for
exemplary damages.
On May 25, 1993, the trial court dismissed both the complaint the counterclaim.
Both parties appealed. On July, 19, 1996, the Court of Appeals affirmed the dismissal of
the complaint but reversed and set aside the dismissal of the counterclaim thereby awarding
respondents damages amounting to more than five million in sum.

ISSUE:
Whether or not respondents are entitled to damages as awarded by the respondent court.

HELD:
The Court finds petitioners not guilty of gross negligence. Exemplary damages, therefore,
cannot be awarded to respondents. Petitioner BPI did not act in wanton, fraudulent, reckless,
oppressive, or malevolent manner when it asked for preliminary attachment. It was just
exercising a legal option. The sheriff of the issuing court did the execution and the attachment.
Hence, BPI is not to be blamed for the excessive and wrongful attachment.
As to the filing of the appellate court that the filing of the case was aggravated and
eventually caused the death of two of the respondents, the Court agrees with the petitioner that
such correlation is bereft of basis and is far fetched.
The award of moral damages and attorneys fees is also not in keeping with existing
jurisprudence. Moral damages may be awarded in a breach of contract when the defendant acted
in bad faith, or was guilty of gross negligence amounting to bad faith, or in wanton disregard of
his contractual obligation. Finally, with the elimination of award of moral damages, so must the
award of attorneys fees be deleted.
There is no doubt, however, that the damages sustained by respondents were due to
petitioners fault or negligence, short of gross negligence. Temperate or moderate damages may
be recovered when the court finds that some pecuniary loss has been suffered but its amount
cannot, from the nature of the case, be proved with certainty. The Court deems it prudent to
award reasonable temperate damage to respondents under the circumstances.

Page 137 of 745


Khe Hong Cheng vs. Court of Appeals
G.R. No. 144169, March 28, 2001
355 SCRA 701

FACTS:

Petitioner Khe Hong Cheng, alias Felix Khe, is the owner of Butuan Shipping Lines to
which the Philippine Agricultural Trading Corporation used its vessel M/V Prince Eric
Corporation to ship 3,400 bags of Copra at Masbate for delivery to Dipolog. Such shipping of 3,
400 bags was covered by a marine insurance policy issued by American Home Insurance
Company (eventually Philam). However, said vessel sank somewhere between Negros Island
and Northern Mindanao which resulted to the total loss of the shipment. Insurer Philam paid the
amount of P 354, 000.00, which is the value of the copra, to Philippine Agricultural Trading
Corporation. American Home was thereby subrogated unto the rights of the consignee and filed a
case to recover money paid to the latter, based on breach of common carriage.

While the case was pending, Khe Hong Cheng executed deeds of donations of parcels of
land in favor of his children. As a consequence of a favorable judgment for American Home, a
writ of execution to garnish Khe Hong Chengs property was issued but the sheriff failed to
implement the same for Chengs property were already transferred to his children. Consequently,
American home filed a case for the rescission of the deeds of donation executed by petitioner in
favor of children for such were made in fraud of his creditors. Petitioner answered saying that the
action should be dismissed for it already prescribed. Petitioner posited that the registration of the
donation was on December 27, 1989 and such constituted constructive notice. And since the
complaint was filed only in 1997, more than four years after registration, the action is thereby
barred by prescription.

ISSUE:
whether or not accion pauliana/ rescission of the deed of donation is proper.

HELD:

For an accion pauliana to accrue, the following requisites must concur: (1) the plaintiff asking for
rescission has a credit prior to the alienation, although demandable late; (2) that the debtor has
made a subsequent contract conveying a patrimonial benefit to a third person; (3) that the
creditor has no other Legal remedy to satisfy his claim; but would benefit by rescission of the
conveyance to the third person; (4) that the act being impugned is fraudulent; and (5) that the
third person who received the property conveyed, if by onerous title, has been an accomplice in
the fraud. All the above enumerated elements are present in the case at bar.

Finally, an accion pauliana presupposes the following: 1) a judgment; 2) the issuance by the trial
court of a writ of execution for the satisfaction of the judgment; and 3) the failure of the sheriff
to enforce and satisfy the judgment of the court. In the case at bar, American exhausted all the
properties of the debtor in futility. The date of the trial courts decision is immaterial. What is
important is that the credit of the plaintiff antedates that of the fraudulent alienation by the debtor
of his property. After all, the decision of the trial court against the debtor retroacts to the time
when the debtor became indebted to the creditor.

Page 138 of 745


PHILIPPINE REALTY and HOLDING CORP. v. LEY CONST. and DEV. CORP.
G. R. No. 165548, June 13, 2011

FACTS:
Sometime between April 1988 and October 1989, the two corporations entered into four
major construction projects, as evidenced by four duly notarized "construction agreements."
These were the four construction projects the parties entered into involving a Project 1, Project 2,
Project 3 (all of which involve the Alexandra buildings) and a Tektite Building. LCDC
committed itself to the construction of the buildings needed by PRHC, which in turn committed
itself to pay the contract price agreed upon. Both parties agreed to enter into another agreement.
Abcede asked LCDC to advance the amount necessary to complete construction. Its president
acceded, on the absolute condition that it be allowed to escalate the contract price. Abcede
replied that he would take this matter up with the board of directors of PRHC.The board of
directors turned down the request for an escalation agreement. However, On 9 August 1991
Abcede sent a formal letter to LCDC, asking for its conformity, to the effect that should it infuse
P36 million into the project, a contract price escalation for the same amount would be granted in
its favor by PRHC.

ISSUE:
Whether or not there is a fortuitous event in the case at bar.

RULING:

YES.
Under Article 1174 of the Civil Code, to exempt the obligor from liability for a breach of
an obligation due to an "act of God" or force majeure, the following must concur:

(a) the cause of the breach of the obligation must be independent of the will of the
debtor; (b) the event must be either unforseeable or unavoidable; (c) the event must be
such as to render it impossible for the debtor to fulfill his obligation in a normal manner;
and (d) the debtor must be free from any participation in, or aggravation of the injury to
the creditor.63

The shortage in supplies and cement may be characterized as force majeure.64 In the
present case, hardware stores did not have enough cement available in their supplies or stocks at
the time of the construction in the 1990s. Likewise, typhoons, power failures and interruptions of
water supply all clearly fall under force majeure. Since LCDC could not possibly continue
constructing the building under the circumstances prevailing, it cannot be held liable for any
delay that resulted from the causes aforementioned.

Page 139 of 745


MEGAWORLD GLOBUS ASIA, INC. v .MILA S. TANSECO
G.R. No. 181206 October 9, 2009

FACTS:

On July 7, 1995, petitioner Megaworld Globus Asia, Inc. (Megaworld) and respondent Mila S.
Tanseco (Tanseco) entered into a Contract to Buy and Sell1 a 224 square-meter (more or less)
condominium unit at a pre-selling project. The purchase price was P16,802,037.32, to be paid as
follows: (1) 30% less the reservation fee of P100,000, or P4,940,611.19, by postdated check
payable on July 14, 1995; (2) P9,241,120.50 through 30 equal monthly installments of
P308,037.35 from August 14, 1995 to January 14, 1998; and (3) the balance of P2,520,305.63 on
October 31, 1998, the stipulated delivery date of the unit; provided that if the construction is
completed earlier, Tanseco would pay the balance within seven days from receipt of a notice of
turnover. Tanseco paid all installments due up to January, 1998, leaving unpaid the balance of
P2,520,305.63 pending delivery of the unit. Megaworld, however, failed to deliver the unit
within the stipulated period on October 31, 1998 or April 30, 1999, the last day of the six-month
grace period.

A few days shy of three years later, Megaworld, by notice dated April 23, 2002 (notice of
turnover), informed Tanseco that the unit was ready for inspection preparatory to delivery.
Tanseco replied through counsel, by letter of May 6, 2002, that in view of Megaworlds failure
to deliver the unit on time, she was demanding the return of P14,281,731.70 representing the
total installment payment she had made, with interest at 12% per annum from April 30, 1999, the
expiration of the six-month grace period. Tanseco pointed out that none of the excepted causes of
delay existed.

ISSUE:

Whether or not there was a fortuitous event in the case at bar

RULING:

The Contract to Buy and Sell of the parties contains reciprocal obligations, i.e., to complete and
deliver the condominium unit on October 31, 1998 or six months thereafter on the part of
Megaworld, and to pay the balance of the purchase price at or about the time of delivery on the
part of Tanseco. Compliance by Megaworld with its obligation is determinative of compliance
by Tanseco with her obligation to pay the balance of the purchase price. Megaworld having
failed to comply with its obligation under the contract, it is liable therefor.

That Megaworlds sending of a notice of turnover preceded Tansecos demand for refund does
not abate her cause. For demand would have been useless, Megaworld admittedly having failed
in its obligation to deliver the unit on the agreed date.

Article 1174 of the Civil Code provides:

Art. 1174. Except in cases expressly specified by the law, or when it is otherwise declared by
stipulation, or when the nature of the obligation requires the assumption of risk, no person shall
be responsible for those events which could not be foreseen, or which, though foreseen, were
inevitable.

The Court cannot generalize the 1997 Asian financial crisis to be unforeseeable and beyond the
control of a business corporation. A real estate enterprise engaged in the pre-selling of
condominium units is concededly a master in projections on commodities and currency
movements, as well as business risks. The fluctuating movement of the Philippine peso in the
foreign exchange market is an everyday occurrence, hence, not an instance of caso fortuito.
Megaworlds excuse for its delay does not thus lie.

Page 140 of 745


ROBERTO C. SICAM and AGENCIA de R.C. SICAM, INC. versus LULU V. JORGE
and CESAR JORGE
G.R. NO. 159617 August 8, 2007

FACTS:

On different dates from September to October 1987, Lulu V. Jorge pawned several pieces of
jewelry with Agencia de R. C. Sicam located at No. 17 Aguirre Ave., BF Homes Paraaque,
Metro Manila, to secure a loan in the total amount of P59, 500.00. On October 19, 1987, two
armed men entered the pawnshop and took away whatever cash and jewelry were found inside
the pawnshop vault. Petitioner Sicam sent respondent Lulu a letter dated October 19, 1987
informing her of the loss of her jewelry due to the robbery incident in the pawnshop. On
November 2, 1987, respondent Lulu then wrote a letter to petitioner Sicam expressing disbelief
stating that when the robbery happened, all jewelry pawned were deposited with Far East Bank
near the pawnshop since it had been the practice that before they could withdraw, advance notice
must be given to the pawnshop so it could withdraw the jewelry from the bank. Respondent Lulu
then requested petitioner Sicam to prepare the pawned jewelry for withdrawal on November 6,
1987 but petitioner Sicam failed to return the jewelry.

On September 28, 1988, respondent Lulu joined by her husband, Cesar Jorge, filed a
complaint against petitioner Sicam with the Regional Trial Court of Makati seeking
indemnification for the loss of pawned jewelry and payment of actual, moral and exemplary
damages as well as attorney's fees. However, petitioner Sicam contends that he is not the real
party-in-interest as the pawnshop was incorporated on April 20, 1987 and known as Agencia de
R.C. Sicam, Inc; that petitioner corporation had exercised due care and diligence in the
safekeeping of the articles pledged with it and could not be made liable for an event that is
fortuitous. After trial ,the RTC rendered its Decision dismissing respondents complaint as well
as petitioners counterclaim. The RTC held that robbery is a fortuitous event which exempts the
victim from liability for the loss and under Art. 1174 of the Civil Code. It further held that the
corresponding diligence required of a pawnshop is that it should take steps to secure and protect
the pledged items and should take steps to insure itself against the loss of articles which are
entrusted to its custody as it derives earnings from the pawnshop trade which petitioners failed to
do and that robberies and hold-ups are foreseeable risks in that those engaged in the pawnshop
business are expected to foresee.

ISSUE:
Whether petitioners are liable for the loss of the pawned articles in their possession.

RULING:
Fortuitous events by definition are extraordinary events not foreseeable or avoidable. It is
therefore, not enough that the event should not have been foreseen or anticipated, as is
commonly believed but it must be one impossible to foresee or to avoid. The mere difficulty to
foresee the happening is not impossibility to foresee the same. To constitute a fortuitous event,
the following elements must concur: (a) the cause of the unforeseen and unexpected occurrence
or of the failure of the debtor to comply with obligations must be independent of human will; (b)
it must be impossible to foresee the event that constitutes the caso fortuito or, if it can be
foreseen, it must be impossible to avoid; (c) the occurrence must be such as to render it
impossible for the debtor to fulfill obligations in a normal manner; and, (d) the obligor must be
free from any participation in the aggravation of the injury or loss.

Robbery per se, just like carnapping, is not a fortuitous event. It does not foreclose the
possibility of negligence on the part of herein petitioners. The presentation of the police report of
the Paraaque Police Station on the robbery committed based on the report of petitioners'
employees is not sufficient to establish robbery. Such report also does not prove that petitioners
were not at fault. Also, the robbery in this case took place in 1987 when robbery was already
prevalent and petitioners in fact had already foreseen it as they wanted to deposit the pawn with a
nearby bank for safekeeping. Thus, petitioners are negligent in securing their pawnshop.

Page 141 of 745


Florencia Huibonhoa vs. Court of Appeals
G.R. No. 95897, December 14, 1999
320 SCRA 625

FACTS:
On June 8, 1983, Florencia Huibonhoa entered into a memorandum of agreement with the
siblings Lim, Gojocco and Chua, stating that she will lease from them three (3) adjacent
commercial lots in Binondo, Manila. A contract of lease was thereafter executed between the
parties, where such lease over the lots shall last for fifteen (15) years commencing on July 1,
1983 and renewable upon agreement of the parties. Further, it was agreed in the terms and
conditions of the contract, among others that: (1) Huibonhoa was allowed to construct a four-
storey building; (2) that the said building shall be completed within eight (8) months from the
date of the execution of the contract of lease; (3) that Huibonhoa shall pay to each lessor the sum
of P 300, 000; (4) that Huibonhoa shall pay to each lessor P 15, 000.00 as monthly rentals; (6)
that the obligation to start paying the rental shall commence only upon completion of the
building within the eight-month period.
However, Huibonhoa brought an action for reformation of the contract alleging that their
true intention as to when the monthly rental would accrue was not expressed due to mistake or
accident, averring that by reason of such, the lease contract failed to provide that should an
unforeseen event dramatically increase the cost of construction, the monthly rental would be
reduced and the term of the lease would be extended for such duration as may be fair and
equitable to both the lessor and the lessee.

ISSUE:
Whether or not the assassination of former senator Benigno Aquino was a fortuitous event
that can thereby lead the parties to reform the contract.

HELD:
A fortuitous event is that which could not be foreseen, or even if foreseen, was inevitable.
To exempt the obligor from liability for breach of an obligation due to an act of God, the
following must concur: first, the cause of breach must be independent of the will of the obligor.
Second, the event must be unforeseeable or inevitable. Third, the event must be such as to render
it impossible for the debtor to fulfill his obligation in a normal manner. And fourth, the debtor
must be free from any participation in, or aggravation of, the injury to the creditor. Further,
inflation per se, does not account that a fortuitous event transpired. Inflation is the sharp increase
of money or credit or both without a corresponding increase in business transaction. There is
inflation when there is an increase in the volume of money and credit relative to available parties
to the lease contract. Ordinary diligence on the part of the parties demanded that they execute a
written agreement if indeed they wanted to enter into a new one because of the 15-year life span
of the lease affecting real property and the fact that third persons would be affected thereby on
account of the express agreement allowing the lessee to lease the building to third parties.
However, only when an extraordinary inflation supervenes that the law affords the parties a relief
in contractual obligations. Extraordinary inflation exists when there is a decrease or increase in
the purchasing power of the Philippine currency which is unusual or beyond the common
fluctuation in the value of said currency, and such decrease or increase could not have been
reasonably foreseen or was manifestly beyond the contemplation of the parties at the time of the
establishment of the obligation. Further, no decrease in the peso value of such magnitude having
occurred, Huibonhoa has no valid ground to ask the Court to intervene and modify the lease
agreement to suit her purpose. Huibonhoa failed to prove by evidence, both documentary and
testimonial, that there was an extraordinary inflation from July 1983 to February 1984. Although
she repeatedly alleged that the cost of constructing the building doubled from P 6M to P 12 M,
she failed to show by how much, for instance, the price index of goods and services had risen
during that intervening period. An extraordinary inflation cannot be assumed. Hence, for
Huibonhoa to claim exemption from liability by reason of fortuitous event under Article 1174 of
the Civil Code, she must prove that inflation was the sole and proximate cause of the loss or
destruction of the contract or in this case, of the delay in the construction of the building. Having
failed to do so, Huibonhoas contention is untenable.

Page 142 of 745


Ace Agro Development Corporation vs. Court of Appeals
G.R. No. 119729, January 21, 1997
266 SCRA 429

FACTS:

Petitioner Ace-Agro Development Corporation and private respondent Cosmos Bottling


Corporation entered into service contracts, which they renewed every year. On April 25, 1990,
fire broke out in private respondents plant, destroying, among other places, the area where
petitioner did its work. As a result, petitioners work was stopped.
Petitioner expressed surprise at the termination of the contract and requested private respondent.
Petitioner brought this case against private respondent for breach of contract and damages it
complained that the termination of its service contract was illegal and arbitrary and that, as a
result, it stood to lose profits and to be held liable to its employees for back wages, damages
and/or separation pay.

ISSUE:
Whether the contract terminated on account of a force majeure was justified.

HELD:

Obligations may be extinguished by the happening of unforeseen events, under whose


influence the obligation would never have been contracted, because in such cases, the very basis
upon which the existence of the obligation is founded would be wanting.
Both parties admitted that the April 25, 1990 fire was a force majeure or unforeseen event and
that the same even burned practically all the soft drink bottles and wooden shells -- which are the
objects of the agreement. But the story did not end there.
It is true that defendant-appellant still had other bottles that needed cleaning and wooden shells
that needed repairing; therefore, the suspension of the work of the plaintiff-appellee brought
about by the fire is, at best, temporary as found by the trial court. Hence, plaintiff-appellees
letters of reconsideration of the termination of the agreement addressed to defendant-appellant
dated June 13, 1990 and July 17, 1990

Page 143 of 745


Pedro Dioquino vs. Federico Laureano
G.R. No. L-25906, May 28, 1970
33 SCRA 65

FACTS:

Atty. Dioquino met patrol officer Federico Laureano in the MVO office in Masbate to
register his car. Laureano helped Dioquino in the facilitation of the registration of his car.
Thereby, Atty. Dioquino lent Laureano his car on a commodatum basis but the cars windshield
was broken due to a stone thrown by some mischievous boys. No satisfactory arrangements were
made about the damage caused on the windshield. Laureano believed that the stone-throwing
was merely accidental so he refused to file any charges against the stone-thrower or the parents;
and he also believed that he is not liable for any damages because the incident was a force
majeure.

ISSUE:

The issue is whether or not the breaking of the cars windshield due to the stone-throwing
is a force majeure and thereby exculpating defendant from civil liability in favor of Atty.
Dioquino.

HELD:

YES, because Article 1174 of the Civil Code states that Except in cases expressly
specified by the law, or when it is otherwise declared by stipulation, or when the nature of the
obligation requires the assumption of risk, no person shall be responsible for those events which
could not be foreseen, or which, though foreseen, were inevitable. The stone-throwing that
yielded to the breaking of the windshield was clearly unforeseeable and inevitable. Hence,
Laureano cannot be compelled to pay the damages caused on Atty. Dioquinos car windshield.

Page 144 of 745


Bachelor Express, Incorporated vs. Court of Appeals
G.R. No. 85691, July 31, 1990
193 SCRA 216

FACTS:

On August 1, 1980, Bus No. 800 owned by Bachelor Express, Inc. and driven by
Cresencio Rivera was the situs of a stampede which resulted in the death of passengers
Ornominio Beter and Narcisa Rautraut. The evidence shows that the bus came from Davao City
on its way to Cagayan de Oro City passing Butuan City; that while at Tabon-Tabon, Butuan City,
the bus picked up a passenger; that about fifteen (15) minutes later, a passenger at the rear
portion suddenly stabbed a PC soldier which caused commotion and panic among the
passengers; that when the bus stopped, passengers Ornominio Beter and Narcisa Rautraut were
found lying down the road, the former already dead as a result of head injuries and the latter also
suffering from severe injuries which caused her death later. The passenger assailant alighted
from the bus and ran toward the bushes but was killed by the police. Thereafter, the heirs of
Ornominio Beter and Narcisa Rautraut, private respondents herein (Ricardo Beter and Sergia
Beter are the parents of Ornominio while Teofilo Rautraut and Zoetera [should be Zotera]
Rautraut are the parents of Narcisa) filed a complaint for "sum of money" against Bachelor
Express, Inc. its alleged owner Samson Yasay and the driver Rivera.

ISSUE:
Whether or not Bachelor Express, Inc. can be held liable for the death of Beter and
Rautraut.

HELD:

The running amuck of the passenger was the proximate cause of the incident as it triggered
off a commotion and panic among the passengers such that the passengers started running to the
sole exit shoving each other resulting in the falling off the bus by passengers Beter and Rautraut
causing them fatal injuries. The sudden act of the passenger who stabbed another passenger in
the bus is within the context of force majeure.

However, in order that a common carrier may be absolved from liability in case of force
majeure, it is not enough that the accident was caused by force majeure. The common carrier
must still prove that it was not negligent in causing the injuries resulting from such accident.
Considering the factual findings of the Court of Appeals-the bus driver did not immediately stop
the bus at the height of the commotion; the bus was speeding from a full stop; the victims fell
from the bus door when it was opened or gave way while the bus was still running; the conductor
panicked and blew his whistle after people had already fallen off the bus; and the bus was not
properly equipped with doors in accordance with law-it is clear that the petitioners have failed to
overcome the presumption of fault and negligence found in the law governing common carriers.
The petitioners' argument that the petitioners "are not insurers of their passengers" deserves no
merit in view of the failure of the petitioners to prove that the deaths of the two passengers were
exclusively due to force majeure and not to the failure of the petitioners to observe extraordinary
diligence in transporting safely the passengers to their destinations as warranted by law.
The liability, if any, of the petitioners is anchored on culpa contractual or breach of contract of
carriage.

Page 145 of 745


PEDRO VASQUEZ v. THE COURT OF APPEALS
G.R. No. L-42926 1985 Sep 13

FACTS:

MV 'Pioneer Cebu' was owned and operated by the defendant and used in the transportation
of goods and passengers in the interisland shipping. It had a passenger capacity of three hundred
twenty-two including the crew. It undertook the said voyage on a special permit issued by the
Collector of Customs inasmuch as, upon inspection, it was found to be without an emergency
electrical power system. The special permit authorized the vessel to carry only two hundred sixty
passengers due to the said deficiency and for lack of safety devices for 322 passengers. A
headcount was made of the passengers on board, resulting on the tallying of 168 adults and 20
minors, although the passengers manifest only listed 106 passengers. It has been admitted,
however, that the headcount is not reliable. When the vessel left Manila, its officers were already
aware of the typhoon Klaring building up somewhere in Mindanao. Plaintiffs seek the recovery
of damages due to the loss of Alfonso Vasquez, Filipinas Bagaipo and Mario Marlon Vasquez
during said voyage.

ISSUE:
Whether or not the respondent would be exempt from responsibility due to its defense of
fortuitous event.

RULING:

To constitute a caso fortuito that would exempt a person from responsibility, it is


necessary that (1) the event must be independent of the human will; (2) the occurrence must
render it impossible for the debtor to fulfill the obligation in a normal manner; and that (3) the
obligor must be free of participation in, or aggravation of, the injury to the creditor. The event
must have been impossible to foresee, or if it could be foreseen, must have been impossible to
avoid. There must be an entire exclusion of human agency from the cause of injury or loss.

Under the circumstances, while, indeed, the typhoon was an inevitable occurrence, yet,
having been kept posted on the course of the typhoon by weather bulletins at intervals of six
hours, the captain and crew were well aware of the risk they were taking as they hopped from
island to island from Romblon up to Tanguingui. They held frequent conferences, and oblivious
of the utmost diligence required of very cautious persons, they decided to take a calculated risk.
In so doing, they failed to observe that extraordinary diligence required of them explicitly by law
for the safety of the passengers transported by them with due regard for all circumstances and
unnecessarily exposed the vessel and passengers to the tragic mishap. They failed to overcome
that presumption of fault or negligence that arises in cases of death or injuries to passengers.

With regard to the contention that the total loss of the vessel extinguished its liability
pursuant to Article 587 of the Code of Commerce, it was held that the liability of a shipowner is
limited to the value of the vessel or to the insurance thereon. Despite the total loss of the vessel
therefore, its insurance answers for the damages that a shipowner or agent may be held liable for
by reason of the death of its passengers.

Page 146 of 745


ALBERTA YOBIDO vs. COURT OF APPEALS
G.R. No. 113003 1997 Oct 17

FACTS:
On April 26, 1988, spouses Tito and Leny Tumboy and their minor children named Ardee and
Jasmin, boarded at Mangagoy, Surigao del Sur, a Yobido Liner bus bound for Davao City. Along
Picop Road in Km. 17, Sta. Maria, Agusan del Sur, the left front tire of the bus exploded. The
bus fell into a ravine around three (3) feet from the road and struck a tree. The incident resulted
in the death of 28-year-old Tito Tumboy, and physical injuries to other passengers. On
November 21, 1988, a complaint for breach of contract of carriage, damages and attorney's fees
was filed by Leny and her children against Alberta Yobido, the owner of the bus, and Cresencio
Yobido, its driver, before the Regional Trial Court of Davao City. The plaintiffs asserted that
violation of the contract of carriage between them and the defendants was brought about by the
driver's failure to exercise the diligence required of the carrier in transporting passengers safely
to their place of destination. On the other hand, the defendants raised the affirmative defense of
caso fortuito.

ISSUE:

Whether or not petitioners should be exempt from liability because the tire blowout was a
fortuitous event.

RULING:

As a rule, when a passenger boards a common carrier, he takes the risks incidental to the
mode of travel he has taken. After all, a carrier is not an insurer of the safety of its passengers
and is not bound absolutely and at all events to carry them safely and without injury. However,
when a passenger is injured or dies, while traveling, the law presumes that the common carrier is
negligent. Thus, the Civil Code provides under Article 1755 that a common carrier is bound to
carry the passengers safely as far as human care and foresight can provide, using the utmost
diligence of very cautious persons, with a due regard for all the circumstances. Accordingly, in
culpa contractual, once a passenger dies or is injured, the carrier is presumed to have been at
fault or to have acted negligently. This disputable presumption may only be overcome by
evidence that the carrier had observed extraordinary diligence as prescribed by Articles 1733, 10
1755 and 1756 of the Civil Code or that the death or injury of the passenger was due to a
fortuitous event. Consequently, the court need not make an express finding of fault or negligence
on the part of the carrier to hold it responsible for damages sought by the passenger.

The petitioners' contention that they should be exempt from liability because the tire
blowout was no more than a fortuitous event that could not have been foreseen, must fail. Under
the circumstances of this case, the explosion of the new tire may not be considered a fortuitous
event. There are human factors involved in the situation. The fact that the tire was new did not
imply that it was entirely free from manufacturing defects or that it was properly mounted on the
vehicle. Neither may the fact that the tire bought and used in the vehicle is of a brand name noted
for quality, resulting in the conclusion that it could not explode within five days' use. It is settled
that an accident caused either by defects in the automobile or through the negligence of its driver
is not a caso fortuito that would exempt the carrier from liability for damages.

Moral damages are generally not recoverable in culpa contractual except when bad faith
had been proven. However, the same damages may be recovered when breach of contract of
carriage results in the death of a passenger, as in this case. Exemplary damages, awarded by way
of example or correction for the public good when moral damages are awarded, may likewise be
recovered in contractual obligations if the defendant acted in wanton, fraudulent, reckless,
oppressive, or malevolent manner. Because petitioners failed to exercise the extraordinary
diligence required of a common carrier, which resulted in the death of Tito Tumboy, it is deemed
to have acted recklessly. As such, private respondents shall be entitled to exemplary damages.

Page 147 of 745


ROBERTO JUNTILLA vs. CLEMENTE FONTANAR
G.R. No. L-45637 1985 May 31

FACTS:

Plaintiff was a passenger of the public utility jeepney bearing plate No. PUJ-71-7 on the
course of the trip from Danao City to Cebu City. The jeepney was driven by defendant Berfol
Camoro. It was registered under the franchise of defendant Clemente Fontanar but was actually
owned by defendant Fernando Banzon. When the jeepney reached Mandaue City, the right rear
tire exploded causing the vehicle to turn turtle. In the process, the plaintiff who was sitting at the
front seat was thrown out of the vehicle. Upon landing on the ground, the plaintiff momentarily
lost consciousness. When he came to his senses, he found that he had a lacerated wound on his
right palm. Aside from this, he suffered injuries on his left arm, right thigh and on his back.
Because of his shock and injuries, he went back to Danao City but on the way, he discovered that
his `Omega' wrist watch was lost. Upon his arrival in Danao City, he immediately entered the
Danao City Hospital to attend to his injuries, and also requested his father-in-law to proceed
immediately to the place of the accident and look for the watch. In spite of the efforts of his
father-in-law, the wrist watch, which he bought for P852.70 could no longer be found.

ISSUE:

Whether or not the Court of First Instance of Cebu erred when it absolved the carrier from
any liability upon a finding that the tire blow out is a fortuitous event.

RULING:

The Court of First Instance of Cebu erred when it absolved the carrier from any liability
upon a finding that the tire blow out is a fortuitous event for there are specific acts of negligence
on the part of the respondents. The records show that the passenger jeepney turned turtle and
jumped into a ditch immediately after its right rear tire exploded. The evidence shows that the
passenger jeepney was running at a very fast speed before the accident. We agree with the
observation of the petitioner that a public utility jeep running at a regular and safe speed will not
jump into a ditch when its right rear tire blows up. There is also evidence to show that the
passenger jeepney was overloaded at the time of the accident.

The preponderance of authority is in favor of the doctrine that a passenger is entitled to


recover damages from a carrier for an injury resulting from a defect in an appliance purchased
from a manufacturer, whenever it appears that the defect would have been discovered by the
carrier if it had exercised the degree of care which under the circumstances was incumbent upon
it, with regard to inspection and application of the necessary tests. For the purposes of this
doctrine, the manufacturer is considered as being in law the agent or servant of the carrier, as far
as regards the work of constructing the appliance. According to this theory, the good repute of
the manufacturer will not relieve the carrier from liability.

The rationale of the carrier's liability is the fact that the passenger has neither choice nor
control over the carrier in the selection and use of the equipment and appliances in use by the
carrier. Having no privity whatever with the manufacturer or vendor of the defective equipment,
the passenger has no remedy against him, while the carrier usually has. It is but logical,
therefore, that the carrier, while not an insurer of the safety of his passengers, should
nevertheless be held to answer for the flaws of his equipment if such flaws were at all
discoverable.

The source of a common carrier's legal liability is the contract of carriage, and by entering
into the said contract, it binds itself to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of a very cautious person, with a due regard for
all the circumstances. The records show that this obligation was not met by the respondents.

Page 148 of 745


THE PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC. vs. MGG MARINE
SERVICES, INC. and DOROTEO GAERLAN
G.R. No. 135645 2002 Mar 8

FACTS:

On March 1, 1987, San Miguel Corporation insured several beer bottle cases with
petitioner Philippine American General Insurance Company. The cargo were loaded on board the
M/V Peatheray Patrick-G to be transported from Mandaue City to Bislig, Surigao del Sur. After
having been cleared by the Coast Guard Station in Cebu the previous day, the vessel left the port
of Mandaue City for Bislig, Surigao del Sur on March 2, 1987. The following day, March 3,
1987, M/V Peatheray Patrick-G listed and subsequently sunk off Cawit Point, Cortes, Surigao
del Sur. As a consequence thereof, the cargo belonging to San Miguel Corporation was lost.
Subsequently, San Miguel Corporation claimed the amount of its loss from petitioner.

The Board of Marine Inquiry conducted its own investigation of the sinking of the M/V
Peatheray Patrick-G to determine whether or not the captain and crew of the vessel should be
held responsible for the incident. On May 11, 1989, the Board rendered its decision exonerating
the captain and crew of the ill-fated vessel for any administrative liability. It found that the cause
of the sinking of the vessel was the existence of strong winds and enormous waves in Surigao del
Sur, a fortuitous event that could not have been forseen at the time the M/V Peatheray Patrick-G
left the port of Mandaue City. It was further held by the Board that said fortuitous event was the
proximate and only cause of the vessels sinking.

ISSUE:

Whether the cargo was lost due to a fortuitous event and whether respondents exercised
due diligence to prevent the loss of the cargo.

RULING:

Common carriers, from the nature of their business and for reasons of public policy, are
mandated to observe extraordinary diligence in the vigilance over the goods and for the safety of
the passengers transported by them. Owing to this high degree of diligence required of them,
common carriers, as a general rule, are presumed to have been at fault or negligent if the goods
transported by them are lost, destroyed or if the same deteriorated.

However, this presumption of fault or negligence does not arise in the cases enumerated
under Article 1734 of the Civil Code:

Common carriers are responsible for the loss, destruction, or deterioration of the goods,
unless the same is due to any of the following causes only:(1) Flood, storm, earthquake, lightning
or other natural disaster or calamity;(2) Act of the public enemy in war, whether international or
civil;(3) Act or omission of the shipper or owner of the goods;(4) The character of the goods or
defects in the packing or in the containers;(5) Order or act of competent public authority.

The findings of the Board of Marine Inquiry indicate that the attendance of strong winds
and huge waves while the M/V Peatheray Patrick-G was sailing through Cortes, Surigao del
Norte on March 3, 1987 was indeed fortuitous. Thus, the Caprain could not be expected to have
foreseen the unfavorable weather condition that awaited the vessel in Cortes, Surigao del Sur. It
was the presence of the strong winds and enormous waves which caused the vessel to list, keel
over, and consequently lose the cargo contained therein. The appellate court likewise found that
there was no negligence on the part of the crew of the M/V Peatheray Patrick-G. Hence, private
respondents cannot be held liable for the said loss.

Page 149 of 745


MINDEX RESOURCES DEVELOPMENT vs. EPHRAIM MORILLO
G.R. No. 138123 2002 Mar 12

FACTS:

On February 1991, a verbal agreement was entered into between Ephraim Morillo and
Mindex Resources Corporation for the lease of the formers 6 x 6 ten-wheeler cargo truck for use
in MINDEXs mining operations in Binaybay, Bigaan, San Teodoro, Oriental Mindoro, at the
stipulated rental of P300.00 per hour for a minimum of eight hours a day or a total of P2,400.00
daily. MINDEX had been paying the rentals until April 10, 1991. Unknown to Morillo, on
April 11, 1991, the truck was burned by unidentified persons while it was parked unattended at
Sitio Aras, Bigaan, San Teodoro, Oriental Mindoro, due to mechanical trouble. Upon learning of
the burning incident, Morillo offered to sell the truck to MINDEX but the latter refused. Instead,
it replaced the vehicles burned tires and had it towed to a shop for repair and overhauling.

On April 15, 1991, Morillo sent a letter to Mr. Arni Isberg, the Finance Manager of
MINDEX, thru Mr. Ramoncito Gozar, Project Manager, proposing that he is entrusting to
MINDEX the said vehicle in the amount of P275,000.00 which is its cost price, in four monthly
installments. Morillo then promised to relinquish all the necessary documents upon full payment
of said account. On the other hand, MINDEX expressed thier reservations and made counter
offers that it will pay the truck in the amount of P76,000, that the repair and overhaul will be on
their expense, and that they wll return it in a good running condition after repair. Morillo replied
1 that he will relinquish to MINDEX the damaged truck, that he is amenable to receive the rental
in the amount of P76,000.00, and that MINDEX will pay fifty thousand pesos monthly until the
balance of P275,000.00 is fully paid. On August 1991, Morillo pulled out the truck from the
repair shop of MINDEX and had it repaired elsewhere for which he spent the total amount of
P132,750.00.

ISSUE:
Whether or not the Court of Appeals gravely erred in finding that petitioner failed to
overcome the presumption of negligence against it considering that the facts show that the
burning of the truck was a fortuitous event.

RULING:

Both the RTC and the CA found petitioner negligent and thus liable for the loss or
destruction of the leased truck. Both parties may have suffered from the burning of the truck;
however, as found by both lower courts, the negligence of petitioner makes it responsible for the
loss. In order for a fortuitous event to exempt one from liability, it is necessary that one has
committed no negligence or misconduct that may have occasioned the loss. An act of God cannot
be invoked to protect a person who has failed to take steps to forestall the possible adverse
consequences of such a loss. Ones negligence may have concurred with an act of God in
producing damage and injury to another; nonetheless, showing that the immediate or proximate
cause of the damage or injury was a fortuitous event would not exempt one from liability. When
the effect is found to be partly the result of a persons participation -- whether by active
intervention, neglect or failure to act -- the whole occurrence is humanized and removed from the
rules applicable to acts of God.

The records clearly shows that petitioner failed to exercise reasonable care and caution that
an ordinarily prudent person would have used in the same situation. Petitioner fell short of
ordinary diligence in safeguarding the leased truck against the accident.n Petitioner failed to
employ reasonable foresight, diligence and care that would have exempted it from liability
resulting from the burning of the truck. Negligence, as commonly understood, is that conduct
that naturally or reasonably creates undue risk or harm to others. It may be a failure to observe
that degree of care, precaution or vigilance that the circumstances justly demand; or to do any
other act that would be done by a prudent and reasonable person, who is guided by
considerations that ordinarily regulate the conduct of human affairs.

Page 150 of 745


NATIONAL POWER CORPORATION vs. PHILIPP BROTHERS OCEANIC, INC.
G.R. No. 126204 2001 Nov 20

FACTS:

On May 14, 1987, the National Power Corporation (NAPOCOR) issued invitations to bid
for the supply and delivery of 120,000 metric tons of imported coal for its Batangas Coal-Fired
Thermal Power Plant in Calaca, Batangas. The Philipp Brothers Oceanic, Inc. (PHIBRO)
prequalified and was allowed to participate as one of the bidders. After the public bidding was
conducted, PHIBROs bid was accepted. NAPOCORs acceptance was conveyed in a letter
dated July 8, 1987, which was received by PHIBRO on July 15, 1987. On July 10, 1987,
PHIBRO sent word to NAPOCOR that industrial disputes might soon plague Australia, the
shipments point of origin, which could seriously hamper PHIBROs ability to supply the needed
coal. From July 23 to July 31, 1987, PHIBRO again apprised NAPOCOR of the situation in
Australia, particularly informing the latter that the ship owners therein are not willing to load
cargo unless a strike-free clause is incorporated in the charter party or the contract of carriage.
In order to hasten the transfer of coal, PHIBRO proposed to NAPOCOR that they equally share
the burden of a strike-free clause. NAPOCOR refused.

On August 6, 1987, PHIBRO received from NAPOCOR a confirmed and workable letter
of credit. Instead of delivering the coal on or before the thirtieth day after receipt of the Letter of
Credit, as agreed upon by the parties in the July contract, PHIBRO effected its first shipment
only on November 17, 1987. Consequently, in October 1987, NAPOCOR once more advertised
for the delivery of coal to its Calaca thermal plant. PHIBRO participated anew in this
subsequent bidding. On November 24, 1987, NAPOCOR disapproved PHIBROs application
for pre-qualification to bid for not meeting the minimum requirements. Upon further inquiry,
PHIBRO found that the real reason for the disapproval was its purported failure to satisfy
NAPOCORs demand for damages due to the delay in the delivery of the first coal shipment.

ISSUE:

Whether or not the Court of Appeals gravely and seriously erred in concluding and so
holding that PHIBROs delay in the delivery of imported coal was due to NAPOCORs alleged
delay in opening a letter of credit and to force majeure, and not to PHIBROs own deliberate acts
and faults

RULING:

Fortuitous events may be produced by two general causes: (1) by Nature, such as
earthquakes, storms, floods, epidemics, fires, etc., and (2) by the act of man, such as an armed
invasion, attack by bandits, governmental prohibitions, robbery, etc. The term generally applies,
broadly speaking, to natural accidents. In order that acts of man such as a strike, may constitute
fortuitous event, it is necessary that they have the force of an imposition which the debtor could
not have resisted. Hence, by law and by stipulation of the parties, the strikes which took place in
Australia from the first week of July to the third week of September, 1987, exempted Phibro
from the effects of delay of the delivery of the shipment of coal.

In addition, PHIBRO and NAPOCOR explicitly agreed in Section XVII of the Bidding
Terms and Specifications that neither seller (PHIBRO) nor buyer (NAPOCOR) shall be liable
for any delay in or failure of the performance of its obligations, other than the payment of money
due, if any such delay or failure is due to Force Majeure. Specifically, they defined force
majeure as any disabling cause beyond the control of and without fault or negligence of the
party, which causes may include but are not restricted to Acts of God or of the public enemy;
acts of the Government in either its sovereign or contractual capacity; governmental restrictions;
strikes, fires, floods, wars, typhoons, storms, epidemics and quarantine restrictions.

Page 151 of 745


WILLIAM ONG GENATO vs. BENJAMIN BAYHON
G.R. No. 171035 August 24, 2009

FACTS:

Respondent Benjamin Bayhon alleged that on July 3, 1989, he obtained from the
petitioner a loan amounting to PhP 1,000,000.00;3 that to cover the loan, he executed a Deed of
Real Estate Mortgage over the property covered by Transfer Certificate of Title (TCT) No.
38052; that, however, the execution of the Deed of Real Estate Mortgage was conditioned upon
the personal assurance of the petitioner that the said instrument is only a private memorandum of
indebtedness and that it would neither be notarized nor enforced according to its tenor. In his
Answer, petitioner Genato denied the claim of the respondent regarding the death of the latters
wife.8 He alleged that on the date that the real estate mortgage was to be signed, respondent
introduced to him a woman as his wife.9 He alleged that the respondent signed the dacion en
pago and that the execution of the instrument was above-board.

Petitioner further averred that despite demands, respondent refused to execute the requisite
documents to transfer to him the ownership of the lot subject of the dacion en pago. Petitioner
prayed, inter alia, for the court to order the respondent to execute the final deed of sale and
transfer of possession of the said lot.

ISSUE:

Whether or not the dacion en pago is void.

RULING:

Under our law, therefore, the general rule is that a party's contractual rights and obligations
are transmissible to the successors. The rule is a consequence of the progressive
"depersonalization" of patrimonial rights and duties that, as observed by Victorio Polacco, has
characterized the history of these institutions. From the Roman concept of a relation from person
to person, the obligation has evolved into a relation from patrimony to patrimony, with the
persons occupying only a representative position, barring those rare cases where the obligation is
strictly personal, i.e., is contracted intuitu personae, in consideration of its performance by a
specific person and by no other. The transition is marked by the disappearance of the
imprisonment for debt.28 (Emphasis supplied)

The loan in this case was contracted by respondent. He died while the case was pending before
the Court of Appeals. While he may no longer be compelled to pay the loan, the debt subsists
against his estate. No property or portion of the inheritance may be transmitted to his heirs unless
the debt has first been satisfied. Notably, throughout the appellate stage of this case, the estate
has been amply represented by the heirs of the deceased, who are also his co-parties in Civil
Case No. Q-90-7012.

The procedure in vindicating monetary claims involving a defendant who dies before final
judgment is governed by Rule 3, Section 20 of the Rules of Civil Procedure.

Page 152 of 745


UNION BANK OF THE PHILIPPINES versus EDMUND SANTIBAEZ
G.R. No. 149926 2005 Feb 23

FACTS:

On May 31, 1980, the First Countryside Credit Corporation (FCCC) and Efraim M.
Santibaez entered into a loan agreement in the amount of P128,000.00. The amount was
intended for the payment of the purchase price of one unit Ford 6600 Agricultural All-Purpose
Diesel Tractor. In view thereof, Efraim and his son, Edmund, executed a promissory note in
favor of the FCCC, the principal sum payable in five equal annual amortizations of P43,745.96
due on May 31, 1981 and every May 31st thereafter up to May 31, 1985. On December 13, 1980,
the FCCC and Efraim entered into another loan agreement, this time in the amount of
P123,156.00. It was intended to pay the balance of the purchase price of another unit of Ford
6600 Agricultural All-Purpose Diesel Tractor, with accessories, and one unit Howard Rotamotor
Model AR 60K. Again, Efraim and his son, Edmund, executed a promissory note for the said
amount in favor of the FCCC. Aside from such promissory note, they also signed a Continuing
Guaranty Agreement for the loan dated December 13, 1980.

Sometime in February 1981, Efraim died, leaving a holographic will. Subsequently in


March 1981, testate proceedings commenced before the RTC of Iloilo City. On April 9, 1981,
Edmund, as one of the heirs, was appointed as the special administrator of the estate of the
decedent. On August 20, 1981, a Deed of Assignment with Assumption of Liabilities was
executed by and between FCCC and Union Savings and Mortgage Bank, wherein the FCCC as
the assignor, among others, assigned all its assets and liabilities to Union Savings and Mortgage
Bank. Demand letters for the settlement of his account were sent by petitioner Union Bank of the
Philippines (UBP) to Edmund, but the latter failed to heed the same and refused to pay. Thus, on
February 5, 1988, the petitioner filed a Complaint for sum of money against the heirs of Efraim
Santibaez, Edmund and Florence, before the RTC of Makati City.

ISSUE:

Whether or not the petitioner can hold the heirs liable on the obligation of the deceased.

RULING:

Florence S. Ariola could not be held accountable for any liability incurred by her late
father. The documentary evidence presented, particularly the promissory notes and the
continuing guaranty agreement, were executed and signed only by the late Efraim Santibaez
and his son Edmund. As the petitioner failed to file its money claim with the probate court, at
most, it may only go after Edmund as co-maker of the decedent under the said promissory notes
and continuing guaranty, of course, subject to any defenses Edmund may have as against the
petitioner. However, the court had not acquired jurisdiction over the person of Edmund. Also, the
petitioner had not sufficiently shown that it is the successor-in-interest of the Union Savings and
Mortgage Bank to which the FCCC assigned its assets and liabilities.

Page 153 of 745


Jesus San Agustin vs. Court of Appeals
G.R. No. 121940, December 4, 2001
371 SCRA 348

FACTS:

On February 11, 1974, the Government Service Insurance System (GSIS) sold to Macaria
Vda de Caiquep, a parcel or residential land located at Pasig City, part of the GISIS Low Cost
Housing Project evidenced by a Deed of Absolute Sale. On February 19, 1974, the Register of
Deeds of Rizal issued in the name of Caiquep, Transfer Certificate of Title. The next day,
Caiquep sold the subject lot to private respondent Maximo Menez. Sometime in 1979, for being
suspected as a subversive, military men ransacked Menezs house in Rizal. He surrendered to
the authorities and was detained for two years. When released, another order for his arrest was
issued so he hid in Mindanao for another four years or until March 1984. In December 1990, he
discovered that the subject TCT was missing. He consulted a lawyer but the latter did not act
immediately on the matter. Upon consulting a new counsel, an Affidavit of Loss was filed with
the Register of Deeds and a certified copy of TCT was issued. Private respondent also declared
the property for tax purposes and obtained a certification thereof from the Assessors office. His
search for the registered owner to different parts of the country failed prompting the former to
file a petition for the issuance of owners duplicate copy to replace the lost one. During the
hearing, only Menez and counsel were present because the Register of Deeds and the Provincial
Prosecutor were not notified. The trial court granted his petition after Menez presented his
evidence ex parte. San Agustin claimed this was the first time he became aware of the case of
his aunt Ma. Vda de Caiquep and the present occupant of the property. He filed a Motion to
Reopen Reconstitution Proceedings but RTC denied said motion. Petitioner moved for motion
for re consideration but was again denied.

ISSUE:

Whether or not petitioner is bound by the contract entered into by his predecessor-in-
interest.

HELD:

The petitioner is bound by contracts entered into by his predecessors-in-interest. In this


case, the the GSIS has not filed any action for the annulment of Deed of Absolute Sale of the lot
that the latter sold to Caiquep, nor the forfeiture of the lot in question. In our view, the suit filed
by the rightful party, the GSIS. For now, the said contract of sale is binding upon heirs of
Macaria Vda de Caiquep., including petitioner who alleges to be one of her heirs, in line with the
rule that heirs are bound by contracts entered into by their predecessors-in-interest.

Page 154 of 745


PROJECT BUILDERS, INC. vs. THE COURT OF APPEALS
G. R. No. 99433 2001 Jun 19

FACTS:

On August 21, 1975, plaintiff and defendant PBI entered into an agreement whereby it
was agreed that plaintiff would provide a maximum amount of P2,000,000.00 against which said
defendant would discount and assign to plaintiff on a with recourse non-collection basis its
accounts receivable under the contracts to sell specified in said agreement. And on June 15,
1976, the same parties entered into an agreement whereby it was agreed that PBIs credit line
with plaintiff be increased to P5,000,000.00. It was stipulated that the credit line of
P5,000,000.00 granted includes the amount already assigned/discounted. The discounts were on
different date accounts receivables with different maturity dates from different condominium-
unit buyers. And each time a certain account receivable was discounted, the covering Contract to
Sell was assigned by defendant to plaintiff. The total amount of receivables discounted by
defendant PBI is P7,986,815.38 and consists of twenty accounts. Of such receivables amounting
to P7,986,815.38 plaintiff released to defendant PBI the amount of P4,549,132.72 and the
difference of P3,437,682.66 represents the discounting fee or finance fee. To secure compliance,
defendants executed a Deed of Real Estate Mortgage in favor of plaintiff. When defendants
allegedly defaulted in the payment of the subject account, plaintiff foreclosed the mortgage and
plaintiff was the highest bidder in the amount of P3,500,000.00. The foreclosed property was
redeemed a year later, but after application of the redemption payment, plaintiff claims that there
is still a deficiency in the amount of P1,323,053.08. The trial court dismissed the complaint. The
Court of Appeals however overturned the judgment of the trial court.

ISSUE:
Whether or not the assignment of credit is valid.

RULING:

An assignment of credit is an act of transferring, either onerously or gratuitously, the


right of an assignor to an assignee who would then be capable of proceeding against the debtor
for enforcement or satisfaction of the credit. The transfer of rights takes place upon perfection of
the contract, and ownership of the right, including all appurtenant accessory rights, is thereupon
acquired by the assignee. The assignment binds the debtor only upon acquiring knowledge of the
assignment but he is entitled, even then, to raise against the assignee the same defenses he could
set up against the assignor. Where the assignment is on account of pure liberality on the part of
the assignor, the rules on donation would likewise be pertinent; where valuable consideration is
involved, the assignment partakes of the nature of a contract of sale or purchase.

Upon an assignment of a contract to sell, the assignee is effectively subrogated in place


of the assignor and in a position to enforce the contract to sell to the same extent as the assignor
could. In an assignment of credit, the consent of the debtor is not essential for its perfection, his
knowledge thereof or lack of it affecting only the efficaciousness or inefficaciousness of any
payment he might make.Consent is not necessary in order that assignment may fully produce
legal effects. Hence, the duty to pay does not depend on the consent of the debtor. Otherwise, all
creditors would be prevented from assigning their credits because of the possibility of the
debtors refusal to give consent. What the law requires in an assignment of credit is not the
consent of the debtor but merely notice to him. A creditor may, therefore, validly assign his
credit and its accessories without the debtors consent. The purpose of the notice is only to
inform the debtor that from the date of the assignment, payment should be made to the assignee
and not to the original creditor.

In the case, the assignment, was "with recourse", and default in the payment of
installments had been duly established when petitioner corporation foreclosed on the mortgaged
parcels of land.

Page 155 of 745


Development Bank of the Philippines vs. Court of Appeals
G.R. No. 118180, September 20, 1996
262 SCRA 245

FACTS:

Private respondents were the original owners of a parcel of land which they mortgaged
to petitioner bank and was subsequently foreclosed for the formers default on their obligation.
Consequently, a Transfer Certificate of Title was eventually issued in petitioners name being the
sole bidder in the auction sale conducted during the foreclosure of said land.
Thereafter, petitioner and private respondents entered into a Deed of Conditional Salewherein
petitioner agreed to reconvey the foreclosed property to private respondents under the condition
that petitioner shall deliver to private respondents, their heirs, administrators and assigns a good
and sufficient deed of conveyance covering the property, subject matter of the said deed of
conditional sale, upon completion of payment by said private respondents.
Upon completing the payment of the full repurchase price, private respondents demanded from
petitioner the execution of a Deed of Conveyance in their favor.

Petitioner then informed private respondents that the prestation to execute and deliver a
deed of conveyance in their favor had become legally impossible in view of Sec.6 of R.A. 6657
(Comprehensive Agrarian Reform Law) approved on June 10, 1988 and Sec.1 of E.O. 407 issued
June 10, 1990. The former law annulling all sales, dispositions, leases, management contracts or
transfers of possession of private lands executed by the original landowner in violation of the
retention limits provided thereof upon its effectivity while the latter law requires all government
instrumentalities to immediately execute deeds of transfer in favor of the Republic of the
Philippines as represented by the Department of Agrarian Reform and to surrender to the latter
department all landholdings suitable for agriculture.
Aggrieved, private respondents filed a complaint for specific performance with damages against
petitioner.

ISSUE:
The issue is whether or not said laws had rendered legally impossible compliance by
petitioner with its obligation to execute a deed of conveyance of the subject land in favor of
private respondents.

HELD:

It is a rule that if the obligation depends upon a suspensive condition, the


demandability as well as the acquisition of effectivity of the rights arising from the obligationis
suspended pending the happening or fulfillment of the fact or event which constitutes the
condition. Once the event which constitutes the condition is fulfilled resulting in the effectivity
of the obligation, its effects retroact to the moment when the essebtial elements which gave birth
to the obligation have taken place. Applying this precept to the case, the fullpayment by the
appellees on April 6, 1990 retroacts to the time the contract of conditional sale was executed on
April 6, 1984. From that time, all elements of the contract were present.Consequently; the
contract of sale was perfected. As such, the said sale does not come under the coverage of R.A.
6657 and E.O. 407.

Further, R.A. 6657 refers to the original owners of said agricultural lands and
petitioner is not as such.

Page 156 of 745


Maria Tomimbang v. Atty. Jose Tomimbang
GR No. 165116; August 4, 2009

Facts:

Petitioner and respondent are siblings. Their parents donated to petitioner an eight-door
apartment located at 149 Santolan Road, Murphy, Quezon City. Petitioner failed to obtain a loan
from PAG-IBIG Fund, hence, respondent offered to extend a credit line to petitioner on the
following conditions: (1) petitioner shall keep a record of all the advances; (2) petitioner shall
start paying the loan upon the completion of the renovation; (3) upon completion of the
renovation, a loan and mortgage agreement based on the amount of the advances made shall be
executed by petitioner and respondent; and (4) the loan agreement shall contain comfortable
terms and conditions which petitioner could have obtained from PAG-IBIG.

A conflict between the siblings ensued leading to a new agreement whereby petitioner was
to start making monthly payments on her loan. Upon respondent's demand, petitioner turned
over to respondent all the records of the cash advances for the renovations. Subsequently, or
from June to October of 1997, petitioner made monthly payments of P18, 700.00, or a total
ofP93, 500.00. Petitioner never denied the fact that she started making such monthly payments.
Thereafter, the petitioner can no longer be found and also stopped making the monthly payments.
Thus, a complaint was filed against the petitioner demanding payment of the loan plus interest.
Petitioner contended that the loan is not yet due and demandable as the renovation of the
apartment is not yet completed.

Issue:

Whether or not the loan is already due and demandable.

Ruling:

The loan is already due and demandable due to the subsequent agreement entered in to by
the parties.
Article 1291 of the Civil Code provides, thus:

Art. 1291. Obligations may be modified by:


(1) Changing their object or principal conditions;
(2) Substituting the person of the debtor;
(3) Subrogating a third person in the rights of the creditor.

The petitioner admitted that she started to comply with the demand of the respondent to
pay on a monthly basis. Her partial performance of her obligation is unmistakable proof that
indeed the original agreement between her and respondent had been novated by the deletion of
the condition that payments shall be made only after completion of renovations. Hence, by her
very own admission and partial performance of her obligation, there can be no other conclusion
but that under the novated agreement, petitioner's obligation is already due and demandable.

Page 157 of 745


GONZALES VS THE HEIRS OF THOMAS AND PAULA CRUZ
GR No. 131784 September 16, 1999

FACTS:

On December 1, 1983, Paula Ao Cruz together with the plaintiffs heirs of Thomas and
Paula Cruz entered into a contract of lease with the defendant, Felix L. Gonzales of a half portion
of a land containing an area of 12 hectares, more or less, and an accretion of 2 hectares, more or
less, situated in Rodriguez Town, Province of Rizal and covered by Transfer Certificate of Title
No. 12111. As stipulated therein:

Paragraph 9 - The LESSORS hereby commit themselves and shall undertake to


obtain a separate and distinct T.C.T. over the herein leased portion to the LESSEE within a
reasonable period of time which shall not in any case exceed four (4) years, after which a new
Contract shall be executed by the herein parties which shall be the same in all respects with this
Contract of Lease/Purchase insofar as the terms and conditions are concerned.

Under the contract, Gonzales paid the rental fees but did not choose to exercise the option
of paying the one million purchase price. A letter was issued by one of the heirs to rescind the
said contract following breach and ordered Gonzales to vacate the premises within ten days.
Gonzales did no vacate. A few days later Paula Cruz died. A case was launched in Court by the
heirs of Paula Cruz.

ISSUE:

How must paragraph nine of the contract be interpreted in enforcing the contract of lease?

RULING:

If a stipulation in a contract admits of several meanings, it shall be understood as bearing


that import most adequate to render it effectual. An obligation cannot be enforced unless the
plaintiff has fulfilled the condition upon which it is premised. The ninth provision was intended
to ensure that respondents would have a valid title over the specific portion they were selling to
petitioner. Only after the title is assured may the obligation to buy the land and to pay the sums
stated in the Contract be enforced within the period stipulated. Verily, the petitioners obligation
to purchase has not yet ripened and cannot be enforced until and unless respondents can prove
their title to the property subject of the Contract. The ninth clause was the condition precedent of
the contract.

Respondents cannot rescind the contract, because they have not caused the transfer of the
TCT to their names, which is a condition precedent to petitioners obligation. This Court has
held that there can be no rescission (or more properly, resolution) of an obligation as yet non-
existent, because the suspensive condition has not happened.

Page 158 of 745


INSULAR LIFE VS YOUNG
GR No. 140964 January 16, 2002

FACTS:

Respondent Robert Young obtained a short term loan of P170,000,000.00 from interbank
to finance the purchase 45% equity in Insular Savings Bank. He did this under the assumption
that Araneta would purchase 99.82% of the banks outsanding capital stock and consolidate all
shares in Youngs name. However, Araneta backed and Young was left with a massive debt.
Young entered into a Memorandum of Agreement where Insular Life and its Pension Fund
whereby Insular Life would purchase shares of stock if Young would abide by certain
conditions: one of them being to infuse additional capital of P50,000,000.00 into the Bank.

It was discovered that Young was pilfering funds from the bank through check kiting
operations and he tendered his resignation. He also defaulted on his obligations. His shares of
stock were purchased by Insular Life in a public auction. The shares were then consolidated in its
name. On January 7, 1992, Young filed a case for annulment of notarial sale, specific
performance and damages.

ISSUE:

Is Insular Life entitled to ownership of majority of the Banks shares of stock?

RULING:

The provisions of the MOA negate the existence of a perfected contract of sale. The MOA
is merely a contract to sell since the parties therein specifically undertook to enter into a contract
of sale if the stipulated conditions are met and the representation and warranties given by Young
prove to be true. Here, the MOA provides that Young shall infuse additional capital of
P50,000,000.00 into the Bank. Young failed to infuse the required additional capital. Moreover,
the due diligence audit shows that Young was involved in fraudulent schemes like check kiting.
Since no sale transpired between the parties, the CA erred in concluding that Insular Life
purchased 55% of the total shares of the Bank under the MOA.

It would be unfair on the part of Young to demand compliance by Insular Life of its
obligations when he himself was remiss in his own.

Page 159 of 745


DIRECT FUNDERS HOLDERS ASSOCIATION VS LAVIA
GR No. 141851. January 16, 2002

FACTS:

The petitioners assail the decision of the CA affirming the decision of the RTC in issuing a
writ of mandatory preliminary injunction despite the orders of a co-equal court in deciding that
the property in question was in the lawful possession of the petitioner.

ISSUE:

Is petitioners contention tenable?

RULING:

The conditional sale agreement was the only document that the respondent presented
during the summary hearing of the application for a temporary restraining order before the
Regional Trial Court, Branch 71, Pasig City. The conditional sale agreement is officious and
ineffectual. First, it was not consummated. Second, it was not registered and duly annotated on
the Transfer Certificate of Title (No. 12357) covering the subject property. Third, it was
executed about eight (8) years after the execution of the real estate mortgage over the subject
property.

To emphasize, the mortgagee (United Savings Bank) did not give its consent to the
change of debtor. It is a fundamental axiom in the law on contracts that a person not a party to
an agreement cannot be affected thereby. Worse, not only was the conditional sale agreement
executed without the consent of the mortgagee-creditor, United Savings Bank, the same was also
a material breach of the stipulations of the real estate mortgage over the subject property.

The petitioner as opposed to Kambiyak Chan bears a TCT, deeds of assignment,


certificates of sale in its favor showing that it has a better right to possession of the disputed land.

Page 160 of 745


VDA. DE MISTICA VS NAGUIAT
418 SCRA 73 December 11, 2003

FACTS:

On April 5, 1979, Eulalio Mistica, predecessor-in-interest of herein [petitioner], entered


into a contract to sell with [respondent] Bernardino Naguiat over a lot. Pursuant to said
agreement, respondent gave a downpayment of P2,000.00. He made another partial payment of
P1,000.00 on February 7, 1980. He failed to make any payments thereafter. Eulalio Mistica died
sometime in October 1986. On December 4, 1991, petitioner filed a complaint for rescission
alleging that the failure and refusal of respondents to pay the balance of the purchase price
constitutes a violation of the contract which entitles her to rescind the same.

ISSUE:

Is petitioner entitled to rescission of contract?

RULING:

The transaction between Eulalio Mistica and respondents, as evidenced by the Kasulatan,
was clearly a Contract of Sale. A deed of sale is considered absolute in nature when there is
neither a stipulation in the deed that title to the property sold is reserved to the seller until the full
payment of the price; nor a stipulation giving the vendor the right to unilaterally resolve the
contract the moment the buyer fails to pay within a fixed period.

In a contract of sale, the remedy of an unpaid seller is either specific performance or


rescission. Rescission, however, is allowed only where the breach is substantial and fundamental
to the fulfillment of the obligation. In the present case, the failure of respondents to pay the
balance of the purchase price within ten years from the execution of the Deed did not amount to
a substantial breach.

Moreover, it is undisputed that during the ten year period, petitioner never made any
demand for the balance of the purchase price. Petitioner even refused the payment tendered by
respondents during her husbands funeral, thus showing she was not exactly blameless for the
lapse of the ten year period.

Page 161 of 745


HERMOSA VS LONGARA
GR No. L-5267, October 27, 1953

FACTS:

This is an appeal by way of certiorari against a decision of the Court of Appeals, fourth
division, approving certain claims presented by Epifanio M. Longara against the testate estate of
Fernando Hermosa, Sr. The claims are of three kinds, namely, P2,341.41 representing credit
advances made to the intestate from 1932 to 1944, P12,924.12 made to his son Francisco
Hermosa, and P3,772 made to his grandson, Fernando Hermosa, Jr. from 1945 to 1947, after the
death of the intestate, which occurred in December, 1944. The claimant presented evidence and
the Court of Appeals found, in accordance therewith, that the intestate had asked for the said
credit advances for himself and for the members of his family "on condition that their payment
should be made by Fernando Hermosa, Sr. as soon as he receive funds derived from the sale of
his property in Spain." Claimant had testified without opposition that the credit advances were to
be "payable as soon as Fernando Hermosa, Sr.'s property in Spain was sold and he receive
money derived from the sale." The Court of Appeals held that payment of the advances did not
become due until the administratrix received the sum of P20,000 from the buyer of the property.
Upon authorization of the probate court in October, 1947, and the same was paid for
subsequently. The Claim was filed on October 2, 1948.

ISSUE:

Does said condition a potestative condition and thusly void and unenforceable?

RULING:

A careful consideration of the condition upon which payment of the sums advanced was
made to depend, "as soon as he (intestate) receive funds derived from the sale of his property in
Spain," discloses the fact that the condition in question does not depend exclusively upon the
will of the debtor, but also upon other circumstances beyond his power or control. Cirumstances
show that the intestate had already decided to sell his house lest he meant to fool his creditors.
But in addition of the sale to him (the intestate-vendor), there were still other conditions that had
no concur to effect the sale, mainly that of the presence of a buyer, ready, able and willing to
purchase the property under the conditions demanded by the intestate. It is evident, therefore,
that the condition of the obligation was not a purely protestative one, depending exclusively
upon the will of the intestate, but a mixed one, depending partly upon the will of intestate and
partly upon chance. The Supreme Court upheld the ruling of the lower courts.

Page 162 of 745


TRILLANA VS QUEZON COLLEGES
GR No. L-5003, June 27, 1953

FACTS:

On June 1, 1948, Damasa Crisostomo applied for 200 shares of stock worth PhP100.00
each at Quezon Colleges, Inc. Within her letter of application, she stipulated, You will find
(Babayaran kong lahat pagkatapos na ako ay makapag-pahuli ng isda) pesos as my initial
payment and the balance payable in accordance with law and the rules and regulations of the
Quezon College. Damasa died on October 26, 1948. Since no payment was rendered on the
subscription made in the foregoing letter, Quezon College presented a claim of PhP20,000.00 on
her intestate proceedings. The petitioner administrator of the estate then contests the validity of
said proceedings?

ISSUE:

Is the condition laid down by Damasa Crisostomo valid?

RULING:

There is nothing in the record to show that the Quezon College, Inc. accepted the term of
payment suggested by Damasa Crisostomo, or that if there was any acceptance the same came to
her knowledge during her lifetime. As the application of Damasa Crisostomo is obviously at
variance with the terms evidenced in the form letter issued by the Quezon College, Inc., there
was absolute necessity on the part of the College to express its agreement to Damasa's offer in
order to bind the latter. Conversely, said acceptance was essential, because it would be unfair to
immediately obligate the Quezon College, Inc. under Damasa's promise to pay the price of the
subscription after she had caused fish to be caught. Thus, it cannot be said that the letter ripened
into a contract.

Indeed, the need for express acceptance on the part of the Quezon College, Inc. becomes
the more imperative, in view of the proposal of Damasa Crisostomo to pay the value of the
subscription after she has harvested fish, a condition obviously dependent upon her sole will and,
therefore, facultative in nature, rendering the obligation void. Under the Civil Code it is provided
that if the fulfillment of the condition should depend upon the exclusive will of the debtor, the
conditional obligation shall be void.

Page 163 of 745


VISAYAN SAWMILL VS CA
219 SCRA 378 March 3, 1993

FACTS:

On May 1, 1983, herein plaintiff-appellee and defendants appellants entered into a sale
involving scrap iron, subject to the condition that plaintiff appellee will open a letter of credit in
the amount of P250,00.00 in favor of defendant-appellant corporation on or before May 15,
1983. On May 24, 1983, plaintiff-appellee informed defendans-appellants by telegram that the
letter of credit was opened May 12, 1983 at the BPI main office in Ayala, but that transmittal
was delayed. On May 26, 1983, defendants-appellants received a letter advice from the
Dumaguete City Branch of BPI dated May 26, 1983, that a domestic letter of credit had been
opened in favor of Visayan Sawmill Company.

On July 19, 1983 plaintiffs then demanded that defendants comply with the deed of sale.
On July 20, 1983 defendant corporation informed plaintiffs lawyer that it is unwilling to
continue with the sale due to plaintiffs failure to comply with the essential preconditions of the
contract.

Private respondent prayed for judgment ordering the petitioner corporation to comply with
the contract by delivering to him the scrap iron subject thereof.

ISSUE:

Did petitioner corporation violate the terms and conditions of the contract?

RULING:

The petitioner corporations obligation to sell is unequivocally subject to a positive


suspensive condition. The failure of the private respondent to comply with the positive
suspensive condition cannot even be considered a breach casual or serious but simply an
event that prevented the obligation of petitioner corporation to convey title from acquiring
binding force.

The letter of credit in favor of petitioner was indisputably not in accordance with the
stipulation in the contract signed by the parties on at three counts: (1) it was not opened, made or
indorsed by the private respondent, but by a corporation which is not a party to the contract; (2)
it was not opened with the bank agreed upon and; (3) it is not irrevocable and unconditional, for
it is without recourse, it is set to expire on a specific date and it stipulates certain conditions with
respect to shipment.

Consequently, the obligation of petitioner to sell did not arise; it therefore cannot be
compelled by specific performance to comply with its prestation.

Page 164 of 745


LEAO VS COURT OF APPEALS
GR No. 129018 November 15, 2001

FACTS:

On November 13, 1985, Hermogenes Fernando, as vendor and Carmelita Leao, as vendee
executed a contract to sell involving a piece of land. In the contract, Carmelita Leao bound
herself to pay Hermogenes Fernando the sum of PhP107,750.00 as the total purchase price of the
lot.

The contract also provided for a grace period of one month within which to make
payments, together with the one corresponding to the month of grace. Should the month of grace
expire without the installments for both months having been satisfied, an interest of 18% per
annum will be charged on the unpaid installments. Should a period of ninety days elapse from
the expiration of the grace period without the overdue and unpaid installment paid with proper
interests, Fernando, as vendor, was authorized to declare the contract cancelled. The defendant
later filed an ejectment case for failure of petitioner to pay within the terms of contract.

ISSUE:

Is petitioner entitled to rights over the lot?

RULING:

The transaction between the parties was a conditional sale not an absolute sale. The
intention of the parties was to reserve the ownership of the land in the seller until the buyer has
paid the total purchase price. The ownership of the lot was not transferred to Carmelita Leao. In
a contract to sell real property on installments, the full payment of the purchase price is a positive
suspensive condition, the failure of which is not considered a breach, casual or serious, but
simply an event that prevented the obligation of the vendor to convey title from acquiring any
obligatory force. In the case at bar, petitioners non-payment of the installments after April 1,
1989, prevented the obligation of respondent to convey the property from arising. In fact, it
brought into effect the provision on cancellation.

However, in view of RA No. 6552, that the default committed by petitioner in respect of
the obligation could be compensated by the interest and surcharges imposed upon her under the
contract in question.

Page 165 of 745


HEIRS OF SANDEJAS VS LINA
GR No. 141634 February 5, 2001

FACTS:

Eliodoro Sendejas, Sr., served as administrator of the estate of Remedios R. Sandejas.


Eliodoro, in his capacity as seller, bound and obligated himself, administrators, and assigns, to
sell forever and absolutely and in their entirety parcels of lands which formed part of the estate
of the late Remedios to one Mr. Alex A. Lina for the consideration of P1 Million. Eliodoro died
and Mr. Alex Lina served as temporary administrator of the estate until he was replaced by the
heir of Eliodoro, Sixto Sandejas. Mr. Lina filed an Omnibus motion to approve the deed of
conditional sale executed between Plaintiff-in-Intervention Alex A. Lina and Eliodoro Sandejas,
Sr. on June 7, 1982. The administrator Sixto filed a motion to dismiss.

ISSUE:

Is Mr. Lina entitled to purchase parcels of lands forming the estate of Remedios?

RULING:

In a contract to sell, the payment of the purchase price is a positive suspensive condition.
The vendors obligation to convey the title does not become effective in case of failure to pay.
On the other hand, the agreement between Eliodoro, Sr. and respondent is subject to a suspensive
condition the procurement of a court approval, not full payment. There was no reservation of
ownership in the agreement. In accordance with paragraph 1 of the Receipt, petitioners were
supposed to deed the disputed lots over to respondent. This they could do upon the courts
approval, even before full payment. Hence, their contract was a conditional sale, rather than a
contract to sell as determined by the CA.

Because petitioners did not consent to he sale of their ideal shares in the disputed lots,
the CA correctly limited the scope of the Receipt to the pro-indiviso share of Eliodoro, Sr. Thus,
it correctly modified the intestate courts ruling by excluding their shares from the ambit of the
transaction.

The petition was partially granted. The appealed decision and resolution are affirmed
with he modification that respondent is entitled to only a pro-indiviso share equivalent to 11/20
of the disputed lots.

Page 166 of 745


CIR VS PRIMETOWN
GR No. 162155 August 28, 2007

FACTS:

On March 11, 1999, Gilbert Yap, vice chair of respondent Primetown Property Group,
Inc., applied for the refund or credit of income tax respondent paid in 1997. According to Yap,
because respondent suffered losses, it was not liable for income taxes. Nevertheless, respondent
paid its quarterly corporate income tax and remitted creditable withholding tax from real estate
sales to the BIR in the total amount of P26,318,398.32. Therefore, respondent was entitled to tax
refund or tax credit.

On May 13, 1999, revenue officer Elizabeth Y. Santos required respondent to submit
additional documents to support its claim. Respondent complied but its claim was not acted
upon. Thus, on April 14, 2000, it filed a petition for review in the Court of Tax Appeals (CTA).
On December 15, 2000, the CTA dismissed the petition as it was filed beyond the two-year
prescriptive period for filing a judicial claim for tax refund or tax credit. Respondents now assail
that decision for dismissal of the CTA.

ISSUE:

What is the expiration period for the filing of the action?

RULING:

Both Article 13 of the Civil Code and Section 31, Chapter VIII, Book I of the
Administrative Code of 1987 deal with the same subject matter the computation of legal
periods. Under the Civil Code, a year is equivalent to 365 days whether it be a regular year or a
leap year. Under the Administrative Code of 1987, however, a year is composed of 12 calendar
months. Needless to state, under the Administrative Code of 1987, the number of days is
irrelevant.

There obviously exists a manifest incompatibility in the manner of computing legal


periods under the Civil Code and the Administrative Code of 1987. For this reason, we hold that
Section 31, Chapter VIII, Book I of the Administrative Code of 1987, being the more recent law,
governs the computation of legal periods. Lex posteriori derogat priori.

Following this formula, respondents petition (filed on April 14, 2000) was filed on the
last day of the 24th calendar month from the day respondent filed its final adjusted return. Hence,
it was filed within the reglementary period.

Page 167 of 745


NAMARCO vs Tecson
GR No. L-29131 August 27, 1969

FACTS:

On a previous court case, the CFI rendered judgment:

(a) Ordering the defendants Miguel D. Tecson and Alto Surety Insurance Co.,
Inc. to pay jointly and severally plaintiff PRATRA the sum of P7,200.00 plus 7% interest from
May 25, 1960 until the amount is fully paid, plus P500.00 for attorney's fees, and plus costs;
(b) ordering defendant Miguel D. Tecson to indemnify his co-defendant Alto Surety & Insurance
Co., Inc. on the cross-claim for all the amounts it would be made to pay in this decision, in case
defendant Alto Surety & Insurance Co., Inc. pay the amount adjudged to plaintiff in this
decision. From the date of such payment defendant Miguel D. Tecson would pay the Alto Surety
& Insurance Co., Inc., interest at 12% per annum until Miguel D. Tecson has fully reimbursed
plaintiff of the said amount.

Defendant Miguel Tecson seeks the dismissal of the complaint on the ground of lack of
jurisdiction and prescription. This case was filed exactly on December 21, 1965 but more than
ten years have passed a year is a period of 365 days (Art. 13, CCP). Plaintiff forgot that 1960,
1964 were both leap years so that when this present case was filed it was filed two days too late.

ISSUE:

Should the complaint be dismissed on the grounds of prescription?

RULING:

In the language of this Court, in People vs. Del Rosario, with the approval of the Civil
Code of the Philippines (Republic Act 386) ... we have reverted to the provisions of the Spanish
Civil Code in accordance with which a month is to be considered as the regular 30-day month ...
and not the solar or civil month," with the particularity that, whereas the Spanish Code merely
mentioned "months, days or nights," ours has added thereto the term "years" and explicitly
ordains that "it shall be understood that years are of three hundred sixty-five days."

The decision was affirmed.

Page 168 of 745


Ernest Berg vs. Magdalena Estate, Inc.
G.R. No. L-3784, October 17, 1952
92 Phil 111

FACTS:

The complaint avers that plaintiff and defendant are co-owners of said property, the
former being the owner of one-third interest and the latter of the remaining two-thirds. The
division is asked because plaintiff and defendant are unable to agree upon the management of the
property and upon the partition thereof.

Defendant answered setting up a special defense and counterclaim. As a special defense,


defendant claims that on September 22, 1943, it sold to plaintiff one-third of the property in
litigation subject to the express condition that should either vendor or vendee decide to sell his
undivided share, the party selling would grant to the other party first an irrevocable option to
purchase the same at the sellers price. It avers that in January 1946, plaintiff fixed the sum of
P200, 000 as the price of said share and offered to sell it to defendant, which offer was accepted
and for the payment of said price plaintiff gave defendant a period of time which, including the
extensions granted would expire on May 31, 1947. Defendant claims that in spite of its
acceptance of the offer, plaintiff refused to accept the payment of the price, and for this refusal
defendant suffered damages in the amount of P100, 000. For these reasons, defendant asks for
specific performance.

ISSUE:
Whether or not the obligation is one subject to a term.

HELD:

The obligation is rather subject to a condition. Under Article 1125 of the old Civil Code,
obligations with a term, for the fulfillment of which a day certain has been fixed, shall be
demandable only when the day arrives. A day certain is understood to be that which must
necessarily arrive, even though it is not known when. In order that an obligation may be with a
term, it is, therefore, necessary that it should arrive, sooner or later; otherwise, if its arrival is
uncertain, the obligation is conditional.

Viewing in this light the clause on which defendant relies for the enforcement of its
right to buy the property, it would seem that it is not a term, but a condition. Considering the
first alternative, that is, until defendant shall have obtained a loan from the National City Bank of
New York, it is clear that the granting of such loan is not definite and cannot be held to come
within the terms day certain. And if it is considered that the period given was until such time
as defendant could raise money from other sources, then it is also to be indefinite and contingent,
and so it is also a condition and not a term within the meaning of the law. In any event, it is
apparent that the fulfillment of the condition contained in this second alternative is made to
depend upon defendants exclusive will, and viewed in this light, the plaintiffs obligation to sell
did not arise, for, under article 1115 of the old Civil Code, when the fulfillment of the condition
depends upon the exclusive will of the debtor the conditional obligation shall be void.

Page 169 of 745


Lirag Textile Mills, Inc. vs. Court of Appeals
G.R. No. L-30736, April 14, 1975
63 SCRA 375

FACTS:
Petitioners Lirag Textile Mills, Inc. and Felix K. Lirag seek a review by certiorari of the
decision of the respondent Court of Appeals in favor of respondent.
Respondent Court of Appeals affirmed the decision of the lower court, principally its conclusion
that the trial court did not commit any error in its evaluation of the evidence when it found that it
was not true that petitioner Lirag Textile Mills suffered pecuniary loss and in market
opportunities which it used as a justification to terminate the services of plaintiff Alcantara; that
it was not also true that the latter suffered from lack of skill; that, therefore, there was a violation
of the written contract of employment executed by and between petitioners and private
respondent Alcantara; that petitioner Lirag was responsible for inducing private respondent
Alcantara to leave his employment with the Philippine Chamber of Industries where he was
holding a permanent position and to accept employment with petitioner Lirag Textile Mills; and
that appellee Alcantara was correctly awarded moral damages and attorney's fees.

ISSUE:
The issue is whether or not respondent Court was correct in sentencing the petitioners to
pay respondent back salaries, moral damages and attorney's fees.

HELD:
As could be clearly seen from the stipulation of facts between the parties in and as a fact
recognized by both the trial court and the respondent Appellate Court, the contract of
employment was for an indefinite period as it shall continue without ending, subject to a
resolutory period, unless sooner terminated by reason of voluntary resignation or by virtue of a
valid cause or causes (the resolutory period). There is an indefinite period of time for
employment agreed upon by and between petitioners and the private respondent, subject only to
the resolutory period agreed upon which may end the indeterminate period of employment,
namely voluntary resignation on the part of private respondent Alcantara or termination of
employment at the option of petitioner Lirag Textile Mills, but for a valid cause or causes. It
necessarily follows that if the petitioner-employer Lirag Textile Mills terminates the employment
without a valid cause or causes, it committed a breach of the contract of employment executed
by and between the parties. The measure of an employer's liability provided for in Republic Act
1052 as amended, is solely intended for contracts of employment without a stipulated period. It
cannot possibly apply as a limitation to an employer's liability in cases where the employer
commits a breach of contract by violating an indefinite period of employment expressly agreed
upon through his wrongful act of terminating said employment without any valid cause or
causes, which act may even amount to bad faith on the employer's part.
A "period" has been defined "as a space of time which has an influence on obligation as a result
of a juridical act, and either suspends their demandableness or produces their extinguishment."
Obligations with a period are those whose consequences are subjected in one way or another to
the expiration of said period or term. Article 1193 of the Civil Code provides that obligations
with a resolutory period take effect at once, but terminate upon arrival of the day certain. A day
certain is understood to be that which must necessarily come, although it may not be known
when. The Supreme Court has no doubt that the "indefinite period" of employment expressly
agreed upon by and between the parties in this case is really a resolutory period because the
employment is bound to terminate on a future "day certain" such as the employee's resignation or
employer's termination of employment upon a valid cause or causes, like death of the employee
or termination of employer's corporate existence, although it may not be known when.
Petitioner Lirag Textile Mills, Inc. violated the contract of employment with private respondent
Alcantara when the former terminated his services without a valid cause. The act was attended
with bad faith and deceit because said petitioner made false allegations of a supposed valid
cause.

Page 170 of 745


Daguhoy Enterprises, Inc. vs. Ponce
G.R. No. L-6515, October 18, 1954
96 Phil 15

FACTS:

In the year 1950, defendant-appellant Domingo Ponce was chairman and manager and
his son Buhay M. Ponce was secretary-treasurer of the plaintiff corporation Daguhoy
Enterprises, Inc. On June 24, Rita L. Ponce, wife of Domingo, executed in favor of plaintiff
corporation a deed of mortgage over a parcel of land including the improvements thereon to
secure the payment of a loan of P5, 000 granted to her by said corporation, payable within six
years with interests at 12% annum. On March 10, 1951, Rita L. Ponce with the consent of her
husband Domingo executed another mortgage deed amending the first one, whereby the loan was
increased from P5,000 to P6,190, the terms and conditions of the mortgage remaining the same.
Rita and Domingo presented the two mortgage deeds for registration in the office of the register
of deeds for registrations in the office of the register of deeds, but the said register advised the
two to cure the defects and furnish the necessary data. Instead of complying with the suggestion
and requirements, the two withdrew the two mortgage deeds and then mortgaged the same parcel
of land in favor of the Rehabilitation Finance Corporation (RFC) to secure a loan.
Potenciano Gapol, the majority stockholder in the corporation, upon learning that the deeds of
mortgage were not registered and that they were withdrawn from the office of the register of
deeds and the land covered by the two deeds was again mortgaged to RFC, he filed a civil case
against the respondents, not only for the amount of the loan of P6,190 but for other sums,
possibly on the theory that the loan in question was granted by Domingo and Buhay as officers
of the corporation.

To account for the amount of the loan, Domingo and his son filed in court a check of
RFC in the amount of P6,190 and an interesr of P266.10 in favor of the company. Thereafter,
Gapol petitioned the court for permission to withdraw the amounts as payment of the loan. But
because the defendants opposed said petition, the court denied it. Gapol, agreeing to the
cancellation of the mortgage as soon as the amounts are withdrawn and deposited with the Bank
of America, in the name of the company, filed a second petition for withdrawal. However, the
defendants failed to agree, thus it was again denied.

ISSUE:

Whether or not the sum in the form of an RFC check and some interest deposited in the
civil case may be withdrawn to satisfy the judgment and to pay the loan of P6,190 and part of the
interest due.

HELD:

Although the original loan of P5,000 including the increase of P1,190 was payable within
six years from June 1950 and so did not become due and payable until 1956, the trial court held
that under article 1198 of the Civil Code, the debtor lost the benefit of the period by reason of her
failure to give the security in the form of the two deeds of mortgage and register them, including
defendants act in withdrawing said two deeds from the office of the register of deeds and then
mortgaging the same property in favor of the RFC; and so the obligation became pure and
without any condition and consequently, the loan became due and immediately demandable.
Likewise, even if the defendants had already deposited a certain amount in favor of the
corporation, they are not yet relieved from the payment of interests from the time of the deposit
because the loan is not yet paid.

Page 171 of 745


Victorias Planters vs. Victorias Milling Co. Inc.
G.R. No. L-6648, July 25, 1955
97 PHIL 318

FACTS:
From 1917 to 1934, the sugar cane planters Manapla and Cadiz, Negros Occidental, executed
identical milling contracts, under which the sugar central "North Negros Sugar Co. Inc." would
mill the sugar produced by the sugar cane planters of the Manapla and Cadiz districts.
The sugar cane planters of Manapla and Cadiz, Negros Occidental had executed a contract
whereby Ossorio was given a period up to December 31, 1916 within which to make a study of
and decide whether he would construct a sugar central or mill with a capacity of milling 300 tons
of sugar cane every 24 hours and setting forth the mutual obligations and undertakings of such
central and the planters and the terms and conditions under which the sugar cane produced by
said planters would be milled in the event of the construction of such sugar central by Ossorio.
Such central was in fact constructed by said Ossorio in Manapla, Negros Occidental, through the
North Negros Sugar Co., Inc., where after the standard form of milling contracts were
executed.The parties cannot stipulate as to the milling contracts executed by the planters by
Victorias, Negros Occidental, other than as follows: 1) a number of them executed such milling
contracts with the North Negros Sugar Co., Inc.; 2) while a number of them executed milling
contracts with the Victorias Milling Co., Inc., which was likewise organized by Miguel J.
Ossorio and which had constructed another Central at Victorias, Negros Occidental. Thus, after
the war, all the sugar cane produced by the planters of petitioner associations, in Manapla, Cadiz,
as well as in Victorias, who held milling contracts, were milled in only one central, that of the
respondent corporation at Victorias. Beginning with the year 1948, and in the following years,
when the planters-members of the North Negros Planters Association, Inc. considered that the
stipulated 30-year period of their milling contracts executed in the year 1918 had already expired
and terminated in the crop year 1947-1948, and the planters-members of the Victorias Planters
Association, Inc. likewise considered the stipulated 30-year period of their milling contracts, as
having likewise expired and terminated in the crop year 1948-1949, under the pertinent
provisions of the standard milling contract. Notwithstanding the repeated representations made
by the herein petitioners with the respondent corporation, the herein respondent has refused and
still refuses to accede to the same, contending that under the provisions of the milling contract.

ISSUE:
Whether or not the trial court erred in rendering its disputed decision, favoring the
petitioner.

HELD :
The fact that the contracts make reference to "first milling" does not make the period of
thirty (30) years one of thirty (30) milling years. The term "first milling" used in the contracts
under consideration was for the purpose of reckoning the thirty-year period stipulated therein.
Even if the thirty-year period provided for in the contracts be construed as milling years, the
deduction or extension of six (6) years would not be justified. At most on the last year of the
thirty-year period stipulated in the contracts the delivery of sugar cane could be extended up to a
time when all the amount of sugar cane raised and harvested should have been delivered to the
appellant's mill as agreed upon. Further, the parties stipulated that in the event of flood, typhoon,
earthquake, or other force majeure, war, insurrection, civil commotion, organized strike, etc., the
contract shall be deemed suspended during said period, does not mean that the happening of any
of those events stops the running of the period agreed upon. It only relieves the parties from the
fulfillment of their respective obligations during that time the planters from delivering sugar
cane and the central from milling it. In order that the central, the herein appellant, may be
entitled to demand from the other parties the fulfillment of their part in the contracts, the latter
must have been able to perform it but failed or refused to do so and not when they were
prevented by force majeure such as war. To require the planters to deliver the sugar cane which
they failed to deliver during the four (4) years of the Japanese occupation and the two (2) years
after liberation when the mill was being rebuilt is to demand from the obligors the fulfillment of
an obligation which was impossible of performance at the time it became due.

Page 172 of 745


JESPAJO VS CA
GR No. 113626 September 27, 2002

FACTS:

On February 1, 1985, said corporation, represented by its President, Jesus L. Uy, entered
into separate contracts of lease with Tan Te Gutierrez and Co Tong. Pursuant to the contract, Tan
Te occupied room No. 217 of the subject building at a monthly rent of P847.00 while Co Teng
occupied the Penthouse at a monthly rent of P910.00. The terms of the contract among others are
the following:
PERIOD OF LEASE- The lease period shall be effective as of February 1, 1985
and shall continue for an indefinite period provided the lessee is up-to-date in the payment of his
monthly rentals. The LESSEE may, at his option, terminate this contract any time by giving
sixty (60) days prior written notice of termination to the LESSOR.

However, violation of any of the terms and conditions of this contract shall be a
sufficient ground for termination thereof by the LESSOR.

The private respondents religiously paid the monthly rental fees. On January 2, 1990, the
lessor corporation sent a written notice to the lessees informing them of the formers intention to
increase the monthly rentals on the occupied premises to P3,500.00 monthly effective February
1, 1990. The private respondents refused payment. An ejectment case was filed against them in
court.

ISSUE:

Is the stipulation a potestative period and hence void?

RULING:

The lease contract between petitioner and respondents is with a period subject to a
resolutory condition. The wording of the agreement is unequivocal. The condition imposed in
order that the contract shall remain effective is that the lessee is up-to-date in his monthly
payments. It is undisputed that the lessees Gutierrez and Co Tong religiously paid their rent at
the increasing rate of 20% annually. The agreement between the lessor and the lessees are
therefore still subsisting, with the original terms and conditions agreed upon, when the petitioner
unilaterally increased the rental payment to more than 20% or P3,500.00 a month.

The petitioner is estopped from backing out of their representations in the contract with
respondent, that is, they may not renege on their own acts and representations, to the prejudice of
the respondents who relied on them.

Page 173 of 745


BORROMEO VS CA
GR No. L-22962 September 28, 1972

FACTS:

Respondent Jose A Villamor was a distributor of lumber belonging to Mr. Miller who was
the agent of the Insular Lumber Company in Ceb City. Defendant usually borrowed from his
friend and former classmate-petitioner Canuto O. Borromeo several amounts of money. On one
occasion, with some pressing obligation to Mr. Miller, defendant borrowed a large sum of money
from Borromeo for which he mortgaged his land and house in Cebu City. Mr. Miller filed a civil
action against the defendant and attached his properties including those mortgaged to plaintiff,
inasmuch as the deed of mortgage in favor of plaintiff could not be registered as it was not
properly drawn up. Plaintiff then pressed for settlement of his obligation, but defendant instead
offered to execute a document of future payment. Liquidation was made and defendant was
found to have owed plaintiff the sum of PhP7220.00, for which defendant signed a promissory
therefor on November 29, 1933 with interest at the rate of 12% per annum, agreeing to pay as
soon as I have money. The note further stipulates that the defendant would waive the right of
prescription as prescribed in the Civil Code of Procedure. Plaintiff did not collect within the 1st
ten years since defendant did not have any property attached to his name. However after the
second World War, plaintiff then pressed on his demands. The RTC granted his motion but the
CA reversed the ruling claiming that said period was contrary to law?

ISSUE:

Is said period stipulated in the contract valid?

RULING:

The CA erred in its decision. It should be noted that the wordings in said contracts should
not instantly nullify the intent of the parties. The intent of the parties is clear that an extension
of time be granted to respondent for payment of his debts.

In effect, the first 10 years should not be considered in the prescription of the contract and
that the next ten years is granted from which the counting of the period should begin.

Page 174 of 745


GONZALES VS JOSE
GR No. 43429 October 24, 1938

FACTS:

The plaintiff Benito Gonzales filed an action to recover from the defendant the total
amount of Php547.95 from two promissory notes dated June 22, 1922 and September 13, 1922.
The CFI granted his petition. The defendant now assails that decision claiming that the complaint
was uncertain inasmuch as the notes did not specify when the indebtedness was incurred or when
it was demandable, and that, granting that plaintiff has any cause of action, the same has
prescribed in accordance with law.

ISSUE:

Does plaintiff have a cause of action?

RULING:

Article 1128 of the Civil Code stipulates that if the obligation does not specify a term, but it
is inferred from its nature and circumstances that it was intended to grant the debtor time for its
performance, the period of the term shall be fixed by the Court.

The two promissory notes are governed by Article 1128 because under the terms thereof,
the plaintiff intended to grant the defendant a period within which to pay his debts. However, the
action to ask the court to fix a period has already prescribed. The period of prescription is ten
years, which has already elapsed from the execution of the promissory notes until the filing of
the action on June 1, 1934.

Page 175 of 745


BALUYUT VS POBLETE
GR No. 144435 February 6, 2007

FACTS:

On July 20, 1981, Guillermina Baluyut, mortgaged her house to secure a loan in the
amount of PhP850,000.00 from the spouses Eulogio and Salud Poblete. The load was set to
mature in one month. After a month had passed, she was unable to pay her indebtedness which
led the spouses to extrajudicially foreclose the mortgage. The property was then sold on Auction
to the Poblete spouses who asked Baluyut to vacate the premises. Baluyut instead filed an action
for annulment of mortgage. His claim was rejected by the RTC and the CA. Petitioner claims
that based on the testimony of Atty. Edwina Mendoza that the maturity of the loan which she
incurred is only for one year.

ISSUE:

Is petitioners contention tenable?

RULING:

Evidence of a prior or contemporaneous verbal agreement is generally not admissible to


vary, contradict or defeat the operation of a valid contract. In the instant case, aside from the
testimony of Atty. Mendoza, no other evidence was presented to prove that the real date of
maturity is one year.

The terms that were thusly reduced to writing is deemed to contain all the terms agreed
upon and no evidence of such terms can be admitted other than the contents of the agreement
itself. The promissory note is the law between petitioner and private respondents and it clearly
states that the loan shall mature in one month from date of the said Promissory Note.

Page 176 of 745


MALAYAN REALTY VS UY
GR No. 163763 November 10, 2006

FACTS:

Malayan Realty, Inc. (Malayan), is the owner of an apartment unit known as 3013 Interior
No. 90 (the property), located at Nagtahan Street, Sampaloc, Manila. In 1958, Malayan entered
into a verbal lease contract with Uy Han Yong (Uy) over the property at a monthly rental of
P262.00. The monthly rental was increased yearly starting 1989, and by 2001, the monthly
rental was P4,671.65.

On July 17, 2001, Malayan sent Uy a written notice informing him that the lease contract
would no longer be renewed or extended upon its expiration on August 31, 2001, and asking him
to vacate and turn over the possession of the property within five days from August 31, 2001, or
on September 5, 2001. Despite Uys receipt of the notice on June 18, 2001, he refused to vacate
the property, prompting Malayan to file before the Metropolitan Trial Court (MeTC) of Manila a
complaint for ejectment, docketed as Civil Case No. 171256, and was raffled to Branch 3
thereof. The Court ruled in favor of Uy and granted an extension period of five years.

ISSUE:

Is respondent Uy entitled to a grant of extension by the Court?

RULING:

The 2nd paragraph of Article 1687 provides that in the event that the lessee has occupied
the leased premises for over a year, the courts may fix a longer term for the lease.
The power of the courts to establish a grace period is potestative or discretionary, depending on
the particular circumstances of the case. Thus, a longer term may be granted where equities
come into play, and may be denied where none appears, always with due deference to the
parties freedom to contract.

In the present case, respondent has remained in possession of the property from the time
the complaint for ejectment was filed on September 18, 2001 up to the present time. Effectively,
respondents lease has been extended for more than five years, which time is, under the
circumstances, deemed sufficient as an extension and for him to find another place to stay.

Page 177 of 745


KASAPIAN NG MANGGAGAWA NG COCA-COLA VS CA
GR No. 159828 April 19, 2006

FACTS:

On June 1998, a Collective Bargaining Agreement which was in effect between petitioner
union and private respondent company expired. With the intervention of the NCMB
Administrator, on December 26, 1998, both parties executed and signed a MOA providing for
salary increases and other economic and non-economic benefits. As part of the MOA, 61
employees were regularized. Consequently, petitioner demanded the payment and benefits of the
newly regularized employees retroactive to December 1, 1998. Petitioner then demanded
renegotiation of the CBA which private respondent refused. On December 9, 1999, despite the
pendency of petitioners complaint before the NLRC, private respondent closed its Manila and
Antipolo plants resulting in the termination of employment of 646 employees. The affected
employees were considered on paid leave from December 9, 1999 to February 29, 2009 and were
paid their corresponding salaries. The Petitioners amended their complaint to include union
busting, illegal dismissal, etc.

ISSUE:

Is the closure of the Manila and Antipolo plants valid?

RULING:

Under Article 280 of the Labor Code, all those who have been with the company for one
year by said date must automatically be considered regular employees by operation of law. The
61 employees all qualify as regular employees by this provision.

The characterization of the employees services as no longer necessary or sustainable,


and therefore properly terminable, is an exercise of business judgment on the part of the
employer. The wisdom or soundness of such characterizing or decision is not subject to
discretionary review on the part of the Labor Arbiter nor of the NLRC so long, of course, as
violation of law or merely arbitrary and malicious action is not shown. As found by the NLRC,
the private respondents decision to close the plant was a result of a study conducted which
established that the most prudent course of action for the private respondent was to stop
operations in said plants and transfer production to other more modern and technologically
advanced plants of private respondent.

Page 178 of 745


Santos Ventura Hocorma Foundation Inc. vs. Ernesto Santos and Riverland Inc.
G.R. No. 153004, November 5, 2004
441 SCRA 472

FACTS:

Ernesto Santos and Santos Ventura Hocorma Foundation Inc. (SVHFI) were plaintiff and
defendant, respectively, in several civil cases in different courts in the Philippines. The parties,
however, executed a compromise agreement on October 16, 1990 which amicably ended all their
pending litigations. The compromise agreement was judicially approved on September 30, 1991.

ISSUE:

Whether the respondents are entitled to legal interest.

HELD:

A compromise is a contract whereby the parties, by making reciprocal concessions, avoid


litigation or put an end to one already commenced. It is an agreement between two or more
persons, who, for preventing or putting an end to a lawsuit adjust their difficulties by mutual
consent in the manner which they agree on, and which every one of them prefers in the hope of
gaining, balanced by the danger of losing.

The general rule is that a compromise has upon the parties the effect and authority of res
judicata, with respect to the matter definitely stated therein, or which by implication from its
terms should be deemed to have been included therein. This holds true even if the agreement has
not been judicially approved.

The two-year period must be counted from October 26, 1990, the date of execution of
the compromise agreement, and not on September 30, 1991 when respondent wrote a demand
letter to petitioner on October 28, 1992, the obligation was already due and demandable. When
the petitioner failed to pay its due obligation after the demand was made, it incurred delay.
Article 1169 of the Civil Code provides: Those obliged to deliver or to do something incur in
delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of
their obligation.

In the case at bar, the obligation was already due and demandable after the lapse of the
two-year period from the execution of the contract. Furthermore, the obligation is liquidated
because the debtor knows precisely how much he is to pay and when he is to pay it. Petitioner
delayed in the performance as he fully settled his outstanding balance on February 8, 1995 which
was more than two years after the extrajudicial demand. The demand letter sent to petitioner was
in accordance with an extrajudicial demand contemplated by law.The petitioner is liable for
damages for the delay in the performance of its obligation as provided for in Article 1170. When
the debtor knows the amount and period when he is to pay, interest as damages is generally
allowed as a matter of right. The complaining party has been deprived of funds to which he is
entitled by virtue of their compromise agreement. The goal of compensation requires that the
complainant be compensated for the loss of use of the funds.

This compensation is in the form of interest. In the absence of the agreement, the legal
rate of interest shall prevail. The legal interest for loan as forebearance of money is 12% per
annum to be computed from the default, from judicial or extrajudicial demand under and subject
to the provisions of Article 1169 of the Civil Code.

Page 179 of 745


Manuel Melotindos vs. Melecio Tobias
G.R. No. 146658, October 28, 2002
391 SCRA 299

FACTS:

Eighty-seven-year old petitioner, Atty. Manuel D. Melontindos, was the lessee of the
ground floor of a house in Malate, Manila. He had been renting the place since 1983 on a
month-to-month basis from its owner, respondent Melecio Tobias, who was then residing in
Canada.

Sometime in the last quarter of 1995, owing to his sickly mother who needed constant
medical attention and filial care, respondent demanded from petitioner either to pay an increased
rate of monthly rentals or else to vacate the place so he and his mother could use the house
during her regular medical check-up in Manila. For two (2) years nothing came out of the
demand to vacate, hence, in 1997 respondent insisted upon raising the rental fee once again.

On 1 June 1998, respondent asked petitioner to restore the premises to him for some
essential repairs of its dilapidated structure. This time he did not offer petitioner anymore the
option to pay higher rentals. The renovation of the house was commenced but had to stop
midway because petitioner refused to vacate the portion he was occupying and worse he
neglected to pay for the lease for four (4) months from May to August 1998. Hence for the
second time, or on 19 October 1998, respondent demanded the payment of the rental arrears as
well as the restoration of the house to him. On 3 February 1999, since petitioner was insisting on
keeping possession of the house but did not pay the rental for January 1999, although he had
settled the arrears of four (4) months, respondent was compelled to file a complaint for
ejectment.

The MeTC of Manila decided the ejectment complaint in favor of respondent and ordered
petitioner to vacate the leased premises and to pay rental arrears in the amount of P60,000.00 as
of December 1998 and P6,000.00 for every month thereafter until he finally restored possession
thereof to respondent plus attorneys fees of P15,000.00 and the costs of suit. The RTC of
Manila upheld in toto the MeTC Decision and denied the subsequent motion for reconsideration
for failure to set the date of hearing thereof not later than ten (10) days from its filing.
Petitioners recourse to the Court of Appeals by petition for review was also unsuccessful since
the assailed Decision was affirmed in its entirety as the ensuing motion for reconsideration
thereof was denied for late filling, i.e., the motion was filed only on 30 October 2000 beyond the
fifteen (15) day period from his receipt of the CA Decision on 9 October 2000 as shown by the
registry return receipt.

ISSUE:

Whether or not the lower courts erred in their rulings.

HELD:

It is not only the evidence on record but petitioners pleadings themselves that confirm
his default in paying the rental fees for more than three (3) months in 1999 and 1998 prior to the
filing of the ejectment complaint. There is also sufficient basis for the courts a quo to conclude
that respondent desperately needed the property in good faith for his own family and for the
repair and renovation of the house standing thereon. These facts represent legal grounds to eject
a tenant.

The Petition for Review is DENIED for lack of merit.

Page 180 of 745


LL and Company Development vs. Huang Chao Chun
G.R. No. 142378, March 7, 2000
378 SCRA 612

FACTS:

The case originated from an unlawful detainer case filed by petitioner before the trial
court alleging that respondents Huang Chao Chun and Yang Tung Fa violated their amended
lease contract over a 1,112 square meter lot it owns, when they did not pay the monthly rentals
thereon in the total amount of P4,322,900.00. It also alleged that the amended lease contract
already expired on September 16, 1996 but respondents refused to surrender possession thereof
plus the improvements made thereon, and pay the rental arrearages despite repeated demands.
The parties entered into the amended lease contract sometime in August 1991. The same
amended the lease contract previously entered into by the parties on August 8, 1991.
Respondent were joined by the Tsai Chun International Resources Inc. in their answer to the
Complaint, wherein they alleged that the actual lessee is the corporation. Respondents and the
corporation denied petitioners allegations.

The MTC dismissed the case. The MTC ruled that the lessees could extend the contract
entered into by the parties unilaterally for another five years for reasons of justice and equity. It
also ruled that the corporations failure to pay the monthly rentals as they fell due was justified
by the fact that petitioner refused to honor the basis of the rental increase as stated in their Lease
Agreement. This was affirmed by the RTC. It also held that the parties had a reciprocal
obligation: unless and until petitioner presented the increased realty tax, private respondents
were not under any obligation to pay the increased monthly rental. The decision was likewise
affirmed by the Court of Appeals.

ISSUE:

Whether or not the court could still extend the term of the lease, after its expiration.

HELD:
In general, the power of the courts to fix a longer term for a lease is discretionary. Such
power is to be exercised only in accordance with the particular circumstances of a case: a longer
term to be granted where equities demanding extension come into play; to be denied where none
appear -- always with due deference to the parties freedom to contract. Thus, courts are not
bound to extend the lease.
Article 1675 of the Civil Code excludes cases falling under Article 1673 from those under
Article 1687. Article 1673 provides among others, that the lessor may judicially eject the lessee
upon the expiration of the period agreed upon or that, which is fixed for the duration of the
leases. Where no period has been fixed by the parties, the courts, pursuant to Article 1687,
have the potestative authority to set a longer period of lease.
In the case, the Contract of Lease provided for a fixed period of five (5) years -- specifically
from September 16, 1991 to September 15, 1996. Because the lease period was for a
determinate time, it ceased, by express provision of Article 1669 of the Civil Code, on the day
fixed, without need of a demand. Here, the five-year period expired on September 15, 1996,
whereas the Complaint for ejectment was filed on October 6, 1996. Because there was no longer
any lease that could be extended, the MeTC, in effect, made a new contract for the parties, a
power it did not have.
Furthermore, the extension of a lease contract must be made before the term of the agreement
expires, not after. Upon the lapse of the stipulated period, courts cannot belatedly extend or
make a new lease for the parties, even on the basis of equity. Because the Lease Contract ended
on September 15, 1996, without the parties reaching any agreement for renewal, respondents can
be ejected from the premises.

Page 181 of 745


Brent School vs. Zamora
G.R. No. L-48494, February 5, 1990
181 SCRA 702

FACTS:

The root of the controversy at bar is an employment contract in virtue of which Doroteo
R. Alegre as engaged as athletic director by Brent School, Inc. at a yearly compensation of
P20,000. The contract fixed a specific term for its existence, five (5) years, i.e., from July 18,
1971, the date of execution of the agreement, to July 17, 1976. Subsequent subsidiary
agreements dated March 15, 1973, August 28, 1973, and September 14, 1974 reiterated the same
terms and conditions, including the expiry date, as those contained in the original contract.

Some three (3) months before the expiration of the stipulated period, or more precisely on
April 20, 1976, Alegre was given a copy of the report filed by Brent School with the Department
of Labor advising of the termination of his services effective on July 16, 1976.

Alegre objected to this termination of his employment contending that since his services
were necessary and desirable in the usual business of his employer, and his employment had
lasted for five (5) years, he had acquired the status of a regular employee and could not be
removed except for valid cause.

ISSUE:

The issue is whether or not Alegres contention is tenable.

HELD:

The provisions of the Labor Code recognize the existence and legality of term
employments. The case at bar is one which involves term employment. Therefore, Alegres
employment was terminated upon the expiration of his last contract with Brent School on July
16, 1976 without the necessity of any notice. The advance written advice given the Department
of Labor with copy to said petitioner was a mere reminder of the impending expiration of his
contract, not a letter of termination, nor an application for clearance to terminate which needed
the approval of the Department of Labor to make the termination of his services effective. In any
case, such clearance should properly have been given, not denied.

Page 182 of 745


Lourdes Valerio Lim vs.People of the Philippines
G.R. No. L-34338, November 21, 1984
133 SCRA 333

FACTS:

On January 10, 1966, the appellant, a businesswoman, went to the house of Maria Ayroso
and proposed to sell Ayrosos tobacco. Ayroso agreed to the proposition of the appellant to sell
her tobacco consisting of 615 kilos at P1.30 a kilo. The appellant was to receive the overprice
for which she could sell the tobacco. This agreement was made in the presence of plaintiffs
sister, Salud G. Bantug. Salvador Bantug drew the document dated January 10, 1966 in which
appellant acknowledged the receipt of the tobacco. In the document, the parties agreed that the
proceeds of the sale will be given to Ayroso as soon as the tobaccos were sold.

Appellant subsequently failed to pay the entire obligation prompting Ayroso to file an
estafa case against her. Both the Court of First Instance and the Court of Appeals convicted her
of the crime charged.

ISSUE:

Whether or not the provisions of Article 1197 of the Civil Code is applicable.

HELD:

It is clear in the agreement that the proceeds of the sale of the tobacco should be turned
over to the complainant as soon as the same was sold, or, that the obligation was immediately
demandable as soon as the tobacco was disposed of. Hence, Article 1197 of the New Civil Code,
which provides that the courts may fix the duration of the obligation if it does not fix a period,
does not apply.

Anent the argument that petitioner was not an agent because the agreement does not say
that she would be paid the commission if the goods were sold, the fact that appellant received the
tobacco to be sold at P1.30 per kilo and the proceeds to be given to complainant as soon as it was
sold, strongly negates transfer of ownership of the goods to the petitioner. The agreement
constituted her as an agent with the obligation to return the tobacco if the same was not sold.

Page 183 of 745


Pacific Banking Corp. vs. Court of Appeals
G.R. No. L-45656, May 5, 1989
173 SCRA 103

FACTS:

On April 15, 1955, private respondents Joseph and Eleanor Hart organized Insular Farms
Inc. (Insular), applied for and after eleven (11) months, obtained a lease from the Department of
Agriculture for a period of twenty five (25) years and renewable for another twenty five (25)
years. Subsequently, Joseph approached John Clarkin for financial assistance and the two signed
a memorandum of agreement and that of 1,000 shares outstanding, so that Clarkin had 510
shares against the Harts. Hart was appointed President and General Manager of the First City
National Bank.

Due to financial difficulty, Insular Farms Inc. borrowed P250, 000 from Pacific Banking
Corp. (Pacific) in July of 1956. On July 31, 1956, Insular executed a promissory note of P250,
000 to the bank payable in five (5) installments. Said note provided that in case there is default in
the payment of any installment due; all other installments shall become due and payable.

As the business further deteriorated, Hart agreed to Clarkins proposal that all Insulars
shares of stocks be pledged to petitioner bank in lieu of additional collateral and to insure an
extension of the period to pay the July 1957 installment.On March 3, 1958, Pacific Farms Inc.
was organized to engage in the same business as Insulars. The next day, Pacific wrote Insular
having later forty-eight (48) hours to pay the entire obligation. On March 7, 1958, Hart received
a notice that the pledged shares of stocks of Insular would be sold to public auction to satisfy
Insulars obligation. Private respondents filed complaint for reconveyance and damages with the
CFI of Manila, which was granted. The same was lifted on the motion of Pacific.

On March 21, 1958, Pacific sold Insulars shares of stocks to its own stockholders and then
resold them back to Pacific all of Insulars assets. On September 28, 1959, Joseph filed another
complaint for recovery of sum of money comprising his investments and earning against Insular.
The Claims are dismissed so that the private respondents appealed to the Cain which the court
granted the claims and ordered the petitioners to pay the private respondents the claims sought
for.

ISSUE:

Whether or not the Court may fix a period in the parties agreement to extend the payment
of the loan, including the installment which was due on or before July 1957 it being imprecise.

HELD:

In case the period of extension is not precise, the provisions of Article 1197 of the Civil
Code should apply. The pledge executed as collateral security no longer contained a provision on
installment due on or before July 1957. The pledge constituted on February 19, 1958 on the
shares of stocks of Insular was sufficient consideration for the extension, considering that pledge
was additional collateral required by the Pacific in addition to the continuing guaranty of Carkin.
Even the ledge did not provide for dates of payment of installments; or any fixed date for
maturity of the whole indebtedness. Accordingly, the date of maturity of the indebtedness should
be as may be determined by the court under Article 1197 of the Civil Code. Hence, the disputed
foreclosure and subsequent sale were premature.

Page 184 of 745


Felipe Agoncillo vs. Crisanto Javier
G.R. No. L-12611, August 7, 1918
38 Phil 124

FACTS:

On February 27 1904, Anastasio Alano, Jlose Alano and Florencio Alano executed in
favor of the plaintiff, Dra. Marcela Marino a document stipulating that the Alanos as
testamentary heirs of deceased Rev. Anastacio Cruz, would pay the sum of P2, 730.50 within
one (1) year with interest of 12 percent per annum representing the amount of debt incurred by
Cruz. Moreover, the agreement provided that the Alanos are to convey the house and lot
bequeathed to them by Cruz in the event of failure to pay the debt in money at its maturity.

No part of interest or principal due has been paid except the sum of P200 paid in 1908 by
Anastacio Alano. In 1912, Anastasio died intestate. On August 8, 1914, CFI of Batangas
appointed Crisanto Javier as administrator of Anastasios estate. On March 17, 1916, the
plaintiffs filed the complaint against Florencio, Jose and Crisanto praying that unless defendants
pay the debt for the recovery of which the action was brought, they be required to convey to
plaintiffs the house and lot described in the agreement, that the property be appraised and if its
value is found to be less than the amount of the debt, with accrued interest at the stipulation rate,
judgment be rendered in favor of the plaintiffs for the balance.

ISSUE:
The issue is whether or not the agreement that the defendant-appellant, at the maturity of
the debt, will pay the sum of the money lent by the appellees or will transfer the rights to the
ownership and possession of the house and lot bequeathed to the former by the testator in favor
of the appellees, is valid.

HELD:
This stipulation is valid because it is simply an alternative obligation, which is expressly
allowed by law. The agreement to convey the house and lot on an appraised value in the event of
failure to pay the debt in money at its maturity is valid. It is simply an undertaking that if debt is
not paid in money, it will be paid in another way. The agreement is not open to the objection that
the agreement is pacto comisorio. It is not an attempt to permit the creditor to declare the
forfeiture of the security upon the failure of the debtor to pay at its maturity. It is simply
provided that if the debt is not paid in money, it shall be paid by the transfer of the property at a
valuation. Such an agreement unrecorded, creates no right in rem, but as between the parties, it is
perfectly valid and specific performance by its terms may be enforced unless prevented by the
creation of superior rights in favor of third persons.

The contract is not susceptible of the interpretation that the title to the house and lot in
question was to be transferred to the creditor ipso facto upon the mere failure of the debtors to
pay the debt at its maturity. The obligations assumed by the debtors were in the alternative, and
they had the right to elect which they would perform. The conduct of parties shows that it was
not their understanding that the right to discharge the obligation by the payment of the money
was lost to the debtors by their failure to pay the debt at its maturity. The plaintiff accepted the
payment from Anastacio in 1908, several years after the debt matured.

It is quite clear therefore that under the terms of the contract, and the parties themselves
have interpreted it, the liability of the defendant as to the conveyance of the house and lot is
subsidiary and conditional, being dependent upon their failure to pay the debt in money. It must
follow therefore that if the action to recover the debt was prescribed, the action to compel a
conveyance of the house and lot is likewise barred, as the agreement to make such conveyance
was not an independent principal undertaking, but merely a subsidiary alternative pact relating to
the method by which the debt must be paid.

Page 185 of 745


Ong Guan Can vs. The Century Insurance Company, Ltd.
G.R. No. 21196, February 6, 1924
46 Phil 592

FACTS:

A building of the plaintiff was insured against fire by the defendant in the sum of
P30,000.00 as well as the goods and merchandise therein contained in the sum of P15,000.00.
The house and merchandise insured were burnt early in the morning of February 28, 1923 while
the policies issued by the defendant in favor of the plaintiff were in force.
The appellants contend that under clause 14 of the conditions of the policies, it amay rebuild the
house burnt and although the house may be smaller, yet it would be sufficient indemnity to the
insured for the actual loss suffered by him.

ISSUE:

Whether or not the defendant company may perform the alternative obligation despite the
fact that the plaintiffs consent was not secured.

HELD:

It must be noted that in alternative obligations, the debtor, the insurance company in this
case, must notify the creditor of his election, stating which of the two prestations he is disposed
to fulfill, in accordance with the law. The object of this notice is to five the creditor, that is , the
plaintiff in the instant case, opportunity to expr3ss his consent. The record shows that the
appellant company did not give a formal notice of its selection to rebuild and while the witnesses
speaks of the propped reconstruction of the house destroyed, yet the plaintiff id d not give his
assent to the proposition, for the reason that the new house would be smaller and of materials of
lower kind than those employed in the construction of the house destroyed.

Page 186 of 745


LEGARDA VS MIAILHE
GR No. L-3435 April 28, 1951

FACTS:

On June 3, 1944, plaintiffs filed a complaint against the original defendant William J.B.
Burke, alleging defendants unjustified refusal to accept payment in discharge of a mortgage
indebtedness in his favor, and praying that the latter be order (1) to receive the sum of
P75,920.83; (2) to execute the corresponding deed of release of mortgage, and; (3) to pay
damages in the sum of P1,000. The Court then decided in favor of plaintiff Legarda. After the
war and the subsequent defeat of the Japanese occupants, defendant filed a case in court claiming
that plaintiff Clara de Legarda violated her agreement with defendant, by forcing to deposit
worthless Japanese military notes when they originally agreed that the interest was to be
condoned until after the occupation and that payment was rendered either in Philippine or
English currency. Defendant was later substituted upon death by his heir Miailhe and the Courts
judged in defendants favor. Plaintiff now assails said decision.

ISSUE:

Is the tender of payment by plaintiff valid?

RULING:

On February 17, 1943, the only currency available was the Philippine currency, or the
Japanese Military notes, because all other currencies, including the English, were outlawed by a
proclamation issued by the Japanese Imperial Commander on January 3, 1942. The right to
election ceased to exist on the date of plaintiffs payment because it had become legally
impossible. And this is so because in alternative obligations there is no right to choose
undertakings that are impossible or illegal. In other words, the obligation on the part of the
debtor to pay the mortgage indebtedness has since then ceased to be alternative. It appears
therefore, that the tender of payment in Japanese Military notes was a valid tender because it was
the only currency permissible at the time and its payment was tantamount to payment in
Philippine currency.

However, payment with the clerk of court did not have any legal effect because it was
made in certified check, and a check does not meet the requirements of legal tender. Therefore,
her consignation did not have the effect of relieving her from her obligation of the defendant.

Page 187 of 745


ESTANISLAO REYES vs. SEBASTIANA MARTINEZ ET AL.,
G.R. No. 32226 . DECEMBER 29, 1930.

FACTS:

Estanislao Reyes filed an action against the Martinez heirs in which the plaintiff seeks,
among others, to recover five parcels of land, containing approximately one thousand coconut
trees, and to obtain a declaration of ownership in his own favor as against the defendants with
respect to said parcels. This cause of action is founded upon the contract, and the claim by the
plaintiff is to have the five parcels adjudged to him in lieu of another parcel formerly supposed to
contain one thousand trees and described in paragraph 8 of the contract between him and certain
of the Martinez heirs. By this contract Reyes was to be given the parcel described in clause 8, but
in a proviso to said clause, the parties contracting with Reyes agreed to assure to him certain
other land containing an equivalent number of trees in case he should so elect.

ISSUE:

Whether or not Reyes is entitled to the recovery of ownership of the five parcels of land
subject of this case.

RULING:

The prior history of the litigation shows that Reyes elected to take and hold the parcel
described in clause 8, and his right thereto has all along been recognized in the dispositions made
by the court with respect to said land. In our decision in Martinez vs. Grao (51 Phil., 287, 301),
it was a basal assumption that Reyes would obtain the thousand trees referred to; and we are of
the opinion that, from various steps taken in the prior litigation, Reyes must be taken to have
elected to take that particular parcel and he is now estopped from asserting a contrary election to
take the five parcels of land described in paragraph IX of his complaint.

However, the title to the parcel of land elected by Reyes is in the heirs of Inocente
Martinez and it does not appear that they have transferred said title to Reyes. It results therefore
that Reyes now has a claim for damages against the parties signatory to the contract of March 5,
1921, for the value of the aforesaid property. We therefore reach the conclusion that Reyes
should either have the land originally set apart for him under clauses 4 and 8 of the contract, or,
in case his right thereto should fail, he should not be required to pay the judgment for P8,000
which was awarded to the Martinez heirs in Martinez vs. Grao (51 Phil., 287, 302).

Page 188 of 745


QUIZANA VS REDUGORIO
GR No. L-6620 May 7, 1954

FACTS:

This is an appeal to this Court from a decision rendered by the Court of First Instance of
Marinduque, wherein the defendants-appellants are ordered to pay the plaintiff-appellee the sum
of P550, with interest from the time of the filing of the complaint, and from an order of the same
court denying a motion of the defendants-appellants for the reconsideration of the judgment on
the ground that they were deprived of their day in court.

ISSUE:

What is the nature and effect of the actionable document mentioned above?

RULING:

The decisive question at issue, therefore, is whether the second part of the written
obligation, in which the obligors agreed and promised to deliver a mortgage over the parcel of
land described therein, upon their failure to pay the debt on a date specified in the proceeding
paragraph, is valid and binding and effective upon the plaintiff-appellee, the creditor. This
second part of the obligation in question is what is known in law as a facultative obligation,
defined in article 1206 of Civil Code of the Philippines, which provides:

ART. 1206. When only one prestation has been agreed upon, but the obligor may
render another in substitution, the obligation is called facultative.

There is nothing in the agreement which would argue against its enforcement. it is not
contrary to law or public morals or public policy, and notwithstanding the absence of any legal
provision at the time it was entered into government it, as the parties had freely and voluntarily
entered into it, there is no ground or reason why it should not be given effect. It is a new right
which should be declared effective at once.

Page 189 of 745


PURITA ALIPIO vs. COURT OF APPEALS
G.R. No. 134100. September 29, 2000

FACTS:

Respondent Romeo Jaring was the lessee of a 14.5 hectare fishpond in Barito, Mabuco,
Hermosa, Bataan, for a period of five years ending on September 12, 1990. On June 19, 1987, he
subleased the fishpond, for the remaining period of his lease, to the spouses Placido and Purita
Alipio and the spouses Bienvenido and Remedios Manuel. The stipulated amount of rent was
P485,600.00, payable in two installments of P300,000.00 and P185,600.00, with the second
installment falling due on June 30, 1989. Each of the four sublessees signed the contract.
The first installment was duly paid, but of the second installment, the sublessees only satisfied a
portion thereof, leaving an unpaid balance of P50,600.00. Despite due demand, the sublessees
failed to comply with their obligation, so that, on October 13, 1989, private respondent sued the
Alipio and Manuel spouses for the collection of the said amount before the Regional Trial Court.
In the alternative, he prayed for the rescission of the sublease contract should the defendants fail
to pay the balance.

Petitioner Purita Alipio moved to dismiss the case because her husband had passed away.
And that any action for recovery of money, debt or interest thereon, shall be dismissed when the
defendant dies before final judgment.The trial court denied petitioner's motion and held that the
obligation is solidary. On appeal, the Court of Appeals affirmed the decision.

ISSUE:

Whether a creditor can sue the surviving spouse for the collection of a debt which is
owed by the conjugal partnership of gains, or whether such claim must be filed in proceedings
for the settlement of the estate of the decedent.

RULING:

The Court held that the respondent cannot sue the surviving spouse of a decedent in an
ordinary proceeding for the collection of a sum of money chargeable against the conjugal
partnership. Because when the husband died, their conjugal partnership was automatically
dissolved and debts chargeable against it is to be paid in the settlement of estate proceedings.
Moreover, respondent does not cite any provision of law which provides that when there are two
or more lessees, or in this case, sublessees, the latter's obligation to pay the rent is solidary.Thus,
the liability of the sublessees is merely joint. Since the obligation of the Manuel and Alipio
spouses is chargeable against their respective conjugal partnerships, the unpaid balance of
P50,600.00 should be divided into two so that each couple is liable to pay the amount of
P25,300.00. Hence, the petition is granted.

Page 190 of 745


PH CREDIT CORP VS CA
GR No. 109648 November 22, 2001

FACTS:

PH Credit Corp., filed a case against Pacific Lloyd Corp., Carlos Farrales, Thomas H. Van
Sebille and Federico C. Lim, for [a] sum of money. The case was docketed as Civil Case No.
83-17751 before the Regional Trial Court, Branch 51, Manila. After service of summons upon
the defendants, they failed to file their answer within the reglementary period, hence they were
declared in default. PH Credit Corp., was then allowed to present its evidence ex-parte. The
RTC judged in favor of PH Credit Corp.

On July 27, 1990, a motion for the issuance of a writ of possession was filed and on
October 12, 1990, the same was granted. The writ of possession itself was issued on October 26,
1990. Said order and writ of possession are now the subject of this petition. Petitioner claims
that Respondent Judge erred in applying the presumption of a joint obligation in the face of the
conclusion of fact and law contained in the decision showing that the obligation is solidary.

ISSUE:

Is the petitioners contention tenable?

RULING:

The Rules of Court requires that all available objections to a judgment or proceeding must
be set up in an Omnibus Motion assailing it; otherwise, they are deemed waived. In the case at
bar, the objection of private respondent to his solidary liability became available to him, only
after his real property was sold at public auction. At the time his personal properties were levied
and sold, it was not evident to him that he was being held solely liable for the monetary
judgment rendered against him and his co-respondents. That was why his objections then did not
include those he asserted when his solidary liability became evident.

In the dispositive portion of the January 31, 1984 Decision of the trial court, the word
solidary neither appears nor can it be inferred therefrom. The fallo merely stated that the
following respondents were liable: Pacific Lloyd Corporation, Thomas H. Van Sebille, Carlos M.
Farrales and Federico C. Lim. Under the circumstances, the liability is joint, as provided by the
Civil Code.

We should stress that respondents obligation is based on the judgment rendered by the
trial court. The dispositive portion or the fallo is its decisive resolution and is thus the subject of
execution. The other parts of the decision may be resorted to in order to determine the ratio
decidendi for the disposition. Where there is a conflict between the dispositive part and the
opinion of the court contained in the text or body of the decision, the former must prevail over
the latter on the theory that the dispositive portion is the final order, while the opinion is merely a
statement ordering nothing. Hence the execution must conform with that which is ordained or
decreed in the dispositive portion of the decision.

Page 191 of 745


CDCP VS ESTRELLA
GR No. 147791 September 8, 2006

FACTS:

On December 29, 1978, respondents Rebecca G. Estrella and her granddaughter, Rachel
E. Fletcher, boarded in San Pablo City, a BLTB bus bound for Pasay City. However, they never
reached their destination because their bus was rammed from behind by a tractor-truck of CDCP
in the South Expressway. The strong impact pushed forward their seats and pinned their knees
to the seats in front of them. They regained consciousness only when rescuers created a hole in
the bus and extricated their legs from under the seats. They suffered physical injuries as a result.
Thereafter, respondents filed a Complaint for damages against CDCP, BLTB, Espiridion
Payunan, Jr. and Wilfredo Datinguinoo before the Regional Trial Court of Manila, Branch 13.

ISSUE:

Are the accused jointly or solidarily liable?

RULING:

The case filed by respondents against petitioner is an action for culpa aquiliana or quasi-
delict under Article 2176 of the Civil Code. The liability for the negligent conduct of the
subordinate is direct and primary, but is subject to the defense of due diligence in the selection
and supervision of the employee. In the instant case, the trial court found that petitioner failed to
prove that it exercised the diligence of a good father of a family in the selection and supervision
of Payunan, Jr.

It is well-settled in Fabre, Jr. v. Court of Appeals, that the owner of the other vehicle
which collided with a common carrier is solidarily liable to the injured passenger of the same.
The Peitition was thusly DENIED.

Page 192 of 745


REPUBLIC GLASS CORPORATION v. QUA
G.R. No. 14413 July 30, 2004

FACTS:

Petitioners and respondent were stockholders of Ladtek, Inc., which obtained loans from
Metrobank and PDCP where they stood as sureties. Among themselves they executed
Agreements for Contribution, Indemnity and Pledge of shares of Stocks, stating that in case of
default in the payment of loans, the parties would reimburse each other the proportionate share of
any sum that any might pay to creditors. Ladtek defaulted on its loan obligations, hence
Metrobank filed a collection case. During the pendency thereof, RGC and Gervel paid
Metrobank where a waiver and quitclaim in favor of the two was executed. Upon Quas refusal
to reimburse, RGC and Gervel foreclosed the pledged shares of stocks owned by Qua at a public
auction. On appeal, the CA issued the assailed decision and held that there was an implied
novation of the agreement and that the payment did not extinguish the entire obligation and did
not benefit Qua. Hence, the petition, where the petitioners claim the following: (1) Qua is
estopped from claiming that the payment made was not for the entire obligation, due to his
judicial admissions; (2) payment of the entire obligation is a condition sine qua non for the
demand of reimbursement under the indemnity agreements; and (3) there is no novation in the
instant case.

ISSUE:

(1)Whether payment of the entire obligation is an essential condition for reimbursement;


and (2) Whether there was no novation.

RULING:

The petition is denied. Although the Agreement does not state that payment of the entire
obligation is an essential condition for reimbursement, RGC and Gervel cannot automatically
claim for indemnity from Qua because Qua himself is liable directly to Metrobank and PDCP.
The elements of novation are not established in the instant case. Contrary to RGC and Gervels
claim, payment of any amount will not automatically result in reimbursement. If a solidary
debtor pays the obligation in part, he can recover reimbursement from the co-debtors only in so
far as his payment exceeded his share in the obligation. This is precisely because if a solidary
debtor pays an amount equal to his proportionate share in the obligation, then he in effects pays
only what is due from him. If the debtor pays less than his share in the obligation, he cannot
demand reimbursement because his payment is less than his actual debt.

Page 193 of 745


INDUSTRIAL MANAGEMENT VS NLRC
GR No. 101723 May 11, 2000

FACTS:

This is a petition for certiorari assailing the Resolution dated September 4, 1991 issued by
the National Labor Relations Commission in RAB-VII-0711-84 on the alleged ground that it
committed a grave abuse of discretion amounting to lack of jurisdiction in upholding the Alias
Writ of Execution issued by the Labor Arbiter which deviated from the dispositive portion of the
Decision dated March 10, 1987, thereby holding that the liability of the six respondents in a case
adjudicated by the NLRC is solidary despite the absence of the word "solidary" in the dispositive
portion of the Decision, when their liability should merely be joint.

ISSUE:

Is the petitioners liability pursuant to the Decision of the Labor Arbiter dated March 10,
1987, solidary or not?

RULING:

In the dispositive portion of the Labor Arbiter, the word "solidary" does not appear. The
said fallo expressly states the following respondents therein as liable, namely: Filipinas Carbon
and Mining Corporation, Gerardo Sicat, Antonio Gonzales, Industrial Management Development
Corporation (petitioner INIMACO), Chiu Chin Gin, and Lo Kuan Chin. Nor can it be inferred
therefrom that the liability of the six (6) respondents in the case below is solidary, thus their
liability should merely be joint.

Moreover, it is already a well-settled doctrine in this jurisdiction that, when it is not


provided in a judgment that the defendants are liable to pay jointly and severally a certain sum of
money, none of them may be compelled to satisfy in full said judgment. Granting that the Labor
Arbiter has committed a mistake in failing to indicate in the dispositive portion that the liability
of respondents therein is solidary, the correction -- which is substantial -- can no longer be
allowed in this case because the judgment has already become final and executory.

Page 194 of 745


METRO MANILA TRANSIT CORPORATION vs. THE COURT OF APPEALS
G.R. No. 104408 1993 June 21, 1993

FACTS:

On August 28, 1979, plaintiff-appellant Nenita Custodio boarded as a paying passenger a


public utility jeepney with plate No. D7 305 PUJ, then driven by defendant Agudo Calebag and
owned by his co-defendant Victorino Lamayo, bound for her work at Dynetics Incorporated
located in Bicutan, Taguig, Metro Manila, where she then worked as a machine operator earning
P16.25 a day. While the passenger jeepney was travelling at (a) fast clip along DBP Avenue,
Bicutan, Taguig, Metro Manila another fast moving vehicle, a Metro Manila Transit Corp. bus
with plate no. 3Z 307 PUB (Philippines) '79 driven by defendant Godofredo C. Leonardo was
negotiating Honeydew Road, Bicutan, Taguig, Metro Manila bound for its terminal at Bicutan.
As both vehicles approached the intersection of DBP Avenue and Honeydew Road they failed to
slow down and slacken their speed; neither did they blow their horns to warn approaching
vehicles. As a consequence, a collision between them occurred, the passenger jeepney ramming
the left side portion of the MMTC bus. The collision impact caused plaintiff-appellant Nenita
Custodio to hit the front windshield of the passenger jeepney and (she) was thrown out
therefrom, falling onto the pavement unconscious with serious physical injuries. She was brought
to the Medical City Hospital where she regained consciousness only after one (1) week. Thereat,
she was confined for twenty-four (24) days, and as a consequence, she was unable to work for
three and one half months (3 1/2).

A complaint for damages was filed by herein private respondent, who being then a minor
was assisted by her parents, against all of therein named defendants following their refusal to pay
the expenses incurred by the former as a result of the collision. Said defendants denied all the
material allegations in the complaint and pointed an accusing finger at each other as being the
party at fault.

ISSUE:

Whether the evidence presented during the trial with respect to the proof of due diligence
of petitioner MMTC in the selection and supervision of its employees, particularly driver
Leonardo, is sufficient.

RULING:

With the allegation and subsequent proof of negligence against the defendant driver and
of an employer-employee relation between him and his co-defendant MMTC in this instance, the
case is undoubtedly based on a quasi-delict under Article 2180. When the employee causes
damage due to his own negligence while performing his own duties, there arises the juris tantum
presumption that the employer is negligent, rebuttable only by proof of observance of the
diligence of a good father of a family. For failure to rebut such legal presumption of negligence
in the selection and supervision of employees, the employer is likewise responsible for damages,
the basis of the liability being the relationship of pater familias or on the employer's own
negligence.

Hence, the court consistently held that where the injury is due to the concurrent
negligence of the drivers of the colliding vehicles, the drivers and owners of the said vehicles
shall be primarily, directly and solidarily liable for damages and it is immaterial that one action
is based on quasi-delict and the other on culpa contractual, as the solidarity of the obligation is
justified by the very nature thereof. Hence, decision of respondent Court of Appeals is affirmed.

Page 195 of 745


INCIONG VS. COURT OF APPEALS
G.R. No. 96405, June 26, 1996

FACTS:

On February 3, 1983, petitioner Baldomero L. Inciong, Jr. together with Rene C. Naybe
and Gregorio D. Pantanosas signed a promissory note in the amount of P50, 000.00 holding
themselves jointly and severally liable to private respondent Philippine Bank of
Communications. The promissory note was due on May 5, 1983. Said due date expired without
the promissors having paid their obligation.

On November 14, 1983 and on June 8, 1984, private respondent sent petitioner telegrams
demanding payment thereof. On December 11, 1983, private respondent also sent registered mail
a final letter of demand to Rene C. Naybe. Since both obligors did not respond to the demand
made, private respondent filed on January 24, 1986 a complaint for collection of the sum of P50,
000.00 against the three (3) obligors. On January 27, 1987, the lower court dismissed the case
against defendant Pantanosas as prayed by herein private respondent. Meanwhile, only the
summons addressed to petitioner was served for the reason that defendant Naybe had gone to
Saudi Arabia.

The lower court rendered its decision holding petitioner solidarily liable and to pay
herein respondent bank the amount of P50, 000.00 plus interest thereon. Petitioner appealed the
said decision to the Court of Appeals. The respondent court, however, affirmed the decision of
the lower court. The petitioner moved for reconsideration, which was later on denied by the
respondent Court of Appeals.

ISSUE:

Whether or not the dismissal of the complaint against Naybe, the principal debtor, and
against Pantanosas, his co-maker, constituted a release of his obligation.

HELD:

The dismissal of the complaint against Naybe and Pantanosas did not constitute a
release of petitioners obligation, especially because the dismissal of the case against Pantanosas
was upon the motion of private respondent itself. Petitioner signed the promissory note as a
solidary co-maker and not as a guarantor. A solidary or joint and several obligation is one in
which each debtor is liable for the entire obligation, and each creditor is entitled to demand the
whole obligation. The promissory note involved in this case expressly states that the three
signatories therein are jointly and severally liable, any one, some or all of them may be
proceeded against for the entire obligation. The choice is left to the solidary creditor to determine
against whom he will enforce collection

Under Article 1207 of the Civil Code, when there are two or more debtors in one and
the same obligation, the presumption is that the obligation is joint so that each of the debtors is
liable only for a proportionate part of the debt. There is solidary liability only when the
obligation expressly so states, when the law so provides or when the nature of the obligation so
requires.

Page 196 of 745


PHILIPPINE BLOOMING MILLS VS CA
GR No. 142381 October 15, 2003

FACTS:

This is a petition for review on certiorari to annul the Decision dated 16 July 1999 of the
Court of Appeals in CA-G.R. CV No. 39690, as well as its Resolution dated 17 February 2000
denying the motion for reconsideration. The Court of Appeals affirmed with modification the
Decision dated 31 August 1992 rendered by Branch 113 of the Regional Trial Court of Pasay
City ("trial court"). The trial courts Decision declared petitioner Alfredo Ching ("Ching") liable
to respondent Traders Royal Bank ("TRB") for the payment of the credit accommodations
extended to Philippine Blooming Mills, Inc. ("PBM"). The petition is a thinly veiled attempt to
make the Supreme Court reconsider its decision in the prior case of Traders Royal Bank v. Court
of Appeals.

ISSUE:

Is Ching is liable for obligations PBM contracted after execution of the Deed of
Suretyship?

RULING:

Ching is liable for credit obligations contracted by PBM against TRB before and after
the execution of the 21 July 1977 Deed of Suretyship. This is evident from the tenor of the deed
itself, referring to amounts PBM "may now be indebted or may hereafter become indebted" to
TRB. The law expressly allows a suretyship for "future debts (Article 2053).

Ching would like the Court to rule that his liability is limited, at most, to the amount
stated in PBMs rehabilitation plan. In claiming this reduced liability, Ching invokes Article
1222. In granting the loan to PBM, TRB required Chings surety precisely to insure full recovery
of the loan in case PBM becomes insolvent or fails to pay in full. This was the very purpose of
the surety. Thus, Ching cannot use PBMs failure to pay in full as justification for his own
reduced liability to TRB. As surety, Ching agreed to pay in full PBMs loan in case PBM fails to
pay in full for any reason, including its insolvency.

TRB, as creditor, has the right under the surety to proceed against Ching for the entire
amount of PBMs loan. This is clear from Article 1216 of the Civil Code whereby the creditor
may proceed against any one of the solidary debtors.

Page 197 of 745


ASSET BUILDERS CORPORATION vs. STRONGHOLD INSURANCE COMPANY,
INC.
G.R. No. 187116 October 18, 2010

FACTS:

(Lucky Star) as part of the completion of its project to construct the ACG Commercial On April
28, 2006, Asset Builders Corporation (ABC) entered into an agreement with Lucky Star Drilling
& Construction Corporation Complex 3 Lucky Star was to supply labor, materials, tools, and
equipment including technical supervision to drill one (1) exploratory production well on the
project site. The total contract price for the said project was P1,150,000.00. To guarantee faithful
compliance with their agreement, Lucky Star engaged respondent Stronghold which issued two
(2) bonds in favor of petitioner. The first, SURETY BOND G(16) No. 141558, dated May 9,
2006, covers the sum of P575,000.004 or the required downpayment for the drilling work. On
May 20, 2006, ABC paid Lucky Star P575,000.00 (with 2% withholding tax) as advance
payment, representing 50% of the contract price. Lucky Star, thereafter, commenced the drilling
work. By July 18, 2006, just a few days before the agreed completion date of 60 calendar days,
Lucky Star managed to accomplish only ten (10) % of the drilling work. On the same date,
petitioner sent a demand letter to Lucky Star for the immediate completion of the drilling work
with a threat to cancel the agreement and forfeit the bonds should it still fail to complete said
project within the agreed period.

On August 3, 2006, ABC sent a Notice of Rescission of Contract with Demand for Damages to
Lucky Star

ISSUE:

Whether or not Stronghold should be held liable.

RULING:

Suretyship, in essence, contains two types of relationship the principal relationship


between the obligee (petitioner) and the obligor (Lucky Star), and the accessory surety
relationship between the principal (Lucky Star) and the surety (respondent). In this arrangement,
the obligee accepts the suretys solidary undertaking to pay if the obligor does not pay. Such
acceptance, however, does not change in any material way the obligees relationship with the
principal obligor. Neither does it make the surety an active party to the principal obligee-obligor
relationship. Thus, the acceptance does not give the surety the right to intervene in the principal
contract. The suretys role arises only upon the obligors default, at which time, it can be directly
held liable by the obligee for payment as a solidary obligor.

In the case at bench, when Lucky Star failed to finish the drilling work within the agreed
time frame despite petitioners demand for completion, it was already in delay. Due to this
default, Lucky Stars liability attached and, as a necessary consequence, respondents liability
under the surety agreement arose. In fine, respondent should be answerable to petitioner on
account of Lucky Stars non-performance of its obligation as guaranteed by the performance
bond.

Finally, Article 1217 of the New Civil Code acknowledges the right of reimbursement from a co-
debtor (the principal co-debtor, in case of suretyship) in favor of the one who paid (the surety).
Thus, respondent is entitled to reimbursement from Lucky Star for the amount it may be required
to pay petitioner arising from its bonds.

Page 198 of 745


ESPARWA SECURITY, v. LICEO DE CAGAYAN UNIVERSITY
G.R. No. 150402 Nov 8, 2006

FACTS:

On 1 December 1997, Eparwa and LDCU, entered into a Contract for Security Services.
On 21 December 1998, 11 security guards (security guards) whom Eparwa assigned to LDCU
from 1 December 1997 to 30 November 1998, filed a complaint before the NLRC Regional
Arbitration Branch No. 10 in Cagayan de Oro City. The complaint was filed against both
Eparwa and LDCU for underpayment of salary, legal holiday pay, 13th month pay, rest day,
service incentive leave, night shift differential, overtime pay, and payment for attorneys fees.
The Labor Arbiter found that the security guards are entitled to wage differentials and premium
for holiday and rest day work. The Labor Arbiter held Eparwa and LDCU solidarily liable
pursuant to Article 109 of the Labor Code. LDCU filed an appeal before the NLRC. LDCU
agreed with the Labor Arbiters decision on the security guards entitlement to salary differential
but challenged the propriety of the amount of the award. LDCU alleged that security guards not
similarly situated were granted uniform monetary awards and that the decision did not include
the basis of the computation of the amount of the award.

ISSUE:

Is LDCU alone ultimately liable to the security guards for the wage differentials and
premium for holiday and rest day pay?

RULING:

Articles 106, 107 and 109 of the Labor Code read:Art. 106. Contractor or subcontractor.
Whenever an employer enters into a contract with another person for the performance of the
formers work, the employees of the contractor and of the latters subcontractor, if any, shall be
paid in accordance with the provisions of this Code.Article 107. Indirect employer. The
provisions of the immediately preceding Article shall likewise apply to any person, partnership,
association or corporation which, not being an employer, contracts with an independent
contractor for the performance of any work, task, job or project. Article 109. Solidary liability.
The provisions of existing laws to the contrary notwithstanding, every employer or indirect
employer shall be held responsible with his contractor or subcontractor for any violation of any
provision of this Code. For purposes of determining the extent of their civil liability under this
Chapter, they shall be considered as direct employers.

This joint and several liability of the contractor and the principal is mandated by the
Labor Code to assure compliance of the provisions therein including the statutory minimum
wage [Article 99, Labor Code]. The contractor is made liable by virtue of his status as direct
employer. The principal, on the other hand, is made the indirect employer of the contractors
employees for purposes of paying the employees their wages should the contractor be unable to
pay them. This joint and several liability facilitates, if not guarantees, payment of the workers
performance of any work, task, job or project, thus giving the workers ample protection as
mandated by the 1987 Constitution. For the security guards, the actual source of the payment of
their wage differentials and premium for holiday and rest day work does not matter as long as
they are paid. This is the import of Eparwa and LDCUs solidary liability. Creditors, such as the
security guards, may collect from anyone of the solidary debtors. Solidary liability does not
mean that, as between themselves, two solidary debtors are liable for only half of the payment.
LDCUs ultimate liability comes into play because of the expiration of the Contract for Security
Services. There is no privity of contract between the security guards and LDCU, but LDCUs
liability to the security guards remains because of Articles 106, 107 and 109 of the Labor Code.
.

Page 199 of 745


DIMAYUGA vs. PHILIPPINE COMMERCIAL & INDUSTRIAL BANK
Division G.R. No. 42542 Aug 5, 1991

FACTS:

On February 6, 1962, petitioner borrowed from the plaintiff-respondent, the sum of ten
thousand (P10,000.00) pesos as evidenced by a promissory note executed and signed by Pedro
Tanjuatco and Carlos Dimayuga. The indebtedness was to be paid on May 7, 1962 with interest
at the rate of ten percent (10%) per annum in case of non-payment at maturity as evidenced by
and in accordance with the terms and conditions of the promissory note executed jointly and
severally by defendants.

In the aforementioned promissory note, Carlos Dimayuga bound himself to pay jointly
and severally with Pedro Tanjuatco interest at the rate of 10% per annum on the said amount of
P10,000.00 until fully paid. Moreover, both undertook to "jointly and severally authorize the
respondent Philippine Commercial and Industrial Bank, at its option to apply to the payment of
this note any and all funds, securities or other real or personal property of value which hands
(sic) on deposit or otherwise belonging to anyone or all of us. Upon the default of the promissors
to pay, a complaint was filed on July 11, 1969 by the PCIB for some of money.
Defendant Carlos Dimayuga, however, had remitted to the plaintiff -respondent the amount
totalling P4,000.00 by way of partial payments made from August 1, 1969 to May 7, 1970 as
evidenced by corresponding receipts thereto. These payments were nevertheless applied to past
interests, charges and partly on the principal. On May 28, 1974, the trial court rendered a
decision holding defendants jointly and severally liable to pay the plaintiff the sum of P9,139.60
with interest at 10% per annum until fully paid plus P913.96 as attorneys' fees.
On July 11, 1974, petitioner filed a motion alleging that since Pedro Tanjuatco died on
December 23, 1973, the money claim of the respondents should be dismissed and prosecuted
against the estate of the late Pedro Tanjuatco. On June 22, 1974, the trial court denied the motion
for lack of merit.Not satisfied, the petitioner appealed to the respondent court. The Court of
Appeals dismissed the appeal. Hence, this petition.

ISSUE:

Whether the position of the petitioner that Pedro Tanjuatco having died on December 23,
1973, the money claim of PCIB should be dismissed and prosecuted against the estate of the late
Tanjuatco.

RULING:

From the evidence presented, there can be no dispute that Carlos Dimayuga bound
himself jointly and severally with Pedro C. Tanjuatco, now deceased, to pay the obligation with
PCIB in the amount of P10,000.00 plus 10% interest per annum. In addition, as above stated, in
case of non-payment, they undertook among others to jointly and severally authorize respondent
bank, at its option to apply to the payment of this note, any and all funds, securities, real or
personal properties, etc. belonging to anyone or all of them. Otherwise stated, the promissory
note in question provides in unmistakable language that the obligation of petitioner Dimayuga is
joint and several with Pedro C. Tanjuatco.
It is well settled under the law and jurisprudence that when the obligation is solidary, the creditor
may bring his action in toto against the debtors obligated in solidum. As expressly allowed by
Article 1216 of the Civil Code, the creditor may proceed against any one of the solidary debtors
or some or all of them simultaneously. "Hence, there is nothing improper in the creditor's filing
of an action against the surviving solidary debtors alone, instead of instituting a proceeding for
the settlement of the estate of the deceased debtor wherein his claim could be filed." The notice
is undoubtedly left to the solidary creditor to determine against whom he will enforce collection.
Thus, the appeal interposed by petitioner-appellant is dismissed for lack of merit and the decision
of the Court of First Instance is Affirmed in toto.

Page 200 of 745


CERNA VS CA
GR No. L-48359 March 30, 1993

FACTS:

On or about October 16, 1972, Celerino Delgado (Delgado) and Conrad Leviste (Leviste)
entered into a loan agreement which was evidenced by a promissory note worded as follows:
FOR VALUE RECEIVED, I, CELERINO DELGADO, with postal address at 98 K-11 St.,
Kamias Rd., Quezon City, promise to pay to the order of CONRAD C. LEVISTE, NINETY (90)
DAYS after date, at his office at 215 Buendia Ave., Makati, Rizal, the total sum of
SEVENTEEN THOUSAND FIVE HUNDRED (P17,500.00) PESOS, Philippine Currency,
without necessity of demand, with interest at the rate of TWELVE (12%) PERCENT per annum
On the same date, Delgado executed a chattel mortgage over a Willy's jeep owned by him. And
acting as the attorney-in-fact of herein petitioner, Manolo P. Cerna (petitioner), he also
mortgaged a "Taunus" car owned by the latter. The period lapsed without Delgado paying the
loan. This prompted Leviste to file a collection suit docketed as Civil Case No. 17507 with the
Court of First Instance of Rizal, Branch XXII against Delgado and petitioner as solidary debtors.
The Court of Appeals held that petitioner and Delgado were solidary debtors.

ISSUE:

Are petitioner and Delgado solidary debtors?

RULING:

Only Delgado signed the promissory note and accordingly, he was the only one bound by
the contract of loan. Nowhere did it appear in the promissory note that petitioner was a co-
debtor. The law is clear that "(c)ontracts take effect only between the parties. But by some
stretch of the imagination, petitioner was held solidarily liable for the debt allegedly because he
was a co-mortgagor of the principal debtor, Delgado. This ignores the basic precept that "(t)here
is a solidary liability only when the obligation expressly so states, or when the law or the nature
of the obligation requires solidarity." We have already stated that the contract of loan, as
evidenced by the promissory note, was signed by Delgado only. Petitioner had no part in the said
contract. Thus, nowhere could it be seen from the agreement that petitioner was solidarily bound
with Delgado for the payment of the loan.

Page 201 of 745


NAZARENO VS. COURT OF APPEALS
G.R. No. 131641, February 23, 2000

FACTS:

Maximino Nazareno, Sr. and Aurea Poblete were husband and wife. Aurea died on April
15, 1970, while Maximino, Sr. died on December 18, 1980. After the death of Maximino, Sr.,
Romeo filed an intestate case in the Court of First Instance of Cavite, Branch XV, where the case
was docketed as Sp. Proc. No. NC-28. Upon the reorganization of the courts in 1983, the case
was transferred to the Regional Trial Court of Naic, Cavite. Romeo was appointed administrator
of his fathers estate. In the course of the intestate proceedings, Romeo discovered that his
parents had executed several deeds of sale conveying a number of real properties in favor of his
sister, Natividad. One of the deeds involved six lots in Quezon City which were allegedly sold by
Maximino, Sr., with the consent of Aurea, to Natividad on January 29, 1970 for the total amount
of P47,800.00.

ISSUE:

Whether or not the Deed of Absolute of Sale can be equated as a divisible obligation.

HELD:

The Supreme court held that the Deed of Absolute Sale is an indivisible contract founded
on an indivisible obligation. As such, it being indivisible, it can not be annulled by only one of
them. And since this suit was filed only by the estate of Maximino A. Nazareno, Sr. without
including the estate of Aurea Poblete, the present suit must fail. The estate of Maximino A.
Nazareno, Sr. can not cause its annulment while its validity is sustained by the estate of Aurea
Poblete. An obligation is indivisible when it cannot be validly performed in parts, whatever may
be the nature of the thing which is the object thereof. The indivisibility refers to the prestation
and not to the object. The Deed of Sale of January 29, 1970 supposedly conveyed the six lots to
Natividad. The obligation is clearly indivisible because the performance of the contract cannot be
done in parts, otherwise the value of what is transferred is diminished. Petitioners are mistaken in
basing the indivisibility of a contract on the number of obligors. In any case, if petitioners only
point is that the estate of Maximino, Sr. alone cannot contest the validity of the Deed of Sale
because the estate of Aurea has not yet been settled, the argument would nonetheless be without
merit. The validity of the contract can be questioned by anyone affected by it. A void contract is
inexistent from the beginning. Hence, even if the estate of Maximino, Sr. alone contests the
validity of the sale, the outcome of the suit will bind the estate of Aurea as if no sale took place
at all.

Page 202 of 745


ALONZO VS SAN JUAN
GR No. 137549 February 11, 2005

FACTS:

A complaint for recovery of possession was filed by Aurelio P. Alonzo and Teresita A.
Sison against Jaime and Perlita San Juan docketed as Civil Case No. Q-96-29415 before the
Regional Trial Court (RTC) of Quezon City, Branch 77. In their Complaint, plaintiffs alleged
that they are the registered owners of a parcel of land. At around June of 1996, plaintiffs
discovered that a portion on the left side of the said parcel of land with an area of one hundred
twenty-five (125) square meters, more or less, was occupied by the defendants for more than a
year, without their prior knowledge or consent. A demand letter was sent to the defendants in
August of 1996 requiring them to vacate the property but they refused to comply; hence, the
filing of the Complaint. During the pendency of the case, the parties agreed to enter into a
Compromise Agreement which the trial court approved in a Judgment.

Alleging that they failed to abide by the provisions of the Compromise Agreement by their
failure to pay the amounts due thereon, plaintiffs sent a letter demanding that the defendants
vacate the premises. Plaintiffs subsequently filed an Amended Motion for Execution. Acting on
the motion, the trial court issued its Order dated 11 August 1998 denying the motion.

ISSUE:

Is the RTC decision correct?

RULING:

In herein case, the respondents failed to discharge their burden of proving payment. Even
assuming that payments were made, it has not been shown to the full satisfaction of this Court
whether the payments were made specifically to satisfy respondents obligation under the
Compromise Agreement, nor were the circumstances under which the payments were made
explained, taking into consideration the conditions of the Compromise Agreement.

Respondents contract with the petitioners have the force of law between them.
Respondents are thus bound to fulfill what has been expressly stipulated therein. Items 11 and 12
of the Compromise Agreement provided, in clear terms, that in case of failure to pay on the part
of the respondents, they shall vacate and surrender possession of the land that they are occupying
and the petitioners shall be entitled to obtain immediately from the trial court the corresponding
writ of execution for the ejectment of the respondents. This provision must be upheld, because
the Agreement supplanted the Complaint itself. When the parties entered into a Compromise
Agreement, the original action for recovery of possession was set aside and the action was
changed to a monetary obligation. Once approved judicially, the Compromise Agreement can
not and must not be disturbed except for vices of consent or forgery.

Page 203 of 745


DAVID VS CA
GR No. 115821 October 13, 1999

FACTS:

The Regional Trial Court of Manila, Branch 27, with Judge Ricardo Diaz, then presiding,
issued a writ of attachment over real properties covered by TCT Nos. 80718 and 10289 of
private respondents. In his Decision dated October 31, 1979, Judge Diaz ordered private
respondent Afable to pay petitioner P66,500.00 plus interest from July 24, 1974, until fully paid,
plus P5,000.00 as attorney's fees, and to pay the costs of suit.

On June 20, 1980, however, Judge Diaz issued an Order amending said Decision, so that
the legal rate of interest should be computed from January 4, 1966, instead of from July 24,
1974. The amended Decision in the decretal portion reads:

WHEREFORE, judgment is hereby rendered against the defendant, Valentin


Afable Jr., ordering him to pay to the plaintiff the sum of P66,500.00 plus the legal rate of
interest thereon from January 4, 1966 up to the time the same is fully paid plus the amount of
P5,000.00 as and for attorney's fees and to pay the costs of the suit." ordering the private
respondent Afable to pay the petitioner the sum of P66,500.00 plus the legal rate of interest
thereon from July 24, 1974, plus the amount of P5,000.00 as attorney's fees and to pay the costs
of suit.

The CA affirmed the judgment. The affirmation now comes to review before the SC.

ISSUE:
Should the payment of interest be simple or compound?

RULING:

As therein held, Article 2212 contemplates the presence of stipulated or conventional


interest which has accrued when demand was judicially made. In cases where no interest had
been stipulated by the parties, as in the case of Philippine American Accident Insurance, no
accrued conventional interest could further earn interest upon judicial demand.

When the judgment sought to be executed ordered the payment of simple "legal interest"
only and said nothing about payment of compound interest, but the respondent judge orders
payment of compound interest, then, he goes beyond the confines of a judgment which had
become final.

Page 204 of 745


REPUBLIC OF THE PHILIPPINES vs.THI THU THUY T. DE GUZMAN
G.R. No. 175021 June 15, 2011

FACTS:

Respondent is a contractor accredited by the PNP for the supply of office and construction
materials and equipment, and for the delivery of various services such as printing and rental,
repair of various equipment, and renovation of buildings, facilities, vehicles, tires, and spare
parts. On December 8, 1995, the PNP Engineering Services (PNPES), released a Requisition and
Issue Voucher for the acquisition of various building materials amounting to (P2,288,562.60) for
the construction of a four-storey condominium building with roof deck at Camp Crame, Quezon
City. Respondent averred that on December 11, 1995, MGM and petitioner, represented by the
PNP, through its chief, executed a Contract of Agreement8 (the Contract) wherein MGM, for the
price of P2,288,562.60, undertook to procure and deliver to the PNP the construction materials
itemized in the purchase order attached to the Contract. Respondent claimed that after the PNP
Chief approved the Contract and purchase order, MGM, on March 1, 1996, proceeded with the
delivery of the construction materials, as evidenced by Delivery Receipts and Sales Invoices and
the "Report of Public Property Purchase" issued by the PNPs Receiving and Accounting
Officers to their Internal Auditor Chief. Respondent asseverated that following the PNPs
inspection of the delivered materials on March 4, 1996, the PNP issued two Disbursement
Vouchers; one in the amount of P2,226,147.26 in favor of MGM, and the other, in the amount of
P62,415.34, representing the three percent (3%) withholding tax, in favor of the BIR.

ISSUE:
What is the proper interest to be awarded?

RULING:

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan
or forbearance of money, the interest due should be that which may have been stipulated in
writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be
computed from default, i.e., from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest


on the amount of damages awarded may be imposed at the discretion of the court at the rate of
6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages
except when or until the demand can be established with reasonable certainty. Accordingly,
where the demand is established with reasonable certainty, the interest shall begin to run from
the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such
certainty cannot be so reasonably established at the time the demand is made, the interest shall
begin to run only from the date the judgment of the court is made (at which time the
quantification of damages may be deemed to have been reasonably ascertained). The actual base
for the computation of legal interest shall, in any case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the
rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be
12% per annum from such finality until its satisfaction, this interim period being deemed to be
by then an equivalent to a forbearance of credit.84

Since the obligation herein is for the payment of a sum of money, the legal interest rate to be
imposed, under Article 2209 of the Civil Code is six percent (6%) per annum.

Page 205 of 745


Marques vs. Far East Bank
G.R. No. 171379, January 10, 2011

Facts:

Maxilite Technologies, Inc. (Maxilite) is a domestic corporation engaged in the


importation and trading of equipment for energy-efficiency systems. Jose N. Marques (Marques)
is the President and controlling stockholder of Maxilite. Far East Bank and Trust Co. (FEBTC) is
a local bank which handled the financing and related requirements of Marques and Maxilite.
Marques and Maxilite maintained accounts with FEBTC. Accordingly, FEBTC financed
Maxilites capital and operational requirements through loans secured with properties of
Marques under the latters name. Far East Bank Insurance Brokers, Inc. (FEBIBI) is a local
insurance brokerage corporation while Makati Insurance Company is a local insurance company.
Both companies are subsidiaries of FEBTC. On 17 June 1993, Maxilite and Marques entered into
a trust receipt transaction with FEBTC, in the sum of US$80,765.00, for the shipment of various
high-technology equipments from the United States, with the merchandise serving as collateral.
The foregoing importation was covered by a trust receipt document signed by Marques on behalf
of Maxilite. Sometime in August 1993, FEBIBI, upon the advice of FEBTC, facilitated the
procurement and processing from Makati Insurance Company of four separate and independent
fire insurance policies over the trust receipted merchandise. Finding that Maxilite failed to pay
the insurance premium in the sum of P8,265.60 for Insurance Policy No. 1024439 covering the
period 24 June 1994 to 24 June 1995, FEBIBI sent written reminders to FEBTC, dated 19
October 1994, 24 January 1995, and 6 March 1995, to debit Maxilites account. On 24 and 26
October 1994, Maxilite fully settled its trust receipt account. On 9 March 1995, a fire gutted the
Aboitiz Sea Transport Building along M.J. Cuenco Avenue, Cebu City, where Maxilites office
and warehouse were located. As a result, Maxilite suffered losses amounting to at least P2.1
million, which Maxilite claimed against the fire insurance policy with Makati Insurance
Company. Makati Insurance Company denied the fire loss claim on the ground of non-payment
of premium. FEBTC and FEBIBI disclaimed any responsibility for the denial of the claim.

Issue:

Whether FEBTC, FEBIBI and Makati Insurance Company are jointly and severally liable
to pay respondents the full coverage of the subject insurance policy?

Held:

Contrary to Maxilites and Marques view, FEBTC is solely liable for the payment of the
face value of the insurance policy and the monetary awards stated in the Court of Appeals
decision. Suffice it to state that FEBTC, FEBIBI, and Makati Insurance Company are
independent and separate juridical entities, even if FEBIBI and Makati Insurance Company are
subsidiaries of FEBTC. Absent any showing of its illegitimate or illegal functions, a subsidiarys
separate existence shall be respected, and the liability of the parent corporation as well as the
subsidiary shall be confined to those arising in their respective business. Besides, the records are
bereft of any evidence warranting the piercing of corporate veil in order to treat FEBTC,
FEBIBI, and Makati Insurance Company as a single entity. Likewise, there is no evidence
showing FEBIBIs and Makati Insurance Companys negligence as regards the non-payment of
the insurance premium.

Page 206 of 745


PRISMA CONSTRUCTION & DEVELOPMENT CORPORATION vs.MENCHAVEZ
G.R. No. 160545 March 9, 2010

FACTS:

On December 8, 1993, Pantaleon, the President and Chairman of the Board of PRISMA,
obtained a P1,000,000.00 loan from the respondent, with a monthly interest of P40,000.00
payable for six months, or a total obligation of P1,240,000.00 to be paid within six (6) months.
To secure the payment of the loan, Pantaleon issued a promissory note. As of January 4, 1997,
the petitioners had already paid a total of P1,108,772.00. However, the respondent found that the
petitioners still had an outstanding balance of P1,364,151.00 as of January 4, 1997, to which it
applied a 4% monthly interest. Thus, on August 28, 1997, the respondent filed a complaint for
sum of money with the RTC to enforce the unpaid balance, plus 4% monthly interest,
P30,000.00 in attorneys fees, P1,000.00 per court appearance and costs of suit.

ISSUE:

What is the proper interest rate to be awarded?

RULING:

In the present case, the respondent issued a check for P1,000,000.00. In turn, Pantaleon, in his
personal capacity and as authorized by the Board, executed the promissory note quoted above.
Thus, the P1,000,000.00 loan shall be payable within six (6) months, or from January 8, 1994 up
to June 8, 1994. During this period, the loan shall earn an interest of P40,000.00 per month, for a
total obligation of P1,240,000.00 for the six-month period. We note that this agreed sum can be
computed at 4% interest per month, but no such rate of interest was stipulated in the promissory
note; rather a fixed sum equivalent to this rate was agreed upon.

Article 1956 of the Civil Code specifically mandates that "no interest shall be due unless it has
been expressly stipulated in writing." Under this provision, the payment of interest in loans or
forbearance of money is allowed only if: (1) there was an express stipulation for the payment of
interest; and (2) the agreement for the payment of interest was reduced in writing. The
concurrence of the two conditions is required for the payment of interest at a stipulated rate.
Thus, we held in Tan v. Valdehueza and Ching v. Nicdao that collection of interest without any
stipulation in writing is prohibited by law.

Applying this provision, we find that the interest of P40,000.00 per month corresponds only to
the six (6)-month period of the loan, or from January 8, 1994 to June 8, 1994, as agreed upon by
the parties in the promissory note. Thereafter, the interest on the loan should be at the legal
interest rate of 12% per annum, consistent with our ruling in Eastern Shipping Lines, Inc. v.
Court of Appeals:

When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be
computed from default, i.e., from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code."

Page 207 of 745


THERESA MACALALAG vs. PEOPLE OF THE PHILIPPINES
G.R. No. 164358 December 20, 2006

FACTS:

On two separate occasions, particularly on 30 July 1995 and 16 October 1995, petitioner
Theresa Macalalag obtained loans from Grace Estrella (Estrella), each in the amount of
P100,000.00, each bearing an interest of 10% per month. Macalalag consistently paid the
interests. Finding the interest rates so burdensome, Macalalag requested Estrella for a reduction
of the same to which the latter agreed. On 16 April 1996 and 1 May 1996, Macalalag executed
Acknowledgment/Affirmation Receipts promising to pay Estrella the face value of the loans in
the total amount of P200,000.00 within two months from the date of its execution plus 6%
interest per month for each loan. Under the two Acknowledgment/Affirmation Receipts, she
further obligated herself to pay for the two (2) loans the total sum of P100,000.00 as liquidated
damages and attorney's fees in the total sum of P40,000.00 as stipulated by the parties the
moment she breaches the terms and conditions thereof.

As security for the payment of the aforesaid loans, Macalalag issued two Philippine
National Bank (PNB) Checks on 30 June 1996, each in the amount of P100,000.00, in favor of
Estrella. However, the said checks were dishonored for the reason that the account against which
the same was drawn was already closed. Estrella sent a notice of dishonor and demand to make
good the said checks to Macalalag, but the latter failed to do so. Hence, Estrella filed two
criminal complaints for Violation of Batas Pambansa Blg. 22 before the Municipal Trial Court in
Cities (MTCC) of Bacolod City.The MTCC found the accused Theresa Macalalag guilty beyond
reasonable doubt of the crime charged and is likewise ordered to pay as civil indemnity the total
amount of P200,000.00 with interest at the legal rate from the time of the filing of the
informations until the amount is fully paid; less whatever amount was thus far paid and validly
deducted from the principal sum originally claimed. On appealed, the Court of Appeals, affirmed
the RTC and the MTCC decisions with modification to the effect that accused was convicted
only of one (1) count of Violation of Batas Pambansa Blg. 22.

ISSUE:

Whether petitioner`s payments over and above the value of the said checks would free
her from criminal liability.

RULING:

The Court argued that, Even if we agree with petitioner Macalalag that the interests on
her loans should not be imputed to the face value of the checks she issued, petitioner Macalalag
is still liable for Violation of Batas Pambansa Blg. 22. Petitioner Macalalag herself declares that
before the institution of the two cases against her, she has made a total payment of P156,000.00.
Applying this amount to the first check (No. C-889835), what will be left is P56,000.00, an
amount insufficient to cover her obligation with respect to the second check. As stated above,
when Estrella presented the checks for payment, the same were dishonored on the ground that
they were drawn against a closed account. Despite notice of dishonor, petitioner Macalalag failed
to pay the full face value of the second check issued.

Only a full payment of the face value of the second check at the time of its presentment
or during the five-day grace period15 could have exonerated her from criminal liability. A
contrary interpretation would defeat the purpose of Batas Pambansa Blg. 22, that of safeguarding
the interest of the banking system and the legitimate public checking account user,16 as the
drawer could very well have himself exonerated by the mere expediency of paying a minimal
fraction of the face value of the check. Hence, the Petition is denied.

Page 208 of 745


Tan vs. Court f Appeals
G.R. No. 116285, October 19, 2001
367 SCRA 571

FACTS:

On May 14, 1978, petitioner Antonio Tan obtained two (2) loans in the total principal
amount of four (4) million pesos from respondent Cultural Center of the Philippines (CCP),
evidenced by 2 promissory notes with maturity dates on May 14, 1979 and July 6, 1979,
respectively. Petitioner defaulted but after a few partial payments he had the loans restructured
by respondent CCP, and petitioner accordingly executed a promissory note on August 31, 1979
in the amount of P3,411,421.32 payable in five (5) installments. Petitioner Tan, however, failed
to pay any of the supposed installments and again offered another mode of paying restructured
loan which respondent CCP refused to consent.

On May 30, 1984, respondent, thru counsel, wrote petitioner demanding the full
payment, within ten (10) days, from receipt of the letter, of the latters restructured loan which as
of April 30, 1984 amounted to P6, 088,735.03.

On August 29, 1984, respondent CCP filed with the RTC of Manila a complaint for a
collection of a sum of money. Eventually, petitioner was ordered to pay said amount, with 25%
thereof as attorneys fees and P500, 000.00 as exemplary damages. The Court of Appeals, on
appeal, reduced the attorneys fees to 5% of the principal amount to be collected from petitioner
and deleted the exemplary damages.

Still unsatisfied with the decision, petitioner comes to this Court seeking for the deletion
of the attorneys fees and the reduction of the penalties.

ISSUE:

The issue is whether or not interests and penalties may be both awarded in the case at bar.

HELD:

YES. Article 1226 of the New Civil Code provides that in obligations with a penal
clause, the penalty shall substitute the indemnity for damages and the payment of interests in
case of non-compliance, if there is no stipulation to the contrary. Nevertheless, damages shall be
paid if the obligor refuses to pay the penalty or is guilty of fraud in the fulfillment of the
obligation. The penalty may be enforced only when it is demandable in accordance with the
provisions of this Code. In the case at bar, the promissory note expressly provides for the
imposition of both interest and penalties in case of default on the part of the petitioner in the
payment of the subject restructured loan, and since the said stipulation has the force of law
between the parties and does not appear to be inequitable or unjust, the said stipulation must be
respected.

Page 209 of 745


EASTERN SHIPPING INES, INC vs. HON. COURT OF APPEALS
G.R. No. 97412 Jul 12, 1994

FACTS:

On December 4, 1981, two fiber drums of riboflavin were shipped from Yokohama,
Japan for delivery vessel `SS EASTERN COMET' owned by defendant Eastern Shipping Lines
under Bill of Lading No. YMA-8 (The shipment was insured under plaintiff's Marine Insurance
Policy No. 81/01177 for P36,382,466.38.

Upon arrival of the shipment in Manila on December 12, 1981, it was discharged unto the
custody of defendant Metro Port Services, Inc. The latter excepted to one drum, said to be in bad
order, which damage was unknown to plaintiff. On January 7, 1982 defendant Allied Brokerage
Corporation received the shipment from defendant Metro Port Service, Inc., one drum opened
and without. On January 8 and 14, 1982, defendant Allied Brokerage Corporation made
deliveries of the shipment to the consignees' warehouse. The latter excepted to one drum which
contained spillages, while the rest of the contents was adulterated/fake Plaintiff contended that
due to the losses/damage sustained by said drum, the consignee suffered losses totaling
P19,032.95, due to the fault and negligence of defendants. Claims were presented against
defendants who failed and refused to pay the same "As a consequence of the losses sustained,
plaintiff was compelled to pay the consignee P19,032.95 under the aforestated marine insurance
policy, so that it became subrogated to all the rights of action of said consignee against
defendants.

ISSUE:

a.)Whether the payment of legal interest on an award for loss or damage is to be computed from
the time the complaint is filed or form the date the decision appealed from is rendered; and
b)Whether the applicable rate of interest is twelve percent or six percent.

HELD:

When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or
quasi-delicts is breached, the contravenor can be held liable for damages. With regard
particularly to an award of interest in the concept of actual and compensatory damages, the rate
of interest, as well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan
or forbearance of money, the interest due should be that which may have been stipulated in
writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be
computed from default, i.e., from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 23 of the Civil Code.
2. When a obligation, not constituting a loan or forbearance of money, is breached, an interest on
the amount of damages awarded may be imposed at the discretion of the court at the rate of 6%
per annum. No interest, however, shall be adjudged on unliquidated claims or damages except
when or until the demand can be established with reasonable certainty. Accordingly, where the
demand is established with reasonable certainty, the interest shall begin to run from the time the
claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot
be so reasonably established at the time the demand is made, the interest shall begin to run only
from the date of the judgment of the court is made (at which time the quantification of damages
may be deemed to have been reasonably ascertained).
3. When the judgment of the court awarding a sum of money becomes final and executory, the
rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be
12% per annum from such finality until its satisfaction, this interim period being deemed to be
by then an equivalent to a forbearance of credit.

Page 210 of 745


PCI vs Ng Shueng Ngor
A.M. No. P-05-1973. March 18, 2005

FACTS:

Complainant EPCIB is the defendant in Civil Case No. CEB-26983 before the Regional
Trial Court (RTC), Branch 16, Cebu City, entitled, Ng Sheung Ngor, doing business under the
name and style Ken Marketing, Ken Appliance Division, Inc. and Benjamin Go, Plaintiffs, vs.
Equitable PCI Bank, Aimee Yu and Ben Apas, Defendants for Annulment and/or Reformation
of Documents and Contracts.
Respondents Antonio A. Bellones and Generoso B. Regalado are the sheriffs in Branches 9 and
16, respectively, of the RTC of Cebu City.

For garnishing accounts maintained by Equitable PCI Bank, Inc. (EPCIB) at Citibank,
N.A., and Hongkong and Shanghai Bank Corporation (HSBC), allegedly in violation of Section
9(b) of Rule 39 of the Rules of Court, a complaint for grave abuse of authority was filed by Atty.
Paulino L. Yusi against Sheriffs Antonio A. Bellones and Generoso B. Regalado. There was an
offer of other real property by petitioner.

ISSUE:

Did respondents violate the Rules of Court?

RULING:

By serving notices of garnishment on Citibank, N.A., HSBC and PNB, Sheriff Regalado
violated EPCIBs right to choose which property may be levied upon to be sold at auction for the
satisfaction of the judgment debt. Thus, it is clear that when EPCIB offered its real properties, it
exercised its option because it cannot immediately pay the full amount stated in the writ of
execution and all lawful fees in cash, certified bank check or any other mode of payment
acceptable to the judgment obligee.

In the case at bar, EPCIB cannot immediately pay by way of Managers Check so it
exercised its option to choose and offered its real properties. With the exercise of the option,
Sheriff Regalado should have ceased serving notices of garnishment and discontinued their
implementation. This is not true in the instant case. Sheriff Regalado was adamant in his
posture even if real properties have been offered which were sufficient to satisfy the judgment
debt.

Page 211 of 745


POLOTAN VS CA
GR No. 119379 September 25, 1998

FACTS:

Private respondent Security Diners International Corporation (Diners Club), a credit


card company, extends credit accomodations to its cardholders for the purchase of goods and
other services from member establishments. Said goods and services are reimbursed later on by
cardholders upon proper billing. Petitioner Rodelo G. Polotan, Sr. applied for membership and
credit accmodations with Diners Club in October 1985. The application form contained terms
and conditions governing the use and availment of the Diners Club card, among which is for the
cardholder to pay all charges made through the use of said card within the period indicated in the
statement of account and any remaining unpaid balance to earn 3% interest per annum plus
prime rate of Security Bank & Trust Company. Notably, in the application form submitted by
petitioner, Ofricano Canlas obligated himself to pay jointly and severally with petitioner the
latters obligation to private respondent.

Upon acceptance of his application, petitioner was issued Diners Club card No. 3651-
212766-3005. As of May 8, 1987, petitioner incurred credit charges plus appropriate interest and
service charges in the aggregate amount of P33,819.84 which had become due and demandable.
Demands for payment made against petitioner proved futile. Hence, private respondent filed a
Complaint for Collection of Sum of Money against petitioner before the lower court.

ISSUE:

Is petitioner liable for payment of credit charges plus interest and service charges?

RULING:

A contract of adhesion is one in which one of the contracting parties imposes a ready-
made form of contract which the other party may accept or reject, but cannot modify. One party
prepares the stipulation in the contract, while the other party merely affixes his signature or his
adhesion thereto, giving no room for negotiation and depriving the latter of the opportunity to
bargain on equal footing. Nevertheless, these types of contracts have been declared as binding as
ordinary contracts, the reason being that the party who adheres to the contract is free to reject it
entirely.

In this case, petitioner, in effect, claims that the subject contract is one-sided in that the
contract allows for the escalation of interests, but does not provide for a downward adjustment of
the same in violation of Central Bank Circular 905. Admittedly, the second paragraph of the
questioned proviso which provides that the Cardholder hereby authorizes Security Diners to
correspondingly increase the rate of such interest in the event of changes in prevailing market
rates x x x is an escalation clause. However, it cannot be said to be dependent solely on the will
of private respondent as it is also dependent on the prevailing market rates.

Escalation clauses are not basically wrong or legally objectionable as long as they are
not solely potestative but based on reasonable and valid grounds. Obviously, the fluctuation in
the market rates is beyond the control of private respondent.

Page 212 of 745


NEW SAMPAGUITA BUILDERS CONSTRUCTION, INC. (NSBCI) V. PHILIPPINE
NATIONAL BANK
G.R. No. 148753 2004 Jul 30

FACTS:

On February 11, 1989, Board Resolution No. 05, Series of 1989 was approved by
Petitioner NSBCI authorizing the company to x x x apply for or secure a commercial loan with
the PNB in an aggregate amount of P8.0M, under such terms agreed by the Bank and the NSBCI,
using or mortgaging the real estate properties registered in the name of its President and
Chairman of the Board Petitioner Eduardo R. Dee as collateral; and authorizing petitioner-
spouses to secure the loan and to sign any and all documents which may be required by
Respondent PNB, and that petitioner-spouses shall act as sureties or co-obligors who shall be
jointly and severally liable with Petitioner NSBCI for the payment of any [and all] obligations.
On August 15, 1989, Resolution No. 77 was approved by granting the request of Respondent
PNB thru its Board NSBCI for an P8 Million loan broken down into a revolving credit line of
P7.7M and an unadvised line of P0.3M for additional operating and working capital to mobilize
its various construction projects.
The loan of Petitioner NSBCI was secured by a first mortgage on the following: a)
three (3) parcels of residential land located at Mangaldan, Pangasinan; b) six (6) parcels of
residential land situated at San Fabian, Pangasinan; and c) a residential lot and improvements
thereon located at Mangaldan. The loan was further secured by the joint and several signatures
of Petitioners Eduardo Dee and Arcelita Marquez Dee, who signed as accommodation-
mortgagors since all the collaterals were owned by them and registered in their names.
Moreover Petitioner NSBCI executed three promissory notes. In addition, petitioner corporation
also signed the Credit Agreement dated August 31, 1989 relating to the revolving credit line of
P7.7 Million x x x and the Credit Agreement dated September 5, 1989 to support the unadvised
line of P300,000.00.
On August 31, 1989, petitioner-spouses executed a Joint and Solidary Agreement
(JSA) in favor of Respondent PNB unconditionally and irrevocably binding themselves to be
jointly and severally liable with the borrower for the payment of all sums due and payable to the
Bank under the Credit Document. Later on, Petitioner NSBCI failed to comply with its
obligations under the promissory notes.
On June 18, 1991, Petitioner Eduardo R. Dee on behalf of Petitioner NSBCI sent a
letter to the Branch Manager of the PNB Dagupan Branch requesting for a 90-day extension for
the payment of interests and restructuring of its loan for another term. Subsequently, NSBCI
tendered payment to Respondent PNB of three (3) checks aggregating P1,000,000.00.
In a meeting held on August 12, 1991, Respondent PNBs representative, Mr. Rolly Cruzabra,
was informed by [Petitioner] Eduardo Dee of his intention to remit to Respondent PNB post-
dated checks covering interests, penalties and part of the loan principals of his due account.
On August 22, 1991, Respondent banks Crispin Carcamo wrote Petitioner Eduardo
Dee, informing him that Petitioner NSBCIs proposal was acceptable, provided the total payment
should be P4,128,968.29 that would cover the amount of P1,019,231.33 as principal,
P3,056,058.03 as interests and penalties, and P53,678.93 for insurance[,] with the issuance of
post-dated checks to be dated not later than November 29, 1991.
On September 6, 1991, Petitioner Eduardo Dee wrote the PNB Branch Manager
reiterating his proposals for the settlement of Petitioner NSBCIs past due loan account
amounting to P7,019,231.33. Petitioner Eduardo Dee later tendered four (4) post-dated
Interbank checks aggregating P1,111,306.67 in favor of Respondent PNB
Upon presentment, however, x x x check nos. 03500087 and 03500088 dated September 29 and
October 29, 1991 were dishonored by the drawee bank and returned due to a stop payment
order from petitioners.
On November 12, 1991, PNBs Mr. Carcamo wrote Petitioner Eduardo Dee informing
him that unless the dishonored checks were made good, said PNB branch shall recall its
recommendation to the Head Office for the restructuring of the loan account and refer the matter
to its legal counsel for legal action. Petitioners did not heed respondents warning and as a result,

Page 213 of 745


the PNB Dagupan Branch sent demand letters to Petitioner NSBCI at its office address at 1611
ERDC Building, E. Rodriguez Sr. Avenue, Quezon City, asking it to settle its past due loan
account.
Petitioners nevertheless failed to pay their loan obligations within the time frame
given them and as a result, Respondent PNB filed with the Provincial Sheriff of Pangasinan at
Lingayen a Petition for Sale
The sheriff foreclosed the real estate mortgage and sold at public auction the mortgaged
properties of petitioner-spouses, with Respondent PNB being declared the highest bidder for the
amount of P10,334,000.00. Copies of the Sheriffs Certificate of Sale were sent by registered
mail to petitioner corporations address petitioner-spouses address.
On April 6, 1992, the PNB Dagupan Branch Manager sent a letter to petitioners at their
address informing them that the properties securing their loan account had been sold at public
auction, that the Sheriffs Certificate of Sale had been registered with the Registry of Deeds of
Pangasinan and that a period of one (1) year therefrom was granted to them within which to
redeem their properties. Petitioners failed to redeem their properties within the one-year
redemption period and so Respondent PNB executed a Deed of Absolute Sale consolidating title
to the properties in its name.
Respondent PNB informed Petitioner NSBCI that the proceeds of the sale conducted on
February 26, 1992 were not sufficient to cover its total claim amounting to P12,506,476.43 and
thus demanded from the latter the deficiency of P2,172,476.43 plus interest and other charges
until the amount was fully paid. Petitioners refused to pay the above deficiency claim which
compelled Respondent PNB to institute the instant Complaint for the collection of its deficiency
claim.

ISSUE:

Whether or not the escalation clause is valid and whether or not it is violative of the
principle of mutuality of contracts.

RULING:
In each drawdown, the Promissory Notes specified the interest rate to be charged: 19.5
percent in the first, and 21.5 percent in the second and again in the third. However, a uniform
clause therein permitted respondent to increase the rate within the limits allowed by law at any
time depending on whatever policy it may adopt in the future x x x, without even giving prior
notice to petitioners. The Court holds that petitioners accessory duty to pay interest did not give
respondent unrestrained freedom to charge any rate other than that which was agreed upon. No
interest shall be due, unless expressly stipulated in writing. It would be the zenith of farcicality
to specify and agree upon rates that could be subsequently upgraded at whim by only one party
to the agreement.

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 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. Besides, the pro
forma promissory notes have the character of a contract dadhsion, where the parties do not
bargain on equal footing, the weaker partys the debtors participation being reduced to the
alternative to take it or leave it.

Page 214 of 745


PRISMA CONSTRUCTION & DEVELOPMENT CORPORATION vs.MENCHAVEZ
G.R. No. 160545, March 9, 2010

FACTS:

On December 8, 1993, Pantaleon, the President and Chairman of the Board of PRISMA,
obtained a P1,000,000.00 loan from the respondent, with a monthly interest of P40,000.00
payable for six months, or a total obligation of P1,240,000.00 to be paid within six (6) months.
To secure the payment of the loan, Pantaleon issued a promissory note. As of January 4, 1997,
the petitioners had already paid a total of P1,108,772.00. However, the respondent found that the
petitioners still had an outstanding balance of P1,364,151.00 as of January 4, 1997, to which it
applied a 4% monthly interest. Thus, on August 28, 1997, the respondent filed a complaint for
sum of money with the RTC to enforce the unpaid balance, plus 4% monthly interest,
P30,000.00 in attorneys fees, P1,000.00 per court appearance and costs of suit.

ISSUE:

What is the proper interest rate to be awarded?

RULING:

In the present case, the respondent issued a check for P1,000,000.00. In turn, Pantaleon, in his
personal capacity and as authorized by the Board, executed the promissory note quoted above.
Thus, the P1,000,000.00 loan shall be payable within six (6) months, or from January 8, 1994 up
to June 8, 1994. During this period, the loan shall earn an interest of P40,000.00 per month, for a
total obligation of P1,240,000.00 for the six-month period. We note that this agreed sum can be
computed at 4% interest per month, but no such rate of interest was stipulated in the promissory
note; rather a fixed sum equivalent to this rate was agreed upon.

Article 1956 of the Civil Code specifically mandates that "no interest shall be due unless it has
been expressly stipulated in writing." Under this provision, the payment of interest in loans or
forbearance of money is allowed only if: (1) there was an express stipulation for the payment of
interest; and (2) the agreement for the payment of interest was reduced in writing. The
concurrence of the two conditions is required for the payment of interest at a stipulated rate.
Thus, we held in Tan v. Valdehueza and Ching v. Nicdao that collection of interest without any
stipulation in writing is prohibited by law.

Applying this provision, we find that the interest of P40,000.00 per month corresponds only to
the six (6)-month period of the loan, or from January 8, 1994 to June 8, 1994, as agreed upon by
the parties in the promissory note. Thereafter, the interest on the loan should be at the legal
interest rate of 12% per annum, consistent with our ruling in Eastern Shipping Lines, Inc. v.
Court of Appeals:

When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be
computed from default, i.e., from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code."

Page 215 of 745


JOSEPH CHAN, WILSON CHAN and LILY CHAN VS. BONIFACIO S. MACEDA, JR
402 SCRA
G.R. No. 142591 352 2003 Apr 30

FACTS:

On July 28, 1976, Bonifacio S. Maceda, Jr., herein respondent, obtained a P7.3 million
loan from the Development Bank of the Philippines for the construction of his New Gran Hotel
Project in Tacloban City. Thereafter, on September 29, 1976, respondent entered into a building
construction contract with Moreman Builders Co., Inc. They agreed that the construction would
be finished not later than December 22, 1977. Respondent purchased various construction
materials and equipment in Manila. Moreman, in turn, deposited them in the warehouse of
Wilson and Lily Chan, herein petitioners. The deposit was free of charge. Unfortunately,
Moreman failed to finish the construction of the hotel at the stipulated time. Hence, on February
1, 1978, respondent filed with the then CFI an action for rescission and damages against
Moreman. On November 28, 1978, the CFI rendered its Decision rescinding the contract
between Moreman and respondent and awarding to the latter P445,000.00 as actual, moral and
liquidated damages; P20,000.00 representing the increase in the construction materials; and
P35,000.00 as attorneys fees. Moreman interposed an appeal to the Court of Appeals but the
same was dismissed on March 7, 1989 for being dilatory. He elevated the case to the SC via a
petition for review on certiorari. In a Decision dated February 21, 1990, the Court denied the
petition. On April 23, 1990 an Entry of Judgment was issued.
Meanwhile, during the pendency of the case, respondent ordered petitioners to return to
him the construction materials and equipment which Moreman deposited in their warehouse.
Petitioners, however, told them that Moreman withdrew those construction materials in 1977.
Hence, on December 11, 1985, respondent filed with the RTC an action for damages with an
application for a writ of preliminary attachment against petitioners.

ISSUE:

Whether or not respondent have the right to demand the release of the said materials and
equipment or claim for damages.

RULING:

At the outset, the case should have been dismissed outright by the trial court because of
patent procedural infirmities. Even without such serious procedural flaw, the case should also be
dismissed for utter lack of merit. Under Article 1311 of the Civil Code, contracts are binding
upon the parties (and their assigns and heirs) who execute them. When there is no privity of
contract, there is likewise no obligation or liability to speak about and thus no cause of action
arises. Specifically, in an action against the depositary, the burden is on the plaintiff to prove the
bailment or deposit and the performance of conditions precedent to the right of action. A
depositary is obliged to return the thing to the depositor, or to his heirs or successors, or to the
person who may have been designated in the contract.
The only pieces of evidence respondent presented to prove the contract of deposit were
the delivery receipts. Significantly, they are unsigned and not duly received or authenticated by
Moreman, petitioners or respondent or any of their authorized representatives. Hence, those
delivery receipts have no probative value at all. While our laws grant a person the remedial right
to prosecute or institute a civil action against another for the enforcement or protection of a right,
or the prevention or redress of a wrong, every cause of action ex-contractu must be founded upon
a contract, oral or written, express or implied. Moreover, respondent also failed to prove that
there were construction materials and equipment in petitioners warehouse at the time he made a
demand for their return. Considering that respondent failed to prove (1) the existence of any
contract of deposit between him and petitioners, nor between the latter and Moreman in his
favor, and (2) that there were construction materials in petitioners warehouse at the time of
respondents demand to return the same, we hold that petitioners have no corresponding
obligation or liability to respondent with respect to those construction materials.

Page 216 of 745


PNB VS ENCINA
GR 174055. February 12, 2008

FACTS:

The Philippine National Bank (PNB) assails the Decision of the Court of Appeals dated
15 May 2005, rendered in CA-G.R. CV No. 79094 which, among others, declared null and void
the interest rate imposed by PNB on the loan obtained from it by respondents and the consequent
extrajudicial foreclosure of the properties offered as security for the loan.
Respondents Encina spouses acquired several loans from PNB from which it failed to pay
within due time. Encina avers that there ought to be longer gestation periods on its part being
engaged in a business of agricultural character.

ISSUE:

Was there a violation of the Usury Law?

RULING:

As borne by the records, the Encina spouses never challenged the validity of their loan
and the accessory contracts with PNB on the ground that they violated the principle of mutuality
of contracts in view of the provision therein that the interest rate shall be set by management.
Their only contention concerning the interest rate was that the charges imposed by the bank
violated the Usury Law. This was the essence of the second cause of action alleged in the
complaint.
It should be definitively ruled in this regard that the Usury Law had been rendered legally
ineffective by Resolution No. 224 dated 3 December 1982 of the Monetary Board of the Central
Bank, and later by Central Bank Circular No. 905 which took effect on 1 January 1983 and
removed the ceiling on interest rates for secured and unsecured loans regardless of maturity. The
effect of these circulars is to allow the parties to agree on any interest that may be charged on a
loan. The virtual repeal of the Usury Law is within the range of judicial notice which courts are
bound to take into account. After all, the fundamental tenet is that the law is deemed part of the
contract. Thus, the trial court was correct in ruling that the second cause of action was without
basis.

Page 217 of 745


RESTITUTA IMPERIAL VS. ALEX JAUCIAN
G.R. No. 149004, April 14, 2004
427 SCRA 517

FACTS:

The present controversy arose from a case for collection of money, filed by Alex A.
Jaucian against Restituta Imperial, on October 26, 1989. The complaint alleges, inter alia, that
defendant obtained from plaintiff six (6) separate loans for which the former executed in favor of
the latter six (6) separate promissory notes and issued several checks as guarantee for payment.
When the said loans became overdue and unpaid, especially when the defendants checks were
dishonored, plaintiff made repeated oral and written demands for payment.
The loans were covered by six (6) separate promissory notes executed by defendant. The
face value of each promissory notes is bigger [than] the amount released to defendant because
said face value already included the interest from date of note to date of maturity. Said
promissory notes indicate the interest of 16% per month, date of issue, due date, the
corresponding guarantee checks issued by defendant, penalties and attorneys fees. The trial
courts clear and detailed computation of petitioners outstanding obligation to respondent was
affirmed by the CA for being convincing and satisfactory. However, the CA held that without
judicial inquiry, it was improper for the RTC to rule on the constitutionality of Section 1, Central
Bank Circular No. 905, Series of 1982.

ISSUES:

(1) Whether or not the penalties charged per month is in the guise of hidden interest.
(2) Whether or not the reduction of attorneys fees by the RTC is reasonable.

RULING:

Iniquitous and unconscionable stipulations on interest rates, penalties and attorneys fees
are contrary to morals. Consequently, courts are granted authority to reduce them equitably. If
reasonably exercised, such authority shall not be disturbed by appellate courts.
Article 1229 of the Civil Code states thus:The judge shall equitably reduce the penalty
when the principal obligation has been partly or irregularly complied with by the debtor. Even if
there has been no performance, the penalty may also be reduced by the courts if it is iniquitous or
unconscionable.
In exercising this power to determine what is iniquitous and unconscionable, courts must
consider the circumstances of each case. What may be iniquitous and unconscionable in one
may be totally just and equitable in another. In the present case, iniquitous and unconscionable
was the parties stipulated penalty charge of 5 percent per month or 60 percent per annum, in
addition to regular interests and attorneys fees. Also, there was partial performance by
petitioner when she remitted P116,540 as partial payment of her principal obligation of
P320,000. Under the circumstances, the trial court was justified in reducing the stipulated
penalty charge to the more equitable rate of 14 percent per annum.
The Promissory Note carried a stipulation for attorneys fees of 25 percent of the
principal amount and accrued interests. Strictly speaking, this covenant on attorneys fees is
different from that mentioned in and regulated by the Rules of Court. Rather, the attorneys
fees here are in the nature of liquidated damages and the stipulation therefor is aptly called a
penal clause. So long as the stipulation does not contravene the law, morals, public order or
public policy, it is binding upon the obligor. It is the litigant, not the counsel, who is the
judgment creditor entitled to enforce the judgment by execution.
Nevertheless, it appears that petitioners failure to comply fully with her obligation was
not motivated by ill will or malice. The twenty-nine partial payments she made were a
manifestation of her good faith. Again, Article 1229 of the Civil Code specifically empowers the
judge to reduce the civil penalty equitably, when the principal obligation has been partly or
irregularly complied with. Upon this premise, we hold that the RTCs reduction of attorneys
fees -- from 25 percent to 10 percent of the total amount due and payable -- is reasonable.

Page 218 of 745


TEDDY PABUGAIS VS. DAVE SAHIJWANI
G.R. No. 156846, February 23, 2004
423 SCRA 596

FACTS:

Pursuant to an Agreement And Undertaking on December 3, 1993, petitioner Teddy G.


Pabugais, in consideration of the amount of P15,487,500.00, agreed to sell to respondent Dave P.
Sahijwani a lot containing 1,239 square meters located at Jacaranda Street, North Forbes Park,
Makati, Metro Manila. Respondent paid petitioner the amount of P600,000.00 as
option/reservation fee and the balance of P14,887,500.00 to be paid within 60 days from the
execution of the contract, simultaneous with delivery of the owners duplicate Transfer
Certificate of Title in respondents name the Deed of Absolute Sale; the Certificate of Non-Tax
Delinquency on real estate taxes and Clearance on Payment of Association Dues. The parties
further agreed that failure on the part of respondent to pay the balance of the purchase price
entitles petitioner to forfeit the P600,000.00 option/reservation fee; while non-delivery by the
latter of the necessary documents obliges him to return to respondent the said option/reservation
fee with interest at 18% per annum.
Petitioner failed to deliver the required documents. In compliance with their agreement,
he returned to respondent the latters P600,000.00 option/reservation fee by way of Far East
Bank & Trust Company Check, which was, however, dishonored.
Petitioner claimed that he twice tendered to respondent, through his counsel, the amount
of P672,900.00 (representing the P600,000.00 option/reservation fee plus 18% interest per
annum computed from December 3, 1993 to August 3, 1994) in the form of Far East Bank &
Trust Company Managers Check No. 088498, dated August 3, 1994, but said counsel refused to
accept the same. On August 11, 1994, petitioner wrote a letter to respondent saying that he is
consigning the amount tendered with the Regional Trial Court of Makati City. On August 15,
1994, petitioner filed a complaint for consignation.
Respondents counsel, on the other hand, admitted that his office received petitioners
letter dated August 5, 1994, but claimed that no check was appended thereto. He averred that
there was no valid tender of payment because no check was tendered and the computation of the
amount to be tendered was insufficient, because petitioner verbally promised to pay 3% monthly
interest and 25% attorneys fees as penalty for default, in addition to the interest of 18% per
annum on the P600,000.00 option/reservation fee.
On November 29, 1996, the trial court rendered a decision declaring the consignation
invalid for failure to prove that petitioner tendered payment to respondent and that the latter
refused to receive the same. Petitioner appealed the decision to the Court of Appeals.
Petitioners motion to withdraw the amount consigned was denied by the Court of Appeals and
the decision of the trial court was affirmed.
On a motion for reconsideration, the Court of Appeals declared the consignation as valid
in an Amended Decision dated January 16, 2003. It held that the validity of the consignation had
the effect of extinguishing petitioners obligation to return the option/reservation fee to
respondent. Hence, petitioner can no longer withdraw the same.
Unfazed, petitioner filed the instant petition for review contending that he can withdraw
the amount deposited with the trial court as a matter of right because at the time he moved for the
withdrawal thereof, the Court of Appeals has yet to rule on the consignations validity and the
respondent had not yet accepted the same.

ISSUE:

Whether or not assigning the amount of P672, 900.00 to Atty. De Guzman is prohibited.

RULING:

The amount consigned with the trial court can no longer be withdrawn by petitioner
because respondents prayer in his answer that the amount consigned be awarded to him is

Page 219 of 745


equivalent to an acceptance of the consignation, which has the effect of extinguishing
petitioners obligation.
Moreover, petitioner failed to manifest his intention to comply with the Agreement And
Undertaking by delivering the necessary documents and the lot subject of the sale to respondent
in exchange for the amount deposited. Withdrawal of the money consigned would enrich
petitioner and unjustly prejudice respondent.
The withdrawal of the amount deposited in order to pay attorneys fees to petitioners
counsel, Atty. De Guzman, Jr., violates Article 1491 of the Civil Code which forbids lawyers
from acquiring by assignment, property and rights which are the object of any litigation in which
they may take part by virtue of their profession. Furthermore, Rule 10 of the Canons of
Professional Ethics provides that the lawyer should not purchase any interest in the subject
matter of the litigation which he is conducting. The assailed transaction falls within the
prohibition because the Deed assigning the amount of P672,900.00 to Atty. De Guzman, Jr., as
part of his attorneys fees was executed during the pendency of this case with the Court of
Appeals. In his Motion to Intervene, Atty. De Guzman, Jr., not only asserted ownership over
said amount, but likewise prayed that the same be released to him. That petitioner knowingly
and voluntarily assigned the subject amount to his counsel did not remove their agreement within
the ambit of the prohibitory provisions. To grant the withdrawal would be to sanction a void
contract.
Wherefore, in view of all the foregoing, the instant petition for review is denied.

Page 220 of 745


LO VS. COURT OF APPEALS
G.R. No. 141434, September 23, 2003
411 SCRA 523

FACTS:

Antonio Lo acquired two parcels of land with an office constructed thereon in an auction
sale on November 9,1995 from the Land Bank of the Philippines. At variance, private respondent
National Onion Growers Cooperative Marketing Association, Inc. was the occupant of the
parcels of land under a subsisting contract of lease with Land Bank. The lease was valid until
December 31,1995.
Upon the expiration of the lease contract, Lo demanded that private respondent vacate the
leased premises and surrender its possession to him. The agricultural cooperative refused on the
ground of a contest against petitioners acquisition of the parcels of land in an action for
annulment of sale, redemption and damages.
On February 23,1996, petitioner filed an action for ejectment and subsequently asked for
imposition of the contractually stipulated penalty of P5, 000 per day of delay in surrendering the
possession of the property. Thereafter, the trial court decided the case in favor of petitioner.
Private respondent was ordered to vacate the leased premises. On appeal to the Regional Trial
Court, the MTC decision was affirmed in toto. The agricultural cooperative then elevated the
case to the court of Appeals that affirmed the lower courts decision but modified that the penalty
to be imposed must be reduced to P1, 000.
Unsatisfied with the decision of the CA, Lo filed the instant petition for review.

ISSUE:

The issue raised by the petitioner is whether or not the Court of Appeals has the authority
to reduce the penalty awarded by the trial court, the same having been stipulated by the parties in
their Contract of Lease.

RULING:

YES, the Court of Appeals has the authority to do so. While courts are not at liberty to
ignore the freedom of the parties to agree on such terms and conditions as they see fit as long as
they are not contrary to law, morals, good customs, public order or public policy, courts may
equitably reduce a stipulated penalty if it is iniquitous or unconscionable, or if the principal
obligation has been partly or irregularly complied with. This power of the courts is explicitly
sanctioned by Article 1229 of the Civil Code which provides that the judge shall equitably
reduce the penalty when the principal obligation has been partly or irregularly complied with by
the debtor. Even if there has been no performance, the penalty may also be reduced by courts if it
is iniquitous or unconscionable.

Page 221 of 745


LIGUTAN VS. COURT OF APPEALS
G.R. No. 138677, February 12, 2002
376 SCRA 561

FACTS:

Petitioners Tolomeo Ligutan and Leonidas dela Llana obtained on May 11, 1981 a loan
in the amount of P120, 000.00 from respondent Security Bank and Trust Company. Petitioners
executed a promissory note binding themselves, jointly and severally, to pay the sum borrowed
with an interest of 15.189% per annum upon maturity and to pay a penalty of 5% every month on
the outstanding principal and interest in case of default. In addition, petitioners agreed to pay
10% of the total amount due by way of attorneys fees if the matter were indorsed to a lawyer for
collection or if a suit were instituted to enforce payment. The obligation matured on September
8, 1981; the bank, however, granted an extension but only until December 29, 1981.
When petitioners defaulted on their obligation, the bank filed on November 3, 1982 with
the RTC of Makati, Branch 143 a complaint for recovery of the due amount.
On September 5, 1988, the trial court ruled in favor of the bank. It ordered the petitioners
to pay, jointly and severally, the sum of P114, 416.00 with interest thereon at the rate of 15.189%
per annum, 2% service charge and 5% per month penalty charge, commencing on May 20, 1982
until fully paid.
The Court of Appeals affirmed it but deleted the 2% service charge pursuant to Central
Bank Circular No. 783. Not fully satisfied with the decision, both parties moved for
reconsideration. Petitioners prayed for the reduction of the 5% penalty for being unconscionable.
The bank, on the other hand, asked that the payment of interest and penalty be commenced not
from the date of filing of complaint but from the time of default as so stipulated in the contract of
the parties.
The petitioner, before this Court, contended, among others that the 15.189% interest and
the penalty of 3% per month or 36% per annum imposed by private respondent bank on
petitioners loan obligation are still manifestly exorbitant, iniquitous and unconscionable.
Respondent bank, which did not take an appeal, would, however, have it that the penalty sought
to be deleted by petitioners was even insufficient to fully cover and compensate for the cost of
money brought about by the radical devaluation and decrease in the purchasing power of the
peso.

ISSUE:

Whether or not the penalty is reasonable and not iniquitous.

RULING:

NO, the penalty is not unreasonable. The Court held that the question of whether a
penalty is reasonable or iniquitous can be partly subjective and partly objective. Its resolution
would depend on such factors as, but not necessarily confide to, the type, extent and purpose of
the penalty, the nature of the obligation, the mode of breach and its consequences, the
supervening realities, the standing and relationship of the parties, and the like, the application of
which, by and large, is addressed to the sound discretion of the court. In Rizal Commercial
Banking Corp. v. Court of Appeals, for example, the Court has tempered the penalty charges
after taking into account the debtors pitiful situation and its offer to settle the entire obligation
with the creditor bank. The stipulated penalty might likewise be reduced when a partial or
irregular payment is made by the payment. The stipulated penalty might even be deleted such as
when there has been substantial performance in good faith by the obligor, when the penalty
clause itself suffers from fatal infirmity, and when exceptional circumstances so exist as to
warrant it. In the case at bar, given the circumstances, not to mention the repeated acts of breach
by petitioners of their contractual obligation, this Court sees no cogent ground to ruling of the
appellate court.

Page 222 of 745


PASCUAL VS. RAMOS
G.R. No. 144712, July 4, 2002
384 SCRA 105

FACTS:

Ramos alleged that on June 3, 1987, for and in consideration of P150,000, the Spouses
Pascual executed in his favor a Deed of Absolute Sale with Right to Repurchase over 2 parcels
of land and the improvements thereon located in Bambang, Bulacan, Bulacan. This document
was annotated at the back of the title. The Pascuals did not exercise their right to repurchase the
property within the stipulated one-year period; hence, Ramos prayed that the title or ownership
over the subject parcels of land and improvements thereon be consolidated in his favor.
In their Answer, the Pascuals admitted having signed the Deed of Absolute Sale with
Right to Repurchase for a consideration of P150, 000 but averred that what the parties had
actually agreed upon and entered into was a real estate mortgage. They further alleged that there
was no agreement limiting the period within which to exercise the right to repurchase and that
they had even overpaid Ramos. The trial court found that the transaction between the parties was
actually a loan in the amount of P150, 000.00, the payment of which was secured by a mortgage
of the property covered by TCT No. 305626. It also found that the Pascuals had made payments
in the total sum of P344,000.00, and that with interest at 7% per annum, they had overpaid the
loan by P141,500.00. Accordingly, in its Decision of March 15, 1995 the trial court ruled in
favor of the defendants. The Pascuals interposed the following defenses: (a) the trial court had no
jurisdiction over the subject or nature of the petition; (b) Ramos had no legal capacity to sue; (c)
the cause of action, if any, was barred by the statute of limitations; (d) the petition stated no
cause of action; (e) the claim or demand set forth in Ramoss pleading had been paid, waived,
abandoned, or otherwise extinguished; and (f) Ramos has not complied with the required
confrontation and conciliation before the barangay.

ISSUE:

Whether or not the contract entered into was a contract of loan and not a contract of sale.

HELD:

After the trial court sustained petitioners claim that their agreement with Ramos was
actually a loan with real estate mortgage, the Pascuals should not be allowed to turn their back on
the stipulation in that agreement to pay interest at the rate of 7% per month. The Pascuals should
accept not only the favorable aspect of the courts declaration that the document is actually an
equitable mortgage but also the necessary consequence of such declaration, that is, that interest
on the loan as stipulated by the parties in that same document should be paid. Besides, when
Ramos moved for a reconsideration of the decision of the trial court pointing out that the interest
rate to be used should be 7% per month, the Pascuals never lifted a finger to oppose the claim. It
was only in their motion for the reconsideration of the decision of the Court of Appeals that the
Pascuals made an issue of the interest rate and prayed for its reduction to 12% per annum.
It is a basic principle in civil law that parties are bound by the stipulations in the contracts
voluntarily entered into by them. Parties are free to stipulate terms and conditions which they
deem convenient provided they are not contrary to law, morals, good customs, public order, or
public policy.
The interest rate of 7% per month was voluntarily agreed upon by Ramos and the
Pascuals. There is nothing from the records and, in fact, there is no allegation showing that
petitioners were victims of fraud when they entered into the agreement with Ramos. Neither is
there a showing that in their contractual relations with Ramos, the Pascuals were at a
disadvantage on account of their moral dependence, ignorance, mental weakness, tender age or
other handicap, which would entitle them to the vigilant protection of the courts as mandated by
Article 24 of the Civil Code.

Page 223 of 745


FIRST METRO INVESTMENTS VS. ESTE DEL SOL MOUNTAIN RESERVE, INC.
G.R. No. 141811, November 15, 2001
369 SCRA 99

FACTS:

Petitioner First Metro granted respondent Este Del Sol a loan of P7,385,500.00 to finance
the construction and development of respondents Mountain Reserve. The loan was payable on
36 consecutive monthly amortizations and the interest on the loan was egged at 16% per annum
based on the diminishing balance. In case of deposit, a 20% one time penalty on the amount due
and such mount shall bear interest at the highest rate permitted by law plus liquidated damages at
the rate of 2% per month and attorneys fees equivalent to 25% of the sum sought to be received.
In accordance with the terms of the loan agreement, respondents Este Del Sol executed several
documents as security for payment. Moreover, it executed as provided for by the loan
agreement, an Underwriting Agreement whereby Forts Metro shall underwrite on a best efforts
basis the public offering of one hundred twenty thousand common shares of Este Del Sol. In
addition, the Underwriting Agreement provided that for supervising the public offering of the
shares, Este Del Sol shall pay First Metro an annual supervision fee of P 200,000.00 per annum
and a consultancy fee of P 332,500.00 per annum for a period of four (4) consecutive years.
Simultaneous with the execution of and in accordance with the terms of the Underwriting
Agreement, a consultancy Agreement was also executed whereby Este Del Sol engaged the
services of petitioner First Metro for a fee as consultant to render general consultancy services.
Since Este Del Sol failed to meet the schedule of repayment it appeared to have incurred
a total obligation of P 12,679,630.98. Thus First Metro caused the extra judicial foreclosure of
the real estate mortgage where First Metro was the highest bidder. However, there remained a
balance of P 6,863,297.73 Hence, First Metro instituted an instant collection suit against
respondent, including those other respondents who have securities of the loan of respondent Este
Del Sol by virtue of their continuing surety agreements.

ISSUE:

Whether or not Underwriting and Consultancy Agreements are mere subterfuges to


camouflage the usurious interest charged by First Metro.

RULING:

The form of the contra ct enters into between the petitioner and respondent is not
conclusive for the law will not permit a usurious loan to hide itself behind a legal form. An
apparently legal loan is usurious when it is intended that additional compensation for the loan
providing for payment bye the borrower for the leaders services which of little value or which
are not in fact to be rendered. Here, the loan Underwriting and Consultancy Agreement are not
separate and independent transactions rather they were executed and delivered contemporaneous
by and executed by First Metro as essential conditions for the grant of the loan. However, in
usurious loans, the entire obligation does not become void because the unpaid principal debt still
stands and remains.

Page 224 of 745


DOMEL TRADING CORPORATION V. COURT OF APPEALS and
G.R. No. 84813, September 22, 1999

FACTS:

On June 3, 1981, private respondent NDC-NACIDA Raw Materials Corporation


(NNRMC) ordered from petitioner Domel Trading Corporation (DOMEL) 22,000 bundles of
buri midribs at P16.00 per bundle to be delivered within 30 working days from the date of the
opening of a letter of credit. On June 4, 1981, private respondent again ordered 300,000 pieces
of rattan poles at P9.65 per piece for a total price of P2,895,000.00, also to be delivered within
60 days from the date of the opening of a letter of credit. The specifications and provisions of
both transactions, which served as their agreement, were printed in two separate purchase orders.

In accordance with their agreement, NNRMC, on July 9, 1981, opened a letter of credit with
Philippine National Bank (PNB) in favor of DOMEL in the amount of P1,997,000.00 to cover its
order for 206,943 pieces of rattan poles. On July 13, 1981, NNRMC opened another letter of
credit in favor of DOMEL in the amount of P1,236,000.00 to cover the price of 93,057 pieces of
rattan poles and 22,000 bundles of buri midribs.

In violation of their agreement, DOMEL failed to deliver the buri midribs and rattan poles within
the stipulated period. Thus, on September 23, 1981, DOMEL and NNRMC agreed to restructure
the latters purchase orders in a Memorandum of Agreement. Under the agreement, NNRMC
extended the expiry date of its two letters of credit to November 5, 1981. It also reduced the
quantity of the rattan poles from 300,000 to only 100,000 pieces while the quantity of buri
midribs remained at 22,000 bundles. Further, DOMEL undertook to deliver the goods on or
before October 31, 1981. However, no deliveries were again made on the said date.
Consequently, demands were made by NNRMC on January 19, 1982 for the payment of
damages, which demands were ignored by DOMEL. Hence, NNRMC filed a complaint for
damages before the Regional Trial Court of Pasig. After trial, judgment was rendered in favor of
plaintiff and against defendant.

Both DOMEL and NNRMC assail the above-quoted decision in separate petitions which have
been consolidated before this Court. Based on the pleadings submitted by the parties, this Court
has resolved to give due course to the petition and decides the same. DOMEL submits it has not
breached its contractual obligation to NNRMC inasmuch as it was the fault of the latter for not
inspecting and examining the rattan poles as well as the buri midribs already shipped by the
suppliers and stored in the formers warehouse. In short, DOMEL claims that NNRMC must
first inspect the ordered items before delivery could be made.

ISSUE:

Whether or not the decision of the Court of Appeals in CA-G.R. CV No. 08952 which
modified the decision of the lower court granting private respondents prayer for damages, was
correct.

RULING:

While the Supreme Court did not agree with the Court of Appeals that the failure of
NNRMC to conduct the inspection mitigated DOMELs liability for liquidated damages,
nevertheless, it agreed in the reduction of the amount of liquidated damages to only P150,000.00.
The amount of P2,000.00 as penalty for every day of delay is excessive and unconscionable.

Article 1229 of the Civil Code states, thus:The judge shall equitably reduce the penalty when
the principal obligation has been partly or irregularly complied with by the debtor. Even if there
has been no performance, the penalty may also be reduced by the courts if it is iniquitous or
unconscionable.

Page 225 of 745


Article 2227 of the Civil Code likewise states, thus: Liquidated damages, whether intended as
an indemnity or a penalty, shall be equitably reduced if they are iniquitous or unconscionable.

In determining whether a penalty clause is iniquitous and unconscionable, a court may very
well take into account the actual damages sustained by a creditor who was compelled to sue the
defaulting debtor, which actual damages would include the interest and penalties the creditor
may have had to pay on its own from its funding source. In this case, NNRMC was only able to
prove that it incurred the amounts of P5,995.83 as opening charges on the two Letters of Credit
and an additional P1,911.85 as amendment charges on the same Letters of Credit. Other than
that, NNRMC failed to prove it had suffered actual damages resulting from the nondelivery of
the specified buri midribs and rattan poles. In fact, what it allegedly suffered are what it calls
Foregone Interest Income and Foregone Profit from the two Letters of Credit. Such could
not be considered as actual damages.

Page 226 of 745


MEDEL VS CA
G.R. No. 131622 November 27, 1998

FACTS:

The Medel spouses obtained several loans of which they were unable to pay in full. On July 23,
1986, Servando and Leticia with the latter's husband, Dr. Rafael Medel, consolidated all their
previous unpaid loans totaling P440,000.00, and sought from Veronica another loan in the
amount of P60,000.00, bringing their indebtedness to a total of P500,000.00, payable on August
23, 1986. They executed a promissory note indicating payment for the balance.
On maturity of the loan, the borrowers failed to pay the indebtedness of P500,000.00,
plus interests and penalties, evidenced by the above-quoted promissory note. On February 20,
1990, Veronica R. Gonzales, joined by her husband Danilo G. Gonzales, filed with the Regional
Trial Court of Bulacan, Branch 16, at Malolos, Bulacan, a complaint for collection of the full
amount of the loan including interests and other charges.

ISSUE:

What is the interest that must be collected on the instant case?

RULING:

Basically, the issue revolves on the validity of the interest rate stipulated upon. Thus, the
question presented is whether or not the stipulated rate of interest at 5.5% per month on the loan
in the sum of P500,000.00, that plaintiffs extended to the defendants is usurious. In other words,
is the Usury Law still effective, or has it been repealed by Central Bank Circular No. 905,
adopted on December 22, 1982, pursuant to its powers under P.D. No. 116, as amended by P.D.
No. 1684?
We agree with petitioners that the stipulated rate of interest at 5.5% per month on the
P500,000.00 loan is excessive, iniquitous, unconscionable and exorbitant. However, we can not
consider the rate "usurious" because this Court has consistently held that Circular No. 905 of the
Central Bank, adopted on December 22, 1982, has expressly removed the interest ceilings
prescribed by the Usury Law and that the Usury Law is now "legally inexistent".
Nevertheless, we find the interest at 5.5% per month, or 66% per annum, stipulated upon
by the parties in the promissory note iniquitous or unconscionable, and, hence, contrary to
morals ("contra bonos mores"), if not against the law. 20 The stipulation is void. The courts shall
reduce equitably liquidated damages, whether intended as an indemnity or a penalty if they are
iniquitous or unconscionable.
Consequently, the Court of Appeals erred in upholding the stipulation of the
parties. Rather, we agree with the trial court that, under the circumstances, interest at 12% per
annum, and an additional 1% a month penalty charge as liquidated damages may be more
reasonable.

Page 227 of 745


PACITA REFORMINA v TOMOL, JR.
NO. L-59096 October 11, 1985

FACTS:

An action for Recovery of Damages for Injury to Person and Loss of Property was filed.
RTC rendered judgment in favor of the plaintiffs and against the defendants, ordering the latter
to pay jointly and severally the former. On appeal, the decision was modified. In the computation
of the legal interest decreed sought to be executed, petitioners claimed that it should be at 12%
per annum invoking Central bank Circular. The respondents, however, insist that said legal
interest should be at the rate of 6% per annum pursuant to Article 2209 of the New Civil code

ISSUE:

How much by way of legal interest, should a judgment debtor pay the judgment creditor?

RULING:

The judgment spoken of and referred to are judgments in litigations involving loans or
forbearances of any money, goods or credits. Any other kind of monetary judgment does not fall
within the coverage of the said law for it is not within the ambit of authority granted to the
Central Bank. The Monetary Board may not tread on forbidden grounds. To make Central Bank
Circular No. 416 applicable to any case other than those specifically provided for by the Usury
Law will make the same of doubtful constitutionality since the Monetary Board will be
exercising legislative functions which are beyond the intendment of PD No. 116.
The petition is without merit, the same is dismissed with costs against petitioners.

Page 228 of 745


SONNY LO v. KJS ECO-FORMWORK SYSTEM
G.R. No. 149420 October 8, 2003

FACTS:

KJS is engaged in the sale of steel scaffoldings while Lo is a building contractor. On


February 22, 1990, petitioner ordered scaffolding equipments from respondent worth
P540,425.80. He paid a downpayment in the amount of P150,000. The balance was made
payable in 10 monthly installments. Respondent delivered the equipments. Petitioner was able to
pay the first two monthly installments. His business suffered financial difficulties and he was
unable to settle his obligations despite demands. On October 11, 1990, the parties executed a
Deed of Assignment whereby petitioner assigned to respondent his receivables from Jonero
Realty. However, Jonero refused to honor the Dees of Assign,nt because it claimed that
petitioner was indebted to it. Petitioner refused to pay claiming that that his obligation had been
extinguished when they executed the deed of assign,ent. RTC dismissed the complaint on the
ground that the assignment of credit extinguished the obligation. Court of appeals reversed the
decision and ordered Lo to pay the plaintiff KJS with legal interests of 6% per annum until fully
paid.

ISSUE:

Whether or not the Deed of Assignment extinguished the obligation

RULING:

An assignment of credit, by virtue of which the owner of the credit, the assignor, by a
legal cause, such as sale, dacion en pago, exchange or donation and without the consent of the
debtor transfers his credit and accessory rights to another, the assignee, who acquires the power
to enforce it against the debtor. Petitioner, as assignor, is bound to warrant the existence and
legality of the credit at the tim of the sale or assignment. When Jonero claimed that it was no
longer indebted to petitioner since the latter had also as unpaid obligation to it, it essentially
meant that its obligation to the petitioner has been extinguished by compensation. Petitioner was
found in breach of his obligation under the Deed of assignment. Court of Appeals decision is
affirmed.

Page 229 of 745


PHILPPINE NATIONAL BANK v. CA and LORETO TAN
G.R. No. 108630 April 2, 1996

FACTS:

Private respondent Loreto Tan is the owner of a parcel of land abutting the national
highway. Expropriaton proceedings were instituted by the government. Tan filed a motion
requesting the issuance of an order for the release to him of the expropriation price of
P32,480.00. PNB was required by the trial court to release to tan the amount and deposited it by
the government. Petitioner, through its Assistant Manager Tagamolila, issued a check and
delivered the same to Sonia Gonzaga on the strength of the SPA, without tans knowledge,
consent and authority. RTC ordered petitioner and Tagamolila to pay private respondent jointly
and severally the amount worth legal interests, damages and attorneys fees. Ca affirmed the
decision.

ISSUE:

Whether the Special Power of Attorney authorized Sonia Gonzaga to receive payment
intended for private respondent

RULING:

There is no question that no payment had ever been made to private respondent as to the
check was never delivered to him. Under Article 1233 of the Civil Code, a debt shall not be
understood to have been paid unless the thing or service in which the obligation consists has
been completely delivered or rendered, as the case may be. The burden of proof of sad payment
lies with the debtor.
The decision of the court of appeals is affirmed with the modification that the award by
the RTC of P5,000 as attorneys fees is reinstated.

Page 230 of 745


CATHAY PACIFIC AIRWAYS v.Spouses Vazquez
G.R. No. 150843 March 14, 2003

FACTS:

Cathay is a common carrier engaged in transporting passenger and goods by air. Spouses
Vazquez are Gold Card Members of its Marc Polo Club. The Spouses, with two friends and a
maid went to HongKong for business. Spouses have the Business class boarding passes and
economy class for the maid. When boarding, the ground stewardess declared a seat change from
Business class to First Class for the Vazquez. The Spouses refused but after insistence by the
stewardess, the spouses gave in. When the arrived in Manila, spouses demanded to be
indemnified in the amount of one million for the humiliation and embarrassment caused by
the employee. RTC ruled for the Vazquez ordering Cathay Airways to pay the spouses, stating
further that there was a breach of contract not because of overbooking but because the latter
pushed through with the upgrading despite objections of the spouses.

ISSUE:

Is an involuntary upgrading of an airlines accommodation at no extra costs cause a


breach of contract of carriage?

RULING:

The Vazquezes are aware of the privileges, but such privileges may be waived. Spouses
should have been consulted first. It should not have been imposed on them over their vehement
objection. By insisting of the upgrade, Pacific Airways breached its contract of carriage with the
Vazquezes. Nominal damages are adjudicated in order that the right of the plaintiff, which have
been violated may be vindicated or recognized and not for indemnifying the plaintiff for any loss
suffered by him.
Petition is partly granted. Court of Appeals decision is modified. Moral damages
deleted, nominal damages reduced to P5,000.

Page 231 of 745


CITIBANK v.SABENIANO
G.R.No. 156132, October 16, 2006

FACTS:

Petitioner Citibank is a banking corporation duly authorized under the laws of the
USA to do commercial banking activities n the Philippines. Sabeniano was a client of
both Petitioners Citibank and FNCB Finance. Respondent filed a complaint against
petitioners claiming to have substantial deposits, the proceeds of which were supposedly
deposited automatically and directly to respondents account with the petitioner Citibank
and that allegedly petitioner refused to despite repeated demands. Petitioner alleged that
respondent obtained several loans from the former and in default, Citibank exercised its
right to set-off respondents outstanding loans with her deposits and money. RTC
declared the act illegal, null and void and ordered the petitioner to refund the amount plus
interest, ordering Sabeniano, on the other hand to pay Citibank her indebtedness. CA
affirmed the decision entirely in favor of the respondent.

ISSUE:

Whether petitioner may exercise its right to set-off respondents loans with her deposits
and money in Citibank-Geneva

RULING:

Petition is partly granted with modification.


1. Citibank is ordered to return to respondent the principal amount of P318,897.34 and
P203,150.00 plus 14.5% per annum
2. The remittance of US $149,632.99 from respondents Citibank-Geneva account is
declared illegal, null and void, thus Citibank is ordered to refund said amount in
Philippine currency or its equivalent using exchange rate at the time of payment.
3. Citibank to pay respondent moral damages of P300,000, exemplary damages for
P250,000, attorneys fees of P200,000.
4. Respondent to pay petitioner the balance of her outstanding loans of P1,069,847.40
inclusive off interest.

Page 232 of 745


TELENGTAN BROTHERS and SONS v.UNITED STATES LINES G.R.No.
132284,February 28,2006

FACTS:

Petitioner is a domestic corporation while US Lines is a foreign corporation engaged in


overseas shipping. It was made applicable that consignees who fail to take delivery of their
containerized cargo within the 10-day free period are liable to pay demurrage charges. On June
22, 1981, US Lines filed a suit against petitioner seeking payment of demurrage charges plus
interest and damages. Petitioner incurred P94,000 which the latter refused to pay despite
repeated demands. Petitioner disclaims liability alleging that it has never entered into a contract
nor signed an agreement to be bound by it. RTC ruled that petitioner is liable to respondent and
all be computed as of the date of payment in accordance with Article 1250 of the Civil Code.
CA affirmed the decision.

ISSUE:

Whether the re-computation of the judgment award in accordance with Article 1250 of
the Civil Code proper

RULING:

The Supreme Court found as erroneous the trial courts decision as affirmed y the Court
of Appeals. The Court holds that there has been an extraordinary inflation within the meaning of
Article 1250 of the Civil Code. There is no reason for ordering the payment of an obligation in
an amount different from what has been agreed upon because of the purported supervention of an
extraordinary inflation.
The assailed decision is affirmed with modification that the order for re-computation as
of the date of payment in accordance with the provisions of Article 1250 of New Civil Code is
deleted.

Page 233 of 745


C. F. SHARP v. NORTHWEST AIRLINES
G.R. No. 133498, April 18,2002

FACTS:

On May 9, 1974, respondent entered into an International Passengers Sales Agency


Agreement with petitioner, authorizing the latter to sell its air transport tickets. Petitioner failed
to remit the proceeds of the ticket sales, for which reason, respondent filed a Collection suit
against petitioner before the Tokyo District Court, which ordered petitioner to pay respondent
82,158,195 Yen and damages for the delay at the rate of 6% per annum fro August 28,1980 up to
and until payment is completed. Unable to execute the decision in Japan, respondent filed a case
with the RTC.
RTC issued writ of execution ordering defendant to pay plaintiff 83,158,195 Yen at the
exchange rate on the date of foreign judgment plus 6% interest. On appeal, petitioner contended
that it had already paid partial payments hence, was not liable to pay additional 6% interest
imposed in the foreign judgment.

ISSUE:
Whether or not the petitioner is liable to pay additional 6% per annum for the delay

RULING:

The petition is denied. CA decision is affirmed with modification. Petitioner is directed to


pay respondent 61,734 Yen plus damages for the delay at 6% per annum from August 28,1980
until payment is completed, with interest at the rate of 12% per annum counted from the date of
filing until fully satisfied. Petitioners liability may be paid in Philippine currency computed at
the exchange rate prevailing at the time of payment.

Page 234 of 745


ALBERT PADILLA v. SPOUSES PAREDES and COURT OF APPEALS
G.R. NO. 124874,March 17, 2000

FACTS:

On October 20, 1988, petitioner Padilla and private respondent entered into a contract to
sell involving a parcel of land. The was untitled but private respondent was paying taxes thereon.
Under the contract, petitioner undertook to secure title to the property in private respondents
names of the P312,840 purchase prize, petitioner was to pay downpayment of P50,000 upon
signing and the balance was to be paid within 10 days from the issuance of the court order
directing issuance of the decree of registration. For failure to pay some of the amount,
respondent offered to sell to petitioner one-half of the property for all the payment, lest
respondent rescinds the contract. Petitioner refused and instituted action for specific performance
alleging that they have substantially complied with the obligation. RTC ruled for the petitioners
stating a casual or slight breach that did not warrant rescission. CA reversed the decision and
confirmed the respondents rescission.

ISSUE:

Whether or not the private respondents are entitled to rescind the contract to sell the land
to petitioner

RULING:

The Supreme Court sustained the ruling of CA that private respondent may validly
rescind the contract to sell, however, the reason for this is not that respondents have the power to
rescind but because their obligation thereunder did not arise. The CA is correct in ordering the
return to petitioner of the amounts received from him by private respondents, on the precept that
no one shall be unjustly enriched himself at the expense of another.

Page 235 of 745


SPOUSES TIBAJIA v. COURT OF APPEALS and EDEN TAN
G. R. No. 100290, June 4, 1993

FACTS:

A suit of collection of sum of money was filed by Eden Tan against the spouses. A writ
of attachment was issued, the Deputy Sheriff filed a return stating that a deposit made by Tibajia
in the amount of P442,750 in another case, had been garnished by him. RTC ruled in favor of
Eden Tan and ordered the spouses to pay her an amount in excess of P3,000,000. Court of
Appeals modified the decision by reducing the amount for damages. Tibajia Spouses delivered to
Sheriff Bolima the total money judgment of P398483.70. Tan refused to accept the payment and
insisted that the garnished funds be withdrawn to satisfy the judgment obligation.

ISSUE:
Whether or not payment by means of check is considered payment in legal tender

RULING:

The ruling applies the statutory provisions which lay down the rule that a check is not
legal tender and that a creditor may validly refuse payment by check, whether it be a managers
check, cashiers or personal check. The decision of the court of Appeals is affirmed.

Page 236 of 745


DEVELOPMENT BANK OF THE PHILIPPINES v. COURT OF APEEALS
G.R.No. 138703,June 30, 2006

FACTS:

In March 1968, DBP granted to private respondents an industrial loan in the amount of
P2,500,000 P500,000 n cash and P2,000,000 in DBP Progress Bank. It was evidenced by a
promissory note and secured by a mortgage executed by respondents over their present and
future properties. Another loan was granted by DBP in the for of a 5-year revolving guarantee to
P1,700,000. In 1975, the outstanding accounts wth DBP was restructured in view of failure to
pay. Amounting to P4,655,992.35 were consolidated into a single account. On the other hand, all
accrued interest and charges due amounting to P3,074,672.21 were denominated as Notes
Taken for Interests and evidenced by a separate promissory note. For failure to comply with its
obligation, DBP initiated foreclosure proceedings upon its computation that respondents loans
were arrears by P62,954,473.68. Respondents contended that the collection was unconscionable
if not unlawful or usurious . RTC, as affirmed by the CA, ruled in favor of the respondents.

ISSUE:

Whether the prestation to collect by the DBP is unconscionable or usurious

RULING:

It cannot be determined whether DBP in fact applied an interest rate higher than what is
prescribed under the law. Assuming it did exceed 12% in addition to the other penalties
stipulated in the note, this should be stricken out for being usurious.
The petition is partly granted. Decision of the court of Appeals is reversed and set aside.
The case is remanded o the trial court for the determination of the total amount of the
respondents obligation based on the promissory notes, according to the interest rate agreed upon
by the parties on the interest rate of 12% per annum, whichever is lower.

Page 237 of 745


VITARICH vs. LOSIN
G.R. No. 181560 November 15, 2010

FACTS:

Respondent Chona Losin (Losin) was in the fastfood and catering services business
named Glamours Chicken House. Since 1993, Vitarich, particularly its Davao Branch, had been
her supplier of poultry meat.
In the months of July to November 1996, Losins orders of dressed chicken and other meat
products allegedly amounted to P921,083.10. During this said period, Losins poultry meat needs
for her business were serviced by Rodrigo Directo (Directo) and Allan Rosa (Rosa), both
salesmen and authorized collectors of Vitarich, and Arnold Baybay (Baybay), a supervisor of
said corporation.
On August 24, 1996, Directos services were terminated by Vitarich without Losins
knowledge. He left without turning over some supporting invoices covering the orders of Losin.
Rosa and Baybay, on the other hand, resigned on November 30, 1996 and December 30, 1996,
respectively. Just like Directo, they did not also turn over pertinent invoices covering Losins
account.
On February 12, 1997, demand letters were sent to Losin covering her alleged unpaid
account amounting to P921,083.10. It appears that Losin had issued three (3) checks amounting
to P288,463.30 which were dishonored either for reasons - Drawn Against Insufficient Funds
(DAIF) or Stop Payment.
On March 2, 1998, Vitarich filed a complaint for Sum of Money against Losin, Directo,
Rosa, and Baybay before the RTC.
On August 9, 2001, the RTC rendered its Decision8 in favor of Vitarich, however the CA
rendered the assailed decision in favor of Losin.

ISSUE:

WON there is already payment on the part of Locsin.

RULING:

No. As a general rule, one who pleads payment has the burden of proving it.The burden
rests on the debtor to prove payment, rather than on the creditor to prove non-payment. The
debtor has the burden of showing with legal certainty that the obligation has been discharged by
payment.
True, the law requires in civil cases that the party who alleges a fact has the burden of
proving it. Section 1, Rule 131 of the Rules of Court24 provides that the burden of proof is the
duty of a party to prove the truth of his claim or defense, or any fact in issue by the amount of
evidence required by law. In this case, however, the burden of proof is on Losin because she
alleges an affirmative defense, namely, payment. Losin failed to discharge that burden.
After examination of the evidence presented, this Court is of the opinion that Losin failed to
present a single official receipt to prove payment.25 This is contrary to the well-settled rule that
a receipt, which is a written and signed acknowledgment that money and goods have been
delivered, is the best evidence of the fact of payment although not exclusive.26 All she presented
were copies of the list of checks allegedly issued to Vitarich through its agent Directo,27 a
Statement of Payments Made to Vitarich,28 and apparently copies of the pertinent history of her
checking account with Rizal Commercial Banking Corporation (RCBC). At best, these may only
serve as documentary records of her business dealings with Vitarich to keep track of the
payments made but these are not enough to prove payment.

Page 238 of 745


METROBANK vs. CABILZO
510 SCRA 259

FACTS:

On 12 November 1994, Cabilzo issued a Metrobank Check No. 985988, payable to


CASH and postdated on 24 November 1994 in the amount of One Thousand Pesos (P1,
000.00). The check was drawn against Cabilzos Account with Metrobank Pasong Tamo Branch
under Current Account No. 618044873-3 and was paid by Cabilzo to a certain Mr. Marquez, as
his sales commission. Subsequently, the check was presented to Westmont Bank for payment.
Westmont Bank, in turn, indorsed the check to Metrobank for appropriate clearing. After the
entries thereon were examined, including the availability of funds and the authenticity of the
signature of the drawer, Metrobank cleared the check for encashment in accordance with the
Philippine Clearing House Corporation (PCHC) Rules.
On 16 November 1994, Cabilzos representative was at Metrobank Pasong Tamo Branch
to make some transaction when he was asked by bank personnel if Cabilzo had issued a check in
the amount of P91, 000.00 to which the former replied in the negative. On the afternoon of the
same date, Cabilzo himself called Metrobank to reiterate that he did not issue a check in the
amount of P91, 000.00 and requested that the questioned check be returned to him for
verification, to which Metrobank complied. Upon receipt of the check, Cabilzo discovered that
Metrobank Check No. 985988 which he issued on 12 November 1994 in the amount of P1,
000.00 was altered to P91, 000.00 and the date 24 November 1994 was changed to 14 November
1994.Hence, Cabilzo demanded that Metrobank re-credit the amount of P91, 000.00 to his
account. Metrobank, however, refused reasoning that it has to refer the matter first to its Legal
Division for appropriate action. Repeated verbal demands followed but Metrobank still failed to
re-credit the amount of P91, 000.00 to Cabilzos account
On 30 June 1995, Cabilzo, thru counsel, finally sent a letter-demand to Metrobank for the
payment of P90, 000.00, after deducting the original value of the check in the amount of P1,
000.00. Such written demand notwithstanding, Metrobank still failed or refused to comply with
its obligation. Consequently, Cabilzo instituted a civil action for damages against Metrobank
before the RTC of Manila, Branch 13. In his Complaint docketed as Civil Case No. 95-75651,
Renato D. Cabilzo v. Metropolitan Bank and Trust Company, Cabilzo prayed that in addition to
his claim for reimbursement, actual and moral damages plus costs of the suit be awarded in his
favor.

ISSUE:
Whether equitable estoppel can be appreciated in favor of petitioner

HELD:
The degree of diligence required of a reasonable man in the exercise of his tasks and the
performance of his duties has been faithfully complied with by Cabilzo. In fact, he was wary
enough that he filled with asterisks the spaces between and after the amounts, not only those
stated in words, but also those in numerical figures, in order to prevent any fraudulent insertion,
but unfortunately, the check was still successfully altered, indorsed by the collecting bank, and
cleared by the drawee bank, and encashed by the perpetrator of the fraud, to the damage and
prejudice of Cabilzo.
Metrobank cannot lightly impute that Cabilzo was negligent and is therefore prevented
from asserting his rights under the doctrine of equitable estoppel when the facts on record are
bare of evidence to support such conclusion. The doctrine of equitable estoppel states that when
one of the two innocent persons, each guiltless of any intentional or moral wrong, must suffer a
loss, it must be borne by the one whose erroneous conduct, either by omission or commission,
was the cause of injury. Metrobanks reliance on this dictum is misplaced. For one,
Metrobanks representation that it is an innocent party is flimsy and evidently, misleading. At
the same time, Metrobank cannot asseverate that Cabilzo was negligent and this negligence was
the proximate cause of the loss in the absence of even a scintilla proof to buttress such claim.
Negligence is not presumed but must be proven by the one who alleges it, which petitioner failed
to.

Page 239 of 745


EUFEMIA and ROMEL ALMEDA v. BATHALA MARKETING
G.R.No. 150806, January 28, 2008

FACTS:

In May 1997, Bathala Marketng, renewed its Contract of Lease with Ponciano Almeda.
Under the contract, Ponciano agreed to lease a porton of Almeda Compound for a monthly
rental of P1,107,348.69 for four years. On January 26, 1998, petitioner informed respondent that
its monthly rental be increased by 73% pursuant to the condition No. 7 of the contract and
Article 1250. Respondent refused the demand and insisted that there was no extraordinary
inflation to warrant such application. Respondent refused to pay the VAT and adjusted rentals as
demanded by the petitioners but continually paid the stipulated amount. RTC ruled in favor of
the respondent and declared that plaintiff is not liable for the payment of VAT and the
adjustment rental, there being no extraordinary inflation or devaluation. CA affirmed the
decision deleting the amounts representing 10% VAT and rental adjustment.

ISSUE:

Whether the amount of rentals due the petitioners should be adjusted by reason of
extraordinary inflation or devaluation

RULING:

Petitioners are stopped from shifting to respondent the burden of paying the VAT. 6th
Condition states that respondent can only be held liable for new taxes imposed after the
effectivity of the contract of lease, after 1977, VAT cannot be considered a new tax. Neither
can petitioners legitimately demand rental adjustment because of extraordinary inflation or
devaluation. Absent an official pronouncement or declaration by competent authorities of its
existence, its effects are not to be applied.
Petition is denied. CA decision is affirmed.

Page 240 of 745


EQUITABLE PCI BANK, YU and APAS v. NG SHEUNG NGOR
G.R.NO. 171545, December 19, 2007

FACTS:

On October 7, 2001, respondents Ngor and Go filed an action for amendment and/or
reformation of documents and contracts against Equitable and its employees. They claimed that
they were induced by the bank to avail of its peso and dollar credit facilities by offering low
interests so they accepted and signed Equitables proposal. They alleged that they were unaware
that the documents contained escalation clauses granting Equitable authority to increase interest
without their consent. These were rebutted by the bank. RTC ordered the use of the 1996 dollar
exchange rate in computing respondents dollar-denominated loans. CA granted the Banks
application for injunction but the properties were sold to public auction.

ISSUE:

Whether or not there was an extraordinary deflation

RULING:

Extraordinary inflation exists when there is an unusual decrease in the purchasing power
of currency and such decrease could not be reasonably foreseen or was beyond the contemplation
of the parties at the time of the obligation. Deflation is an inverse situation.
Despite the devaluation of the peso, BSP never declared a situation of extraordinary
inflation. Respondents should pay their dollar denominated loans at the exchange rate fixed by
the BSP on the date of maturity.
Decision of lower courts are reversed and set aside.

Page 241 of 745


SIMPLICIO PALANCA v.ULYSIUS GUIDES and LORENZO GUIDES
G.R. No. 146365 February 28, 2005

FACTS:

In August 1983, petitioner Palanca executed a contract to sell a parcel of land on


installment with Jopson for P11,250. Jopson paid petitioner P1,650 as downpayment, leaving a
balance of P9600. In December 1983, Jopson assigned ad transferred all her rights and interests
over the property to respondent Guides. Believing that she had fully paid the purchase prize,
respondent found out when she verified with the Register of Deeds that the property in question
was still in the name of de Leon. Petitioner stated that she refused to execute the document of
sale in favor of the respondent since the latter failed with the said obligation- that he was not paid
the complete amount in the contract. RTC ruled in favor of the plaintiff and against Palanca,
ordering him to execute a Deed of Absolute Sale and the issuance of TCT, reimburse plaintiff the
amount paid n excess and for damages.

ISSUE:

Whether the petitioners claim of unpaid charges from the respondent proper

RULING:

Petitioner was deemed to have waived his right to present evidence and thus was unable
to adduce evidence of such inflation or fluctuation. Even if there were such, petitioner did not
make a demand on respondent for the satisfaction of the claim.
When petitioner accepted respondents installment payments despite the alleged charges,
and without any showing that he protested the irregularity of such payment, nor demanded the
payment of the alleged charges, respondents liability, if any for said charges is deemed fully
satisfied.

Page 242 of 745


PCIB v. COURT OF APPEALS
G.R. NO. 121989 January 31, 2006

FACTS:

PCIB and MBC were joint bidders in a foreclosure sale held of assorted mining
machinery and equipment previously mortgaged to them by Philippine Iron Mines. Atlas agreed
to purchase some of these properties and the sale was evidenced by a Deed of Sale with a
downpayment of P12,000,000 and the balance of P18,000,000 payable in 6 monthly installments.
In compliance with the contract, Atlas issued HongKong and shanghai Bank check amounting to
P12,000,000. Atlas paid to NAMAWU the amount of P4,298,307.77 in compliance with the writ
of garnishment issued against Atlas to satisfy the judgment in favor of NAMAWU. Atlas alleged
that there was overpayment, hence the suit against PCIB to obtain reimbursement. PCIB
contended that Atlas still owed P908,398.75 because NAAWU had been partially paid in the
amount of P601,260.00. RTC ruled against Atlas to pay P908,398.75 to PCIB. CA reversed the
decision.

ISSUE:

Whether atlas had complied with its obligation to PCIB

RULING:

While the original amount sought to be garnished was P4,298,307,77, the partial payment
of P601,260 naturally reduced it to P3,697,047.77 Atlas overpaid NAMAWU, thus the remedy if
Atlas would be to proceed against NAAWU nut not against PCIB in relation to article 1236 of
the Civil Code
The petition is partly granted.CA decision is reversed and set aside and in lieu thereof
Atlas is ordered to pay PCIB the sum of P146,058.96, with the legal interest commencing from
the time of first demand on August 22, 1985.

Page 243 of 745


JOSE LAGONv. HOOVEN COMALCO INDUSTRIES
G.R. No. 135657 January 17, 2001

FACTS:

Petitioner is the owner of a commercial building while respondent is a domestic


corporation known to be the biggest manufacturer and installer of aluminum materials in the
country. Parties entered into 2 contracts whereby for a total consideration of P104,870. Hooven
agreed to sell and install various aluminum materials in Lagons building. Upon execution of
contracts, Lagon paid Hooven P48,000 in advance. On February 24, 1987, Hooven commenced
an action for sum of money. It was alleged that materials were delvered and installed but
P69,329 remained unpaid even after the completion of the project and despite repeated demands.
RTC held partly on the basis of the ocular inspection finding that the total actual deliveries cost
P87,140 deducting therefrom P48,000. CA set aside the decision and held in favor of Hooven.

ISSUE:

Whether all the materials specified in the contracts had been delivered and installed by
respondent in petitioners commercial building

RULING:

Essentially, respondent has the burden of establishing its affirmative allegations of


complete delivery and installation of the materials and petitioners failure to pay therefor. The
evidence on its discharge is grossly anemic. The CA decision is modified. Lagon is ordered to
pay respondent P6,377.66 representing the value unpaid. On the other hand, respondent is
ordered to pay petitioner P50,000 as moral damages, P30,000 attorneys fees and P46,554.50 as
actual damages.

Page 244 of 745


BANK OF THE PHILIPPINE ISLANDS v. EASTERN PLYWOOD and BENIGNO LIM
G.R. No. 104612, May 10, 1994

FACTS:

Private respondent , Eastern and Lim, an officer and stock holder of Eastern held at least
one joint bank account with the CBTC, the predecessor-in interest of the petitioner BPI. In
March 1975, checking account with Lim in the amount of P120,000 was opened by Velasco with
funds withdrawn fro the account of Eastern and Lim. Velasco died and at the time of his death,
the outstanding balance of the account stood at P662,522.87. Thereafter, Easrtern obtained a loan
of P73,000 fro CBTC in addition, Eastern and Lim and CBTC signed another document entitled
Holdout agreement.
In the settlement proceeding of Velascos estate, the whole balance of P331,261.44 in the
joint account of Velasco and Lim was claimed as part of Velascos estate. The interstate court
granted the urgent motion of heirs of Velasco to withdraw the deposit and authorize them to
divide among themselves the amount. BPI filed a complaint against Lin and Eastern demanding
payment of promissory not for P73,000. RTC ruled that the promissory note is subject to the
holdout agreement. CA affirmed the division.

ISSUE:

Whether BPI is still liable to the private respondent on the account subject to the holdout
agreement after it is withdrawn by the heirs of Velasco

RULING:

The account was proved to belong to Eastern even if it was in the names of Lim and
Velasco. As the real creditor of the bank, Eastern has the right to withdraw it or demand payment
thereof. BPI can not be relieved of its duty to pay Eastern simply because it already allowed the
heirs of Velasco to withdraw the whole balance of the account. Payment made by the debtor to
the wrong party does not extinguish the obligation as to the creditor who is without fault or
negligence.

Page 245 of 745


REPUBLIC vs THI THU THUY T. DE GUZMAN
G.R. No. 175021 June 15, 2011

FACTS:

On December 8, 1995, the PNP Engineering Services (PNPES), released a Requisition


and Issue Voucher for the acquisition of various building materials amounting to Two Million
Two Hundred Eighty-Eight Thousand Five Hundred Sixty-Two Pesos and Sixty Centavos
(P2,288,562.60) for the construction of a four-storey condominium building with roof deck at
Camp Crame, Quezon City. Respondent averred that on December 11, 1995, MGM and
petitioner, represented by the PNP, through its chief, executed a Contract of Agreement (the
Contract) wherein MGM, for the price of P2,288,562.60, undertook to procure and deliver to the
PNP the construction materials itemized in the purchase order attached to the Contract.
Respondent claimed that after the PNP Chief approved the Contract and purchase order,MGM,
on March 1, 1996, proceeded with the delivery of the construction materials, as evidenced by
Delivery Receipt Nos. 151-153,11 Sales Invoice Nos. 038 and 041,12 and the "Report of Public
Property Purchase" issued by the PNPs Receiving and Accounting Officers to their Internal
Auditor Chief. Respondent asseverated that following the PNPs inspection of the delivered
materials on March 4, 1996,14 the PNP issued two Disbursement Vouchers; one in the amount
of P2,226,147.26 in favor of MGM,15 and the other, 16 in the amount of P62,415.34,
representing the three percent (3%) withholding tax, in favor of the Bureau of Internal Revenue
(BIR).The respondent sent a letter dated October 20, 199718 to the PNP, demanding the payment
of P2,288,562.60 for the construction materials MGM procured for the PNP under their
December 1995 Contract. The PNP, through its Officer-in-Charge, replied19 to respondents
counsel, informing her of the payment made to MGM via Land Bank of the Philippines (LBP).
Respondent denying having ever received the LBP check. On May 5, 1999, respondent filed a
Complaint for Sum of Money against the petitioner. The petitioner presented Edgardo Cruz and
testified that Highland Enterprises had been an accredited contractor of the PNP since 1975. In
1995, Cruz claimed that the PNPES was tasked to construct "by administration" a condominium
building. This meant that the PNPES had to do all the work, from the canvassing of the materials
to the construction of the building. The PNPES allegedly lacked the funds to do this and so asked
for Highland Enterprisess help. In a meeting with its accredited contractors, the PNPES asked if
the other contractors would agree to the use of their business name50 for a two percent (2%)
commission of the purchase order price to avoid the impression that Highland Enterprises was
monopolizing the supply of labor and materials to the PNP.51 Cruz alleged that on April 23,
1996, he and the respondent went to the PNP Finance Center to claim the LBP check due to
MGM.

ISSUE:

WON there is already extinguishment of obligation.

RULING:

In general, a payment in order to be effective to discharge an obligation, must be made to


the proper person. Thus, payment must be made to the obligee himself or to an agent having
authority, express or implied, to receive the particular payment. Payment made to one having
apparent authority to receive the money will, as a rule, be treated as though actual authority had
been given for its receipt. Likewise, if payment is made to one who by law is authorized to act
for the creditor, it will work a discharge. The receipt of money due on a judgment by an officer
authorized by law to accept it will, therefore, satisfy the debt.
The respondent was able to establish that the LBP check was not received by her or by
her authorized personnel. The PNPs own records show that it was claimed and signed for by
Cruz, who is openly known as being connected to Highland Enterprises, another contractor.
Hence, absent any showing that the respondent agreed to the payment of the contract price to
another person, or that she authorized Cruz to claim the check on her behalf, the payment, to be
effective must be made to her.

Page 246 of 745


AUDION ELECTRIC COMPANY v. NLRC
G.R. NO. 106648, June 17,1999

FACTS:

Complainant Nicolas Madolid was employed by Audion as a fabricator. He continuously


rendered service, assigned in different offices or projects for 13 years with a clean record. The
complainant was surprised to received an information stating that he will be considered
terminated after the turnover of materials. Complainant claims that he was dismissed without
justifiable cause. For this reason, he claims that he is entitled to reinstatement with full
backwages, payment of overtime pay, project allowances, increase adjustments, 13th month pay
and attorneys fees. Local
Arbiter ruled in favor of Madolid and ordered Audion to pay the former, which was affirmed by
the NLRC.

ISSUE:

Whether the respondent NLRC committed grave abuse of discretion when it ruled that
private respondent was a regular employee and not a project employee

RULING:

Private respondents employment status was established by the certification of


employment issued by the petitioner. The rule is that findings of facts of the NLRC affirming
those of the Labor Arbiter are entitled to a great weight and will not be disturbed if they were
supported by substantial evidence. There was no grave abuse of discretion committed by NLRC
in finding that respondent was not a project employee. Decision of NLRC is affirmed with
modification deleting the awards of damages and attorneys fees.

Page 247 of 745


LBP vs. ONG
G.R. No. 190755, November 24, 2010

FACTS:

Spouses Johnson and Evangeline Sy secured a loan from Land Bank Legazpi City in the amount
of PhP 16 million. The loan was secured by three (3) residential lots, five (5) cargo trucks, and a
warehouse. Under the loan agreement, PhP 6 million of the loan would be short-term and would
mature on February 28, 1997, while the balance of PhP 10 million would be payable in seven (7)
years. The Notice of Loan Approval dated February 22, 1996 contained an acceleration clause
wherein any default in payment of amortizations or other charges would accelerate the maturity
of the loan.Subsequently, however, the Spouses Sy found they could no longer pay their loan.
They sold three (3) of their mortgaged parcels of land for PhP 150,000 to Angelina Gloria Ong,
Evangelines mother, under a Deed of Sale with Assumption of Mortgage.
Evangelines father, petitioner Alfredo Ong, later went to Land Bank to inform it about the sale
and assumption of mortgage.3 Atty. Edna Hingco, the Legazpi City Land Bank Branch Head,
told Alfredo and his counsel Atty. Ireneo de Lumen that there was nothing wrong with the
agreement with the Spouses Sy but provided them with requirements for the assumption of
mortgage. They were also told that Alfredo should pay part of the principal which was computed
at PhP 750,000 and to update due or accrued interests on the promissory notes so that Atty.
Hingco could easily approve the assumption of mortgage. Two weeks later, Alfredo issued a
check for PhP 750,000 and personally gave it to Atty. Hingco. A receipt was issued for his
payment. He also submitted the other documents required by Land Bank, such as financial
statements for 1994 and 1995. Atty. Hingco then informed Alfredo that the certificate of title of
the Spouses Sy would be transferred in his name but this never materialized. No notice of
transfer was sent to him. On December 12, 1997, Alfredo initiated an action for recovery of sum
of money with damages against Land Bank in Civil Case No. T-1941, as Alfredos payment was
not returned by Land Bank. The RTC held that that under the principle of equity and justice, the
bank should return the amount Alfredo had paid with interest at 12% per annum computed from
the filing of the complaint. The RTC further held that Alfredo was entitled to attorneys fees and
litigation expenses for being compelled to litigate.The CA affirmed the RTC Decision.
Land Bank contends that Art. 1236 of the Civil Code backs their claim that Alfredo should have
sought recourse against the Spouses Sy instead of Land Bank. Art. 1236 .

ISSUE:

WON the Art. 1236 of the Civil Code should apply in the instant case.

RULING:

We agree with Land Bank on this point as to the first part of paragraph 1 of Art. 1236. Land
Bank was not bound to accept Alfredos payment, since as far as the former was concerned, he
did not have an interest in the payment of the loan of the Spouses Sy. However, in the context of
the second part of said paragraph, Alfredo was not making payment to fulfill the obligation of
the Spouses Sy. Alfredo made a conditional payment so that the properties subject of the Deed of
Sale with Assumption of Mortgage would be titled in his name. It is clear from the records that
Land Bank required Alfredo to make payment before his assumption of mortgage would be
approved. He was informed that the certificate of title would be transferred accordingly. He,
thus, made payment not as a debtor but as a prospective mortgagor.
Alfredo, as a third person, did not, therefore, have an interest in the fulfilment of the obligation
of the Spouses Sy, since his interest hinged on Land Banks approval of his application, which
was denied. The circumstances of the instant case show that the second paragraph of Art. 1236
does not apply. As Alfredo made the payment for his own interest and not on behalf of the
Spouses Sy, recourse is not against the latter. And as Alfredo was not paying for another, he
cannot demand from the debtors, the Spouses Sy, what he has paid.

Page 248 of 745


BINALBAGAN VS. COURT OF APPEALS
G.R. No. 100594, March 10, 1993

FACTS:

On May 11, 1967, private respondents, through Angelina P. Echaus, in her capacity as
Judicial Administrator of the intestate estate of Luis B. Puentevella, executed a Contract to Sell
and a Deed of Sale of forty-two subdivision lots within the Phib-Khik Subdivision of the
Puentevella family, conveying and transferring said lots to petitioner Binalbagan Tech., Inc.
(hereinafter referred to as Binalbagan). In turn Binalbagan, through its president, petitioner
Hermilo J. Nava (hereinafter referred to as Nava), executed an Acknowledgment of Debt with
Mortgage Agreement, mortgaging said lots in favor of the estate of Puentevella.
Upon the transfer to Binalbagan of titles to the 42 subdivision lots, said petitioner took
possession of the lots and the building and improvements thereon. Binalbagan started operating
a school on the property from 1967 when the titles and possession of the lots were transferred to
it.
It appears that there was a pending case, Civil Case No. 7435 of Regional Trial Court
stationed at Himamaylan, Negros Occidental. In this pending case the intestate estate of the late
Luis B. Puentevella, thru Judicial Administratrix, Angelina L. Puentevella sold said
aforementioned lots to Raul Javellana with the condition that the vendee-promisee would not
transfer his rights to said lots without the express consent of Puentevella and that in case of the
cancellation of the contract by reason of the violation of any of the terms thereof, all payments
therefor made and all improvements introduced on the property shall pertain to the promissor and
shall be considered as rentals for the use and occupation thereof.
Javellana having failed to pay the installments for a period of five years, Civil Case No.
7435 was filed by defendant Puentevella against Raul Javellana and the Southern Negros
Colleges which was impleaded as a party defendant it being in actual possession thereof, for the
rescission of their contract to sell and the recovery of possession of the lots and buildings with
damages.
Accordingly, after trial, judgment was rendered in favor of Puentevella. Came December
29, 1965 when the plaintiffs in the instant case on appeal filed their Third-Party Claim based on
an alleged Deed of Sale executed in their favor by spouses Jose and Lolita Lopez, thus
Puentevella was constrained to assert physical possession of the premises to counteract the
fictitious and unenforceable claim of herein plaintiffs.
Upon the filing of the instant case for injunction and damages on January 3, 1966, an ex-
parte writ of preliminary injunction was issued by the Honorable Presiding Judge Carlos Abiera,
which order, however, was elevated to the Honorable Court of Appeals which issued a writ of
preliminary injunction ordering Judge Carlos Abiera or any other person or persons in his behalf
to refrain from further enforcing the injunction issued by him in this case and from further
issuing any other writs or prohibitions which would in any manner affect the enforcement of the
judgment rendered in Civil Case 7435, pending the finality of the decision of the Honorable
Court of Appeals in the latter case. Thus, defendant Puentevella was restored to the possession of
the lots and buildings subject of this case. However, plaintiffs filed a petition for review with the
Supreme Court which issued a restraining order against the sale of the properties claimed by the
spouses-plaintiffs.
When the Supreme Court dissolved the aforesaid injunction issued by the Court of
Appeals, possession of the building and other property was taken from petitioner Binalbagan and
given to the third-party claimants, the de la Cruz spouses. Petitioner Binalbagan transferred its
school to another location. In the meantime, the defendants in Civil Case No. 293 with the Court
of Appeals interposed an appeal. On October 30, 1978, the Court of Appeals rendered judgment,
reversing the appealed decision in Civil Case No. 293. On April 29, 1981, judgment was entered
in CA-G.R. No. 42211, and the record of the case was remanded to the court of origin on
December 22, 1981. Consequently, in 1982 the judgment in Civil Case No. 7435 was finally
executed and enforced, and petitioner was restored to the possession of the subdivision lots an
May 31, 1982. It will be noted that petitioner was not in possession of the lots from 1974 to May
31, 1982.

Page 249 of 745


After petitioner Binalbagan was again placed in possession of the subdivision lots,
private respondent Angelina Echaus demanded payment from petitioner Binalbagan for the
subdivision lots, enclosing in the letter of demand a statement of account as of September 1982
showing a total amount due of P367,509.93, representing the price of the land and accrued
interest as of that date.
As petitioner Binalbagan failed to effect payment, private respondent Angelina P. Echaus
filed on October 8, 1982 Civil Case No. 1354 of the Regional Trial Court of the Sixth Judicial
Region stationed in Himamaylan, Negros Occidental against petitioners for recovery of title and
damages. Private respondent Angelina P. Echaus filed an amended complaint by including her
mother, brothers, and sisters as co-plaintiffs, which was admitted by the trial court on March 18,
1983.
The trial court rendered a decision in favor of the petitioner because of prescription.
Nonetheless, the Court of Appeals reversed said decision.

ISSUE:

Whether or not the petition is with merit.

RULING:

No. A party to a contract cannot demand performance of the other party's obligations
unless he is in a position to comply with his own obligations. Similarly, the right to rescind a
contract can be demanded only if a party thereto is ready, willing and able to comply with his
own obligations there under (Art. 1191, Civil Code).
In a contract of sale, the vendor is bound to transfer the ownership of and deliver, as well
as warrant, the thing which is the object of the sale (Art. 1495, Civil Code); he warrants that the
buyer shall, from the time ownership is passed, have and enjoy the legal and peaceful possession
of the thing. As afore-stated, petitioner was evicted from the subject subdivision lots in 1974 by
virtue of a court order in Civil Case No. 293 and reinstated to the possession thereof only in
1982. During the period, therefore, from 1974 to 1982, seller private respondent Angelina
Echaus' warranty against eviction given to buyer petitioner was breached though, admittedly,
through no fault of her own. It follows that during that period, 1974 to 1982, private respondent
Echaus was not in a legal position to demand compliance of the prestation of petitioner to pay
the price of said subdivision lots. In short, her right to demand payment was suspended during
that period, 1974-1982.
The prescriptive period within which to institute an action upon a written contract is ten
years (Art. 1144, Civil Code). The cause of action of private respondent Echaus is based on the
deed of sale afore-mentioned. The deed of sale whereby private respondent Echaus transferred
ownership of the subdivision lots was executed on May 11, 1967. She filed Civil Case No. 1354
for recovery of title and damages only on October 8, 1982. From May 11, 1967 to October 8,
1982, more than fifteen (15) years elapsed. Seemingly, the 10-year prescriptive period had
expired before she brought her action to recover title. However, the period 1974 to 1982 should
be deducted in computing the prescriptive period for the reason that, as above discussed, from
1974 to 1982, private respondent Echaus was not in a legal position to initiate action against
petitioner since as afore-stated, through no fault of hers, her warranty against eviction was
breached. In the case of it was held that a court order deferring action on the execution of
judgment suspended the running of the 5-year period for execution of a judgment. Here the
execution of the judgment in Civil Case No. 7435 was stopped by the writ of preliminary
injunction issued in Civil Case No. 293. It was only when Civil Case No. 293 was dismissed
that the writ of execution in Civil Case No. 7435 could be implemented and petitioner
Binalbagan restored to the possession of the subject lots.
Deducting eight years (1974 to 1982) from the period 1967 to 1982, only seven years
elapsed. Consequently, Civil Case No. 1354 was filed within the 10-year prescriptive period.
Working against petitioner's position too is the principle against unjust enrichment, which would
certainly be the result if petitioner were allowed to own the 42 lots without full payment thereof.
WHEREFORE, the petition is DENIED and the decision of the Court of Appeals in CA-
G.R. CV No. 24635 is AFFIRMED.

Page 250 of 745


LORENZO SHIPPING COMPANY v. BJ MARTHEL INTERNATIONAL
G.R. No. 145483, November 19, 2004

FACTS:

Petitioner Lorenzo Shipping is engaged in coastwise shipping and owns the cargo M/V
Dadiangas Express. BJ Marthel is engaged in trading, marketing an dselling various industrial
commodities. Lorenzo Shipping ordered for the second time cylinder lines from the respondent
stating the term of payment to be 25% upon delivery, the balance payable in 5 bi-monthly equal
installments, no again stating the date of the cylinders delivery. It was allegedly paid through
post dated checks but the same was dishonored due to insufficiency of funds. Despite due
demands by the respondent, petitioner falied contending that time was of the essence in the
delivery of the cylinders and that there was a delay since the respondent committed said items
within two months after receipt of fir order. RTC held respondents bound to the quotation with
respect to the term of payment, which was reversed by the Court of appeals ordering appellee to
pay appellant P954,000 plus interest. There was no delay since there was no demand.

ISSUE:

Whether or not respondent incurred delay in performing its obligation under the contract of sale

RULING:

By accepting the cylinders when they were delivered to the warehouse, petitioner waived the
claimed delay in the delivery of said items. Supreme Court geld that time was not of the essence.
There having been no failure on the part of the respondent to perform its obligations, the power
to rescind the contract is unavailing to the petitioner.
Petition is denied. Court of appeals decision is affirmed.

Page 251 of 745


LUZON DEVELOPMENT BANK vs. ENRIQUEZ
G.R. No. 168646 January 12, 2011
DELTA DEVELOPMENT vs. ENRIQUEZ and LUZON DEVELOPMENT BANK
G.R. No. 168666

FACTS:

On July 3, 1995, De Leon (owner of Delta) and his spouse obtained a P4 million loan from the
BANK for the express purpose of developing Delta Homes I.8 To secure the loan, the spouses
De Leon executed in favor of the BANK a real estate mortgage (REM) on several of their
properties,9 including Lot 4. Subsequently, this REM was amended10 by increasing the amount
of the secured loan from P4 million to P8 million. Both the REM and the amendment were
annotated on TCT No. T-637183.11
Sometime in 1997, DELTA executed a Contract to Sell with respondent Angeles Catherine
Enriquez (Enriquez)14 over the house and lot in Lot 4 with the condition that upon full payment
of the total consideration the Owner shall execute a final deed of sale in favor of the Vendee/s.
When DELTA defaulted on its loan obligation, the BANK, instead of foreclosing the REM,
agreed to a dation in payment or a dacion en pago. Enriquez filed a complaint against DELTA
and the BANK before Office of the HLURB19 alleging that DELTA violated the terms of its
License to Sell. The HLURB Arbiter Atty. Raymundo A. Foronda upheld the validity of the
purchase price, but ordered DELTA to accept payment of the balance of P108,013.36 from
Enriquez, and (upon such payment) to deliver to Enriquez the title to the house and lot free from
liens and encumbrances.
DELTA appealed the arbiters Decision to the HLURB Board of Commissioners. The
Commission ordered [Enriquez] to pay [DELTA] the amount due from the time she suspended
payment up to filing of the complaint with 12% interest thereon per annum; thereafter the
provisions of the Contract to Sell shall apply until full payment is made.
The OP adopted by reference the findings of fact and conclusions of law of the HLURB
Decisions, which it affirmed in toto. The CA ruled against the validity of the dacion en pago
executed in favor of the BANK on the ground that DELTA had earlier relinquished its ownership
over Lot 4 in favor of Enriquez via the Contract to Sell.46

ISSUE:
Whether the dacion en pago extinguished the loan obligation, such that DELTA has no
more obligations to the BANK.

RULING:

The violation of Section 18 renders the mortgage executed by DELTA void therefore the
8 million loans are unsecured. Since the Contract to sell did not transfer ownership of Lot 4 to
Enriquez, said ownership remained with DELTA. DELTA could then validly transfer such
ownership (as it did) to another person (the BANK). However, the transferee BANK is bound by
the Contract to Sell and has to respect Enriquezs rights thereunder.
BANK is also not entitled to payment of the equivalent value of the lot 4 from DELTA when the
this court ruled in favor of ENRIQUEZ over lot 4. Like in all contracts, the intention of the
parties to the dation in payment is paramount and controlling. The contractual intention
determines whether the property subject of the dation will be considered as the full equivalent of
the debt and will therefore serve as full satisfaction for the debt. "The dation in payment
extinguishes the obligation to the extent of the value of the thing delivered, either as agreed upon
by the parties or as may be proved, unless the parties by agreement, express or implied, or by
their silence, consider the thing as equivalent to the obligation, in which case the obligation is
totally extinguished."

Page 252 of 745


ESTANISLAO REYES vs. SEBASTIANA MARTINEZ ET AL.,
G.R. No. 32226 . DECEMBER 29, 1930.

FACTS:

Estanislao Reyes filed an action against the Martinez heirs in which the plaintiff seeks,
among others, to recover five parcels of land, containing approximately one thousand coconut
trees, and to obtain a declaration of ownership in his own favor as against the defendants with
respect to said parcels. This cause of action is founded upon the contract, and the claim by the
plaintiff is to have the five parcels adjudged to him in lieu of another parcel formerly supposed to
contain one thousand trees and described in paragraph 8 of the contract between him and certain
of the Martinez heirs. By this contract Reyes was to be given the parcel described in clause 8, but
in a proviso to said clause, the parties contracting with Reyes agreed to assure to him certain
other land containing an equivalent number of trees in case he should so elect.

ISSUE:

Whether or not Reyes is entitled to the recovery of ownership of the five parcels of land
subject of this case.

RULING:

The prior history of the litigation shows that Reyes elected to take and hold the parcel
described in clause 8, and his right thereto has all along been recognized in the dispositions made
by the court with respect to said land. In our decision in Martinez vs. Grao (51 Phil., 287, 301),
it was a basal assumption that Reyes would obtain the thousand trees referred to; and we are of
the opinion that, from various steps taken in the prior litigation, Reyes must be taken to have
elected to take that particular parcel and he is now estopped from asserting a contrary election to
take the five parcels of land described in paragraph IX of his complaint.

However, the title to the parcel of land elected by Reyes is in the heirs of Inocente
Martinez and it does not appear that they have transferred said title to Reyes. It results therefore
that Reyes now has a claim for damages against the parties signatory to the contract of March 5,
1921, for the value of the aforesaid property. We therefore reach the conclusion that Reyes
should either have the land originally set apart for him under clauses 4 and 8 of the contract, or,
in case his right thereto should fail, he should not be required to pay the judgment for P8,000
which was awarded to the Martinez heirs in Martinez vs. Grao (51 Phil., 287, 302).

Page 253 of 745


AQUINTEY v. SPOUSES TIBONG
G.R. No. 166704,December 20, 2006

FACTS:

On May 6, 1999, petitioner Aquintey filed before RTC Baguio, a complaint for sum of
money and damages against respondents. Agrifina alleged that Felicidad secured loans from her
on several occasions at monthly interest rates of 6% to 7%. Despite demands, spouses Tibong
failed to pay their outstanding loans of P773,000,00 exclusive of interests. However, spouses
Tiong alleged that they had executed deeds of assignment in favor of Agrifina amounting to
P546,459 and that their debtors had executed promissory notes in favor of Agrifina. Spouses
insisted that by virtue of these documents, Agrifina became the new collector of their debts.
Agrifina was able to collect the total amount of P301,000 from Felicdads debtors. She tried to
collect the balance of Felicidad and when the latter reneged on her promise, Agrifina filed a
complaint in the office of the barangay for the collection of P773,000.00. There was no
settlement. RTC favored Agrifina. Court of Appeals affirmed the decision with modification
ordering defendant to pay the balance of total indebtedness in the amount of P51,341,00 plus 6%
per month.

ISSUE:

Whether or not the deeds of assignment in favor of petitioner has the effect of payment of
the original obligation that would partially extinguish the same

RULING:

Substitution of the person of the debtor ay be affected by delegacion. Meaning, the debtor
offers, the creditor accepts a third person who consent of the substitution and assumes the
obligation. It is necessary that the old debtor be released fro the obligation and the third person or
new debtor takes his place in the relation . Without such release, there is no novation. Court of
Appeals correctly found that the respondents obligation to pay the balance of their account with
petitioner was extinguished pro tanto by the deeds of credit. CA decision is affirmed with the
modification that the principal amount of the respondents is P33,841.

Page 254 of 745


MAMENTA Vda. De JAYME v. COURT OF APPEALS
G.R.N o. 128669,October 4, 002

FACTS:

On January 8, 1973, spouses Jayme entered into a contract of lease with George Neri, President
of Asian Cars covering one-half of Lot 2700 for 20 years. Under the contract, Asian Cars used
the leased premises as a collateral to secure payment of loan which Asian Cars may obtain from
any bank, provided, the proceeds of the loans shall be used solely for the construction of the
building which upon the termination of lease shall automatically become the property of the
Jayme spouses. In October1977, Asian Cars obtained a loan of six million from Metrobank. The
entire lot 2700 was offered as one of the several properties given as collateral for the loan. Due
to financial difficulties, Asian Cars conveyed ownership of the building on the leased premises to
MBTC by way of dacion en pago. Eventually, MBTC extrajudicially foreclosed the mortgage
and MBTC was the highest bidder in a public auction. Heirs of Graciano Jayme filed an action
for annulment of contract with damages and issuance of preliminary injunction against Asian
Cars. RTC declared that the REM executed by Jayme in favor of Metrobank as valid and
binding. XXX CA affirmed the decision declaring valid also the foreclosure of the mortgage and
the foreclosure sale.

ISSUE:

Whether or not the dacion en pago by Asian Cars in favor of MBTC is valid and binding
despite the stipulation in the lease contract

RULING:

Court of Appeal did not err in considering MBTC as a purchase in good faith,
MBTC had no knowledge of the stipulation in the lease contract. There was no annotation on the
title of any encumbrance. Thus, the transfer of the building in favor of MBTC was properly held
valid and binding by respondent CA.
CA decision is affirmed with modification ordering that private respondent
MBTC pay petitioners rentals amounting to P602,083.33. with 6 % interest per annum until
fully paid.

Page 255 of 745


CALTEX V. INTEREDIATE APPELLATE COURT and ASIA PACIFC
G.R. No. 72703, November 13, 1992

FACTS:

On January 12, 1975, Asia Pacific entered into an agreement with Caltex whereby
petitioner agreed to supply private respondents aviation fuel for 2 years. As of June 30, 1980,
asia Pacific had an outstanding obligation n the total amount of P 4,072,682.13. Caltex executed
a Ded of Assignment wherein it assigned to petitioner its receivables from the National treasury
of the Philippines. Pursuant to the Deed of assignment, National Treasury warrant the amount of
P5,475,294 representing the refund. Caltex refused to return the excess amount of P510,550.63
because it represented the interest and service charges and the rate of 18% per annum on the
unpaid and overdue account of respondent. RTC dismissed the case. IAC reversed the decision
and ordered petitioner to return the amount of P510,550.63 to private respondent.

ISSUE:

Whether or not the Deed of Assignment entered into by the parties constituted dacion en
pago, such that the obligation is totally extinguished, hence, no interest and service charges could
anymore be imposed

RULING:

The Deed of Assignment executed by the parties is not a dation in payment in payment
and did not totally extinguish respondents obligation. It is clear that in this case, dation in
payment does not necessarily mean total extinguishment of the obligation. The obligation is
totally extinguished only when the parties, by agreement, express or implied, or by their silence,
consider the thing a equivalent to the obligation.
Decision of Intermediate Appellate Court is set aside.

Page 256 of 745


SONNY LO v. KJS ECO-FORMWORK SYSTEM
G.R. No. 149420,October 8, 2003

FACTS:

KJS is engaged in the sale of steel scaffoldings while Lo is a building contractor. On


February 22, 1990, petitioner ordered scaffolding equipments from respondent worth
P540,425.80. He paid a downpayment in the amount of P150,000. The balance was made
payable in 10 monthly installments. Respondent delivered the equipments. Petitioner was able to
pay the first two monthly installments. His business suffered financial difficulties and he was
unable to settle his obligations despite demands. On October 11, 1990, the parties executed a
Deed of Assignment whereby petitioner assigned to respondent his receivables from Jonero
Realty. However, Jonero refused to honor the Dees of Assign,nt because it claimed that
petitioner was indebted to it. Petitioner refused to pay claiming that that his obligation had been
extinguished when they executed the deed of assign,ent. RTC dismissed the complaint on the
ground that the assignment of credit extinguished the obligation. Court of appeals reversed the
decision and ordered Lo to pay the plaintiff KJS with legal interests of 6% per annum until fully
paid.

ISSUE:

Whether or not the Deed of Assignment extinguished the obligation

RULING:

An assignment of credit, by virtue of which the owner of the credit, the assignor, by a
legal cause, such as sale, dacion en pago, exchange or donation and without the consent of the
debtor transfers his credit and accessory rights to another, the assignee, who acquires the power
to enforce it against the debtor. Petitioner, as assignor, is bound to warrant the existence and
legality of the credit at the tim of the sale or assignment. When Jonero claimed that it was no
longer indebted to petitioner since the latter had also as unpaid obligation to it, it essentially
meant that its obligation to the petitioner has been extinguished by compensation. Petitioner was
found in breach of his obligation under the Deed of assignment. Court of Appeals decision is
affirmed.

Page 257 of 745


ASI CORP and ANTONIO SAN JUAN v. SPOUSES EFREN EVANGELISTA

FACTS:

Respondents are engaged in the large-scale business of buying broiler eggs, hatching
and selling them and egg by-products. For incubation and hatchings, respondents availed of the
hatching services of ASJ Corp. They agreed o service fees of 80 centavos per egg. Service fees
were paid upon release. Fro consecutive times the respondents failed to pay the fee until such
time that ASJ retained the chicks demanding full payment from the respondent. ASJ received
P15,000 for partial payment but the chicks were still not released. RTC ruling, which was
affirmed by the Court of Appeals holding that ASJ Corp and Antonio San Juan be solidarily
liable to the respondents.

ISSUE:

Was petitioners retention of the chicks and by-products, on account of respondents


failure to pay the corresponding fees unjustified?

RULING:

Respondents offer to partially satisfy their accounts is not enough to extinguish their
obligation. Respondents cannot substitute or apply as their payment the value of the chicks and
by-products they expect to derive because it is necessary that all the debts be paid for the same
kind. The petition is partly granted. The Court of Appeals decision is modified.

Page 258 of 745


NEREO PACULDO v. BONIFACIO REGALADO
G. R. No. 123855,November 20, 2000

FACTS:

On December 27, 1990, petitioner Paculdo and respondent Regalado entered into a
contract of lease over a parcel of land for 25 years. For the first 5 years, Paculdo would pay
monthly rental of P450,000 payable within 5 days of each month, with 2% penalty for very
month of delay. Aside from the above lease, petitioner leased 11 other property from
respondent. Petitioner failed to pay. Without the knowledge of petitioner, respondent ortgaged
the land subject of the lease contract including the improvements to Monte de Piedad. On August
12, 1995, and on subsequent dates thereafter, respondent refused to accepr petitioners daily
rental payments. Petitioner filed an action for injunction to enjoin respondent from disturbing his
possession while respondent filed a complaint for ejectment attaching the demand letters. MTC
held in favor of the plaintiff which was affired by the RTC. CA found that the petitioner
impliedly consented to respondents application of payment to his obligations, thus, dismissed
the petition for lack of merit.

ISSUE:

Whether petitioner was truly in arrears in the payment of rentals on the subject property
at the time of the filing of the complaint of ejectment

RULING:

The lease over the Fairview wet market property is the most onerous among all the
obligations of petitioner to respondent. It was established that the wet market is a going concern
and that petitioner has invested about P35,000,000 in form of improvements, over the property.
Hence, petitioner would stand to lose more if the lease would not proceed. CA decision was
based on a misapprehension of the facts and the law on the application of payment. Hence, the
ejectment case must be dismissed. CA decision is set aside.

Page 259 of 745


CHINA BANKING CORPORATION v. COURT OF APPEALS
G.R. No. 121158, December 5, 1996

FACTS:

China Banking Corporation extended several loans to Native West and so Ching, Native
Wests President. Native west executed a promissory note in favor of China Bank. So Ching,
with the marital consent of his wife additionally executed two real estate mortgages over their
properties. The promissory notes matured and despite due demands, neither private respondents
paid. China Bank filed petition for the extrajudicial foreclosure of the mortgaged properties.
Upon receipt of the foreclosure, private respondents filed a complaint before RTC for accounting
with damages and with temporary restraining order.

ISSUE:

Whether or not the subject additional mortgaged properties of the spouses are not
included in the notice of foreclosure

RULING:

It is well-settled that mortgages given to secure future advancements or loans are valid
and legal contracts, and that the amounts named as considerations in said contracts do not limit
the amount for which the mortgage may stand as security if from the four corners of the
instrument the intent to secure future and their indebtedness can be gathered. Supreme Court
found that petitioners are entitled to foreclose the mortgages.

Page 260 of 745


MOBIL OIL PHILIPPINES and CALTEX v. COURT OF APPEALS and
CONTINENTAL CEMENT
G.R.No. 103052,May 23, 1997

FACTS:

In May 1982, petitioner Mobil Oil entered into a supply agreement with private
respondent Continental Cement, under which the former would supply the latters industrial fuel
oil or bunker fuel oil requirements. MOP extended to CCC an unsecured credit line of
P2,000,000 against which CCCs purchases of oil could initially be charged. MOP made a total
of 67 deliveries of BFO, each delivery consisting of 20,000 liters to CCCs factory. CCC
discovered that, the supposed BFO was in fact, pure water. A joint undertaking was initiated. On
August 23, 1983, Caltex informed CCC that it would be the new owner of Mop effective
September 1, 1983 and that Caltex would assume all rights and obligations of MOP under all its
existing contracts. CA upheld the findings of the trial court that the water-contaminated BFO
delivered by MOP caused damages to CCCs rotary kin.

ISSUE:

Whether or not petitioners can be held liable for the contaminated BO delivered on the
ground that CFS, as carrier-hauler, was an agent of Mobil

RULING:

Court of Appeals correctly ruled that MOP could be held liable for the acts of CFS. The
hauling contract executed by and between MOP and CFS laid out the responsibilities of CFS.
The presumption LAID DOWN IN Article 1523 of the Civil Code is not applicable. The
questioned decision of the court of Appeals is affirmed in toto.

Page 261 of 745


DALTON, vs.FGR REALTY AND DEVELOPMENT CORP
G.R. No. 172577 January 19, 2011

FACTS:

Flora R. Dayrit (Dayrit) owned a 1,811-square meter parcel of land located at the corner of Rama
Avenue which Dalton leased portions of the property.
In June 1985, Dayrit sold the property to respondent FGR Realty and Development Corporation
(FGR). In August 1985, Dayrit and FGR stopped accepting rental payments because they wanted
to terminate the lease agreements with Dalton and Sasam, et al.
Soledad Dalton built a house which she initially used as a dwelling and store space. She vacated
the premises when her children got married. She transferred her residence near F. Ramos Public
Market, Cebu City.
She constructed the 20 feet by 20 feet floor area house sometime in 1973. The last monthly rental
was P69.00. When defendants refused to accept rent al and demanded vacation of the premises,
she consignated [sic] her monthly rentals in court.
The RTC dismissed the 11 September 1985 complaint and ordered Dalton to vacate the property.
The RTC held that:
The requisites of consignation are as follows:
1. The existence of a valid debt.
2. Valid prior tender, unless tender is excuse [sic];
3. Prior notice of consignation (before deposit)
4. Actual consignation (deposit);
5. Subsequent notice of consignation;
Requisite Nos. 3 and 5 are absent or were not complied with. It is very clear that there were no
prior notices of consignation (before deposit) and subsequent notices of consignation (after
deposit) The Court of Appeals affirmed the RTCs 26 February 2002 Decision.

ISSUE:

WON the consignation was void.

RULING:

No. Compliance with the requisites of a valid consignation is mandatory. Failure to


comply strictly with any of the requisites will render the consignation void. Substantial
compliance is not enough. The requisites of a valid consignation: (1) a debt due; (2) the creditor
to whom tender of payment was made refused without just cause to accept the payment, or the
creditor was absent, unknown or incapacitated, or several persons claimed the same right to
collect, or the title of the obligation was lost; (3) the person interested in the performance of the
obligation was given notice before consignation was made; (4) the amount was placed at the
disposal of the court; and (5) the person interested in the performance of the obligation was given
notice after the consignation was made.
Substantial compliance is not enough for that would render only a directory construction to the
law. The use of the words "shall" and "must" which are imperative, operating to impose a duty
which may be enforced, positively indicate that all the essential requisites of a valid consignation
must be complied with. The Civil Code Articles expressly and explicitly direct what must be
essentially done in order that consignation shall be valid and effectual.

Page 262 of 745


SPOUSES JAIME BENOS v. SPOUSES GREGORIO LAWILAO
G.R. No. 172259, December 5, 2006

FACTS:

On February 11,1999, petitioner-spouses Benos and respondent Lawilao executed


a Pacto de Retro Sale where Benos sold their lot and the building erected thereon for
P300,000, one-half of which to be paid in cash to the Benos and the other half to be paid
to the bank to pay off the loans of the Benos which was secured by the same lot and
building. Under the contract, Benos could redeem the property within 18 months from
the date of execution by returning the contract price, otherwise, the sale would become
irrevocable. After paying the P150,000, Lawilao took possession of the property,
restructured it twicw, eventually the loan become due and demandable. On August 14,
2000, a son of Benos and Lawilao paid the bankl but the bank refused. Lawilao filed for
consignation against the bank and deposited the amount of P159,000.00. RTC declared
Lawilao of the ownership of the subject property, which was affirmed by the Court of
Appeals.

ISSUE:

Whether or not the contract of Pacto de Retro Sale be rescinded by the petitioner

RULING:

In the instant case, records show that Lawilao filed the petition for consignation
against the bank in Civil Case without notifying the Benos. Hence, Lawilao failed to
prove their offer to pay the balance, even before the filing of the consignation case.
Lawilao never notified the Benos. Thus, as far as the Benos are concerned, there was no
full and complete payment of the contract price which gives them the right to rescind.
Petition is granted. Court of Appeals decision is reversed and set aside, that the
Pacto de Retro Sale is rescinded and petitioner are ordered to return the amount of
P150,000 to respondents.

Page 263 of 745


PEOPLES INDUSTRIAL AND COMERCIAL v. COURT OF APPEALS and MAR-
ICK INVESTENT
G.R. No. 112733, October 24, 1997

FACTS:

Private respondent is the registered owner of Mar-ick Subdivision which entered into 6
agreements with petitioner, whereby to sell 6 subdivision lots. Except for lot no. 8. All the lots
measure 240 sq each. Lot nos. 3,4,5,6 and 7 similarly stipulate that petitioner agreed to pay for
each lot P7,333.20, P480 as down payment. The balance shall be payable n 120 equal monthly
installments of P57.11 every 30th of the month, for 10 years. With lot no. 8, they agreed to the
purchase price of P7,730 with a down payment of P506 and equal installments of P60.20.
Petitioner failed to perform its obligation. After series of negotiations, the parties agreed to enter
into a new contract to sell 8 lots. Checks issued in favor of the private respondent were received
but not encashed. Private respondent filed a suit against the petitioner. RTC directed petitioner to
return the lots, which was affirmed in toto by the CA.

ISSUE:

Whether or not there was a perfected and enforceable contracts of sale on October
11,1983 which modified the earlier contracts to sell which had not been validly rescinded

RULING:

It is apropos to stress that the agreements are contracts to sell and not contract of sale,
hence, rescission either by judicial action or notarial act is not applicable. Private respondents
act of cancelling the contract to sell was not done arbitrarily. Because the contracts to sell had
long been cancelled when private respondent fled the accion publiciana de possession, there was
no more installment buyer and seller relationship to speak of. It had been reduced to a mere case
of an owner claiming possession of its property that had long been illegally withheld from it by
another.

Page 264 of 745


ETERNAL GARDENS v. COURT OF APPEALS and 7TH DAY ADVENTIST
G.R. No. 124554, December 9, 1997

FACTS:

Petitioner Eternal Gardens and private NPUM entered into a Land Development
Agreement. Under the agreement, EG was to develop a parcel of land owned by NPUM into a
memorial park. The P1.5 million initial installment mentioned in the Deed of Absolute Sale,
shall be deducted out of the proceeds from the First Partys 40% at the end of the 5 th year.
Subsequent payment should be changed against what is due to the first Party under the Land
Development agreement. Later, 2 claimants of the land surfaced but were dismissed. The case
was remanded to the CA for proper determination and dispositions. CA required EG to produce
documents necessary for accounting but failed to do so, hence, the right is waived. CA directed
EG to pay private respondent the amounts of P167,065,195.00 as principal and P167,235,451.00
interest.

ISSUE:

Whether or not the petitioner is liable for interest despite the land dispute

RULING:

Even during the pendency of the land dispute cases, EG was required to deposit the
accruing interests with a reputable commercial bank to avoid possible wastage of funds when
the case was given due course. Yet, EG hedged in depository the amounts due and made obvious
attempts to stay payment by filing sundry motions and pleadings. CA correctly held EG liable for
interest of 12%. It is tantamount to a forbearance of money.

Page 265 of 745


RAYOS V REYES
G.R.No. 150193 February 20, 2003

FACTS:

Three parcels were formerly owned by the spouses Francisco and Asuncion Tazal who on
1 September 1957 sold them for P724.00 to respondents predecessor-in-interest, one Mamerto
Reyes, with right to repurchase within two (2) years from date thereof by paying to the vendee
the purchase price and all expenses incident to their reconveyance. After the sale the vendee a
retro took physical possession of the properties and paid the taxes thereon.
The otherwise inconsequential sale became controversial when two (2) of the three (3)
parcels were again sold on 24 December 1958 by Francisco Tazal for P420.00 in favor of
petitioners predecessor-in-interest Blas Rayos without first availing of his right to repurchase
the properties.

ISSUE:

Was there a valid consignation and tender of payment made in the instant case?

RULING:

In order that consignation may be effective the debtor must show that (a) there was a debt
due; (b) the consignation of the obligation had been made because the creditor to whom a valid
tender of payment was made refused to accept it; (c) previous notice of the consignation had
been given to the person interested in the performance of the obligation; (d) the amount due was
placed at the disposal of the court; and, (e) after the consignation had been made the person
interested was notified thereof.

In the instant case, petitioners failed, first, to offer a valid and unconditional tender of
payment; second, to notify respondents of the intention to deposit the amount with the court; and
third, to show the acceptance by the creditor of the amount deposited as full settlement of the
obligation, or in the alternative, a declaration by the court of the validity of the consignation.
The failure of petitioners to comply with any of these requirements rendered the consignation
ineffective.

Consignation and tender of payment must not be encumbered by conditions if they are to
produce the intended result of fulfilling the obligation. In the instant case, the tender of payment
of P724.00 was conditional and void as it was predicated upon the argument of Francisco Tazal
that he was paying a debt which he could do at any time allegedly because the 1 September 1957
transaction was a contract of equitable mortgage and not a deed of sale with right to repurchase

Page 266 of 745


CEBU INTERNATIONAL V CA
G.R.No. 123031 October 12, 1999

FACTS:

On April 25, 1991, private respondent, Vicente Alegre, invested with CIFC, P500,000.00
pesos, in cash. Petitioner issued a promissory note to mature on May 27, 1991. The note for
P516,238.67 covered private respondent's placement plus interest at twenty and a half percent for
thirty-two days. On May 27, 1991, CIFC issued BPI Check No. 513397 P514,390.94 in favor of
the private respondent as proceeds of his matured investment plus interest. The CHECK was
drawn from petitioner's current account number 0011-0803-59, maintained with BPI, main
branch at Makati City. On June 17, 1991, private respondent's wife deposited the CHECK with
RCBC, in Puerto Princesa, Palawan. BPI dishonored the CHECK with the annotation, that the
"Check (is) Subject of an Investigation." BPI took custody of the CHECK pending an
investigation of several counterfeit checks drawn against CIFC's aforestated checking account.
BPI used the check to trace the perpetrators of the forgery. Immediately, private respondent
notified CIFC of the dishonored CHECK and demanded, on several occasions, that he be paid in
cash. CIFC refused the request, and instead instructed private respondent to wait for its ongoing
bank reconciliation with BPI.

ISSUE:

Whether or not there was valid tender of payment in the instant case?

RULING:

A check is not a legal tender, and therefore cannot constitute valid tender of payment.
"Since a negotiable instrument is only a substitute for money and not money, the delivery of such
an instrument does not, by itself, operate as payment. A check, whether a manager's check or
ordinary check, is not legal tender, and an offer of a check in payment of a debt is not a valid
tender of payment and may be refused receipt by the obligee or creditor. Mere delivery of checks
does not discharge the obligation under a judgment. The obligation is not extinguished and
remains suspended until the payment by commercial document is actually realized

The delivery of promissory notes payable to order, or bills of exchange or other


mercantile documents shall produce the effect of payment only when they have been cashed, or
when through the fault of the creditor they have been impaired.

Page 267 of 745


DE MESA V CA
G.R.No. 106467-68 October 19,1999

FACTS:

Petitioner Dolores Ligaya de Mesa owns several parcels of land in Makati, Pasay City,
Cavite, and General Santos City3 I. Two (2) parcels of land situated in Makati, Metro Manila,
with TCT no. (232345) S-60337 containing an area of 188 square meters and TCT No. (232344)
S-50336 containing an area of 236 square meters.
Two parcels of land situated in Makan, General Santos City, with TCT No. T-11067 containing
an area of 837 square meters. which were mortgaged to the Development Bank of the Philippines
(DBP) as security for a loan she obtained from the bank. Failing to pay her mortgage debt, all her
mortgaged properties were foreclosed and sold at public auction held on different days. On April
30, 1977, the Makar property was sold and the corresponding certificate of sale inscribed on
March 10, 1978. On August 25, 1977, the Naic, Cavite property was sold and the certificate of
sale registered on the same day. On August 30, 1977, the two (2) parcels of land in Makati were
sold at public auction and the certificate of sale was inscribed on November 25, 1977. And on
January 12, 1978, the three (3) parcels of land in Pasay City were also sold and the certificate of
sale was recorded on the same date. In all the said auction sales, DBP was the winning bidder.

ISSUE:

Whether or not the Court can supplant its own reading of an ambiguous contract for the
actual intention of the contracting parties as testified to in open court and under oath.

RULING:

Art. 1370. If the terms of a contract are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulation shall control.

When the words of a contract are plain and readily understood, there is no room for
construction. As the agreement of the parties are reduced to writing, such agreement is
considered as containing all its terms and there can be, between the parties and their successors-
in-interest, no evidence of the terms of the written agreement other than the contents of the
writing.
In the case under consideration, the terms of the "Deed of Sale with Assumption of Mortgage
Debt" are clear and leave no doubt as to what were sold thereunder.

The contract under scrutiny is so explicit and unambiguous that it does not justify any
attempt to read into it any supposed intention of the parties, as the said contract is to be
understood literally, just as they appear on its face.

Page 268 of 745


OCCENA V CA
G.R.No. 44349 October 29, 1976

FACTS:

On February 25, 1975 private respondent Tropical Homes, Inc. filed a complaint for
modification of the terms and conditions of its subdivision contract with petitioners (landowners
of a 55,330 square meter parcel of land in Davao City), making the following allegations:
"That due to the increase in price of oil and its derivatives and the concomitant
worldwide spiralling of prices, which are not within the control of plaintiff, of all commodities
including basis raw materials required for such development work, the cost of development has
risen to levels which are unanticipated, unimagined and not within the remotest contemplation of
the parties at the time said agreement was entered into and to such a degree that the conditions
and factors which formed the original basis of said contract, Annex 'A', have been totally
changed;
"That further performance by the plaintiff under the contract, Annex 'A', will result in
situation where defendants would be unjustly enriched at the expense of the plaintiff; will cause
an inequitous distribution of proceeds from the sales of subdivided lots in manifest contravention
of the original essence of the agreement; and will actually result in the unjust and intolerable
exposure of plaintiff to implacable losses.

ISSUE:

Whether or not provisions of art 1267 of the new civil code is applicable in the case at a
bar?

RULING:

ART. 1267. When the service has become so difficult as to be manifestly beyond the
contemplation of the parties, the obligor may also be released therefrom, in whole or in part."

Respondent's complaint seeks not release from the subdivision contract but that the court
"render judgment modifying the terms and conditions of the contract . . . by fixing the proper
shares that should pertain to the herein parties out of the gross proceeds from the sales of
subdivided lots of subject subdivision". The cited article does not grant the courts this authority
to remake, modify or revise the contract or to fix the division of shares between the parties as
contractually stipulated with the force of law between the parties, so as to substitute its own
terms for those covenanted by the parties themselves. Respondent's complaints for modification
of contract manifestly has no basis in law and therefore states no cause of action. Under the
particular allegations of respondent's complaint and the circumstances therein averred, the courts
cannot even in equity grant the relief sought.

Page 269 of 745


ORTIGAS V FEATI BANK
G.R.No. 24670 December 14, 1979

FACTS:

On March 4, 1952, plaintiff, as vendor, and Augusto Padilla y Angeles and Natividad
Angeles, as vendees, entered into separate agreements of sale on installments over two parcels of
land, known as Lots Nos. 5 and 6, Block 31, of the Highway Hills Subdivision, situated at
Mandaluyong, Rizal. On July 19, 1962, the said vendees transferred their rights and interests
over the aforesaid lots in favor of one Emma Chavez. Upon completion of payment of the
purchase price, the plaintiff executed the corresponding deeds of sale in favor of Emma Chavez.
On or about May 5, 1963, defendant-appellee began laying the foundation and
commenced the construction of a building on Lots Nos. 5 and 6, to be devoted to banking
purposes, but which defendant-appellee claims could also be devoted to, and used exclusively
for, residential purposes. The following day, plaintiff-appellant demanded in writing that
defendant-appellee stop the construction of the commercial building on the said lots. The latter
refused to comply with the demand, contending that the building was being constructed in
accordance with the zoning regulations, defendant-appellee having filed building and planning
permit applications with the Municipality of Mandaluyong, and it had accordingly obtained
building and planning permits to proceed with the construction.

ISSUE:

Whether the Resolution No. 27 s-1960 can nullify or supersede the contractual
obligations assumed by defendant-appellee.

RULING:

It should be stressed, that while non-impairment of contracts is constitutionally


guaranteed, the rule is not absolute, since it has to be reconciled with the legitimate exercise of
police power.

Resolution No. 27, s-1960 declaring the western part of Highway 54, EDSA from Shaw
Boulevard to the Pasig River as an industrial and commercial zone, was obviously passed by the
Municipal Council of Mandaluyong, Rizal in the exercise of police power to safeguard or
promote the health, safety, peace, good order and general welfare of the people in the locality.
Judicial notice may be taken of the conditions prevailing in the area, especially where Lots Nos.
5 and 6 are located. The lots themselves not only front the highway; industrial and commercial
complexes have flourished about the place. EDSA, a main traffic artery which runs through
several cities and municipalities in the Metro Manila area, supports an endless stream of traffic
and the resulting activity, noise and pollution are hardly conducive to the health, safety or
welfare of the residents in its route. Having been expressly granted the power to adopt zoning
and subdivision ordinances or regulations, the municipality of Mandaluyong, through its
Municipal Council, was reasonably, if not perfectly, justified under the circumstances, in passing
the subject resolution.

Page 270 of 745


DANIEL T. SO vs. FOOD FEST LAND, INC.
G.R. No. 183628 April 7, 2010
FOOD FEST LAND, INC. vsDANIEL T. SO
G.R. No. 183670

FACTS:

Food Fest Land Inc. (Food Fest) entered into a September 14, 1999 Contract of Lease1
with Daniel T. So (So) over a commercial space in San Antonio Village, Makati City for a period
of three years (1999-2002) on which Food Fest intended to operate a Kentucky Fried Chicken
carry out branch.
Before forging the lease contract, the parties entered into a preliminary agreement dated
July 1, 1999, the pertinent portion of which states that the lease shall not become binding upon
us unless and until the government agencies concerned shall authorize, permit or license us to
open and maintain our business at the proposed Lease Premises.
While Food Fest was able to secure the necessary licenses and permits for the year 1999, it
failed to commence business operations. For the year 2000, Food Fests application for renewal
of barangay business clearance was "held in abeyance until further study of [its] kitchen
facilities."
As the barangay business clearance is a prerequisite to the processing of other permits,
licenses and authority by the city government, Food Fest was unable to operate. Fearing further
business losses, Food Fest, by its claim, communicated its intent to terminate the lease contract
to So who, however, did not accede and instead offered to help Food Fest secure authorization
from the barangay.
On April 26, 2001, So filed a complaint for ejectment and damages against Food Fest
before the Metropolitan Trial Court (MeTC) of Makati City.
The MeTC, by Decision of July 4, 2005,7 rendered judgment in favor of So.The Regional Trial
Court (RTC), by Decision of November 30, 2006,9 reversed the MeTC Decision.
Court of Appeals however, declared that Food Fests obligation to pay rent was not extinguished
upon its failure to secure permits to operate.

ISSUE:

WON Principle of rebus sic stantibus is applicable to the instant case.

RULING:

No. As for Food Fests invocation of the principle of rebus sic stantibus as enunciated in
Article 1267 of the Civil Code to render the lease contract functus officio, and consequently
release it from responsibility to pay rentals, the Court is not persuaded.
This article, which enunciates the doctrine of unforeseen events, is not, however, an
absolute application of the principle of rebus sic stantibus, which would endanger the security of
contractual relations. The parties to the contract must be presumed to have assumed the risks of
unfavorable developments. It is, therefore, only in absolutely exceptional changes of
circumstances that equity demands assistance for the debtor.19
Food Fest was able to secure the permits, licenses and authority to operate when the lease
contract was executed. Its failure to renew these permits, licenses and authority for the
succeeding year, does not, however, suffice to declare the lease functus officio, nor can it be
construed as an unforeseen event to warrant the application of Article 1267.

Page 271 of 745


MAGAT V CA
G.R.No. 124221 August 4, 2000

FACTS:

Private respondent Santiago A. Guerrero (hereinafter referred to as "Guerrero") was


President and Chairman of[4] "Guerrero Transport Services", a single proprietorship.
Sometime in 1972, Guerrero Transport Services won a bid for the operation of a fleet of taxicabs
within the Subic Naval Base, in Olongapo. As highest bidder, Guerrero was to "provide radio-
controlled taxi service within the U. S. Naval Base, Subic Bay, utilizing as demand requires...
160 operational taxis consisting of four wheel, four-door, four passenger, radio controlled, meter
controlled, sedans, not more than one year.
On September 22, 1972, with the advent of martial law, President Ferdinand E. Marcos issued
Letter of Instruction No. 1. SEIZURE AND CONTROL OF ALL PRIVATELY OWNED
NEWSPAPERS, MAGAZINES, RADIO AND TELEVISION FACILITIES AND ALL
OTHERMEDIA OF COMMUNICATION.

ISSUE:

Whether the contract between Victorino and Guerrero for the purchase of radio
transceivers was void.

RULING:

The contract was not void ab initio. Nowhere in the LOI and Admin. Circular is there an
express ban on the importation of transceivers.

The LOI and Administrative Circular did not render "radios and transceivers" illegal per
se. The Administrative Circular merely ordered the Radio Control Office to suspend the
"acceptance and processing .... of applications... for permits to possess, own, transfer, purchase
and sell radio transmitters and transceivers..."[41] Therefore, possession and importation of the
radio transmitters and transceivers was legal provided one had the necessary license for it.[42]
Transceivers were not prohibited but merely regulated goods. The LOI and Administrative
Circular did not render the transceivers outside the commerce of man. They were valid objects of
the contract.

Page 272 of 745


PNCC V CA
G.R.No. 118696 May 5, 1997

FACTS:

On 7 January 1986, petitioner obtained from the Ministry of Human Settlements a


Temporary Use Permit 2 for the proposed rock crushing project. The permit was to be valid for
two years unless sooner revoked by the Ministry. On 16 January 1986, private respondents wrote
petitioner requesting payment of the first annual rental in the amount of P240,000 which was due
and payable upon the execution of the contract.

They also assured the latter that they had already stopped considering the proposals of
other aggregates plants to lease the property because of the existing contract with petitioner. In
its reply-letter, petitioner argued that under paragraph 1 of the lease contract, payment of rental
would commence on the date of the issuance of an industrial clearance by the Ministry of Human
Settlements, and not from the date of signing of the contract. It then expressed its intention to
terminate the contract, as it had decided to cancel or discontinue with the rock crushing project
"due to financial, as well as technical, difficulties." Private respondents refused to accede to
petitioner's request for the pretermination of the lease contract. They insisted on the performance
of petitioner's obligation and reiterated their demand for the payment of the first annual rental.

ISSUE:

Whether provisions of Article 1266 and the principle of rebus sic stantibus is applicable
in the case at bar?

RULING:

Article 1266 of the Civil Code, which reads: "The debtor in obligations to do shall also be
released when the prestation becomes legally or physically impossible without the fault of the
obligor." Petitioner cannot, however, successfully take refuge in the said article, since it is
applicable 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 oflease falls within the
prestation "to give"; hence, it is not covered within the scope of Article 1266. At any rate, the
unforeseen event and causes mentioned by petitioner are not the legal or physical impossibilities
contemplated in the said article. Besides, petitioner failed to state specifically the circumstances
brought about by "the abrupt change in the political climate in the country" except the alleged
prevailing uncertainties in government policies on infrastructure projects. 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.

Page 273 of 745


NATELCO V CA
G.R.No. 107112 February 24, 1994

FACTS:

Petitioner Naga Telephone Co., Inc. (NATELCO) is a telephone company rendering local
as well as long distance service in Naga City while private respondent Camarines Sur II Electric
Cooperative, Inc. (CASURECO II) is a private corporation established for the purpose of
operating an electric power service in the same city. On November 1, 1977, the parties entered
into a contract (Exh. "A") for the use by petitioners in the operation of its telephone service the
electric light posts of private respondent in Naga City. In consideration therefor, petitioners
agreed to install, free of charge, ten (10) telephone connections for the use by private respondent
After the contract had been enforced for over ten (10) years, private respondent filed on
January 2, 1989 with the Regional Trial Court of Naga City (Br. 28) C.C. No. 89-1642 against
petitioners for reformation of the contract with damages, on the ground that it is too one-sided in
favor of petitioners; that it is not in conformity with the guidelines of the National Electrification
Administration (NEA) which direct that the reasonable compensation for the use of the posts is
P10.00 per post, per month; that after eleven (11) years of petitioners' use of the posts, the
telephone cables strung by them thereon have become much heavier with the increase in the
volume of their subscribers, worsened by the fact that their linemen bore holes through the posts
at which points those posts were broken during typhoons.

ISUUE:

Whether respondent court erred in making a contract for the parties by invoking Article
1267 of the New Civil Code.

RULING:

Article 1267 speaks of "service" which has become so difficult. Taking into consideration
the rationale behind this provision, 9 the term "service" should be understood as referring to the
"performance" of the obligation. In the present case, the obligation of private respondent consists
in allowing petitioners to use its posts in Naga City, which is the service contemplated in said
article. Furthermore, a bare reading of this article reveals that it is not a requirement thereunder
that the contract be for future service with future unusual change. According to Senator Arturo
M. Tolentino, 10 Article 1267 states in our law the doctrine of unforseen events. This is said to
be based on the discredited theory of rebus sic stantibus in public international law; under this
theory, the parties stipulate in the light of certain prevailing conditions, and once these conditions
cease to exist the contract also ceases to exist. Considering practical needs and the demands of
equity and good faith, the disappearance of the basis of a contract gives rise to a right to relief in
favor of the party prejudiced.

Page 274 of 745


REYNA V. COA
FEBRUARY 8, 2011

FACTS:

The Land Bank of the Philippines (Land Bank) was engaged in a cattle-financing
program wherein loans were granted to various cooperatives. Pursuant thereto, Land Bank's Ipil,
Zamboanga del Sur Branch (Ipil Branch) went into a massive information campaign offering the
program to cooperatives.Cooperatives who wish to avail of a loan under the program must fill up
a Credit Facility Proposal (CFP) which will be reviewed by the Ipil Branch. The Ipil Branch
approved the applications of four cooperatives.One of the conditions stipulated in the CFP is that
prior to the release of the loan, a Memorandum of Agreement (MOA) between the supplier of the
cattle, Remad Livestock Corporation (REMAD), and the cooperative, shall have been signed. As
alleged by petitioners, the terms of the CFP allowed for pre-payments or advancement of the
payments prior to the delivery of the cattle by the supplier REMAD but such was not stipulated
in the contracts.
Three checks were issued by the Ipil Branch to REMAD to serve as advanced payment
for the cattle. REMAD, however, failed to supply the cattle on the dates agreed upon.
In post audit, the Land Bank Auditor disallowed the amount of P3,115,000.00 under CSB
No. 95-005 dated December 27, 1996 and Notices of Disallowance Nos. 96-014 to 96-019 in
view of the non-delivery of the cattle. Also made as the basis of the disallowance was the fact
that advanced payment was made in violation of bank policies and COA rules and regulations.
Petitioners were made liable for the amount

ISSUE:

Whether or not the writing off of a loan is considered as condonation

RULING:

This Court rules that writing-off a loan does not equate to a condonation or release of a
debt by the creditor.
As an accounting strategy, the use of write-off is a task that can help a company maintain a more
accurate inventory of the worth of its current assets. In general banking practice, the write-off
method is used when an account is determined to be uncollectible and an uncollectible expense is
recorded in the books of account. If in the future, the debt appears to be collectible, as when the
debtor becomes solvent, then the books will be adjusted to reflect the amount to be collected as
an asset. In turn, income will be credited by the same amount of increase in the accounts
receivable.
Write-off is not one of the legal grounds for extinguishing an obligation under the Civil Code. It
is not a compromise of liability. Neither is it a condonation, since in condonation gratuity on the
part of the obligee and acceptance by the obligor are required. In making the write-off, only the
creditor takes action by removing the uncollectible account from its books even without the
approval or participation of the debtor.

Page 275 of 745


TRANS PACIFIC V CA
G.R.No. 109172 August 19, 1994

FACTS:

Sometime in 1979, petitioner applied for and was granted several financial
accommodations amounting to P1,300,000.00 by respondent Associated Bank. The loans were
evidence and secured by four (4) promissory notes, a real estate mortgage covering three parcels
of land and a chattel mortgage over petitioner's stock and inventories.
Unable to settle its obligation in full, petitioner requested for, and was granted by respondent
bank, a restructuring of the remaining indebtedness which then amounted to P1,057,500.00, as
all the previous payments made were applied to penalties and interests.

The mortgaged parcels of land were substituted by another mortgage covering two other
parcels of land and a chattel mortgage on petitioner's stock inventory. The released parcels of
land were then sold and the proceeds amounting to P1,386,614.20, according to petitioner, were
turned over to the bank and applied to Trans-Pacific's restructured loan. Subsequently,
respondent bank returned the duplicate original copies of the three promissory notes to Trans-
Pacific with the word "PAID" stamped thereon. Despite the return of the notes, or on December
12, 1985, Associated Bank demanded from Trans-Pacific payment of the amount of P492,100.00
representing accrued interest on PN No. TL-9077-82. According to the bank, the promissory
notes were erroneously released.

ISSUE :

Whether or not petitioner has indeed paid in full its obligation to respondent bank.

RULING:

Art. 1271. The delivery of a private document evidencing a credit, made voluntarily by
the creditor to the debtor, implies the renunciation of the action which the former had against the
latter."

The surrender and return to plaintiffs of the promissory notes evidencing the consolidated
obligation as restructured, produces a legal presumption that Associated had thereby renounced
its actionable claim against plaintiffs (Art. 1271, NCC). The presumption is fortified by a
showing that said promissory notes all bear the stamp "PAID", and has not been otherwise
overcome. Upon a clear perception that Associated's record keeping has been less than
exemplary . . . , a proffer of bank copies of the promissory notes without the "PAID" stamps
thereon does not impress the Court as sufficient to overcome presumed remission of the
obligation vis-a-vis the return of said promissory notes. Indeed, applicable law is supportive of a
finding that in interest bearing obligations-as is the case here, payment of principal (sic) shall not
be deemed to have been made until the interests have been covered (Art. 1253, NCC).
Conversely, competent showing that the principal has been paid, militates against postured
entitlement to unpaid interests.

Page 276 of 745


DALUPAN V HARDEN
G.R.No. L-3975 November 27, 1951

FACTS:

On August 26, 1948, plaintiff filed an action against the defendant for the collection of
P113,837.17, with interest thereon from the filing of the complaint, which represents 50 per cent
of the reduction plaintiff was able to secure from the Collector of Internal Revenue in the amount
of unpaid taxes claimed to be due from the defendant. Defendant acknowledged this claim and
prayed that judgment be rendered accordingly. In the meantime, the receiver in the liquidation
case No. R-59634 and the wife of the defendant, Esperanza P. de Harden, filed an answer in
intervention claiming that the amount sought by the plaintiff was exorbitant and prayed that it be
reduced to 10 per cent of the rebate. By reason of the acquiescence of the defendant to the claim
on one hand, and the opposition of the receiver and of the wife on the other, an amicable
settlement was concluded by the plaintiff and the intervenor whereby it was agreed that the sum
of P22,767.43 be paid to the plaintiff from the funds under the control of the receiver "and the
balance of P91,069.74 shall be charged exclusively against the defendant Fred M. Harden from
whatever share he may still have in the conjugal partnership between him and Esperanza P. de
Harden.

ISSUE :

Whether or not the writ of execution asked for by the plaintiff on the two checks is
premature.

RULING:

Examining the terms the court finds that the stipulation limits the right of the plaintiff to
ask for the execution of the judgment to whatever share Fred M. Harden may still have in the
conjugal partnership between him and his wife after the final liquidation and partition thereof.
The execution of the judgment is premised upon a condition precedent, which is the final
liquidation and partition of the conjugal partnership. Note that the condition does not refer to the
liquidation of a particular property of the partnership. It refers to the over-all and final liquidation
of the partnership. Such being the stipulation of the parties which was sanctioned and embodied
by the Court in its decision, it is clear that the writ of execution asked for by the plaintiff on the
two checks is premature.

Page 277 of 745


LOPEZ V TAMBUNTING
G.R.No. 9806 January 19, 1916

FACTS:

These proceedings were brought to recover from the defendant the sum of P2,000,
amount of the fees, which, according to the complaint, are owing for professional medical
services rendered by the plaintiff to a daughter of the defendant from March 10 to July 15, 1913,
which fees the defendant refused to pay, notwithstanding the demands therefor made upon him
by the plaintiff.

The defendant denied the allegations of the complaint, and furthermore alleged that the
obligation which the plaintiff endeavored to compel him to fulfill was already extinguished.

ISSUE:

Whether or not implied condonation can be legally pressumed in the instant case?

RULING:

It is true that number 8 of section 334 of the Code of Civil Procedure provides as a legal
presumption "that an obligation delivered up to the debtor has been paid." Article 1188 of the
Civil Code also provides that the voluntary surrender by a creditor to his debtor, of a private
instrument proving a credit, implies the renunciation of the right of action against the debtor; and
article 1189 prescribes that whenever the private instrument which evidences the debt is in the
possession of the debtor, it will be presumed that the creditor delivered it of his own free will,
unless the contrary is proven.

But the legal presumption established by the foregoing provisions of law cannot stand if
sufficient proof is adduced against it. In the case at bar the trial court correctly held that there
was sufficient evidence to the contrary, in view of the preponderance thereof in favor of the
plaintiff and of the circumstances connected with the defendant's possession of said receipt
Exhibit 1. Furthermore, in order that such a presumption may be taken into account, it is
necessary, as stated in the laws cited, that the evidence of the obligation be delivered up to the
debtor and that the delivery of the instrument proving the credit be made voluntarily by the
creditor to the debtor. In the present case, it cannot be said that these circumstances concurred,
inasmuch as when the plaintiff sent the receipt to the defendant for the purpose of collecting his
fee, it was not his intention that that document should remain in the possession of the defendant
if the latter did not forthwith pay the amount specified therein.

Page 278 of 745


ESTATE OF MOTA V SERRA
G.R.No. 22825 February 14, 1925

FACTS:

On February 1, 1919, plaintiffs and defendant entered into a contract of partnership,


marked Exhibit A, for the construction and exploitation of a railroad line from the "San Isidro"
and "Palma" centrals to the place known as "Nandong". The original capital stipulated was
P150,000. It was covenanted that the parties should pay this amount in equal parts and the
plaintiffs were entrusted with the administration of the partnership.
January 29, 1920, the defendant entered into a contract of sale with Venancio
Concepcion, Phil. C. Whitaker, and Eusebio R. de Luzuriaga, whereby he sold to the latter the
estate and central known as "Palma" with its running business, as well as all the improvements,
machineries and buildings, real and personal properties, rights, choses in action and interests,
including the sugar plantation of the harvest year of 1920 to 1921, covering all the property of
the vendor. Before the delivery to the purchasers of the hacienda thus sold, Eusebio R. de
Luzuriaga renounced all his rights under the contract of January 29, 1920, in favor of Messrs.
Venancio Concepcion and Phil. C. Whitaker.
Afterwards, on January 8, 1921, Venancio Concepcion and Phil. C. Whitaker bought from the
plaintiffs the one half of the railroad line pertaining to the latter executing therefor the document
Exhibit 5. The price of this sale was P237,722.15, excluding any amount which the defendant
might be owing to the plaintiffs.

ISSUE:

Whether or not there was confusion of the rights of the creditor and debtor

RULING:

The purchasers, Phil. C. Whitaker and Venancio Concepcion, to secure the payment of
the price, executed a mortgage in favor of the plaintiffs on the same rights and titles that they had
bought and also upon what they had purchased from Mr. Salvador Serra. In other words, Phil C.
Whitaker and Venancio Concepcion mortgaged unto the plaintiffs what they had bought from the
plaintiffs and also what they had bought from Salvador Serra. If Messrs. Phil. C. Whitaker and
Venancio Concepcion had purchased something from Mr. Salvador Serra, the herein defendant,
regarding the railroad line, it was undoubtedly the one-half thereof pertaining to Mr. Salvador
Serra. This clearly shows that the rights and titles transferred by the plaintiffs to Phil. C.
Whitatker and Venancio Concepcion were only those they had over the other half of the railroad
line. Therefore, as already stated, since there was no novation of the contract between the
plaintiffs and the defendant, as regards the obligation of the latter to pay the former one-half of
the cost of the construction of the said railroad line, and since the plaintiffs did not include in the
sale, evidenced by Exhibit 5, the credit that they had against the defendant, the allegation that the
obligation of the defendant became extinguished by the merger of the rights of creditor and
debtor by the purchase of Messrs. Phil. C. Whitaker and Venancio Concepcion is wholly
untenable.

Page 279 of 745


YEK TON LIN V YUSINGCO
G.R.No. 43608 July 20, 1937

FACTS:

Defendant Pelagio Yusingco was the owner of the steamship Yusingco and, as such, he
executed, on November 19, 1927, a power of attorney in favor of Yu Seguioc to administer,
lease, mortgage and sell his properties, including his vessels or steamship. Yu Seguioc
mortgaged to the plaintiff Yek Tong Lin Fire & Marine Insurance Co., Ltd., with the approval of
the Bureau of Customs, the steamship Yusingco belonging to the defendant. One year and some
months later, the steamship Yusingco needed some repairs which were made by the Earnshaw
Docks & Honolulu Iron Works. The repairs were made upon the guaranty of the defendant and
appellant Vicente Madrigal at a cost of P8,244.66. When neither A. Yusingco Hermanos nor
Pelagio Yusingco could pay said sum to the Earnshaw Docks & Honolulu Iron Works, the
defendant and appellant Vicente Madrigal had to make payment thereof with the stipulated
interest thereon, which was at the rate of 9 per cent per annum, on March 9, 1932, because he
was bound thereto by reason of the bond filed by him, the payment then made by him having
amounted to P8,777.60. When said defendant discovered that he was not to be reimbursed for the
repairs made on the steamship Yusingco, he brought an action against his codefendant Pelagio
Yusingco and A. Yusingco Hermanos to compel them to reimburse, thereby giving rise to civil
case No. 41654 of the Court of First Instance of Manila, entitled "Vicente Madrigal, plaintiff, vs.
Pelagio Yusingco and A. Yusingco Hermanos, defendants" which resulted in a judgment
favorable to him and adverse to the Yusingcos.

ISSUE:

Whether or not obligations were extinguished by reason of the merger of the rights of the
debt or and creditor?

RULING:

After the steamship Yusingco had been sold by virtue of the judicial writ issued in civil
case No. 41654 for the execution of the judgment rendered in favor of Vicente Madrigal, the
only right left to the plaintiff was to collect its mortgage credit from the purchaser thereof at
public auction, inasmuch as the rule is that a mortgage directly and immediately subjects the
property on which it is imposed, whoever its possessor may be, to the fulfillment of the
obligation for the security of which it was created (article 1876, Civil code); but it so happens
that it can not take such steps now because it was the purchaser of the steamship Yusingco at
public auction, and it was so with full knowledge that it had a mortgage credit on said vessel.
Obligations are extinguished by the merger of the rights of the creditor and debtor (articles 1156
and 1192, Civil Code).

Page 280 of 745


E.G.V. REALTY V CA
G.R.No. 120236 July 20, 1999

FACTS:

Petitioner E.G.V. Realty Development Corporation is the owner/developer of a seven-


storey condominium building known as Cristina Condominium. Cristina Condominium
Corporation holds title to all common areas of Cristina Condominium and is in charge of
managing, maintaining and administering the condominiums common areas and providing for
the buildings security. Respondent Unisphere International, Inc. (hereinafter referred to as
Unisphere) is the owner/occupant of Unit 301 of said condominium. On November 28, 1981,
respondent Unispheres Unit 301 was allegedly robbed of various items valued at P6,165.00. The
incident was reported to petitioner CCC. On July 25, 1982, another robbery allegedly occurred at
Unit 301 where the items carted away were valued at P6,130.00, bringing the total value of items
lost to P12,295.00. This incident was likewise reported to petitioner CCC. On October 5, 1982,
respondent Unisphere demanded compensation and reimbursement from petitioner CCC for the
losses incurred as a result of the robbery. On January 28, 1987, petitioners E.G.V. Realty and
CCC jointly filed a petition with the Securities and Exchange Commission (SEC) for the
collection of the unpaid monthly dues in the amount of P13,142.67 against respondent
Unisphere.

ISSUE :

Whether or not set-off or compensation has taken place in the instant case.

RULING:

Compensation or offset under the New Civil Code takes place only when two persons or
entities in their own rights, are creditors and debtors of each other. (Art. 1278).

A distinction must be made between a debt and a mere claim. A debt is an amount
actually ascertained. It is a claim which has been formally passed upon by the courts or quasi-
judicial bodies to which it can in law be submitted and has been declared to be a debt. A claim,
on the other hand, is a debt in embryo. It is mere evidence of a debt and must pass thru the
process prescribed by law before it develops into what is properly called a debt. Absent,
however, any such categorical admission by an obligor or final adjudication, no compensation or
off-set can take place. Unless admitted by a debtor himself, the conclusion that he is in truth
indebted to another cannot be definitely and finally pronounced, no matter how convinced he
may be from the examination of the pertinent records of the validity of that conclusion the
indebtedness must be one that is admitted by the alleged debtor or pronounced by final judgment
of a competent court or in this case by the Commission.

There can be no doubt that Unisphere is indebted to the Corporation for its unpaid
monthly dues in the amount of P13,142.67. This is admitted.

Page 281 of 745


AEROSPACE CHEMICAL V CA
g.r.no. 108129 september 23, 1999

FACTS:

On June 27, 1986, petitioner Aerospace Industries, Inc. (Aerospace) purchased five
hundred (500) metric tons of sulfuric acid from private respondent Philippine Phosphate
Fertilizer Corporation (Philphos). Initially set beginning July 1986, the agreement provided that
the buyer shall pay its purchases in equivalent Philippine currency value, five days prior to the
shipment date. Petitioner as buyer committed to secure the means of transport to pick-up the
purchases from private respondent's loadports. Per agreement, one hundred metric tons (100 MT)
of sulfuric acid should be taken from Basay, Negros Oriental storage tank, while the remaining
four hundred metric tons (400 MT) should be retrieved from Sangi, Cebu. On December 18,
1986, M/T Sultan Kayumanggi docked at Sangi, Cebu, but withdrew only 157.51 MT of sulfuric
acid. Again, the vessel tilted. Further loading was aborted. Two survey reports conducted by the
Societe Generale de Surveillance (SGS) Far East Limited, dated December 17, 1986 and January
2, 1987, attested to these occurrences. Later, on a date not specified in the record, M/T Sultan
Kayumanggi sank with a total of 227.51 MT of sulfuric acid on board. Petitioner chartered
another vessel, M/T Don Victor, with a capacity of approximately 500 MT.6 [TSN, September 1,
1989, pp. 28-29.] On January 26 and March 20, 1987, Melecio Hernandez, acting for the
petitioner, addressed letters to private respondent, concerning additional orders of sulfuric acid to
replace its sunken purchases.

ISSUE:

Should expenses for the storage and preservation of the purchased fungible goods,
namely sulfuric acid, be on seller's account pursuant to Article 1504 of the Civil Code?

RULING:

Petitioner tries to exempt itself from paying rental expenses and other damages by
arguing that expenses for the preservation of fungible goods must be assumed by the seller.
Rental expenses of storing sulfuric acid should be at private respondent's account until ownership
is transferred, according to petitioner. However, the general rule that before delivery, the risk of
loss is borne by the seller who is still the owner, is not applicable in this case because petitioner
had incurred delay in the performance of its obligation. Article 1504 of the Civil Code clearly
states: "Unless otherwise agreed, the goods remain at the seller's risk until the ownership therein
is transferred to the buyer, but when the ownership therein is transferred to the buyer the goods
are at the buyer's risk whether actual delivery has been made or not, except that: (2) Where actual
delivery has been delayed through the fault of either the buyer or seller the goods are at the risk
of the party at fault."

On this score, we quote with approval the findings of the appellate court, thus: The
defendant [herein private respondent] was not remiss in reminding the plaintiff that it would have
to bear the said expenses for failure to lift the commodity for an unreasonable length of time.But
even assuming that the plaintiff did not consent to be so bound, the provisions of Civil Code
come in to make it liable for the damages sought by the defendant.

Page 282 of 745


APODACA V NLRC
G.R.No. 80039 April1 8, 1989

FACTS:

Petitioner was employed in respondent corporation. On August 28, 1985, respondent Jose
M. Mirasol persuaded petitioner to subscribe to P1,500 shares of respondent corporation it
P100.00 per share or a total of P150,000.00. He made an initial payment of P37,500.00. On
September 1, 1975, petitioner was appointed President and General Manager of the respondent
corporation. However, on January 2, 1986, he resigned.
On December 19, 1986, petitioner instituted with the NLRC a complaint against private
respondents for the payment of his unpaid wages, his cost of living allowance, the balance of his
gasoline and representation expenses and his bonus compensation for 1986. Petitioner and
private respondents submitted their position papers to the labor arbiter. Private respondents
admitted that there is due to petitioner the amount of P17,060.07 but this was applied to the
unpaid balance of his subscript in the amount of P95,439.93. Petitioner questioned the set-off
alleging that there was no call or notice for the payment of unpaid subscription and that,
accordingly, the alleged obligation is not enforceable.

ISSUE :

Does the National Labor Relations Commission (NLRC) have jurisdiction to resolve a
claim for non-payment of stock subscriptions to a corporation? Assuming that it has, can an
obligation arising therefrom be offset against a money claim of an employee against the
employer?

RULING:

Firstly, the NLRC has no jurisdiction to determine such intra-corporate dispute between
the stockholder and the corporation as in the matter of unpaid subscriptions. This controversy is
within the exclusive jurisdiction of the Securities and Exchange Commission.

Secondly, assuming arguendo that the NLRC may exercise jurisdiction over the said
subject matter under the circumstances of this case, the unpaid subscriptions are not due and
payable until a call is made by the corporation for payment. Private respondents have not
presented a resolution of the board of directors of respondent corporation calling for the payment
of the unpaid subscriptions. It does not even appear that a notice of such call has been sent to
petitioner by the respondent corporation.

Page 283 of 745


SPOUSES CHUNG V. ULANDAY CONSTRUCTION
OCTOBER 11, 2010

FACTS:

In February 1985, the petitioners contracted with respondent Ulanday Construction, Inc. to
construct, within a 150-day period,the concrete structural shell of the formers two-storey
residential house in Urdaneta Village, Makati City at the contract price of P3, 291,142.00.

The contract stipulated among others that the petitioners shall pay a P987,342.60 downpayment,
with the balance to be paid in progress payments based on actual work completed; (c) the
Construction Manager or Architect shall check the respondents request for progress payment
and endorse it to the petitioners for payment within 3 days from receipt, (d) the petitioners shall
pay the respondents within 7 days from receipt of the Construction Managers or Architects
certificate; (e) the respondent cannot change or alter the plans, specifications, and works without
the petitioners prior written approval. Respondent gave 12 progress billings but the petitioners
were only able to pay 7 of them. On their part, the respondent effected 19 change orders without
the consent of the petitioners amounting to P912, 885.91. Respondents demanded the remaining
balance from the petitioners which the petitioners denied asserting that the respondents violated
the contract.

ISSUE:

Whether or not the petitioners are liable for the remaining balance

RULING:

In contractual relations, the law allows the parties leeway and considers their agreement as the
law between them.Contract stipulations that are not contrary to law, morals, good customs,
public order or public policy shall be binding and should be complied with in good faith. No
party is permitted to change his mind or disavow and go back upon his own acts, or to proceed
contrary thereto, to the prejudice of the other party. In the present case, we find that both parties
failed to comply strictly with their contractual stipulations on the progress billings and change
orders that caused the delays in the completion of the project.

Under the circumstances, fairness and reason dictate that we simply order the set-off of the
petitioners contractual liabilities totaling P575,922.13 against the repair cost for the defective
gutter, pegged at P717,524.00, leaving the amount of P141,601.87 still due from the respondent.
Support in law for this ruling for partial legal compensation proceeds from Articles
1278, 1279, 1281, and 1283 of the Civil Code. In short, both parties are creditors and debtors of
each other, although in different amounts that are already due and demandable.

Page 284 of 745


SELWIN LAO V. SPECIAL PLANS, INC.
GR No. 164729; June 29, 2010

FACTS:

Petitioners Selwyn F. Lao and Edgar Manansala (Manansala), together with Benjamin Jim (Jim),
entered into a Contract of Lease with respondent Special Plans, Inc. (SPI) for the period January
16, 1993 to January 15, 1995 over SPIs building at No. 354 Quezon Avenue, Quezon
City. Petitioners intended to use the premises for their karaoke and restaurant business known as
Saporro Restaurant.
Upon expiration of the lease contract, it was renewed for a period of eight months at a monthly
rate of P23, 000.00. On June 3, 1996, SPI sent a Demand Letter to the petitioners asking for full
payment of rentals in arrears.Receiving no payment, SPI filed on July 23, 1996 a Complaint for
sum of money with the MeTC of Quezon City, claiming unpaid rentals of P118, 000.00 covering
the period March 16, 1996 to August 16, 1996.

Petitioners answered faulting SPI for making them believe that it owns the leased property and
that SPI did not deliver the leased premises in a condition fit for petitioners intended use. Thus,
petitioners claimed that they were constrained to incur expenses for necessary repairs as well as
expenses for the repair of structural defects, which SPI failed and refused to
reimburse. Petitioners prayed that the complaint be dismissed and judgment on their
counterclaims be rendered ordering SPI to pay them the sum of P422, 920.40 as actual damages,
as well as moral damages, attorneys fees and exemplary damages.

ISSUE:

Whether or not the cost of repairs incurred by the petitioners should be compensated against the
unpaid rentals.

RULING:

Petitioners failed to properly discharge their burden to show that the debts are liquidated and
demandable. Consequently, legal compensation is inapplicable.

The petitioners attempted to prove that they spent for the repair of the roofing, ceiling and
flooring, as well as for waterproofing. However, they failed to appreciate that, as per their lease
contract, only structural repairs are for the account of the lessor, herein respondent SPI. In which
case, they overlooked the need to establish that aforesaid repairs are structural in nature, in the
context of their earlier agreement. It would have been an altogether different matter if the lessor
was informed of the said structural repairs and he implicitly or expressly consented and agreed to
take responsibility for the said expenses. Such want of evidence on this respect is fatal to this
appeal. Consequently, their claim remains unliquidated and, legal compensation is
inapplicable.

Page 285 of 745


UNITED PLANTERS MILLING CO. V. CA
GR No. 126890; April 2, 2009

FACTS:

In 1987, the Republic of the Philippines lost around 1.5 Billion Pesos after it had waived its right
to collect on an outstanding indebtedness from petitioner, by virtue of a so-called friendly
foreclosure agreement that ultimately was friendly only to petitioner.

Petitioner United Planters Sugar Milling Co. (UPSUMCO) was engaged in the business of
milling sugar. In 1974, as UPSUMCO commenced operations, it obtained a set of loans from
respondent Philippine National Bank (PNB). The loans were secured
over two parcels of land where the milling plant stood and chattel mortgages over the
machineries and equipment.

On 27 February 1987, through a Deed of Transfer, PNB assigned to the Government its rights,
titles and interests over UPSUMCO, among several other assets.[6] The Deed of Transfer
acknowledged that said assignment was being undertaken in compliance with Presidential
Proclamation No. 50. The Government subsequently transferred these rights, titles and
interests over UPSUMCO to the respondent Asset and Privatization Trust (APT).

ISSUE:

Whether or not there was compensation in the present case.

RULING:

The right of PNB to set-off payments from UPSUMCO arose out of conventional compensation
rather than legal compensation, even though all of the requisites for legal compensation were
present as between those two parties. The determinative factor is the mutual agreement between
PNB and UPSUMCO to set-off payments. Even without an express agreement stipulating
compensation, PNB and UPSUMCO would have been entitled to set-off of payments, as the
legal requisites for compensation under Article 1279 were present.

As soon as PNB assigned its credit to APT, the mutual creditor-debtor relation between PNB and
UPSUMCO ceased to exist. However, PNB and UPSUMCO had agreed to a conventional
compensation, a relationship which does not require the presence of all the requisites under
Article 1279. And PNB too had assigned all its rights as creditor to APT, including its rights
under conventional compensation. The absence of the mutual creditor-debtor relation between
the new creditor APT and UPSUMCO cannot negate the conventional compensation.
Accordingly, APT, as the assignee of credit of PNB, had the right to set-off the outstanding
obligations of UPSUMCO on the basis of conventional compensation before the condonation
took effect on 3 September 1987.

Page 286 of 745


PNB MANAGEMENT V R&R METAL
G.R.No. 132245 January 1, 2002

FACTS:

It appears that on November 19, 1993, respondent R&R Metal Casting and Fabricating,
Inc. (R&R) obtained a judgment in its favor against Pantranco North Express, Inc. (PNEI).
PNEI was ordered to pay respondent P213,050 plus interest as actual damages, P50,000 as
exemplary damages, 25 percent of the total amount payable as attorneys fees, and the costs of
suit. However, the writ of execution was returned unsatisfied since the sheriff did not find any
property of PNEI recorded at the Registries of Deeds of the different cities of Metro Manila.
Neither did the sheriff receive a reply to the notice of garnishment he sent to PNB-Escolta.On
March 27, 1995, respondent filed with the trial court a motion for the issuance of subpoenae
duces tecum and ad testificandum requiring petitioner PNB Management and Development
Corp. (PNB MADECOR) to produce and testify on certain documents pertaining to transactions
between petitioner and PNEI from 1981 to 1995.

ISSUE:

Whether or not legal compensation have occured in the instant case?

RULING:

Legal compensation could not have occurred because of the absence of one requisite in
this case: that both debts must be due and demandable.
Petitioners obligation to PNEI appears to be payable on demand, following the above
observation made by the CA and the assertion made by petitioner. Petitioner is obligated to pay
the amount stated in the promissory note upon receipt of a notice to pay from PNEI. If
petitioner fails to pay after such notice, the obligation will earn an interest of 18 percent per
annum.

Since petitioners obligation to PNEI is payable on demand, and there being no demand
made, it follows that the obligation is not yet due. Therefore, this obligation may not be subject
to compensation for lack of a requisite under the law. Without compensation having taken place,
petitioner remains obligated to PNEI to the extent stated in the promissory note. This obligation
may undoubtedly be garnished in favor of respondent to satisfy PNEIs judgment debt.

Page 287 of 745


SILAHIS V IAC
G.R.No. 74027 December 7, 1989

FACTS:

Petitioner Silahis Marketing Corporation seeks in this petition for review on certiorari a
reversal of the decision of the then Intermediate Appellate Court (IAC) in AC-G.R. CV No.
67162 entitled "De Leon, etc. v. Silahis Marketing Corporation", disallowing petitioner's
counterclaim for commission to partially offset the claim against it of private respondent
Gregorio de Leon for the purchase price of certain merchandise. A review of the record shows
that on various dates in October, November and December, 1975, Gregorio de Leon doing
business under the name and style of Mark Industrial Sales sold and delivered to Silahis
Marketing Corporation various items of merchandise covered by several invoices in the
aggregate amount of P22,213.75 payable within thirty (30) days from date of the covering
invoices.Allegedly due to Silahis' failure to pay its account upon maturity despite repeated
demands, de Leon filed before the then Court of First Instance of Manila a complaint for the
collection of the said accounts including accrued interest thereon in the amount of P661.03 and
attorney's fees of P5,000.00 plus costs of litigation.

ISSUE:

Whether or not private respondent is liable to the petitioner for the commission or margin
for the direct sale which the former concluded and consummated with Dole Philippines,
Incorporated without coursing the same through herein petitioner.

RULING:

It must be remembered that compensation takes place when two persons, in their own
right, are creditors and debtors to each other. Article 1279 of the Civil Code provides that: "In
order that compensation may be proper, it is necessary: [1] that each one of the obligors be
bound principally, and that he be at the same time a principal creditor of the other; [2] that both
debts consist in a sum of money, or if the things due are consumable, they be of the same kind,
and also of the same quality if the latter has been stated; [3] that the two debts be due; [4] that
they be liquidated and demandable; [5] that over neither of them there be any retention or
controversy, commenced by third persons and communicated in due time to the debtor."

When all the requisites mentioned in Art. 1279 of the Civil Code are present,
compensation takes effect by operation of law, even without the consent or knowledge of the
creditors and debtors. 5 Article 1279 requires, among others, that in order that legal
compensation shall take place, "the two debts be due" and "they be liquidated and demandable."
Compensation is not proper where the claim of the person asserting the set-off against the other
is not clear nor liquidated; compensation cannot extend to unliquidated, disputed claim existing
from breach of contract. Undoubtedly, petitioner admits the validity of its outstanding accounts
with private respondent in the amount of P22,213.75 as contained in its answer. But whether
private respondent is liable to pay the petitioner a 20% margin or commission on the subject sale
to Dole Philippines, Inc. is vigorously disputed. This circumstance prevents legal compensation
from taking place.

Page 288 of 745


FRANCIA V CA
G.R.No. 67649 June 28, 1998

FACTS:

Engracio Francia is the registered owner of a residential lot and a two-story house built
upon it situated at Barrio San Isidro, now District of Sta. Clara, Pasay City, Metro Manila. On
October 15, 1977, a 125 square meter portion of Francia's property was expropriated by the
Republic of the Philippines for the sum of P4,116.00 representing the estimated amount
equivalent to the assessed value of the aforesaid portion.Since 1963 up to 1977 inclusive, Francia
failed to pay his real estate taxes. Thus, on December 5, 1977, his property was sold at public
auction by the City Treasurer of Pasay City pursuant to Section 73 of Presidential Decree No.
464 known as the Real Property Tax Code in order to satisfy a tax delinquency of P2,400.00. Ho
Fernandez was the highest bidder for the property. Francia was not present during the auction
sale since he was in Iligan City at that time helping his uncle ship bananas. On March 3, 1979,
Francia received a notice of hearing of LRC Case No. 1593-P "In re: Petition for Entry of New
Certificate of Title" filed by Ho Fernandez, seeking the cancellation of TCT No. 4739 (37795)
and the issuance in his name of a new certificate of title. On March 20, 1979, Francia filed a
complaint to annul the auction sale. He later amended his complaint on January 24, 1980.

ISSUE:

Whether or not francias tax delinquency of P2,400.00 has been extinguished by legal
compensation.

RULING:

There is no legal basis for the contention. By legal compensation, obligations of persons,
who in their own right are reciprocally debtors and creditors of each other, are extinguished (Art.
1278, Civil Code). The circumstances of the case do not satisfy the requirements provided by
Article 1279, to wit:
"(1) that each one of the obligors be bound principally and that he be at the same time a
principal creditor of the other;
We have consistently ruled that there can be no off-setting of taxes against the claims that the
taxpayer may have against the government. A person cannot refuse to pay a tax on the ground
that the government owes him an amount equal to or greater than the tax being collected. The
collection of a tax cannot await the results of a lawsuit against the government.
A claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set-
off under the statutes of set-off, which are construed uniformly, in the light of public policy, to
exclude the remedy in an action or any indebtedness of the state or municipality to one who is
liable to the state or municipality for taxes. Neither are they a proper subject of recoupment since
they do not arise out of the contract or transaction sued on. "The general rule based on grounds
of public policy is well-settled that no set-off admissible against demands for taxes levied for
general or local governmental purposes. The reason on which the general rule is based, is that
taxes are not in the nature of contracts between the party and party but grow out of duty to, and
are the positive acts of the government to the making and enforcing of which, the personal
consent of individual taxpayers is not required

Page 289 of 745


TRINIDAD V ACAPULCO
G.R.No. 147477 June 27, 2006

FACTS:

On May 6, 1991, respondent Estrella Acapulco filed a Complaint before the RTC seeking
the nullification of a sale she made in favor of petitioner Hermenegildo M. Trinidad. She
alleged: Sometime in February 1991, a certain Primitivo Caete requested her to sell a Mercedes
Benz for P580,000.00. Caete also said that if respondent herself will buy the car, Caete was
willing to sell it for P500,000.00. Petitioner borrowed the car from respondent for two days but
instead of returning the car as promised, petitioner told respondent to buy the car from Caete for
P500,000.00 and that petitioner would pay respondent after petitioner returns from Davao.
Following petitioners instructions, respondent requested Caete to execute a deed of sale
covering the car in respondents favor for P500,000.00 for which respondent issued three checks
in favor of Caete. Respondent thereafter executed a deed of sale in favor of petitioner even
though petitioner did not pay her any consideration for the sale. When petitioner returned from
Davao, he refused to pay respondent the amount of P500,000.00 saying that said amount would
just be deducted from whatever outstanding obligation respondent had with petitioner. Due to
petitioners failure to pay respondent, the checks that respondent issued in favor of Caete
bounced, thus criminal charges were filed against her.[3] Respondent then prayed that the deed
of sale between her and petitioner be declared null and void; that the car be returned to her; and
that petitioner be ordered to pay damages.

ISSUE:

Whether or not petitioners claim for legal compensation was already too late

RULING:

The court ruled in favor of the petitioner. Compensation takes effect by operation of law
even without the consent or knowledge of the parties concerned when all the requisites
mentioned in Article 1279 of the Civil Code are present.[26] This is in consonance with Article
1290 of the Civil Code which provides that: Article 1290. When all the requisites mentioned in
article 1279 are present, compensation takes effect by operation of law, and extinguishes both
debts to the concurrent amount, even though the creditors and debtors are not aware of the
compensation. Since it takes place ipso jure,[27] when used as a defense, it retroacts to the date
when all its requisites are fulfilled.

Page 290 of 745


CAROLINA HERNANDEZ-NIEVERA V. WILFREDO HERNANDEZ
GR No. 171165; February 14, 2011

FACTS:

Project Movers Realty & Development Corporation (PMRDC) is a duly organized


domestic corporation engaged in real estate development. It entered into a Memorandum of
Agreement (MOA) whereby it was given the option to buy pieces of land owned by petitioners
Carolina Hernandez-Nievera, Margarita H. Malvar and Demetrio P. Hernandez, Jr. Demetrio,
under authority of a Special Power of Attorney to Sell or Mortgage, signed the MOA also in
behalf of Carolina and Margarita. In the aggregate, the realty measured 4,580,451 square meters
and was segregated by agreement into Area I and Area II.
On March 23, 1998, the PMRDC entered with LBP and Demetrio - the latter purportedly
acting under authority of the same special power of attorney as in the MOA - into a Deed of
Assignment and Conveyance (DAC). PMRDC delivered to petitioners certain checks
representing the money, the same however allegedly bounced. Hence, on January 8, 1999,
petitioners demanded the return of the corresponding TCTs over the land but PMRDC said that
the TCTs could no longer be delivered back to petitioners as the covered properties had already
been conveyed and assigned to the Asset Pool pursuant to the March 23, 1998 DAC. Petitioner
contended that Demetrio could not have entered into the said agreement as his power of attorney
was limited only to selling or mortgaging the properties and not conveying the same to the Asset
Pool.

ISSUE:

Whether or not the novation of the MOA is valid.

RULING:

Thus, it becomes clear that Demetrio's special power of attorney to sell is sufficient to
enable him to make a binding commitment under the DAC in behalf of Carolina and Margarita.
In particular, it does include the authority to extinguish PMRDC's obligation under the MOA to
deliver option money and agree to a more flexible term by agreeing instead to receive shares of
stock in lieu thereof and in consideration of the assignment and conveyance of the properties to
the Asset Pool. Indeed, the terms of his special power of attorney allow much leeway to
accommodate not only the terms of the MOA but also those of the subsequent agreement in the
DAC which, in this case, necessarily and consequently has resulted in a novation of PMRDC's
integral obligations.
There are two ways which could indicate, in fine, the presence of novation and thereby
produce the effect of extinguishing an obligation by another which substitutes the same. The
first is when novation has been explicitly stated and declared in unequivocal terms. The second
is when the old and the new obligations are incompatible on every point. The test of
incompatibility is whether the two obligations can stand together, each one having its
independent existence. If they cannot, they are incompatible, and the latter obligation novates
the first.

Page 291 of 745


ST. JAMES COLLEGE V. EQUITABLE PCI BANK
GR No. 179441; August 9, 2010

FACTS:

Petitioners-spouses owned and operated St. James College of Paranaque. Sometime in


1995, the Philippine Commercial and International Bank (PCIB), respondent, granted the Torres
spouses and/or St. James College a credit line facility of up to 25,000,000 secured by a real estate
mortgage over a parcel of land in Paranaque. Petitioners had defaulted in the payment of the loan
obtained from the secured credit accommodation, their total unpaid loan obligation, as of
September 2001, stood at 18,300,000. Respondent proposed a payment scheme to pay annually
which the petitioners agreed upon but failed to comply with. Respondent then demanded full
settlement of the loan. Petitioners contended that the the full amount is still not due owing to the
implied novation of the terms of payment previously agreed upon. As petitioners assert in this
regard that the acceptance by respondent, particularly of the June 23, 2003 PhP 2,521,609.62
payment, without any objection on the new terms set forth in their June 23, 2003 complementing
covering letter, novated the terms of payment of the 18,300,000 secured loan.

ISSUE:

Whether or not there was novation of contract

RULING:

As a civil law concept, novation is the extinguishment of an obligation by the substitution


or change of the obligation by a subsequent one which terminates it, either by changing its
objects or principal conditions, or by substituting a new debtor in place of the old one, or by
subrogating a third person to the rights of the creditor. Novation may be extinctive or
modificatory. It is extinctive when an old obligation is terminated by the creation of a new one
that takes the place of the former; it is merely modificatory when the old obligation subsists to
the extent that it remains compatible with the amendatory agreement. Novation may either be
express, when the new obligation declares in unequivocal terms that the old obligation is
extinguished, or implied, when the new obligation is on every point incompatible with the old
one. The test of incompatibility lies on whether the two obligations can stand together, each one
with its own independent existence.

For novation, as a mode of extinguishing or modifying an obligation, to apply, the following


requisites must concur:
1) There must be a previous valid obligation.
2) The parties concerned must agree to a new contract.
3) The old contract must be extinguished.
4) There must be a valid new contract.

Page 292 of 745


MARIA TOMIMBANG V. ATTY. JOSE TOMIMBANG
GR No. 165116; August 4, 2009

FACTS:

Petitioner and respondent are siblings. Their parents donated to petitioner an eight-door
apartment located at 149 Santolan Road, Murphy, Quezon City. Petitioner failed to obtain a loan
from PAG-IBIG Fund, hence, respondent offered to extend a credit line to petitioner on the
following conditions: (1) petitioner shall keep a record of all the advances; (2) petitioner shall
start paying the loan upon the completion of the renovation; (3) upon completion of the
renovation, a loan and mortgage agreement based on the amount of the advances made shall be
executed by petitioner and respondent; and (4) the loan agreement shall contain comfortable
terms and conditions which petitioner could have obtained from PAG-IBIG.
A conflict between the siblings ensued leading to a new agreement whereby petitioner
was to start making monthly payments on her loan. Upon respondent's demand, petitioner turned
over to respondent all the records of the cash advances for the renovations. Subsequently, or
from June to October of 1997, petitioner made monthly payments of P18, 700.00, or a total
ofP93, 500.00. Petitioner never denied the fact that she started making such monthly payments.
Thereafter, the petitioner can no longer be found and also stopped making the monthly payments.
Thus, a complaint was filed against the petitioner demanding payment of the loan plus interest.
Petitioner contended that the loan is not yet due and demandable as the renovation of the
apartment is not yet completed.

ISSUE:

Whether or not the loan is already due and demandable.

RULING:

The loan is already due and demandable due to the subsequent agreement entered in to by
the parties.
Article 1291 of the Civil Code provides, thus:

Art. 1291. Obligations may be modified by:


(1) Changing their object or principal conditions;
(2) Substituting the person of the debtor;
(3) Subrogating a third person in the rights of the creditor.

The petitioner admitted that she started to comply with the demand of the respondent to
pay on a monthly basis. Her partial performance of her obligation is unmistakable proof that
indeed the original agreement between her and respondent had been novated by the deletion of
the condition that payments shall be made only after completion of renovations. Hence, by her
very own admission and partial performance of her obligation, there can be no other conclusion
but that under the novated agreement, petitioner's obligation is already due and demandable.

Page 293 of 745


MINDANAO SAVINGS AND LOAN ASSOCIATION INC. V. EDWARD WILLKOM
GR No. 178618; October 11, 2010

FACTS:

The First Iligan Savings and Loan Association, Inc. (FISLAI) and the Davao Savings and
Loan Association, Inc. (DSLAI) banks that entered into a merger, with DSLAI as the surviving
corporation. The articles of merger were not registered with the SEC but when DSLAI changed
its corporate name to MSLAI the amendment was approved by the SEC.Meanwhile, the Board of
Directors of FISLAI passed a resolution, assigning its assets in favor of DSLAI which in turn
assumed the formers liabilities.The business of MSLAI, however, failed was ordered its closure
and placed under receivership.
Prior to the closure of MSLAI, Uy filed an action for collection of sum of money against
FISLAI. The RTC issued a summary decision in favor of Uy, directing defendants therein (which
included FISLAI) to pay the former the sum of P136, 801.70. Therafter,sheriff Bantuas levied on
six (6) parcels of land owned by FISLAI and Willkom was the highest bidder. New certificates
of title covering the subject properties were issued in favor of Willkom who sold one of the
subject parcels of land to Go.
MSLAI, represented by PDIC, filed a complaint forAnnulment of Sheriffs Sale,
Cancellation of Title and Reconveyance of Properties against respondents. Therespondents
averred that MSLAI had no cause of action against them or the right to recover the subject
properties because MSLAI is a separate and distinct entity from FISLAI as the merger did not
take effect.

ISSUE:

Whether or not there was novation of the obligation by substituting the person of the
debtor

RULING:

It is a rule that novation by substitution of debtor must always be made with the consent
of the creditor. Article 1293 of the Civil Code is explicit, thus:
Art. 1293. Novation which consists in substituting a new debtor in the place of the
original one, may be made even without the knowledge or against the will of the latter, but not
without the consent of the creditor. Payment by the new debtor gives him the rights mentioned in
Articles 1236 and 1237.
In this case, there was no showing that Uy, the creditor, gave her consent to the
agreement that DSLAI (now MSLAI) would assume the liabilities of FISLAI. Such agreement
cannot prejudice Uy. Thus, the assets that FISLAI transferred to DSLAI remained subject to
execution to satisfy the judgment claim of Uy against FISLAI. The subsequent sale of the
properties by Uy to Willkom, and of one of the properties by Willkom to Go, cannot, therefore,
be questioned by MSLAI.
The consent of the creditor to a novation by change of debtor is as indispensable as the
creditors consent in conventional subrogation in order that a novation shall legally take
place. Since novation implies a waiver of the right which the creditor had before the novation,
such waiver must be express.

Page 294 of 745


AQUINTEY v. SPOUSES TIBONG
G.R. No. 166704,December 20, 2006

FACTS:

On May 6, 1999, petitioner Aquintey filed before RTC Baguio, a complaint for sum of
money and damages against respondents. Agrifina alleged that Felicidad secured loans from her
on several occasions at monthly interest rates of 6% to 7%. Despite demands, spouses Tibong
failed to pay their outstanding loans of P773,000,00 exclusive of interests. However, spouses
Tiong alleged that they had executed deeds of assignment in favor of Agrifina amounting to
P546,459 and that their debtors had executed promissory notes in favor of Agrifina. Spouses
insisted that by virtue of these documents, Agrifina became the new collector of their debts.
Agrifina was able to collect the total amount of P301,000 from Felicdads debtors. She tried to
collect the balance of Felicidad and when the latter reneged on her promise, Agrifina filed a
complaint in the office of the barangay for the collection of P773,000.00. There was no
settlement. RTC favored Agrifina. Court of Appeals affirmed the decision with modification
ordering defendant to pay the balance of total indebtedness in the amount of P51,341,00 plus
6% per month.

ISSUE:

Whether or not the deeds of assignment in favor of petitioner has the effect of payment of
the original obligation that would partially extinguish the same

RULING:

Substitution of the person of the debtor May be affected by delegacion. Meaning, the
debtor offers, the creditor accepts a third person who consent of the substitution and assumes the
obligation. It is necessary that the old debtor be released from the obligation and the third person
or new debtor takes his place in the relation . Without such release, there is no novation. Court
of Appeals correctly found that the respondents obligation to pay the balance of their account
with petitioner was extinguished pro tanto by the deeds of credit. CA decision is affirmed with
the modification that the principal amount of the respondents is P33,841.

Page 295 of 745


SWAGMAN V CA
G.R.No. 161135 April 8, 2005

FACTS:

Sometime in 1996 and 1997, petitioner Swagman Hotels and Travel, Inc., through Atty.
Leonor L. Infante and Rodney David Hegerty, its president and vice-president, respectively,
obtained from private respondent Neal B. Christian loans evidenced by three promissory notes
dated 7 August 1996, 14 March 1997, and 14 July 1997. Each of the promissory notes is in the
amount of US$50,000 payable after three years from its date with an interest of 15% per annum
payable every three months. In a letter dated 16 December 1998, Christian informed the
petitioner corporation that he was terminating the loans and demanded from the latter payment in
the total amount of US$150,000 plus unpaid interests in the total amount of US$13,500. On 2
February 1999, private respondent Christian filed with the Regional Trial Court of Baguio City,
Branch 59, a complaint for a sum of money and damages against the petitioner corporation,
Hegerty, and Atty. Infante. The petitioner corporation, together with its president and vice-
president, filed an Answer raising as defenses lack of cause of action and novation of the
principal obligations. According to them, Christian had no cause of action because the three
promissory notes were not yet due and demandable.

ISSUE:

Where there is a valid novation, may the original terms of contract which has been
novated still prevail?

HELD:

The receipts, as well as private respondents summary of payments, lend credence to


petitioners claim that the payments were for the principal loans and that the interests on the
three consolidated loans were waived by the private respondent during the undisputed
renegotiation of the loans on account of the business reverses suffered by the petitioner at the
time.
There was therefore a novation of the terms of the three promissory notes in that the
interest was waived and the principal was payable in monthly installments of US$750.
Alterations of the terms and conditions of the obligation would generally result only in
modificatory novation unless such terms and conditions are considered to be the essence of the
obligation itself.[25] The resulting novation in this case was, therefore, of the modificatory type,
not the extinctive type, since the obligation to pay a sum of money remains in force.
Thus, since the petitioner did not renege on its obligation to pay the monthly installments
conformably with their new agreement and even continued paying during the pendency of the
case, the private respondent had no cause of action to file the complaint. It is only upon
petitioners default in the payment of the monthly amortizations that a cause of action would
arise and give the private respondent a right to maintain an action against the petitioner.

Page 296 of 745


AZOLLA FARMS V CA
G.R.No. 138085 November 11, 2004

FACTS:

Petitioner Francis R. Yuseco, Jr., is the Chairman, President and Chief Operating Officer
of petitioner Azolla Farms International Philippines. In 1982, Azolla Farms undertook to
participate in the National Azolla Production Program wherein it will purchase all the Azolla
produced by the Azolla beneficiaries in the amount not exceeding the peso value of all the inputs
provided to them. The project also involves the then Ministry of Agriculture, the Kilusang
Kabuhayan at Kaunlaran, and the Kiwanis. To finance its participation, petitioners applied for a
loan with Credit Manila, Inc., which the latter endorsed to its sister company, respondent Savings
Bank of Manila (Savings Bank). The Board of Directors of Azolla Farms, meanwhile, passed a
board resolution on August 31, 1982, authorizing Yuseco to borrow from Savings Bank in an
amount not exceeding P2,200,000.00.
The loan having been approved, Yuseco executed a promissory note on September 13,
1982, promising to pay Savings Bank the sum of P1,400,000.00 on or before September 13,
1983. the Azolla Farms project collapsed. Blaming Savings Bank, petitioners Yuseco and Azolla
Farms filed on October 3, 1983 with the Regional Trial Court of Manila (Branch 25), a
complaint for damages. In essence, their complaint alleges that Savings Bank unjustifiably
refused to promptly release the remaining P300,000.00 which impaired the timetable of the
project and inevitably affected the viability of the project resulting in its collapse, and resulted in
their failure to pay off the loan. Thus, petitioners pray for P1,000,000.00 as actual damages,
among others.

ISSUE:

Whether the trial court erred in admitting petitioners amended complaint

RULING:

SEC. 5. Amendment to conform to or authorize presentation of evidence .When issues


not raised by the pleadings are tried by express or implied consent of the parties, they shall be
treated in all respects, as if they had been raised in the pleadings. Such amendment of the
pleadings as may be necessary to cause them to conform to the evidence and to raise these issues
may be made upon motion of any party at any time, even after judgment; but failure so to amend
does not affect the result of the trial of these issues. If evidence is objected to at the trial on the
ground that it is not within the issues made by the pleadings, the court may allow the pleadings
to be amended and shall do so freely when the presentation of the merits of the action will be
subserved thereby and the objecting party fails to satisfy the court that the admission of such
evidence would prejudice him in maintaining his action or defense upon the merits.
As can be gleaned from the records, it was petitioners belief that respondents evidence
justified the amendment of their complaint. The trial court agreed thereto and admitted the
amended complaint. On this score, it should be noted that courts are given the discretion to
allow amendments of pleadings to conform to the evidence presented during the trial.

Page 297 of 745


CALIFORNIA BUS LINES V STATE INVESMENTS
G.R.No. 147950 December 11, 2003

FACTS:

Sometime in 1979, Delta Motors CorporationM.A.N. Division (Delta) applied for


financial assistance from respondent State Investment House, Inc.
SIHI agreed to extend a credit line to Delta for P25,000,000.00 in three separate credit
agreements dated May 11, June 19, and August 22, 1979. Delta eventually became indebted to
SIHI to the tune of P24,010,269.32
From April 1979 to May 1980, petitioner California Bus Lines, Inc. (hereafter CBLI),
purchased on installment basis 35 units of M.A.N. Diesel Buses and two (2) units of M.A.N.
Diesel Conversion Engines from Delta. To secure the payment of the purchase price of the 35
buses, CBLI and its president, Mr. Dionisio O. Llamas, executed sixteen (16) promissory notes
in favor of Delta on January 23 and April 25, 1980.[5] In each promissory note, CBLI promised
to pay Delta or order, P2,314,000 payable in 60 monthly installments starting August 31, 1980,
with interest at 14% per annum. CBLI further promised to pay the holder of the said notes 25%
of the amount due on the same as attorneys fees and expenses of collection, whether actually
incurred or not, in case of judicial proceedings to enforce collection. In addition to the notes,
CBLI executed chattel mortgages over the 35 buses in Deltas favor. When CBLI defaulted on
all payments due, it entered into a restructuring agreement with Delta on October 7, 1981, to
cover its overdue obligations under the promissory notes.CBLI continued having trouble meeting
its obligations to Delta. This prompted Delta to threaten CBLI with the enforcement of the
management takeover clause.

ISSUE:

Whether the Restructuring Agreement dated October 7, 1981, between petitioner CBLI
and Delta Motors, Corp. novated the five promissory notes Delta Motors, Corp. assigned to
respondent SIHI.

RULING:

Novation has been defined as the extinguishment of an obligation by the substitution or


change of the obligation by a subsequent one which terminates the first, either by changing the
object or principal conditions, or by substituting the person of the debtor, or subrogating a third
person in the rights of the creditor.For novation to take place, four essential requisites have to be
met, namely, (1) a previous valid obligation; (2) an agreement of all parties concerned to a new
contract; (3) the extinguishment of the old obligation; and (4) the birth of a valid new obligation.

In this case, the attendant facts do not make out a case of novation. The restructuring
agreement between Delta and CBLI executed on October 7, 1981, shows that the parties did not
expressly stipulate that the restructuring agreement novated the promissory notes. Absent an
unequivocal declaration of extinguishment of the pre-existing obligation, only a showing of
complete incompatibility between the old and the new obligation would sustain a finding of
novation by implication.

Page 298 of 745


OCAMPO-PAULE V CA
G.R.No. 145872 February 4, 2002

FACTS:

During the period August, 1991 to April, 1993, petitioner received from private
complainant Felicitas M. Calilung several pieces of jewelry with a total value of One hundred
Sixty Three Thousand One hundred Sixty Seven Pesos and Ninety Five Centavos (P163,167.95).
The agreement between private complainant and petitioner was that the latter would sell the
same and thereafter turn over and account for the proceeds of the sale, or otherwise return to
private complainant the unsold pieces of jewelry within two months from receipt thereof. Since
private complainant and petitioner are relatives, the former no longer required petitioner to issue
a receipt acknowledging her receipt of the jewelry.When petitioner failed to remit the proceeds
of the sale of the jewelry or to return the unsold pieces to private complainant, the latter sent
petitioner a demand letter. Notwithstanding receipt of the demand letter, petitioner failed to turn
over the proceeds of the sale or to return the unsold pieces of jewelry. Private complainant was
constrained to refer the matter to the barangay captain of Sta. Monica, Lubao, Pampanga.

ISSUE:

Whether or not there was a novation of petitioners criminal liability when she and
private complainant executed the Kasunduan sa Bayaran.

RULING:

It is well-settled that the following requisites must be present for novation to take place:
(1) a previous valid obligation; (2) agreement of all the parties to the new contract; (3)
extinguishment of the old contract; and (4) validity of the new one.
Novation, in its broad concept, may either be extinctive or modificatory. It is extinctive when an
old obligation is terminated by the creation of a new obligation that takes the place of the former;
it is merely modificatory when the old obligation subsists to the extent it remains compatible
with the amendatory agreement.
The execution of the Kasunduan sa Bayaran does not constitute a novation of the original
agreement between petitioner and private complainant. Said Kasunduan did not change the
object or principal conditions of the contract between them. The change in manner of payment of
petitioners obligation did not render the Kasunduan incompatible with the original agreement,
and hence, did not extinguish petitioners liability to remit the proceeds of the sale of the jewelry
or to return the same to private complainant.
An obligation to pay a sum of money is not novated, in a new instrument wherein the old
is ratified, by changing only the terms of payment and adding other obligations not incompatible
with the old one, or wherein the old contract is merely supplemented by the new one.
In any case, novation is not one of the grounds prescribed by the Revised Penal Code for
the extinguishment of criminal liability.

Page 299 of 745


REYES V CA
G.R.NO. 147758 june 26, 2002

FACTS:

This petition arose from a civil case for collection of a sum of money with preliminary
attachment filed by respondent Pablo V. Reyes against his first cousin petitioner Arsenio R.
Reyes and spouse Nieves S. Reyes. According to private respondent, petitioner-spouses
borrowed from him P600,000.00 with interest at five percent (5%) per month, which totalled
P1,726,250.00 at the time of filing of the Complaint. The loan was to be used supposedly to buy
a lot in Paraaque. It was evidenced by an acknowledgment receipt dated 15 July 1990 signed by
the petitioner-spouses Arsenio R. Reyes and Nieves S. Reyes and witness Romeo Rueda.
In their Answer petitioners admitted their loan from respondent but averred that there was a
novation so that the amount loaned was actually converted into respondent's contribution to a
partnership formed between them on 23 March 1990.

ISSUE:

Whether or not there was novation in the instant case?

RULING:

For novation to take place, the following requisites must concur: (a) there must be a
previous valid obligation; (b) there must be an agreement of the parties concerned to a new
contract; (c) there must be the extinguishment of the old contract; and, (d) there must be the
validity of the new contract.
In the case at bar, the third requisite is not present. The parties did agree that the amount
loaned would be converted into respondent's contribution to the partnership, but this conversion
did not extinguish the loan obligation. The date when the acknowledgment receipt/promissory
note was made negates the claim that the loan agreement was extinguished through novation
since the note was made while the partnership was in existence.
Significantly, novation is never presumed. It must appear by express agreement of the
parties, or by their acts that are too clear and unequivocal to be mistaken for anything else. An
obligation to pay a sum of money is not novated in a new instrument wherein the old is ratified
by changing only the terms of payment and adding other obligations not incompatible with the
old one, or wherein the old contract is merely supplemented by the new one.

Page 300 of 745


BAUTISTA V PILAR DEVELOPMENT
G.R.NO. 135046 august 17, 1999

FACTS:

In 1978, petitioner spouses Florante and Laarni Bautista purchased a house and lot in
Pilar Village, Las Pinas, Metro Manila. To partially finance the purchase, they obtained from the
Apex Mortgage & Loan Corporation a loan in the amount of P100,180.00. They executed a
promissory note on December 22, 1978 obligating themselves, jointly and severally, to pay the
"principal sum of P100,180.00 with interest rate of 12% and service charge of 3%" for a period
of 240 months, or twenty years, from date, in monthly installments of P1,378.83. Late payments
were to be charged a penalty of one and one-half per cent (1 1/2%) of the amount due. In the
same promissory note, petitioners authorized Apex to "increase the rate of interest and/or service
charges" without notice to them in the event that a law, Presidential Decree or any Central Bank
regulation should be enacted increasing the lawful rate of interest and service charges on the
loan. Payment of the promissory note was secured by a second mortgage on the house and lot
purchased by petitioners.Petitioner spouses failed to pay several installments. On September 20,
1982, they executed another promissory note in favor of Apex. This note was in the amount of
P142,326.43 at the increased interest rate of twenty-one per cent (21%) per annum with no
provision for service charge but with penalty charge of 1 1/2% for late payments.

ISSUE:

Whether or not there was valid novation in the case at bar?

RULING:

Novation has four (4) essential requisites: (1) the existence of a previous valid
obligation; (2) the agreement of all parties to the new contract; (3) the extinguishment of the old
contract; and (4) the validity of the new one. In the instant case, all four requisites have been
complied with. The first promissory note was a valid and subsisting contract when petitioner
spouses and Apex executed the second promissory note. The second promissory note absorbed
the unpaid principal and interest of P142,326.43 in the first note which amount became the
principal debt therein, payable at a higher interest rate of 21% per annum. Thus, the terms of the
second promissory note provided for a higher principal, a higher interest rate, and a higher
monthly amortization, all to be paid within a shorter period of 16.33 years. These changes are
substantial and constitute the principal conditions of the obligation. Both parties voluntarily
accepted the terms of the second note; and also in the same note, they unequivocally stipulated to
extinguish the first note. Clearly, there was animus novandi, an express intention to novate. The
first promissory note was cancelled and replaced by the second note. This second note became
the new contract governing the parties' obligations.

Page 301 of 745


EVADEL REALTY V SORIANO
G.R.No. 144291 April 20, 2001

FACTS:

On April 12, 1996, the spouses Antero and Virginia Soriano (respondent spouses), as
sellers, entered into a "Contract to Sell " with Evadel Realty and Development Corporation
(petitioner), as buyer, over a parcel of land denominated as Lot 5536-C of the Subdivision Plan
of Lot 5536 covered by Transfer Certificate of Title No. 125062 which was part of a huge tract
of land known as the Imus Estate. Upon payment of the first installment, petitioner introduced
improvements thereon and fenced off the property with concrete walls. Later, respondent spouses
discovered that the area fenced off by petitioner exceeded the area subject of the contract to sell
by 2,450 square meters. Upon verification by representatives of both parties, the area encroached
upon was denominated as Lot 5536-D-1 of the subdivision plan of Lot 5536-D of Psd-04-092419
and was later on segregated from the mother title and issued a new transfer certificate of title,
TCT No. 769166, in the name of respondent spouses. Respondent spouses successively sent
demand letters to petitioner on February 14, March 7, and April 24, 1997, to vacate the
encroached area. Petitioner admitted receiving the demand letters but refused to vacate the said
area.

ISSUE:

Whether or not there was novation of contract?

RULING:

Petitioner's claim that there was a novation of contract because there was a "second"
agreement between the parties due to the encroachment made by the national road on the
property subject of the contract by 1,647 square meters, is unavailing. Novation, one of the
modes of extinguishing an obligation, requires the concurrence of the following: (1) there is a
valid previous obligation; (2) the parties concerned agree to a new contract; (3) the old contract
is extinguished; and (4) there is valid new contract. Novation may be express or implied. In order
that an obligation may be extinguished by another which substitutes the same, it is imperative
that it be so declared in unequivocal terms (express novation) or that the old and the new
obligations be on every point incompatible with each other (implied novation).
In the instant case, there was no express novation because the "second" agreement was
not even put in writing. Neither was there implied novation since it was not shown that the two
agreements were materially and substantially incompatible with each other. We quote with
approval the following findings of the trial court: Since the alleged agreement between the
plaintiffs [herein respondents] and defendant [herein petitioner] is not in writing and the alleged
agreement pertains to the novation of the conditions of the contract to sell of the parcel of land
subject of the instant litigation, ipso facto, novation is not applicable in this case since, as stated
above, novation must be clearly proven by the proponent thereof and the defendant in this case is
clearly barred by the Statute of Frauds from proving its claim.

Page 302 of 745


B & I REALTY V. CASPE
G.R. No. 146972 January 29, 2008

FACTS:

Consorcia L. Venegas was the owner of a parcel of land located in Barrio Bagong-Ilog in
Pasig, Rizal and covered by TCT No. 247434. She delivered said title to, and executed a
simulated deed of sale in favor of, Datuin for purposes of obtaining a loan with the RCBC.
Datuin claimed that he had connections with the management of RCBC and offered his
assistance to Venegas in obtaining a loan from the bank. He issued a receipt to the Venegases,
acknowledging that the lot was to be used as a collateral for bank financing and that the deed of
sale was executed only as a device to obtain the loan. However, Datuin prepared a deed of
absolute sale and, through forgery, made it appear that the spouses Venegas executed the
document in his favor. Venegas learned of Datuin's fraudulent scheme when she sold the lot to
herein respondents for P160,000 in a deed of conditional sale. She, along with her husband,
instituted a complaint against Datuin in the then Court of First Instance CFI of Rizal, Branch 11,
docketed as Civil Case No. 188893, for recovery of property and nullification of TCT No.
377734, with damages. However, when the case was called for pre-trial, the Venegases' counsel
failed to appear and the complaint was eventually dismissed without prejudice.

ISSUE:

Whether or not filing of Civil Case No. 36852 by the Venegases had the effect of
interrupting the prescriptive period for the filing of the complaint for judicial foreclosure of
mortgage?

RULING:

We agree with the CA's ruling that Civil Case No. 36852 did not have the effect of
interrupting the prescription of the action for foreclosure of mortgage as it was not an action for
foreclosure but one for annulment of title and nullification of the deed of mortgage and the deed
of sale. It was not at all the action contemplated in Article 1155 of the Civil Code which
explicitly provides that the prescription of an action is interrupted only when the action itself is
filed in court. Petitioner could have protected its right over the property by filing a cross-claim
for judicial foreclosure of mortgage against respondents in Civil Case No. 36852. The filing of a
cross-claim would have been proper there. All the issues pertaining to the mortgage validity of
the mortgage and the propriety of foreclosure would have been passed upon concurrently and not
on a piecemeal basis. This should be the case as the issue of foreclosure of the subject mortgage
was connected with, or dependent on, the subject of annulment of mortgage in Civil Case No.
36852. The actuations clearly manifested that petitioner knew its rights under the law but chose
to sleep on the same.

Page 303 of 745


MESINA V. GARCIA
G.R. No. 168035 November 30, 2006

FACTS:

Atty. Honorio Valisno Garcia and Felicisima Mesina, during their lifetime, enstered into
a Contract to Sell over a lot consisting of 235 square meters, situated at Diversion Road,
Sangitan, Cabanatuan City, covered and embraced by TCT No. T-31643 in the name of
Felicisima Mesina which title was eventually cancelled and TCT No. T-78881 was issued in the
name of herein petitioners. The Contract to Sell provides that the cost of the lot is P70.00 per
square meter for a total amount of P16,450.00; payable within a period not to exceed 7 years at
an interest rate of 12% per annum, in successive monthly installments of P260.85 per month,
starting May 1977. Thereafter, the succeeding monthly installments are to be paid within the
first week of every month, at the residence of the vendor at Quezon City, with all unpaid
monthly installments earning an interest of 1% per month. Instituting this case at bar,
respondent asserts that despite the full payment made on 7 February 1984 for the
consideration of the subject lot, petitioners refused to issue the necessary Deed of Sale to effect
the transfer of the property to her.

ISSUE:

Whether or not respondents cause of action had already prescribed?

RULING:

Article 1155 of the Civil Code is explicit that the prescriptive period is interrupted when
an action has been filed in court; when there is a written extrajudicial demand made by the
creditors; and when there is any written acknowledgment of the debt by the debtor.
The records reveal that starting 19 April 1986 until 2 January 1997 respondent
continuously demanded from the petitioners the execution of the said Deed of Absolute Sale but
the latter conjured many reasons and excuses not to execute the same. Respondent even filed a
Complaint before the Housing and Land Use Regulatory Board way back in June, 1986, to
enforce her rights and to compel the mother of herein petitioners, who was still alive at that time,
to execute the necessary Deed of Absolute Sale for the transfer of title in her name. On 2 January
1997, respondent, through her counsel, sent a final demand letter to the petitioners for the
execution of the Deed of Absolute Sale, but still to no avail. Consequently, because of utter
frustration of the respondent, she finally lodged a formal Complaint for Specific Performance
with Damages before the trial court on 20 January 1997.
Hence, from the series of written extrajudicial demands made by respondent to have the
execution of the Deed of Absolute Sale in her favor, the prescriptive period of 10 years has been
interrupted. Therefore, it cannot be said that the cause of action of the respondent has already
been prescribed.

Page 304 of 745


HEIRS OF GAUDIANE V CA
G.R.No. 119879 March 11, 2004

FACTS:

The lot in controversy is Lot 4389 located at Dumaguete City and covered by Original
Certificate of Title No. 2986-A (OCT 2986-A) in the names of co-owners Felix and Juana
Gaudiane. Felix died in 1943 while his sister Juana died in 1939. Herein respondents are the
descendants of Felix while petitioners are the descendants of Juana.
On November 4, 1927, Felix executed a document entitled Escritura de Compra-Venta
(Escritura, for brevity) whereby he sold to his sister Juana his one-half share in Lot No. 4156
covered by Transfer Certificate of Title No. 3317-A.
Petitioners predecessors-in-interest, Geronimo and Ines Iso (the Isos), believed that the
sale by Felix to their mother Juana in 1927 included not only Lot 4156 but also Lot 4389. In
1974, they filed a pleading in the trial court seeking to direct the Register of Deeds of
Dumaguete City to cancel OCT 2986-A covering Lot 4389 and to issue a new title in favor of the
Isos. This was later withdrawn after respondents predecessors-in-interest, Procopio Gaudiane
and Segundo Gaudiane, opposed it on the ground that the Isos falsified their copy of the
Escritura by erasing Lot 4156 and intercalating in its place Lot 4389.

ISSUE:

Whether the court gravely erred in not giving due course to the claim of petitioners and
legal effect of prescription and laches adverted by defendants-appellants in their answer and
affirmative defenses proven during the hearing by documentary and testimonial evidence.

RULING:

As a general rule, ownership over titled property cannot be lost through prescription.[12]
Petitioners, however, invoke our ruling in Tambot vs. Court of Appeals[13] which held that titled
property may be acquired through prescription by a person who possessed the same for 36 years
without any objection from the registered owner who was obviously guilty of laches.
Petitioners claim is already rendered moot by our ruling barring petitioners from raising
the defense of exclusive ownership due to res judicata. Even assuming arguendo that petitioners
are not so barred, their contention is erroneous. As correctly observed by the appellate court.
As explained earlier, only Lot No. 4156 was sold. It was through this misrepresentation
that appellees predecessor-in-interest succeeded in withholding possession of appellees share in
Lot No. 4389. Appellees cannot, by their own fraudulent act, benefit therefrom by alleging
prescription and laches.

Page 305 of 745


LAUREANO V CA
G.R.No. 114776 February 2, 2000

FACTS:

Petitioner was employed in the singapore airlines limited as the pilot captain of B-707.
Sometime in 1982, defendant, hit by a recession, initiated cost-cutting measures. Seventeen
expatriate captains in the Airbus fleet were found in excess of the defendant's requirement.
Consequently, defendant informed its expatriate pilots including plaintiff of the situation and
advised them to take advance leaves. Realizing that the recession would not be for a short time,
defendant decided to terminate its excess personnel. It did not, however, immediately terminate
it's A-300 pilots. It reviewed their qualifications for possible promotion to the B-747 fleet.
Among the 17 excess Airbus pilots reviewed, twelve were found qualified. Unfortunately,
plaintiff was not one of the twelve. Aggrieved, plaintiff on June 29, 1983, instituted a case for
illegal dismissal before the Labor Arbiter. Defendant moved to dismiss on jurisdictional grounds.
Before said motion was resolved, the complaint was withdrawn.

ISSUE :

What is the prescriptive period for money claims arising from employer-employee
relationship?

RULING:

Article 291. Money claims. - All money claims arising from employee-employer
relations accruing during the effectivity of this Code shall be filed within three (3) years from the
time the cause of action accrued; otherwise they shall be forever barred.
It should be noted further that Article 291 of the Labor Code is a special law applicable to
money claims arising from employer-employee relations; thus, it necessarily prevails over
Article 1144 of the Civil Code, a general law. Basic is the rule in statutory construction that
'where two statutes are of equal theoretical application to a particular case, the one designed
therefore should prevail.'
In the instant case, the action for damages due to illegal termination was filed by
plaintiff-appellee only on January 8, 1987 or more than four (4) years after the effectivity date of
his dismissal on November 1, 1982. Clearly, plaintiff-appellee's action has already prescribed.

Page 306 of 745


BANCO FILIPINO vs. COURT OF APPEALS
332 SCRA 241

FACTS:

Elsa Arcilla and her husband, Calvin Arcilla secured on three occasions, loans from the
Banco Filipino Savings and Mortgage bank in the amount of Php.107,946.00 as evidenced by the
Promissory Note executed by the spouses in favor of the said bank. To secure payment of said
loans, the spouses executed Real Estate Mortgages in favor of the appellants (Banco Filipino)
over their parcels of land. The appellee spouses failed to pay their monthly amortization to
appellant. On September 2, 1985 the appellees filed a complaint for Annulment of the Loan
Contracts, Foreclosure Sale with Prohibitory and Injunction which was granted by the RTC.
Petitioners appealed to the Court of Appeals, but the CA affirmed the decision of the RTC.

ISSUE:

Whether or not the CA erred when it held that the cause of action of the private
respondents accrued on October 30, 1978 and the filing of their complaint for annulment of their
contracts in 1085 was not yet barred by the prescription/

RULING:

The court held that the petition is unmeritorious. Petitioners claim that the action of the
private respondents have prescribed is bereft of merit. Under Article 1150 of the Civil Code, the
time for prescription of all kinds of action where there is no special provision which ordains
otherwise shall be counted from the day they may be brought. Thus the period of prescription of
any cause of action is reckoned only from the date of the cause of action accrued. The period
should not be made to retroact to the date of the execution of the contract, but from the date they
received the statement of account showing the increased rate of interest, for it was only from the
moment that they discovered the petitioners unilateral increase thereof.

Page 307 of 745


VDA. DE DEL GADO vs. COURT OF APPEALS
363 SCRA 58

FACTS:

Carlos Delgado was the absolute owner of a parcel of land with an area of 692,549 square
meter situated in the Municipality of Catarman Samar. Carlos Delgado granted and conveyed by
way of donation with quitclaim all rights, title, interest claim and demand over a portion of land
with an area of 165,000 square meter in favor of the Commonwealth of the Philippines. The
acceptance was then made to President Quezon in his capacity as Commander-in-Chief. The
Deed of Donation was executed with a condition that the said land will be used for the formation
of the National Defense of the Philippines. The said parcel of land then covered by the Torrens
System of the Philippines and was registered in the name of Commonwealth of the Philippines
for a period of 40 years. The land was registered under TCT 0-2539-160 in favor of the
Commonwealth however without any annotation.

Upon declaration of independence, the Commonwealth was replaced by Republic of the


Philippines which took over the subject land and turned over to Civil Aeronautics
Administration, later named Bureau of Air Transportation Office. The said agency utilizes the
said land a domestic airport.

Jose Delgado filed a petition for reconveyance for a violation of the condition. The RTC
ruled in favor of the plaintiff Delgado. But the CA reversed the said decision because of
prescription. The petitioner filed only before 24 years o discovery which the law only requires 10
years of filing.

ISSUE:

Whether or not the petitioners action for reconveyance is already barred by prescription.

RULING:

The Supreme Court denied the petition and affirmed the decision of the Court of Appeals
because the time of filing has been prescribed. Under Article 1144 of the Civil Code on
Prescription based on written contracts, the filing of action for reconveyance is within 10 years
from the time the condition in the Deed of Donation was violated. The petitioner herein filed
only 24 years in the first action and 43 years in the second filing of the 2nd action.

The action for reconveyance on the alleged excess of 33, 607 square meter mistakenly
included in the title was also prescribed Article 1456 of the Civil Code states, if property is
acquired through mistake or fraud, the person obtaining it is, by force of law, considered a
trustee of an implied trust for the benefits of the person from whom the property comes, if within
10 years such action for reconveyance has not been executed.

Page 308 of 745


MAESTRADO vs. COURT OF APPEALS
327 SCRA 678

FACTS:

These consolidated cases involve Lot No. 5872 and the rights of the contending parties
thereto. The lot has an area of 57.601 sq.m. and is registered in the name of the deceased spouses
Ramon and Rosario Chaves. The spouses died intestate in 1943 and 1944, respectively. They
were survived by six heirs. To settle the estate of said spouse, Angel Chaves, one of the heirs,
initiated intestate proceedings and was appointed administrator of said estates in the process. An
inventory of the estates was made and thereafter, the heirs agreed on a project partition. The
court approved the partition but a copy of said decision was missing. Nonetheless, the estate was
divided among the heirs. Subsequently, in 1956, the partition case effected and the respective
shares of the heirs were delivered to them.

Significantly, Lot No.5872 was not included in a number of documents. Parties offered
different explanations as to the omission of said lot in the documents. Petitioners maintain the
existence of an oral partition agreement entered into by all heirs after the death of their parents.
To set things right, petitioners then prepared a quitclaim to confirm the alleged oral agreement.
Respondents dispute voluntariness of their consent to the quitclaims.

Six years after the execution of the quitclaims, respondents discovered that indeed subject lot
was still a common property in the name of the deceased spouses. Eventually, an action for
Quieting of Title was filed by petitioners on December 22, 1983.

The trial court considered Lot No. 5872 as still a common property and therefore must be
divided into six parts, there being six heirs. Petitioners appealed to the Court of Appeals which
sustained the decision of the trial court.

ISSUE:

Whether or not the action for quieting of title had already prescribed.

RULING:

The Supreme Court ruled that an action for quieting of title is imprescriptible especially if
the plaintiff is in possession of the property being litigated. One who is in actual possession of a
land, claiming to be the owner thereof may wait until his possession is disturbed or his title is
attacked before making steps to vindicate his right because his undisturbed possession gives him
a continuing right to seek the aid of the courts to ascertain the nature of the adverse claim and its
effect on his title. Moreover, the Court held that laches is inapplicable in this case. This is
because, as mentioned earlier, petitioners possession of the subject lot has rendered their right to
bring an action for quieting of title imprescriptible.

Page 309 of 745


TANAY RECREATION CENTER AND DEVELOPMENT CORP.
vs. CATALINA MATIENZO FAUSTO
April 12, 2005

FACTS:

Petitioner Tanay Recreation Center and Development Corp. (TRCDC) is the lessee of a
3,090-square meter property located in Sitio Gayas, Tanay, Rizal, owned by Catalina Matienzo
Fausto, under a Contract of Lease. On this property stands the Tanay Coliseum Cockpit operated
by petitioner. The lease contract provided for a 20-year term, subject to renewal within sixty
days prior to its expiration. The contract also provided that should Fausto decide to sell the
property, petitioner shall have the priority right to purchase the same.

On June 17, 1991, petitioner wrote Fausto informing her of its intention to renew the
lease. However, it was Faustos daughter, respondent Anunciacion F. Pacunayen, who replied,
asking that petitioner remove the improvements built thereon, as she is now the absolute owner
of the property. It appears that Fausto had earlier sold the property to Pacunayen and title has
already been transferred in her name. Petitioner filed an Amended Complaint for Annulment of
Deed of Sale, Specific Performance with Damages, and Injunction

In her Answer, respondent claimed that petitioner is estopped from assailing the validity
of the deed of sale as the latter acknowledged her ownership when it merely asked for a renewal
of the lease. According to respondent, when they met to discuss the matter, petitioner did not
demand for the exercise of its option to purchase the property, and it even asked for grace period
to vacate the premises.

ISSUE:

The contention in this case refers to petitioners priority right to purchase, also referred to
as the right of first refusal.

RULING:

When a lease contract contains a right of first refusal, the lessor is under a legal duty to
the lessee not to sell to anybody at any price until after he has made an offer to sell to the latter at
a certain price and the lessee has failed to accept it. The lessee has a right that the lessor's first
offer shall be in his favor. Petitioners right of first refusal is an integral and indivisible part of
the contract of lease and is inseparable from the whole contract. The consideration for the lease
includes the consideration for the right of first refusal and is built into the reciprocal obligations
of the parties.

It was erroneous for the CA to rule that the right of first refusal does not apply when the
property is sold to Faustos relative. When the terms of an agreement have been reduced to
writing, it is considered as containing all the terms agreed upon. As such, there can be, between
the parties and their successors in interest, no evidence of such terms other than the contents of
the written agreement, except when it fails to express the true intent and agreement of the parties.
In this case, the wording of the stipulation giving petitioner the right of first refusal is plain and
unambiguous, and leaves no room for interpretation. It simply means that should Fausto decide
to sell the leased property during the term of the lease, such sale should first be offered to
petitioner. The stipulation does not provide for the qualification that such right may be exercised
only when the sale is made to strangers or persons other than Faustos kin. Thus, under the terms
of petitioners right of first refusal, Fausto has the legal duty to petitioner not to sell the property
to anybody, even her relatives, at any price until after she has made an offer to sell to petitioner
at a certain price and said offer was rejected by petitioner.

Page 310 of 745


ROMEO MENDOZA vs. COURT OF APPEALS
February 18, 2005

FACTS:

Manotok was the administrator of a parcel of land which it leased to Benjamin Mendoza;
that the contract of lease expired on December 31, 1988; that even after the expiration of the
lease contract, Benjamin Mendoza, and after his demise, his son, Romeo, continued to occupy
the premises and thus incurred a total of P44,011.25 as unpaid rentals from January 1, 1989 to
July 31, 1996; that on July 16, 1996, Manotok made a demand on Benjamin Mendoza to pay the
rental arrears and to vacate the premises within fifteen (15) days from receipt of the demand
letter; that despite receipt of the letter and after the expiration of the 15-day period, the
Mendozas refused to vacate the property and to pay the rentals. The complaint prayed that the
court order Mendoza and those claiming rights under him to vacate the premises and deliver
possession thereof to Manotok, and to pay the unpaid rentals from January 1, 1989 to July 31,
1996 plus P875.75 per month starting August 1, 1996, subject to such increase allowed by law,
until he finally vacates the premise.

ISSUE:

Whether or not the Honorable Court of Appeals committed error in giving efficacy to a
lease contract signed in 1988 when the alleged signatory was already dead since 1986.

RULING:

This is a case for unlawful detainer. It appears that respondent corporation leased the
property subject of this case to petitioners father. After expiration of the lease, petitioner
continued to occupy the property but failed to pay the rentals. On July 16, 1996, respondent
corporation made a demand on petitioner to vacate the premises and to pay their arrears.

An action for unlawful detainer may be filed when possession by a landlord, vendor,
vendee or other person of any land or building is unlawfully withheld after the expiration or
termination of the right to hold possession by virtue of a contract, express or implied. The only
issue to be resolved in an unlawful detainer case is physical or material possession of the
property involved, independent of any claim of ownership by any of the parties involved. In the
case at bar, petitioner lost his right to possess the property upon demand by respondent
corporation to vacate the rented lot. Petitioner cannot now refute the existence of the lease
contract because of his prior admissions in his pleadings regarding his status as tenant on the
subject property.

Page 311 of 745


JEFFERSON LIM vs. QUEENSLAND TOKYO COMMODITIES, INC.
January 4, 2002

FACTS:

Sometime in 1992, Benjamin Shia, a market analyst and trader of Queensland, was
introduced to petitioner Jefferson Lim by Marissa Bontia, one of his employees. Marissas father
was a former employee of Lims father. Shia suggested that Lim invest in the Foreign Exchange
Market, trading U.S. dollar against the Japanese yen, British pound, Deutsche Mark and Swiss
Franc.Before investing, Lim requested Shia for proof that the foreign exchange was really
lucrative. They conducted mock tradings without money involved. As the mock trading showed
profitability, Lim decided to invest with a marginal deposit of US$5,000 in managers check.
The marginal deposit represented the advance capital for his future tradings. It was made to
apply to any authorized future transactions, and answered for any trading account against which
the deposit was made, for any loss of whatever nature, and for all obligations, which the investor
would incur with the broker. Petitioner Lim was then allowed to trade with respondent company
which was coursed through Shia by virtue of blank order forms all signed by Lim. Respondent
furnished Lim with the daily market report and statements of transactions as evidenced by the
receiving forms, some of which were received by Lim.

Meanwhile, on October 22, 1992, respondent learned that it would take seventeen (17)
days to clear the managers check given by petitioner. Shia returned the check to petitioner who
informed Shia that petitioner would rather replace the managers check with a travelers check.
Shia noticed that the travelers check was not indorsed but Lim told Shia that Queensland could
sign the endorsee portion. Because Shia trusted the latters good credit rating, and out of
ignorance, he brought the check back to the office unsigned. Inasmuch as that was a busy Friday,
the check was kept in the drawer of respondents consultant. Later, the travelers check was
deposited with Citibank.

On October 27, 1992, Citibank informed respondent that the travelers check could not be
cleared unless it was duly signed by Lim, the original purchaser of the travelers check. A Miss
Arajo, from the accounting staff of Queensland, returned the check to Lim for his signature, but
the latter, aware of his P44,465 loss, demanded for a liquidation of his account and said he would
get back what was left of his investment.

ISSUE:

Whether or not the CA erred in reversing the decision of the RTC which dismissed
the respondents complaint

RULING:

The essential elements of estoppel are: (1) conduct of a party amounting to false
representation or concealment of material facts or at least calculated to convey the impression
that the facts are otherwise than, and inconsistent with, those which the party subsequently
attempts to assert; (2) intent, or at least expectation, that this conduct shall be acted upon by, or
at least influence, the other party; and (3) knowledge, actual or constructive, of the real facts. ere,
it is uncontested that petitioner had in fact signed the Customers Agreement in the morning of
October 22, 1992, knowing fully well the nature of the contract he was entering into. The
Customers Agreement was duly notarized and as a public document it is evidence of the fact,
which gave rise to its execution and of the date of the latter.

Next, petitioner paid his investment deposit to respondent in the form of a managers
check in the amount of US$5,000 as evidenced by PCI Bank Managers Check No. 69007, dated
October 22, 1992. All these are indicia that petitioner treated the Customers Agreement as a
valid and binding contract.

Page 312 of 745


PLACEWELL INTERNATIONAL SERVICES CORP. vs. CAMOTE
G.R. No. 169973, June 26, 2006

FACTS:

Petitioner Placewell International Services Corporation (PISC) deployed respondent


Ireneo B. Camote to work as building carpenter for SAAD Trading and Contracting Co. (SAAD)
at the Kingdom of Saudi Arabia (KSA) for a contract duration of two years, with a
corresponding salary of US$370.00 per month. At the job site, respondent was allegedly found
incompetent by his foreign employer; thus the latter decided to terminate his services. However,
respondent pleaded for his retention and consented to accept a lower salary of SR 800.00 per
month. Thus, SAAD retained respondent until his return to the Philippines two years after.

On November 27, 2001, respondent filed a sworn Complaint for monetary claims against
petitioner alleging that when he arrived at the job site, he and his fellow Filipino workers were
required to sign another employment contract written in Arabic under the constraints of losing
their jobs if they refused; that for the entire duration of the new contract, he received only SR
590.00 per month; that he was not given his overtime pay despite rendering nine hours of work
everyday; that he and his co-workers sought assistance from the Philippine Embassy but they did
not succeed in pursuing their cause of action because of difficulties in communication.

ISSUE:

Whether there is estoppel by laches

HELD:

R.A. No. 8042 explicitly prohibits the substitution or alteration to the prejudice of the
worker, of employment contracts already approved and verified by the Department of Labor and
Employment (DOLE) from the time of actual signing thereof by the parties up to and including
the period of the expiration of the same without the approval of the DOLE. The subsequently
executed side agreement of an overseas contract worker with her foreign employer which
reduced her salary below the amount approved by the POEA is void because it is against our
existing laws, morals and public policy. The said side agreement cannot supersede her standard
employment contract approved by the POEA.

Petitioners contention that respondent is guilty of laches is without basis. Laches has
been defined as the failure of or neglect for an unreasonable and unexplained length of time to do
that which by exercising due diligence, could or should have been done earlier, or to assert a
right within reasonable time, warranting a presumption that the party entitled thereto has either
abandoned it or declined to assert it. Thus, the doctrine of laches presumes that the party guilty
of negligence had the opportunity to do what should have been done, but failed to do so.
Conversely, if the said party did not have the occasion to assert the right, then, he can not be
adjudged guilty of laches. Laches is not concerned with the mere lapse of time; rather, the party
must have been afforded an opportunity to pursue his claim in order that the delay may
sufficiently constitute laches.

In the instant case, respondent filed his claim within the three-year prescriptive period for
the filing of money claims set forth in Article 291 of the Labor Code from the time the cause of
action accrued. Thus, we find that the doctrine of laches finds no application in this case.

Page 313 of 745


HEIRS OF RAGUA vs. COURT OF APPEALS
G.R. Nos. 88521-22

FACTS:

These consolidated cases involve a prime lot consisting of 4,399,322 square meters,
known as the Diliman Estate, situated in Quezon City. On this 439 hectares of prime land now
stand the following: the Quezon City Hall, Philippine Science High School, Quezon Memorial
Circle, Visayas Avenue, Ninoy Aquino Parks and Wildlife, portions of UP Village and East
Triangle, the entire Project 6 and Vasha Village, Veterans Memorial Hospital and golf course,
Department of Agriculture, Department of Environment and Natural Resources, Sugar
Regulatory Administration, Philippine Tobacco Administration, Land Registration Authority,
Philcoa Building, Bureau of Telecommunications, Agricultural Training Institute building,
Pagasa Village, San Francisco School, Quezon City Hospital, portions of Project 7, Mindanao
Avenue subdivision, part of Bago Bantay resettlement project, SM City North EDSA, part of
Phil-Am Life Homes compound and four-fifths of North Triangle. This large estate was the
subject of a petition for judicial reconstitution originally filed by Eulalio Ragua in 1964, which
gave rise to protracted legal battles between the affected parties, lasting more than thirty-five
(35) years.

ISSUE:

Whether estoppel by laches exists on the part of petitioner

HELD:

Petitioners filed the petition for reconstitution of OCT 632 nineteen (19) years after the
title was allegedly lost or destroyed. We thus consider petitioners guilty of laches. Laches is
negligence or omission to assert a right within a reasonable time, warranting the presumption
that the party entitled to assert it either has abandoned or declined to assert it.

Page 314 of 745


METROPOLITAN BANK & TRUST COMPANY vs. COURT OF APPEALS
June 8, 2000

FACTS:

Mr. Chia offered the subject property for sale to private respondent G.T.P. Development
Corporation (hereafter, GTP), with assumption of the mortgage indebtedness in favor of
petitioner METROBANK secured by the subject property. Pending negotiations for the proposed
sale, Atty. Bernardo Atienza, acting in behalf of respondent GTP, went to METROBANK to
inquire on Mr. Chia's remaining balance on the real estate mortgage. METROBANK obliged
with a statement of account of Mr. Chia amounting to about P115,000.00 as of August ,1980.
The deed of sale and the memorandum of agreement between Mr. Chia and respondent GTP
were eventually executed and signed. Atty. Atienza went to METROBANK Quiapo Branch and
paid one hundred sixteen thousand four hundred sixteen pesos and seventy-one centavos
(P116,416.71) for which METROBANK issued an official receipt acknowledging payment. This
notwithstanding, petitioner METROBANK refused to release the real estate mortgage on the
subject property despite repeated requests from Atty. Atienza, thus prompting respondent GTP to
file an action for specific performance against petitioner METROBANK and Mr. Chia.

ISSUE:

Whether or not the CA erred in reversing the decision of the lower court.

RULING:

The Court found no compelling reasons to disturb the assailed decision. All things
studiedly viewed in proper perspective, the Court are of the opinion, and so rule, that whatever
debts or loans mortgagor Chia contracted with Metrobank after September 4, 1980, without the
conformity of plaintiff-appellee, could not be adjudged as part of the mortgage debt the latter so
assumed. We are persuaded that the contrary ruling on this point in Our October 24, 1994
decision would be unfair and unjust to plaintiff-appellee because, before buying subject property
and assuming the mortgage debt thereon, the latter inquired from Metrobank about the exact
amount of the mortgage debt involved.

Petitioner METROBANK is estopped from refusing the discharge of the real estate
mortgage on the claim that the subject property still secures "other unliquidated past due loans."

Page 315 of 745


SPOUSES DEL CAMPO vs. COURT OF APPEALS
February 1, 2001

FACTS:

Salome, Consorcia, Alfredo, Maria, Rosalia, Jose, Quirico and Julita, all surnamed
Bornales, were the original co-owners of the lot in question.

On July 14, 1940, Salome sold part of her 4/16 share to Soledad Daynolo. Thereafter,
Soledad Daynolo immediately took possession of the land described above and built a house
thereon. A few years later, Soledad and her husband, Simplicio Distajo, mortgaged the subject
portion of the lot as security for a debt to Jose Regalado, Sr. This transaction was evidenced by a
Deed of Mortgage.

On April 14, 1948, three of the eight co-owners of Lot 162, specifically, Salome,
Consorcia and Alfredo, sold 24,993 square meters of said lot to Jose Regalado, Sr. On May 4,
1951, Simplicio Distajo, heir of Soledad Daynolo who had since died, paid the mortgage debt
and redeemed the mortgaged portion of Lot 162 from Jose Regalado, Sr. The latter, in turn,
executed a Deed of Discharge of Mortgage in favor of Soledads heirs, namely: Simplicio
Distajo, Rafael Distajo and Teresita Distajo-Regalado. On same date, the said heirs sold the
redeemed portion of Lot 162 for P1,500.00 to herein petitioners, the spouses Manuel Del Campo
and Salvacion Quiachon.

ISSUE:

Whether or not the sale of the subject portion constitutes a sale of a concrete or definite
portion of land owned in common does not absolutely deprive herein petitioners of any right or
title thereto.

RULING:

There can be no doubt that the transaction entered into by Salome and Soledad could be
legally recognized in its entirety since the object of the sale did not even exceed the ideal shares
held by the former in the co-ownership. As a matter of fact, the deed of sale executed between
the parties expressly stipulated that the portion of Lot 162 sold to Soledad would be taken from
Salomes 4/16 undivided interest in said lot, which the latter could validly transfer in whole or in
part even without the consent of the other co-owners. Salomes right to sell part of her undivided
interest in the co-owned property is absolute in accordance with the well-settled doctrine that a
co-owner has full ownership of his pro-indiviso share and has the right to alienate, assign or
mortgage it, and substitute another person in its enjoyment.

Page 316 of 745


CUENCO vs. CUENCO
G.R. No. 149844, October 13, 2004

FACTS:

On September 19, 1970, the [respondent] filed the initiatory complaint herein for specific
performance against her uncle [Petitioner] Miguel Cuenco which averred, inter alia that her
father, the late Don Mariano Jesus Cuenco (who became Senator) and said [petitioner] formed
the Cuenco and Cuenco Law Offices; that on or around August 4, 1931, the Cuenco and
Cuenco Law Offices served as lawyers in two (2) cases entitled Valeriano Solon versus Zoilo
Solon (Civil Case 9037) and Valeriano Solon versus Apolonia Solon (Civil Case 9040)
involving a dispute among relatives over ownership of lot 903 of the Banilad Estate which is
near the Cebu Provincial Capitol; that records of said cases indicate the name of the [petitioner]
alone as counsel of record, but in truth and in fact, the real lawyer behind the success of said
cases was the influential Don Mariano Jesus Cuenco; that after winning said cases, the awardees
of Lot 903 subdivided said lot into three (3) parts as follows:

Lot 903-A: 5,000 [square meters]: Mariano Cuencos attorneys fees


Lot 903-B: 5,000 [square meters]: Miguel Cuencos attorneys fees
Lot 903-C: 54,000 [square meters]: Solons retention

Petitioner later claimed the property after the death of his brother.

ISSUES:

Whether Petitioner is in is estoppel


Whether laches barred the right of action of respondent

HELD:

From the time Lot 903-A was subdivided and Marianos six children -- including
Concepcion -- took possession as owners of their respective portions, no whimper of protest
from petitioner was heard until 1963. By his acts as well as by his omissions, Miguel led
Mariano and the latters heirs, including Concepcion, to believe that Petitioner Cuenco respected
the ownership rights of respondent over Lot 903-A-6. That Mariano acted and relied on
Miguels tacit recognition of his ownership thereof is evident from his will, executed in 1963.
Indeed, as early as 1947, long before Mariano made his will in 1963, Lot 903-A -- situated along
Juana Osmea Extension, Kamputhaw, Cebu City, near the Cebu Provincial Capitol -- had been
subdivided and distributed to his six children in his first marriage. Having induced him and his
heirs to believe that Lot 903-A-6 had already been distributed to Concepcion as her own,
petitioner is estopped from asserting the contrary and claiming ownership thereof. The principle
of estoppel in pais applies when -- by ones acts, representations, admissions, or silence when
there is a need to speak out -- one, intentionally or through culpable negligence, induces another
to believe certain facts to exist; and the latter rightfully relies and acts on such belief, so as to be
prejudiced if the former is permitted to deny the existence of those facts.
Petitioner claims that respondents action is already barred by laches. Laches is
negligence or omission to assert a right within a reasonable time, warranting a presumption that
the party entitled to it has either abandoned or declined to assert it.[40] In the present case,
respondent has persistently asserted her right to Lot 903-A-6 against petitioner. Concepcion was
in possession as owner of the property from 1949 to 1969. When Miguel took steps to have it
separately titled in his name, despite the fact that she had the owners duplicate copy of TCT No.
RT-6999 -- the title covering the entire Lot 903-A -- she had her adverse claim annotated on the
title in 1967. When petitioner ousted her from her possession of the lot by tearing down her wire
fence in 1969, she commenced the present action on September 19, 1970, to protect and assert
her rights to the property. We find that she cannot be held guilty of laches, as she did not sleep
on her rights.

Page 317 of 745


LAUREL vs. HON. ANIANO A. DESIERTO
July 1, 2002

FACTS:

Petitioner Salvador H. Laurel moves for a reconsideration of this Courts decision declaring
him, as Chair of the National Centennial Commission (NCC), a public officer. Petitioner also
prays that the case be referred to the Court En Banc.

ISSUE:

Whether or not Laurel is a public officer as Chair of the NCC

RULING:

The issue in this case is whether petitioner, as Chair of the NCC, is a public officer under the
jurisdiction of the Ombudsman. Assuming, as petitioner proposes, that the designation of other
members to the NCC runs counter to the Constitution, it does not make petitioner, as NCC Chair,
less a public officer. Such serious constitutional repercussions do not reduce the force of the
rationale behind this Courts decision.

Second, petitioner invokes estoppel. He claims that the official acts of the President, the
Senate President, the Speaker of the House of Representatives, and the Supreme Court, in
designating Cabinet members, Senators, Congressmen and Justices to the NCC, led him to
believe that the NCC is not a public office.

The contention has no merit. In estoppel, the party representing material facts must have the
intention that the other party would act upon the representation. It is preposterous to suppose that
the President, the Senate President, the Speaker and the Supreme Court, by the designation of
such officials to the NCC, intended to mislead petitioner just so he would accept the position of
NCC Chair. Estoppel must be unequivocal and intentional. Moreover, petitioner himself admits
that the principle of estoppel does not operate against the Government in the exercise of its
sovereign powers.

Third, as ground for the referral of the case to the Court En Banc, petitioner submits that our
decision in this case modified or reversed doctrines rendered by this Court, which can only be
done by the Court En Banc.It is argued that by designating three of its then incumbent members
to the NCC, the Court took the position that the NCC was not a public office. The argument is a
bit of a stretch. Section 4 (3), Article VIII of the Constitution provides that no doctrine or
principle of law laid down by the court in a decision rendered en banc or in division may be
modified or reversed except by the court sitting en banc. In designating three of its incumbent
members to the NCC, the Court did not render a decision, in the context of said constitutional
provision, which contemplates an actual case. Much less did the Court, by such designation,
articulate any doctrine or principle of law. Invoking the same provision, petitioner asserts that
the decision in this case reversed or modified Macalino vs. Sandiganbayan, holding that the
Assistant Manager of the Treasury Division and the Head of the Loans Administration &
Insurance Section of the Philippine National Construction Corporation (PNCC) is not a public
officer under Republic Act No. 3019. This contention also has no merit. The rationale for the
ruling in Macalino is that the PNCC has no original charter as it was incorporated under the
general law on corporations. However, as we pointed out in our decision, a conclusion that
EXPOCORP is a government-owned or controlled corporation would not alter the outcome of
this case because petitioners position and functions as Chief Executive Officer of EXPOCORP
are by virtue of his being Chairman of the NCC. The other issues raised by petitioner are mere
reiterations of his earlier arguments. The Court, however, remains unswayed thereby.

Page 318 of 745


SPOUSES HANOPOL vs. SHOEMART INCORPORATED
October 4, 2002

FACTS:

Shoemart, Inc., is a corporation duly organized and existing under the laws of the
Philippines engaged in the operation of department stores. On December 4, 1985, Shoemart,
through its Executive Vice-President, Senen T. Mendiola, and spouses Manuel R. Hanopol and
Beatriz T. Hanopol executed a Contract of Purchase on Credit.

Under the terms of the contract, Shoemart extended credit accommodations, in the
amount of Three Hundred Thousand Pesos (P300,000.00), for purchases on credit made by
holders of SM Credit Card issued by spouses Hanopol for one year, renewable yearly thereafter.
Spouses Hanopol were given a five percent (5%) discount on all purchases made by their
cardholders, deductible from the semi-monthly payments to be made to Shoemart by spouses
Hanopol.

For failure of spouses Hanopol to pay the principal amount of One Hundred Twenty-Four
Thousand Five Hundred Seventy-One Pesos and Eighty-Nine Centavos (P124,571.89) as of
October 6, 1987, Shoemart instituted extrajudicial foreclosure proceedings against the mortgaged
properties.

Spouses Hanopol alleged that Shoemart breached the contract when the latter failed to
furnish the former with the requisite documents by which the formers liability shall be
determined, namely: charge invoices, purchase booklets and purchase journal, as provided in
their contract; that without the requisite documents, spouses Hanopol had no way of knowing
that, in fact, they had already paid, even overpaid, whatever they owed to Shoemart; that despite
said breach, Shoemart even had the audacity to apply for extrajudicial foreclosure with the
Sheriff.

ISSUE:

Whether or not Shoemart acted with manifest bad faith in pursuing with the foreclosure
and auction sale of the property of spouses Hanopol, and, accordingly, should be held liable for
damages.

RULING:

All the three (3) elements for litis pendentia as a ground for dismissal of an action are
present, namely: (a) identity of parties, or at least such parties who represent the same interest in
both actions; (b) identity of rights asserted and relief prayed for, the relief being founded on the
same facts; and (c) the identity, with respect to the two (2) preceding particulars in the two (2)
cases, in such that any judgment that may be rendered in the pending case, regardless of which
party is successful, would amount to res judicata in the other.

In the case at bench, the parties are the same; the relief sought in the case before the
Court of Appeals and the trial court are the same, that is, to permanently enjoin the foreclosure of
the real estate mortgage executed by spouses Hanopol in favor of Shoemart; and, both are
premised on the same facts. The judgment of the Court of Appeals would constitute a bar to the
suit before the trial court.

Page 319 of 745


TERMINAL FACILITIES vs. PPA
378 SCRA 82

FACTS:

Before us are two (2) consolidated petitions for review, one filed by the Terminal
Facilities and Services Corporation (TEFASCO) and the other by the Philippine Ports Authority
(PPA). TEFASCO is a domestic corporation organized and existing under the laws of the
Philippines with principal place of business at Barrio Ilang, Davao City. It is engaged in the
business of providing port and terminal facilities as well as arrastre, stevedoring and other port-
related services at its own private port at Barrio Ilang.

Sometime in 1975 TEFASCO submitted to PPA a proposal for the construction of a


specialized terminal complex with port facilities and a provision for port services in Davao City.
To ease the acute congestion in the government ports at Sasa and Sta. Ana, Davao City, PPA
welcomed the proposal and organized an inter-agency committee to study the plan. The
committee recommended approval.

On April 21, 1976 the PPA Board of Directors passed Resolution No. 7 accepting and
approving TEFASCO's project proposal.

Long after TEFASCO broke round with massive infrastructure work, the PPA Board
curiously passed on October 1, 1976 Resolution No. 50 under which TEFASCO, without asking
for one, was compelled to submit an application for construction permit. Without the consent of
TEFASCO, the application imposed additional significant conditions.

The series of PPA impositions did not stop there. Two (2) years after the completion of
the port facilities and the commencement of TEFASCO's port operations, or on June 10, 1978,
PPA again issued to TEFASCO another permit, under which more onerous conditions were
foisted on TEFASCO's port operations. In the purported permit appeared for the first time the
contentious provisions for ten percent (10%) government share out of arrastre and stevedoring
gross income and one hundred percent (100%) wharfage and berthing charges.

On February 10, 1984 TEFASCO and PPA executed a Memorandum of Agreement


(MOA) providing among others for (a) acknowledgment of TEFASCO's arrears in government
share at Three Million Eight Hundred Seven Thousand Five Hundred Sixty-Three Pesos and
Seventy-Five Centavos (P3,807,563.75) payable monthly, with default penalized by automatic
withdrawal of its commercial private port permit and permit to operate cargo handling services;
(b) reduction of government share from ten percent (10%) to six percent (6%) on all cargo
handling and related revenue (or arrastre and stevedoring gross income); (c) opening of its pier
facilities to all commercial and third-party cargoes and vessels for a period coterminous with its
foreshore lease contract with the National Government; and, (d) tenure of five (5) years
extendible by five (5) more years for TEFASCO's permit to operate cargo handling in its private
port facilities. In return PPA promised to issue the necessary permits for TEFASCO's port
activities. TEFASCO complied with the MOA and paid the accrued and current government
share.

On August 30, 1988 TEFASCO sued PPA and PPA Port Manager, and Port Officer in
Davao City for refund of government share it had paid and for damages as a result of alleged
illegal exaction from its clients of one hundred percent (100%) berthing and wharfage fees. The
complaint also sought to nullify the February 10, 1984 MOA and all other PPA issuances
modifying the terms and conditions of the April 21, 1976 Resolution No. 7 above-mentioned.

PPA appealed the decision of the trial court to the Court of Appeals. The appellate court
in its original decision recognized the validity of the impositions and reversed in toto the
decision of the trial court. TEFASCO moved for reconsideration which the Court of Appeals
found partly meritorious. Thus the Court of Appeals in its Amended Decision partially affirmed
Page 320 of 745
the RTC decision only in the sense that PPA was directed to pay TEFASCO (1) the amounts of
Fifteen Million Eight Hundred Ten Thousand Thirty-Two Pesos and Seven Centavos
(P15,810,032.07) representing fifty percent (50%) wharfage fees and Three Million Nine
Hundred Sixty-One Thousand Nine Hundred Sixty-Four Pesos and Six Centavos
(P3,961,964.06) representing thirty percent (30%) berthing fees which TEFASCO could have
earned as private port usage fee from 1977 to 1991. The Court of Appeals held that the one
hundred percent (100%) berthing and wharfage fees were unenforceable because they had not
been approved by the President under P.D. No. 857, and discriminatory since much lower rates
were charged in other private ports as shown by PPA issuances effective 1995 to 1997. Both
PPA and TEFASCO were unsatisfied with this disposition hence these petitions.

ISSUE:

Whether or not the collection by PPA of one hundred percent (100%) wharfage fees and
berthing charges; (c) the propriety of the award of fifty percent (50%) wharfage fees and thirty
percent (30%) berthing charges as actual damages in favor of TEFASCO for the period from
1977 to 1991 is valid.

RULING:

The imposition by PPA of ten percent (10%), later reduced to six percent (6%),
government share out of arrastre and stevedoring gross income of TEFASCO is void. This
exaction was never mentioned in the contract, much less is it a binding prestation, between
TEFASCO and PPA. What was clearly stated in the terms and conditions appended to PPA
Resolution No. 7 was for TEFASCO to pay and/or secure from the proper authorities "all fees
and/or permits pertinent to the construction and operation of the proposed project." The
government share demanded and collected from the gross income of TEFASCO from its arrastre
and stevedoring activities in TEFASCO's wholly owned port is certainly not a fee or in any event
a proper condition in a regulatory permit. Rather it is an onerous "contractual stipulation" which
finds no root or basis or reference even in the contract aforementioned.

Page 321 of 745


MENDOZA vs. COURT OF APPEALS
June 25, 2001

FACTS:

Petitioner Danilo D. Mendoza is engaged in the domestic and international trading of raw
materials and chemicals. He operates under the business name Atlantic Exchange Philippines
(Atlantic), a single proprietorship registered with the Department of Trade and Industry (DTI).
Sometime in 1978 he was granted by respondent Philippine National Bank (PNB) a Five
Hundred Thousand Pesos (P500,000.00) credit line and a One Million Pesos (P1,000,000.00)
Letter of Credit/Trust Receipt (LC/TR) line.

As security for the credit accommodations and for those which may thereinafter be
granted, petitioner mortgaged to respondent PNB the following: 1) three (3) parcels of land with
improvements in F. Pasco Avenue, Santolan, Pasig; 2) his house and lot in Quezon City; and 3)
several pieces of machinery and equipment in his Pasig coco-chemical plant.

Petitioner executed in favor of respondent PNB three (3) promissory notes covering the
Five Hundred Thousand Pesos (P500,000.00) credit line, one dated March 8, 1979 for Three
Hundred Ten Thousand Pesos (P310,000.00); another dated March 30, 1979 for Forty Thousand
Pesos (P40,000.00); and the last dated September 27, 1979 for One Hundred Fifty Thousand
Pesos (P150,000.00).

Petitioner made use of his LC/TR line to purchase raw materials from foreign importers.
He signed a total of eleven (11) documents denominated as "Application and Agreement for
Commercial Letter of Credit," on various dates

In a letter dated January 3, 1980 and signed by Branch Manager Fil S. Carreon Jr.,
respondent PNB advised petitioner Mendoza that effective December 1, 1979, the bank raised its
interest rates to 14% per annum, in line with Central Bank's Monetary Board Resolution No.
2126 dated November 29, 1979.

On March 9, 1981, he wrote a letter to respondent PNB requesting for the restructuring of
his past due accounts into a five-year term loan and for an additional LC/TR line of Two Million
Pesos (P2,000,000.00). According to the letter, because of the shut-down of his end-user
companies and the huge amount spent for the expansion of his business, petitioner failed to pay
to respondent bank his LC/TR accounts as they became due and demandable.

Ceferino D. Cura, Branch Manager of PNB Mandaluyong replied on behalf of the


respondent bank and required petitioner to submit the following documents before the bank
would act on his request: 1) Audited Financial Statements for 1979 and 1980; 2) Projected cash
flow (cash in - cash out) for five (5) years detailed yearly; and 3) List of additional machinery
and equipment and proof of ownership thereof. Cura also suggested that petitioner reduce his
total loan obligations to Three Million Pesos (P3,000,000.00).

On September 25, 1981, petitioner sent another letter addressed to PNB Vice-President
Jose Salvador, regarding his request for restructuring of his loans. He offered respondent PNB
the following proposals: 1) the disposal of some of the mortgaged properties, more particularly,
his house and lot and a vacant lot in order to pay the overdue trust receipts; 2) capitalization and
conversion of the balance into a 5-year term loan payable semi-annually or on annual
installments; 3) a new Two Million Pesos (P2,000,000.00) LC/TR line in order to enable Atlantic
Exchange Philippines to operate at full capacity; 4) assignment of all his receivables to PNB
from all domestic and export sales generated by the LC/TR line; and 5) maintenance of the
existing Five Hundred Thousand Pesos (P500,000.00) credit line.

The petitioner testified that respondent PNB Mandaluyong Branch found his proposal
favorable and recommended the implementation of the agreement. However, Fernando

Page 322 of 745


Maramag, PNB Executive Vice-President, disapproved the proposed release of the mortgaged
properties and reduced the proposed new LC/TR line to One Million Pesos (P1,000,000.00).
Petitioner claimed he was forced to agree to these changes and that he was required to submit a
new formal proposal and to sign two (2) blank promissory notes.

In a letter dated July 2, 1982, petitioner offered the following revised proposals to
respondent bank: 1) the restructuring of past due accounts including interests and penalties into
a 5-year term loan, payable semi-annually with one year grace period on the principal; 2)
payment of Four Hundred Thousand Pesos (P400,000.00) upon the approval of the proposal; 3)
reduction of penalty from 3% to 1%; 4) capitalization of the interest component with interest rate
at 16% per annum; 5) establishment of a One Million Pesos (P1,000,000.00) LC/TR line against
the mortgaged properties; 6) assignment of all his export proceeds to respondent bank to
guarantee payment of his

Petitioner failed to pay the subject two (2) Promissory Notes Nos. 127/82 and 128/82 as
they fell due. Respondent PNB extra-judicially foreclosed the real and chattel mortgages, and
the mortgaged properties were sold at public auction to respondent PNB, as highest bidder, for a
total of Three Million Seven Hundred Ninety Eight Thousand Seven Hundred Nineteen Pesos
and Fifty Centavos (P3,798,719.50).

The petitioner filed a complaint for specific performance, nullification of the extra-
judicial foreclosure and damages against respondents PNB. He alleged that the Extrajudicial
Foreclosure Sale of the mortgaged properties was null and void since his loans were restructured
to a five-year term loan; hence, it was not yet due and demandable. On March 16, 1992, the trial
court rendered judgment in favor of the petitioner and ordered the nullification of the
extrajudicial foreclosure of the real estate mortgage, the Sheriffs sale of the mortgaged real
properties by virtue of consolidation thereof and the cancellation of the new titles issued to PNB;
that PNB vacate the subject premises in Pasig and turn the same over to the petitioner; and also
the nullification of the extrajudicial foreclosure and sheriff's sale of the mortgaged chattels, and
that the chattels be returned to petitioner Mendoza if they were removed from his Pasig premises
or be paid for if they were lost or rendered unserviceable.

The trial court decided for the petitioner. Upon appeal, the Court of Appeals reversed the
decision of the trial court and dismissed the complaint.

ISSUE:

Whether or not respondent promised to be bound by the proposal of the petitioner for a
five-year restructuring of his overdue loan.

RULING:

No. Respondent Court of Appeals held that there is no evidence of a promise from
respondent PNB, admittedly a banking corporation, that it had accepted the proposals of the
petitioner to have a five-year restructuring of his overdue loan obligations. It found and held, on
the basis of the evidence adduced, that "appellee's (Mendoza) communications were mere
proposals while the bank's responses were not categorical that the appellee's request had been
favorably accepted by the bank."

Nowhere in those letters presented by the petitioner is there a categorical statement that
respondent PNB had approved the petitioners proposed five-year restructuring plan. It is
stretching the imagination to construe them as evidence that his proposed five-year restructuring
plan has been approved by the respondent PNB which is admittedly a banking corporation. Only
an absolute and unqualified acceptance of a definite offer manifests the consent necessary to
perfect a contract. If anything, those correspondences only prove that the parties had not gone
beyond the preparation stage, which is the period from the start of the negotiations until the
moment just before the agreement of the parties.

Page 323 of 745


The doctrine of promissory estoppel is an exception to the general rule that a promise of
future conduct does not constitute an estoppel. In some jurisdictions, in order to make out a
claim of promissory estoppel, a party bears the burden of establishing the following elements: (1)
a promise reasonably expected to induce action or forebearance; (2) such promise did in fact
induce such action or forebearance, and (3) the party suffered detriment as a result.

It is clear from the forgoing that the doctrine of promissory estoppel presupposes the
existence of a promise on the part of one against whom estoppel is claimed. The promise must
be plain and unambiguous and sufficiently specific so that the Judiciary can understand the
obligation assumed and enforce the promise according to its terms. For petitioner to claim that
respondent PNB is estopped to deny the five-year restructuring plan, he must first prove that
respondent PNB had promised to approve the plan in exchange for the submission of the
proposal. As discussed earlier, no such promise was proven, therefore, the doctrine does not
apply to the case at bar. A cause of action for promissory estoppel does not lie where an alleged
oral promise was conditional, so that reliance upon it was not reasonable. It does not operate to
create liability where it does not otherwise exist.

Page 324 of 745


ROBLETT INDUSTRIAL CONSTRUCTION CORPORATION
vs. COURT OF APPEALS
266 SCRA 71

FACTS:

On 23 September 1986 respondent Contractors Equipment Corporation (CEC) instituted


an action for a sum of money against petitioner Roblett Industrial Construction Corporation
(RICC) before the Regional Trial Court of Makati alleging that in 1985 it leased to the latter
various construction equipment which it used in its projects. As a result RICC incurred unpaid
accounts amounting to P342,909.38.

On 19 December 1985 RICC through its Assistant Vice President for Finance Candelario
S. Aller Jr. entered into an Agreement with CEC where it confirmed petitioner's account. As an
off-setting arrangement respondent received from petitioner construction materials worth
P115,000.00 thus reducing petitioner's balance to P227,909.38.

A day before the execution of their Agreement, or on 18 December 1985, RICC paid
CEC P10,000.00 in postdated checks which when deposited were dishonored. As a consequence
the latter debited the amount to petitioner's account of P227,909.38 thus increasing its balance to
P237,909.38.

On 24 July 1986 Mariano R. Manaligod, Jr., General Manager of CEC, sent a letter of
demand to petitioner through its Vice President for Finance regarding the latter's overdue
account of P237,909.38 and sought settlement thereof on or before 31 July 1986. In reply,
petitioner requested for thirty (30) days to have enough time to look for funds to substantially
settle its account.

Traversing the allegations of respondent, Candelario S. Aller Jr. declared that he signed
the Agreement with the real intention of having proof of payment. In fact Baltazar Banlot, Vice
President for Finance of petitioner, claimed that after deliberation and audit it appeared that
petitioner overpaid respondent by P12,000.00 on the basis of the latter's Equipment Daily Time
Reports for 2 May to 14 June 1985 which reflected a total obligation of only P103,000.00. He
claimed however that the Agreement was not approved by the Board and that he did not
authorize Aller Jr. to sign thereon.

On rebuttal, Manaligod Jr. declared that petitioner had received a statement of account
covering the period from 28 March to 12 July 1985 in the amount of P376,350.18 which it never
questioned. From this amount P3,440.80, based on respondent's account with petitioner and
P30,000.00, representing payments made by the latter, were deducted thus leaving a balance of
P342,909.38 as mentioned in the Agreement. On 19 December 1990 the trial court rendered
judgment ordering petitioner to pay respondent

ISSUE:

Whether or not the agreement between the parties is binding upon them.

RULING:

Yes. It must be emphasized that the same agreement was used by plaintiff as the basis for
claiming defendant's obligation of P237,909.38 and also used by defendant as the same basis for
its alleged payment in full of its obligation to plaintiff. But while plaintiff treats the entire
agreement as valid, defendant wants the court to treat that portion which treats of the offsetting
Page 325 of 745
of P115,000.00 as valid, whereas it considers the other terms and conditions as "onerous, illegal
and want of prior consent and Board approval." This Court cannot agree to defendant's
contention. It must be stressed that defendant's answer was not made under oath, and therefore,
the genuineness and due execution of the agreement which was the basis for plaintiff's claim is
deemed admitted (Section 8, Rule 8, Rules of Court). Such admission, under the principle of
estoppel, is rendered conclusive upon defendant and cannot be denied or disproved as against
plaintiff (Art. 1431, Civil Code). Either the agreement is valid or void. It must be treated as a
whole and not to be divided into parts and consider only those provisions which favor one party
(in this case the defendant). Contracts must bind both contracting parties, its validity or
compliance cannot be left to the will of one of them (Art. 1308, New Civil Code).

Page 326 of 745


SIME DARBY PILIPINAS, INC. V. GOODYEAR PHILIPPINES, INC.
GR No. 182148; June 8, 2011

FACTS:

Macgraphics leased a billboard to Sime Darby to bare its name and logo at a monthly
rental of P120, 000.00 for four years and was set to expire on March 30, 1998. Sime Darby paid
Macgraphics a total of P1.2 million representing the ten-month deposit which the latter would
apply to the last ten months of the lease. Thereafter, Sime Darby was bought by Goodyear for a
total of P1.65 billion including the assignment of the receivables in connection with its billboard
advertising. Sime Darby then notified Macgraphics of the assignment of the Magallanes
billboard in favor of Goodyear.

Macgraphics then sent a letter to Sime Darby, dated July 11, 1996, informing the latter that it
could not give its consent to the assignment of lease to Goodyear and advised Goodyear that any
advertising service it intended to get from them would have to wait until after the expiration or
valid pre-termination of the lease then existing with Sime Darby. Goodyear demanded partial
rescission of deed and the refund of P1, 239,000.00value of Sime Darby's leasehold rights over
the Magallanes billboard.
Sime Darby refused and a complaint was filed by Goodyear.

ISSUE:

Whether or not the doctrine of laches can be applied in the present case

RULING:

The Court finds that the doctrine of laches cannot be applied in this case.

Laches is the failure or neglect, for an unreasonable and unexplained length of time, to do that
which, by exercising due diligence, could or should have been done earlier; it is negligence or
omission to assert a right within a reasonable time, warranting the presumption that the party
entitled to assert it either has abandoned or declined to assert it. There is no absolute rule as to
what constitutes laches or staleness of demand; each case is to be determined according to its
particular circumstances, with the question of laches addressed to the sound discretion of the
court. Because laches is an equitable doctrine, its application is controlled by equitable
considerations and should not be used to defeat justice or to perpetuate fraud or injustice.

From the records, it appears that Macgraphics first learned of the assignment when Sime Darby
sent its letter-notice dated May 3, 1996. From the letters sent by Macgraphics to Goodyear, it is
apparent that Macgraphics had to study and determine both the legal and practical implications
of entertaining Goodyear as a client. After review, Macgraphics found that consenting to the
assignment would entail the commitment of manpower and resources that it did not foresee at the
inception of the lease. It thereafter communicated its non-conformity to the assignment. To the
mind of the Court, there was never a delay.

Page 327 of 745


KINGS PROPERTIES CORP V. GALIDO
G.R. No. 170023 Nov 27, 2009

FACTS:

Kings Properties Corporation (petitioner) filed this Petition for Review on Certiorari
assailing the Court of Appeals Decision[2] dated 20 December 2004 in CA-G.R. CV No. 68828
as well as the Resolution[3] dated 10 October 2005 denying the Motion for Reconsideration. In
the assailed decision, the Court of Appeals reversed the Regional Trial Courts Decision dated 4
July 2000. This case involves an action for cancellation of certificates of title, registration of
deed of sale and issuance of certificates of title filed by Canuto A. Galido before Branch 71 of
the Regional Trial Court of Antipolo City (trial court). On 18 April 1966, the heirs of Domingo
Eniceo, namely Rufina Eniceo and Maria Eniceo, were awarded with Homestead Patent No.
112947 consisting of four parcels of land located in San Isidro, Antipolo, Rizal and particularly
described as follows; Lot No. 1 containing an area of 96,297 square meters; Lot No. 3 containing
an area of 25,170 square meters; Lot No. 4 containing an area of 26,812 square meters; and Lot
No. 5 containing an area of 603 square meters. The Antipolo property with a total area of
14.8882 hectares was registered under Original Certificate of Title (OCT) No. 535. Subsequently
a deed of sale covering the Antipolo property was executed between Rufina Eniceo and Maria
Eniceo as vendors and respondent as vendee. They sold the Antipolo property to respondent for
P250,000. A certain Carmen Aldana delivered the owners duplicate copy of OCT No. 535 to
respondent.Petitioner alleges that when Maria Eniceo died in June 1975, Rufina Eniceo and the
heirs of Maria Eniceo, who continued to occupy the Antipolo property as owners, thought that
the owners duplicate copy of OCT No. 535 was lost. On 5 April 1988, the Eniceo heirs
registered with the Registry of Deeds of Marikina City a Notice of Loss dated 2 April 1988 of
the owners copy of OCT No. 535. The Eniceo heirs also filed a petition for the issuance of a
new owners duplicate copy of OCT No. 535 with Branch 72 of the Regional Trial Court of
Antipolo, Rizal. The RTC rendered a decision finding that the certified true copy of OCT No.
535 contained no annotation in favor of any person, corporation or entity. The RTC ordered the
Registry of Deeds to issue a second owners copy of OCT No. 535 in favor of the Eniceo heirs
and declared the original owners copy of OCT NO. 535 cancelled and considered of no further
value. Thus the Registry of Deeds issued a second owners copy of OCT No. 535 in favor of the
Eniceo heirs. Petitioner states that as early as 1991, respondent knew of the RTC decision in
LRC Case No. 584-A because respondent filed a criminal case against Rufina Eniceo and
Leonila Bolinas for giving false testimony upon a material fact during the trial of LRC Case No.
584-A. Petitioner alleges that sometime in February 1995, Bolinas came to the office of Alberto
Tronio Jr. , petitioners general manager, and offered to sell the Antipolo property. Tronio
ascertained that OCT No. 535 was clean and had no lien and encumbrances. After the necessary
verification, petitioner decided to buy the Antipolo property. On 14 March 1995, respondent
caused the annotation of his adverse claim in OCT No. 535. On 20 March 1995, the Eniceo heirs
executed a deed of absolute sale in favor of petitioner covering lots 3 and 4 of the Antipolo
property for P500,000. On the same date, Transfer Certificate of Title (TCT) Nos. 277747 and
277120 were issued. TCT No. 277747 covering lots 1 and 5 of the Antipolo property was
registered in the names of Rufina Eniceo, Ambrosio Eniceo, Rodolfo Calove, Fernando Calove
and Leonila Calove Bolinas. TCT No. 277120 covering lots 3 and 4 of the Antipolo property was
registered in the name of petitioner. On 5 April 1995, the Eniceo heirs executed another deed of
sale in favor of petitioner covering lots 1 and 5 of the Antipolo property for P1,000,000. TCT
No. 278588 was issued in the name of petitioner and TCT No. 277120 was cancelled. On 17
August 1995, the Secretary of the Department of Environment and Natural Resources (DENR
Secretary) approved the deed of sale between the Eniceo heirs and respondent. On 16 January
1996, respondent filed a civil complaint with the trial court against the Eniceo heirs and
petitioner. Respondent prayed for the cancellation of the certificates of title issued in favor of
petitioner, and the registration of the deed of sale and issuance of a new transfer certificate of
title in favor of respondent. The trial court rendered its decision dismissing the case for lack of
legal and factual basis. Respondent appealed to the Court of Appeals. On 20 December 2004, the
CA rendered a decision reversing the trial courts decision. Aggrieved by the CAs decision and
resolution, petitioner elevated the case before the High Court.

Page 328 of 745


ISSUES:

Whether the adverse claim of respondent over the Antipolo property should be barred by
laches
Whether the deed of sale delivered to respondent should be presumed an equitable
mortgage pursuant to Article 1602(2) and 1604 of the Civil Code.

HELD:
The contract between the Eniceo heirs and respondent executed was a perfected contract
of sale. A contract is perfected once there is consent of the contracting parties on the object
certain and on the cause of the obligation. In the present case, the object of the sale is the
Antipolo property and the price certain is P250,000. The contract of sale has also been
consummated because the vendors and vendee have performed their respective obligations under
the contract. In a contract of sale, the seller obligates himself to transfer the ownership of the
determinate thing sold, and to deliver the same to the buyer, who obligates himself to pay a price
certain to the seller. The execution of the notarized deed of sale and the delivery of the owners
duplicate copy of OCT No. 535 to respondent is tantamount to a constructive delivery of the
object of the sale. The Eniceo heirs also claimed in their answer that the deed of sale is fake and
spurious. However, as correctly held by the CA, forgery can never be presumed. The party
alleging forgery is mandated to prove it with clear and convincing evidence. Whoever alleges
forgery has the burden of proving it. In this case, petitioner and the Eniceo heirs failed to
discharge this burden.
Petitioner contends that respondent is guilty of laches because he slept on his rights by
failing to register the sale of the Antipolo property at the earliest possible time. Petitioner claims
that despite respondents knowledge of the subsequent sale in 1991, respondent still failed to
have the deed of sale registered with the Registry of Deeds. The essence of laches is the failure
or neglect, for an unreasonable and unexplained length of time, to do that which, through due
diligence, could have been done earlier, thus giving rise to a presumption that the party entitled
to assert it had either abandoned or declined to assert it. Respondent discovered in 1991 that a
new owners copy of OCT No. 535 was issued to the Eniceo heirs. Respondent filed a criminal
case against the Eniceo heirs for false testimony. When respondent learned that the Eniceo heirs
were planning to sell the Antipolo property, respondent caused the annotation of an adverse
claim. On 16 January 1996, when respondent learned that OCT No. 535 was cancelled and new
TCTs were issued, respondent filed a civil complaint with the trial court against the Eniceo heirs
and petitioner. Respondents actions negate petitioners argument that respondent is guilty of
laches. True, unrecorded sales of land brought under Presidential Decree No. 1529 or the
Property Registration Decree (PD 1529) are effective between and binding only upon the
immediate parties. The registration required in Section 51 of PD 1529 is intended to protect
innocent third persons, that is, persons who, without knowledge of the sale and in good faith,
acquire rights to the property. Petitioner, however, is not an innocent purchaser for value. Hence
the petition was denied.

Page 329 of 745


METROBANK v. CABLZO
G.R. No. 154469 December 6, 2006

FACTS:

Respondent Cabilzo was one of the Metrobanks client who maintained a current
account. On November 12, 199, Cabilzo issued a Metrobank check payable to cash in the
amount of P1,000 and was paid to a certain Mr. Marquez. The check was oresented to Westmont
Bank or payment and in turn indorsed to etrobank for appropriate clearing. It was discovered
that the amount withdrawn wa P91,000, thus, the check was altered. Cabilzo re-credit the amount
of P91,000 to his account but Metrobank refused to comply despite demands. RTC ordered
Metrobank to pay the sum of P90,000 to Cabilzo. Court of Appeals affirmed the decision with
modification.

ISSUE:
Whether holding Metrobank, as drawee bank, liable for the alternations on the subject
check bearing the authentic signature of the drawer thereof

RULING:

The degree of diligence in the exercise of his tasks and the performance of his duties have
been faithfully complied with by Cabilzo. It is obvious that Metrobank was remiss in the duty
and violated that fiduciary relationship with its clients as it appeared that there are material
alterations on the check that are visble to the naked eye but the bank failed to detect such.
Petition is denied. Court of Appeals decision is affirmed with modification that
exemplary damages in the amount of P50,000 be awarded.

Page 330 of 745


MESINA V. GARCIA
G.R. No. 168035 November 30, 2006

FACTS:

Atty. Honorio Valisno Garcia and Felicisima Mesina, during their lifetime, enstered into
a Contract to Sell over a lot consisting of 235 square meters, situated at Diversion Road,
Sangitan, Cabanatuan City, covered and embraced by TCT No. T-31643 in the name of
Felicisima Mesina which title was eventually cancelled and TCT No. T-78881 was issued in the
name of herein petitioners. The Contract to Sell provides that the cost of the lot is P70.00 per
square meter for a total amount of P16,450.00; payable within a period not to exceed 7 years at
an interest rate of 12% per annum, in successive monthly installments of P260.85 per month,
starting May 1977. Thereafter, the succeeding monthly installments are to be paid within the
first week of every month, at the residence of the vendor at Quezon City, with all unpaid
monthly installments earning an interest of 1% per month. Instituting this case at bar,
respondent asserts that despite the full payment made on 7 February 1984 for the
consideration of the subject lot, petitioners refused to issue the necessary Deed of Sale to effect
the transfer of the property to her.

ISSUE:

Whether or not respondents cause of action had already prescribed?

RULING:

Article 1155 of the Civil Code is explicit that the prescriptive period is interrupted when
an action has been filed in court; when there is a written extrajudicial demand made by the
creditors; and when there is any written acknowledgment of the debt by the debtor.

The records reveal that starting 19 April 1986 until 2 January 1997 respondent
continuously demanded from the petitioners the execution of the said Deed of Absolute Sale but
the latter conjured many reasons and excuses not to execute the same. Respondent even filed a
Complaint before the Housing and Land Use Regulatory Board way back in June, 1986, to
enforce her rights and to compel the mother of herein petitioners, who was still alive at that time,
to execute the necessary Deed of Absolute Sale for the transfer of title in her name. On 2 January
1997, respondent, through her counsel, sent a final demand letter to the petitioners for the
execution of the Deed of Absolute Sale, but still to no avail. Consequently, because of utter
frustration of the respondent, she finally lodged a formal Complaint for Specific Performance
with Damages before the trial court on 20 January 1997.

Hence, from the series of written extrajudicial demands made by respondent to have the
execution of the Deed of Absolute Sale in her favor, the prescriptive period of 10 years has been
interrupted. Therefore, it cannot be said that the cause of action of the respondent has already
been prescribed.

Page 331 of 745


PAHAMOTANG VS. PNB
G.R. No. 156403, March 21, 2005

FACTS:

On July 1, 1972, Melitona Pahamotang died. She was survived by her husband Agustin
Pahamotang, and their eight (8) children, namely: Ana, Genoveva, Isabelita, Corazon, Susana,
Concepcion and herein petitioners Josephine and Eleonor, all surnamed Pahamotang. On
September 15, 1972, Agustin filed with the then Court of First Instance of Davao City a petition
for issuance of letters administration over the estate of his deceased wife. The petition, docketed
as Special Case No. 1792, was raffled to Branch VI of said court, hereinafter referred to as the
intestate court. In his petition, Agustin identified petitioners Josephine and Eleonor as among the
heirs of his deceased spouse. It appears that Agustin was appointed petitioners' judicial guardian
in an earlier case - Special Civil Case No. 1785 also of the CFI of Davao City, Branch VI. On
December 7, 1972, the intestate court issued an order granting Agustins petition.

The late Agustin then executed several mortgages and later sale of the properties with the
PNB and Arguna respectively. The heirs later questioned the validity of the transactions
prejudicial to them. The trial court declared the real estate mortgage and the sale void but both
were valid with respect to the other parties. The decision was reversed by the Court of Appeals;
to the appellate court, petitioners committed a fatal error of mounting a collateral attack on the
foregoing orders instead of initiating a direct action to annul them.

ISSUE:

Whether the Court of Appeals erred in reversing the decision of the trial court

RULING:

In the present case, the appellate court erred in appreciating laches against petitioners. The
element of delay in questioning the subject orders of the intestate court is sorely lacking.
Petitioners were totally unaware of the plan of Agustin to mortgage and sell the estate properties.
There is no indication that mortgagor PNB and vendee Arguna had notified petitioners of the
contracts they had executed with Agustin. Although petitioners finally obtained knowledge
of the subject petitions filed by their father, and eventually challenged the July 18, 1973,
October 19, 1974, February 25, 1980 and January 7, 1981 orders of the intestate court, it is
not clear from the challenged decision of the appellate court when they (petitioners) actually
learned of the existence of said orders of the intestate court. Absent any indication of the point
in time when petitioners acquired knowledge of those orders, their alleged delay in
impugning the validity thereof certainly cannot be established. And the Court of Appeals cannot
simply impute laches against them.

Page 332 of 745


SHOPPER'S PARADISE REALTY & DEVELOPMENT CORPORATION
vs. EFREN ROQUE
January 13, 2004

FACTS:

On 23 December 1993, petitioner Shopper's Paradise Realty & Development


Corporation, represented its president, Veredigno Atienza, entered into a twenty-five year lease
with Dr. Felipe C. Roque, now deceased, over a parcel of land, Petitioner issued to Dr. Roque a
check for P250,000.00 by way of "reservation payment." Simultaneously, petitioner and Dr.
Roque likewise entered into a memorandum of agreement for the construction, development and
operation of a commercial building complex on the property. Conformably with the agreement,
petitioner issued a check for another P250,000.00 "downpayment" to Dr. Roque.

The annotations, however, were never made because of the untimely demise of Dr. Felipe
C. Roque. The death of Dr. Roque on 10 February 1994 constrained petitioner to deal with
respondent Efren P. Roque, one of the surviving children of the late Dr. Roque, but the
negotiations broke down due to some disagreements. In a letter, dated 3 November 1994,
respondent advised petitioner "to desist from any attempt to enforce the aforementioned contract
of lease and memorandum of agreement". On 15 February 1995, respondent filed a case for
annulment of the contract of lease and the memorandum of agreement, with a prayer for the
issuance of a preliminary injunction. Efren P. Roque alleged that he had long been the absolute
owner of the subject property by virtue of a deed of donation inter vivos executed in his favor by
his parents, Dr. Felipe Roque and Elisa Roque, on 26 December 1978, and that the late Dr.
Felipe Roque had no authority to enter into the assailed agreements with petitioner. The donation
was made in a public instrument duly acknowledged by the donor-spouses before a notary public
and duly accepted on the same day by respondent before the notary public in the same instrument
of donation. The title to the property, however, remained in the name of Dr. Felipe C. Roque,
and it was only transferred to and in the name of respondent sixteen years later, or on 11 May
1994, while he resided in the United States of America, delegated to his father the mere
administration of the property. Respondent came to know of the assailed contracts with petitioner
only after retiring to the Philippines upon the death of his father. On 9 August 1996, the trial
court dismissed the complaint of respondent; it explained:

Ordinarily, a deed of donation need not be registered in order to be valid between the
parties. Registration, however, is important in binding third persons. Thus, when Felipe Roque
entered into a lease contract with defendant corporation, plaintiff Efren Roque (could) no longer
assert the unregistered deed of donation and say that his father, Felipe, was no longer the owner
of the subject property at the time the lease on the subject property was agreed upon. "The
registration of the Deed of Donation after the execution of the lease contract did not affect the
latter unless he had knowledge thereof at the time of the registration which plaintiff had not been
able to establish. Plaintiff knew very well of the existence of the lease. He, in fact, met with the
officers of the defendant corporation at least once before he caused the registration of the deed of
donation in his favor and although the lease itself was not registered, it remains valid considering
that no third person is involved. Plaintiff cannot be the third person because he is the successor-
in-interest of his father, Felipe Roque, the lessor, and it is a rule that contracts take effect not
only between the parties themselves but also between their assigns and heirs (Article 1311, Civil
Code) and therefore, the lease contract together with the memorandum of agreement would be
conclusive on plaintiff Efren Roque. He is bound by the contract even if he did not participate
therein. Moreover, the agreements have been perfected and partially executed by the receipt of
his father of the downpayment and deposit totaling to P500,000.00." The trial court ordered
respondent to surrender TCT No. 109754 to the Register of Deeds of Quezon City for the
annotation of the questioned Contract of Lease and Memorandum of Agreement.

On appeal, the Court of Appeals reversed the decision of the trial court and held to be
invalid the Contract of Lease and Memorandum of Agreement. While it shared the view
expressed by the trial court that a deed of donation would have to be registered in order to bind

Page 333 of 745


third persons, the appellate court, however, concluded that petitioner was not a lessee in good
faith having had prior knowledge of the donation in favor of respondent, and that such actual
knowledge had the effect of registration insofar as petitioner was concerned. The appellate court
based its findings largely on the testimony of Veredigno Atienza during cross-examination.

ISSUE:

Whether or not the respondent is barred by laches and estoppel from denying the
contracts.

RULING:

The Court cannot accept petitioner's argument that respondent is guilty of laches. Laches,
in its real sense, is the failure or neglect, for an unreasonable and unexplained length of time, to
do that which, by exercising due diligence, could or should have been done earlier; it is
negligence or omission to assert a right within a reasonable time, warranting a presumption that
the party entitled to assert it either has abandoned or declined to assert it. Respondent learned of
the contracts only in February 1994 after the death of his father, and in the same year, during
November, he assailed the validity of the agreements. Hardly, could respondent then be said to
have neglected to assert his case for an unreasonable length of time.

Neither is respondent estopped from repudiating the contracts. The essential elements of
estoppel in pais, in relation to the party sought to be estopped, are: 1) a clear conduct amounting
to false representation or concealment of material facts or, at least, calculated to convey the
impression that the facts are otherwise than, and inconsistent with, those which the party
subsequently attempts to assert; 2) an intent or, at least, an expectation, that this conduct shall
influence, or be acted upon by, the other party; and 3) the knowledge, actual or constructive, by
him of the real facts. With respect to the party claiming the estoppel, the conditions he must
satisfy are: 1) lack of knowledge or of the means of knowledge of the truth as to the facts in
question; 2) reliance, in good faith, upon the conduct or statements of the party to be estopped;
and 3) action or inaction based thereon of such character as to change his position or status
calculated to cause him injury or prejudice. 12 It has not been shown that respondent intended to
conceal the actual facts concerning the property; more importantly, petitioner has been shown
not to be totally unaware of the real ownership of the subject property. Altogether, there is no
cogent reason to reverse the Court of Appeals in its assailed decision.

Page 334 of 745


MEATMASTER vs. LELIS INTEGRATED
452 SCRA 626

FACTS:

On November 11, 1993, petitioner Meatmasters International Corporation engaged the


services of respondent Lelis Integrated Development Corporation to undertake the construction
of a slaughterhouse and meat cutting and packing plant. The Construction Agreement provided
that the construction of petitioners slaughterhouse should be completed by March 10, 1994.
Respondent failed to finish the construction of the said facility within the stipulated period,
hence, petitioner filed a complaint for rescission of contract and damages on August 9, 1996
before the Regional Trial Court.

On November 23, 1998, the trial court rendered decision RESCINDING the Construction
Agreement between plaintiff Meatmaster Intl. Corp. and defendant Lelis Integrated Devt. Corp.
with both parties shouldering their own respective damage.

A copy of the decision was received by the respondent on December 9, 1998. A motion
for reconsideration was filed by respondent on December 22, 1998, but the same was denied. A
copy of the resolution denying the motion for reconsideration was received on March 25, 1999.
Respondent filed its notice of appeal on March 29, 1999.

Initially, the trial court dismissed the appeal for failure of the respondent to pay the
requisite docket fees within the reglementary period. Upon motion by the respondent however,
the trial court reconsidered and gave due course to the notice of appeal because respondent paid
the docket fees.

In a motion to dismiss filed before the appellate court, the petitioner alleged that
respondents appeal suffers from jurisdictional infirmity because of late payment of docket fees.

CA set aside the decision of the trial court and directed petitioner to pay respondent the
amount of P1,863,081.53. Petitioners motion for reconsideration was denied Hence, the instant
petition.

ISSUE:

Whether or not the Court of Appeals erred in entertaining the appeal of respondent
despite the finality of the trial courts decision.

RULING:

Yes. It is well-established that the payment of docket fees within the prescribed period is
mandatory for the perfection of an appeal. This is so because a court acquires jurisdiction over
the subject matter of the action only upon the payment of the correct amount of docket fees
regardless of the actual date of filing of the case in court. The payment of the full amount of the
docket fee is a sine qua non requirement for the perfection of an appeal. The court acquires
jurisdiction over the case only upon the payment of the prescribed docket fees.

In the case at bar, the respondent seasonably filed the notice of appeal but it paid the docket fees
one (1) month after the lapse of the appeal period. As admitted by the respondent, the last day
for filing the notice of appeal was on March 29, 1999, but it paid the docket fees only on April
30, 1999 because of oversight. Obviously, at the time the said docket fees were paid, the
decision appealed from has long attained finality and no longer appealable.

Respondents contention that the petitioner is now estopped from raising the issue of late
payment of the docket fee because of his failure to assail promptly the trial courts order
approving the notice of appeal and accepting the appeal fee, is untenable. Estoppel by laches

Page 335 of 745


arises from the negligence or omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to assert it either has abandoned or declined to assert it. In the
case at bar, petitioner raised at the first instance the non-payment of the docket fee in its motion
for reconsideration before the trial court. Petitioner reiterated its objection in the motion to
dismiss before the appellate court and finally, in the instant petition. Plainly, petitioner cannot be
faulted for being remiss in asserting its rights considering that it vigorously registered a
persistent and consistent objection to the Court of Appeals assumption of jurisdiction at all
stages of the proceedings.

Page 336 of 745


MANIPOR vs. RICAFORT
407 SCRA 298

FACTS:

Respondent spouses Pablo and Antonia Ricafort instituted an action for annulment of
Transfer of Certificate of Title in the name of spouses Renato and Teresita Villareal covering a
299 sq.m. lot. The Ricaforts alleged that they are co-owners of said property together with
Abelardo, the father and predecessor of Renato as evidenced by an agreement whereby Abelardo
recognized their ownership of portion of the lot. Respondents also claim that, in violation of
the agreement, Abelardo obtained during his lifetime Original Certificate of Title over the lot
without their knowledge and consent. When Abelardo died in 1993, Renato and Teresita
transferred the title over the land in their name and were issued a TCT.

In the course of the proceedings, parties entered into a compromise settlement wherein
the Villareals admitted the genuineness and due execution of the agreement between respondents
and Abelardo. Hence, they agreed to physically divide the lot into half. They also agreed to cause
a relocation survey and the expenses will be borne equally by them.

The trial court approved the compromise agreement but not long thereafter, respondents
filed a motion to cite the Villareals in contempt of court for refusing to comply with the terms of
the agreement. Eventually, herein petitioners who are all siblings of Renato filed a motion for
intervention and substitution of parties alleging that spouses Renato and Teresita have waived
their interest in the disputed lot in their favor. Petitioners availed of various remedies only to
pursue the endeavor for the annulment of the compromise judgment. Most of them were denied
until they resorted to this review before the Supreme Court.

ISSUE:

Whether or not the petitioners are estopped from seeking the annulment of the
compromise judgment.

RULING:

Yes, note that in a Sinumpaang Salaysay, petitioners admitted that they acquiesced to
have the subject lot donated and registered in Renatos name. In view of such admission,
petitioners are estopped from denying Renatos absolute title to the lot. Under the principle of
estoppel, an admission or representation is rendered conclusive upon the person making it and
cannot be denied against the person relying thereon. Verily, since petitioners admitted that they
donated the lot to Renato, they cannot now be allowed to defeat respondents claim by
conveniently asserting that they are co-owners of the lot. Otherwise, respondents, who rightfully
relied on the Certificate of Title, would be prejudiced by petitioners misleading conduct.

Page 337 of 745


LARENA vs. MAPILI
408 SCRA 484

FACTS:

Hipolito Mapili during his lifetime owned a parcel of unregistered land declared for
taxation purposes in his name. The property had descended by succession from Hipolito to his
only son Magno and on to the latters own widow and children. These heirs, the herein
respondents, took possession of the property up to the outbreak of World War II when they
evacuated to the hinterlands.

On the other hand, petitioner Aquilina Larena took possession of the property in the1970s
alleging that she had purchased it from her aunt (Filomena Larena) on February 17, 1968.
Filomena Larena in turn claimed to have bought it from Hipolito on October 28, 1949, as
evidence by the Affidavit of Transfer of Real Property executed on the same date. The Regional
Trial Court, however, declared the said affidavit as spurious because Hipolito was already dead
when the alleged transfer was made to Filomena Larena.

On appeal, the Court of Appeals declared that respondents had never lost their right to the
land in question as they were the heirs to whom the property had descended upon the death of the
original claimant and possessor.

ISSUE:

Whether or not Filomena Larena acquired the subject property by means of sale,
prescription, and/or laches.

RULING:

No, Filomena did not acquire said property by means of sale, prescription and/or laches.
First, the tax declarations are not a conclusive evidence of ownership, but a proof that the holder
has a claim of title over the property. It is good indicia of possession in the concept of owner. It
may strengthen Aquilinas bona fide claim of acquisition of ownership. However, petitioners
failed to present the evidence needed to tack the date of possession on the property in question.

Second, acquisitive prescription is a mode of acquiring ownership by a possessor through


the requisite lapse of time. Since the claims of purchase were unsubstantiated, petitioners acts of
possessory character have been merely tolerated by the owner. Hence, it did not constitute
possession. Moreover, there is lack of just title on the part of Aquilina and therefore, ordinary
acquisitive prescription of ten (10) years as provided under Article 1134 of the Civil Code cannot
be applied. Under Article 1137 of the Civil Code, the lapse of time required for extra-ordinary
acquisitive prescription is thirty (30) years, and records show that the lapse of time was only
twenty-seven (27) yearsa period that was short of three (3) years, when the complaint was
filed.

Finally, laches is a failure or neglect for an unreasonable and unexplained length of time
to do that which could or should have been done earlier through the exercise of due diligence.
The filing by respondents of the complaint in 1977 completely negates the decision that the latter
were negligent in asserting their claim.

Page 338 of 745


SANTOS vs. SANTOS
366 SCRA 395

FACTS:

Petitioner Zenaida M. Santos is the widow of Salvador Santos, a brother of private


respondents Calixto, Alberto, Antonio, all surnamed Santos and Rosa Santos-Carreon.

The spouses Jesus and Rosalia were the parents of the respondents and the husband of the
petitioner. The spouses owned a parcel of registered land with a four-door apartment
administered by Rosalia who rented them out. On January 19, 1959, the spouses executed a deed
of sale of the properties in favor of their children Salvador and Rosa. Rosa in turn sold her share
to Salvador on November 20, 1973, which resulted in the issuance of new TCT. Despite the
transfer of the property to Salvador, Rosalia continued to lease and receive rentals from the
apartment units.

On January 9, 1985, Salvador died, followed by Rosalia who died the following month.
Shortly after, petitioner Zenaida, claiming to be Salvadors heir, demanded the rent from Antonio
Hombrebueno, a tenant of Rosalia. When the latter refused to pay, Zenaida filed an ejectment
suit against him with the Metropolitan Trial Court of Manila, which eventually decided in
Zenaidas favor.

On January 5, 1989, private respondent instituted an action for reconveyance of property


with preliminary injunction against petitioner in the Regional Trial Court of Manila, where they
alleged that the two deeds of sale were simulated for lack of consideration. The petitioner on the
other hand denied the material allegations in the complaint and that she further alleged that the
respondents right to reconveyance was already barred by prescription and laches considering the
fact that from the date of sale from Rosa to Salvador up to his death, more or less twelve (12)
years had lapsed, and from his death up to the filing of the case for reconveyance, four (4) years
has elapsed. In other words, it took respondents about sixteen (16) years to file the case.
Moreover, petitioner argues that an action to annul a contract for lack of consideration prescribes
in ten (10) years and even assuming that the cause of action has not prescribed, respondents are
guilty of laches for their inaction for a long period of time.

The trial court decided in favor of private respondents in as much as the deeds of sale
were fictitious, the action to assail the same does not prescribe.

Upon appeal, the Court of Appeals affirmed the trial courts decision. It held that the
subject deeds of sale did not confer upon Salvador the ownership over the subject property,
because even after the sale, the original vendors remained in dominion, control, and possession
thereof.

ISSUE:

Whether or not the cause of action of the respondents had prescribed and/or barred by
laches.

RULING:

No, the cause of action by the respondents had not prescribed nor is it barred by laches.

First, the right to file an action for the reconveyance of the subject property to the estate
of Rosalia has not prescribed since deeds of sale were simulated and fictitious. The complaint
amounts to a declaration of nullity of a void contract, which is imprescriptible. Hence,
respondents cause of action has not prescribed.

Page 339 of 745


Second, neither is their action barred by laches. The elements of laches are: 1) conduct on
the part of the defendant, or of one under whom he claims, giving rise to the situation of which
the complainant seeks a remedy; 2) delay in asserting the complainants rights, the complainant
having knowledge or notice of the defendants conduct as having been afforded an opportunity to
institute a suit; 3) lack of knowledge or notice on the part of the defendant that the complainant
would assert the right in which he bases his suit; and 4) injury or prejudice to the defendant in
the event relief is accorded to the complainant, or the suit is not held barred. These elements
must all be proved positively. The lapse of four (4) years is not an unreasonable delay sufficient
to bar respondents action. Moreover, the fourth (4th) element is lacking in this case. The concept
of laches is not concerned with the lapse of time but only with the effect of unreasonable lapse.
The alleged sixteen (16) years of respondents inaction has no adverse effect on the petitioner to
make respondents guilty of laches.

Page 340 of 745


VILLANUEVA- MIJARES ET. AL. vs. COURT OF APPEALS
April 12, 2000

FACTS:

Felipe Villanueva left a 15,336-square-meter parcel of land in Kalibo, Capiz to his eight
children: Simplicio, Benito, Leon, Eustaquio, Camila, Fausta and Pedro. In 1952, Pedro declared
under his name 1/6 portion of the property (1,905 sq. m.). He held the remaining properties in
trust for his co-heirs who demanded the subdivision of the property but to no avail. After Leons
death in 1972, private respondents discovered that the shares of Simplicio, Nicolasa, Fausta and
Maria Baltazar had been purchased by Leon through a deed of sale dated August 25, 1946 but
registered only in 1971. In July 1970, Leon also sold and partitioned the property in favor of
petitioners, his children, who thereafter secured separate and independent titles over their
respective pro- indiviso shares.

Private respondents, who are also descendants of Felipe, filed an action for partition with
annulment of documents and/or reconveyance and damages against petitioners. They contended
that Leon fraudulently obtained the sale in his favor through machinations and false pretenses.
The RTC declared that private respondents action had been barred by res judicata and that
petitioners are the legal owners of the property in question in accordance with the individual
titles issued to them.

ISSUE:

Whether or not laches apply against the minors property that was held in trust.

RULING:

No. At the time of the signing of the Deed of Sale of August 26,1948, private respondents
Procerfina, Prosperedad, Ramon and Rosa were minors. They could not be faulted for their
failure to file a case to recover their inheritance from their uncle Leon, since up to the age of
majority, they believed and considered Leon their co-heir administrator. It was only in 1975, not
in 1948, that they became aware of the actionable betrayal by their uncle. Upon learning of their
uncles actions, they filed for recovery. Hence, the doctrine of stale demands formulated in
Tijam cannot be applied here. They did not sleep on their rights, contrary to petitioners
assertion.

Furthermore, when Felipe Villanueva died, an implied trust was created by operation of
law between Felipes children and Leon, their uncle, as far as the 1/6 share of Felipe. Leons
fraudulent titling of Felipes 1/6 share was a betrayal of that implied trust.

Page 341 of 745


SPS. EDRALIN V. PHIL. VETERANS BANK
G.R. No. 168523, March 09, 2011

FACTS:

Respondent Philippine Veterans Bank is a commercial banking institution created under


Republic Act (RA) No. 3518, as amended by RA No. 7169. On February 5, 1976, Veterans Bank
granted petitioner spouses Fernando and Angelina Edralin a loan in the amount of Two Hundred
Seventy Thousand Pesos (P270,000.00). As security thereof, petitioners executed a Real Estate
Mortgage in favor of Veterans Bank over a real property situated in the Municipality of
Paraaque and registered in the name of petitioner Fernando Edralin. The mortgaged property is
more particularly described in Transfer Certificate of Title (TCT) No. 204889. The REM was
registered with the Registry of Deeds of the Province of Rizal. The REM and its subsequent
amendments were all duly annotated at the back of TCT No. 204889. The Edralins failed to pay
their obligation to Veterans Bank. Thus, on June 28, 1983, Veterans Bank filed a Petition for
Extrajudicial Foreclosure of the REM with the Office of the Clerk of Court and Ex-Officio
Sheriff of Rizal. In due course it was foreclosed and a sale was held in which the Ex-Officio
Sheriff of Rizal sold the mortgaged property at public auction. Veterans Bank emerged as the
highest bidder at the said foreclosure sale and was issued the corresponding Certificate of Sale.
The said Certificate of Sale was registered with the Registry of Deeds of the Province of Rizal
and annotated at the back of TCT No. 204889 under Entry No. 83-62953/T-No. 43153-A. Upon
the Edralins failure to redeem the property during the one-year period provided under Act No.
3135, Veterans Bank acquired absolute ownership of the subject property. Consequently,
Veterans Bank caused the consolidation of ownership of the subject property in its name on
January 19, 1994. Subsequently the Register of Deeds of Paraaque, Metro Manila cancelled
TCT No. 204889 under the name of Fernando Edralin and replaced it with a new transfer
certificate of title, TCT No. 78332, in the name of Veterans Bank. Despite the foregoing, the
Edralins failed to vacate and surrender possession of the subject property to Veterans Bank.
Thus, on May 24, 1996, Veterans Bank filed an Ex-Parte Petition for the Issuance of a Writ of
Possession, docketed as Land Registration Case No. 06-060 before Branch 274 of the Regional
Trial Court (RTC) of Paraaque City. The same, however, was dismissed for Veterans Banks
failure to prosecute. Veterans Bank again filed an Ex-Parte Petition for Issuance of Writ of
Possession, this time docketed as Land Registration Case No. 03-0121, before the RTC of
Paraaque City. Veterans Bank divulged in its Certification against Forum-Shopping that the
earlier case, LRC No. 96-060, involving the same subject matter and parties, was dismissed. The
Edralins moved to dismiss the petition on the ground that the dismissal of LRC No. 96-060
constituted res judicata. The trial court denied the motion to dismiss explaining that the ground
of failure to present evidence is not a determination of the merits of the case hence does not
constitute res judicata on the petition for issuance of a writ of possession. The appellate court
ruled in favor of Veterans Bank hence the petition.

ISSUE:

Whether the consolidation of ownership of the extrajudicially foreclosed property


through a Deed of Sale is in accordance with law.

HELD:

Petitioners assail the CA's ruling that the issuance of a writ of possession does not
prescribe.[48] They maintain that Articles 1139, 1149, and 1150 of the Civil Code regarding
prescriptive periods cover all kinds of action, which necessarily include the issuance of a writ of
possession. Petitioners posit that, for purposes of the latter, it is the five-year prescriptive period
provided in Article 1149 of the Civil Code which applies because Act No. 3135 itself did not
provide for its prescriptive period. Thus, Veterans Bank had only five years from September 12,
1983, the date when the Certificate of Sale was issued in its favor, to move for the issuance of a
writ of possession. Respondent argues that jurisprudence has consistently held that a registered

Page 342 of 745


owner of the land, such as the buyer in an auction sale, is entitled to a writ of possession at any
time after the consolidation of ownership.

The Court could not accept petitioners' contention. We have held before that the
purchaser's right "to request for the issuance of the writ of possession of the land never
prescribes. "The right to possess a property merely follows the right of ownership," and it would
be illogical to hold that a person having ownership of a parcel of land is barred from seeking
possession thereof. Moreover, the provisions cited by petitioners refer to prescription of actions.
An action is "defined as an ordinary suit in a court of justice, by which one party prosecutes
another for the enforcement or protection of a right, or the prevention or redress of a wrong." On
the other hand "a petition for the issuance of the writ, under Section 7 of Act No. 3135, as
amended, is not an ordinary action filed in court, by which one party `sues another for the
enforcement or protection of a right, or prevention or redress of a wrong.' It is in the nature of an
ex parte motion [in] which the court hears only one side. It is taken or granted at the instance
and for the benefit of one party, and without notice to or consent by any party adversely affected.
Accordingly, upon the filing of a proper motion by the purchaser in a foreclosure sale, and the
approval of the corresponding bond, the writ of possession issues as a matter of course and the
trial court has no discretion on this matter."Hence the Petition was denied for lack of merit. The
CA Decision dated June 10, 2005 in CA-G.R. SP No. 89248 was affirmed.

Page 343 of 745


MARTIN V. DBS
G.R. No. 174632 June 16, 2010
FACTS:

Felicidad T. Martin, Melissa M. Isidro, Grace M. David, Caroline M. Garcia, Victoria M.


Roldan, and Benjamin T. Martin, Jr., as lessors, entered into a lease contract with the DBS Bank
Philippines, Inc., covering a commercial warehouse and lots that DBS was to use for office,
warehouse, and parking yard for repossessed vehicles. The lease was for five years, from March
1, 1997 to March 1, 2002, at a monthly rent of P300,000.00 for the first year, P330,000.00 for the
second year, P363,000.00 for the third year, P399,300.00 for the fourth year, and P439,230.00
for the final year, all net of withholding taxes. DBS paid a deposit of P1,200,000.00 and advance
rentals of P600,000.00. On May 25 and August 13, 1997 heavy rains flooded the leased property
and submerged into water the DBS offices there along with its 326 repossessed vehicles. As a
result, on February 11, 1998 DBS wrote the Martins demanding that they take appropriate steps
to make the leased premises suitable as a parking yard for its vehicles. DBS suggested the
improvement of the drainage system or the raising of the propertys ground level. In response,
the Martins filled the propertys grounds with soil and rocks. But DBS lamented that the property
remained unsuitable for its use since the Martins did not level the grounds. Worse, portions of
the perimeter fence collapsed because of the excessive amount of soil and rock that were
haphazardly dumped on it. In June 1998, DBS vacated the property but continued paying the
monthly rents. On September 11, 1998, however, it made a final demand on the Martins to
restore the leased premises to tenantable condition on or before September 30, 1998, otherwise,
it would rescind the lease contract. On September 24, 1998 the Martins contracted the services of
Altitude Systems & Technologies Co. for the reconstruction of the perimeter fence on the
property. On October 13, 1998 DBS demanded the rescission of the lease contract and the return
of its deposit. At that point, DBS had already paid the monthly rents from March 1997 to
September 1998. The Martins refused, however, to comply with DBS demand. On July 7, 1999
DBS filed a complaint against the Martins for rescission of the contract of lease with damages
before the Regional Trial Court of Makati City, Branch 141, in Civil Case 99-1266. Claiming
that the leased premises had become untenantable, DBS demanded rescission of the lease
contract as well as the return of its deposit of P1,200,000.00.
The Makati City RTC rendered a decision, dismissing the complaint against the Martins.
The trial court found that, although the floods submerged DBS vehicles, the leased premises
remained tenantable and undamaged. Moreover, the Martins had begun the repairs that DBS
requested but were not given sufficient time to complete the same. It held that DBS unjustifiably
abandoned the leased premises and breached the lease contract. Thus, the trial court ordered its
deposit of P1,200,000.00 deducted from the unpaid rents due the Martins and ordered DBS to
pay them the remaining P15,198,360.00 in unpaid rents.
On appeal to the Court of Appeals, the court rendered judgment reversing and setting
aside the RTC decision. The CA found that floods rendered the leased premises untenantable and
that the RTC should have ordered the rescission of the lease contract especially since the contract
provided for such remedy. The CA ordered the Martins to apply the deposit of P1,200,000.00 to
the rents due up to July 7, 1999 when DBS filed the complaint and exercised its option to rescind
the lease. The CA ordered the Martins to return the remaining balance of the deposit to DBS.
With the denial of their separate motions for reconsideration DBS and the Martins filed their
respective petitions for review before this Court in G.R. 174632 and 174804. The Court
eventually consolidated the two cases.

ISSUE:
Whether or not the CA erred in holding that DBS is entitled to the rescission of the lease
contract only from July 7, 1999 when it filed its action for rescission, entitling the
Martins to collect rents until that time.

Page 344 of 745


HELD:
Unless the terms of a contract are against the law, morals, good customs, and public
policy, such contract is law between the parties and its terms bind them. In Felsan Realty &
Development Corporation v. Commonwealth of Australia,13 the Court regarded as valid and
binding a provision in the lease contract that allowed the lessee to pre-terminate the same when
fire damaged the leased building, rendering it uninhabitable or unsuitable for living. Here,
paragraph VIII14 of the lease contract between DBS and the Martins permitted rescission by
either party should the leased property become untenantable because of natural causes. Thus In
case of damage to the leased premises or any portion thereof by reason of fault or negligence
attributable to the lessee, its agents, employees, customers, or guests, the lessee shall be
responsible for undertaking such repair or reconstruction. In case of damage due to fire,
earthquake, lightning, typhoon, flood, or other natural causes, without fault or negligence
attributable to the lessee, its agents, employees, customers or guests, the lessor shall be
responsible for undertaking such repair or reconstruction. In the latter case, if the leased premises
become untenantable, either party may demand for the rescission of this contract and in such
case, the deposit referred to in paragraph III shall be returned to the lessee immediately. The
Martins claim that DBS cannot invoke the above since they undertook the repair and
reconstruction of the leased premises, incurring P1.6 million in expenses. The Martins point out
that the option to rescind was available only if they failed to do the repair work and
reconstruction.
But, under their agreement, the remedy of rescission would become unavailable to DBS
only if the Martins, as lessors, made the required repair and reconstruction after the damages by
natural cause occurred, which meant putting the premises after the floods in such condition as
would enable DBS to resume its use of the same for the purposes contemplated in the agreement,
namely, as office, warehouse, and parking space for DBS repossessed vehicles. Here, it is
undisputed that the floods of May 25 and August 13, 1997 submerged the DBS offices and its
326 repossessed vehicles. The floods rendered the place unsuitable for its intended uses. And,
while the Martins did some repairs, they did not restore the place to meet DBS needs. The
photographs16 taken of the place show that the Martins filled the grounds with soil and rocks to
raise the elevation but did not level and compact the same so they could accommodate the
repossessed vehicles. Moreover, the heaviness of the filling materials caused portions of the
perimeter walls to collapse or lean dangerously.17 Indeed, the Office of the City Engineer
advised DBS that unless those walls were immediately demolished or rehabilitated, they would
endanger passersby
Undeniably, the DBS suffered considerable damages when flood waters deluged its
offices and 326 repossessed vehicles. Notably, DBS vacated the leased premises in June of 1998,
without rescinding the lease agreement, evidently to allow for unhindered repair of the grounds.
In fact, DBS continued to pay the monthly rents until September 1998, showing how DBS leaned
back to enable the Martins to finish the repair and rehabilitation of the place. 19 The Martins
provided basis for rescission by DBS when they failed to do so.
Hence the Court denied the petition and affirmed with mocifications the April 26, 2006
decision of the Court of Appeals in CA-G.R. CV 76210 in that Felicidad T. Martin, Melissa M.
Isidro, Grace M. David, Caroline M. Garcia, Victoria M. Roldan, and Benjamin T. Martin, Jr. are
ORDERED to return the full deposit of P1,200,000.00 to DBS Bank Philippines, Inc. (formerly
known as Bank of Southeast Asia, now merged with and into BPI Family Bank) with interest of
12% per annum to be computed from the finality of this decision until the amount is fully paid.

Page 345 of 745


HEIRS OF ZABALA V. CA
G.R. No. 189602 May 6, 2010

FACTS:

On April 1, 2002, respondent Vicente T. Manuel filed a Complaint for ejectment with
damages against Alfredo Zabala before the Municipal Trial Court in Cities of Balanga, Bataan.
Respondent alleged that he was in actual and peaceful possession of a fishpond (Lot No. 1483)
located in Ibayo, Balanga City. On October 15, 2001, Zabala allegedly entered the fishpond
without authority, and dumped soil into the fishpond without an Environment Compliance
Certificate. Zabala continued such action until the time of the filing of the Complaint, killing the
crabs and the bangus that respondent was raising in the fishpond. Thus, respondent asked that
Zabala be restrained from touching and destroying the fishpond; that Zabala be ejected therefrom
permanently; and for actual and moral damages and attorneys fees. Zabala promptly moved for
the dismissal of the Complaint for non-compliance with the requirement under the Local
Government Code to bring the matter first to barangay conciliation before filing an action in
court.
Respondent subsequently filed a Motion for Judgment on the ground of petitioners failure to file
a responsive pleading or answer. The MTCC, in an Order dated May 27, 2003, granted Zabalas
motion and dismissed the Complaint, holding that respondent indeed violated the requirement of
barangay conciliation. Respondent then appealed the ruling to the Balanga, Bataan Regional
Trial Court. In a decision dated March 30, 2004,[5] the RTC reversed the MTCCs May 27, 2003
Order and rendered judgment directing Zabala, his heirs or subalterns to immediately vacate Lot
No. 1483 and restore respondent to his peaceful possession thereof. The RTC also directed
Zabala to pay respondent actual damages, moral damages, and attorneys fees. The RTC found
that Zabala did not, in fact, file an answer to the Complaint. Zabala then filed a Petition for
Review before the Court of Appeal. The CA promulgated a Decision upholding the RTCs
reversal of the MTCCs Order. The CA held that, based on the allegations in the Complaint, the
requirement for prior conciliation proceedings under the Local Government Code was
inapplicable to the suit before the MTCC, the action being one for ejectment and damages, with
application for a writ of preliminary injunction, even without the use of those actual terms in the
Complaint. However, the CA granted Zabalas prayer for the deletion of the awards for actual
and moral damages, and for attorneys fees. Zabala filed a Motion for Reconsideration, which
the CA denied. Zabalas heirs filed this Verified Petition for Certiorari. They prayed for the
annulment of the CAs December 19, 2008 Decision and August 26, 2009 Resolution, and for
the reinstatement of the MTCCs May 27, 2003 Order. In the alternative, they prayed that the
Court remand the records to the MTCC, so that they could file their Answer, and that due
proceedings be undertaken before judgment. In a Resolution dated November 18, 2009,
respondents were required to file their Comment on the Petition. Subsequently a Compromise
Agreement was entered into by the parties.

ISSUE:

Whether or not the case must prosper and continue considering the present circumstances

HELD :

No. The Court ruled that Under Article 2028 of the Civil Code, a compromise agreement
is a contract whereby the parties, by making reciprocal concessions, avoid litigation or put an
end to one already commenced. Compromise is a form of amicable settlement that is not only
allowed, but also encouraged in civil cases. Contracting parties may establish such stipulations,
clauses, terms, and conditions as they deem convenient, provided that these are not contrary to
law, morals, good customs, public order, or public policy. Thus, finding the above Compromise
Agreement to have been validly executed and not contrary to law, morals, good customs, public
order, or public policy, we approve the same. Thus the Compromise Agreement was and
judgment is hereby rendered in accordance therewith. By virtue of such approval, this case was
deemed terminated.

Page 346 of 745


STAR PAPER vs. SIMBOL
487 SCRA 228

FACTS:

Petitioner was the employer of the respondents. Under the policy of Star Paper the
employees are:

1. New applicants will not be allowed to be hired if in case he/she has a relative, up to the 3rd
degree of relationship, already employed by the company.
2. In case of two of our employees (singles, one male and another female) developed a friendly
relationship during the course of their employment and then decided to get married, one of them
should resign to preserve the policy stated above.

Respondents Comia and Simbol both got married to their fellow employees. Estrella on
the other hand had a relationship with a co-employee resulting to her pregnancy on the belief that
such was separated. The respondents allege that they were forced to resign as a result of the
implementation of the said assailed company policy.

The Labor Arbiter and the NLRC ruled in favor of petitioner. The decision was appealed
to the Court of Appeals which reversed the decision.

ISSUE:

Whether the prohibition to marry in the contract of employment is valid

HELD:

It is significant to note that in the case at bar, respondents were hired after they were
found fit for the job, but were asked to resign when they married a co-employee. Petitioners
failed to show how the marriage of Simbol, then a Sheeting Machine Operator, to Alma Dayrit,
then an employee of the Repacking Section, could be detrimental to its business operations.
Neither did petitioners explain how this detriment will happen in the case of Wilfreda Comia,
then a Production Helper in the Selecting Department, who married Howard Comia, then a
helper in the cutter-machine. The policy is premised on the mere fear that employees married to
each other will be less efficient. If we uphold the questioned rule without valid justification, the
employer can create policies based on an unproven presumption of a perceived danger at the
expense of an employees right to security of tenure.
Petitioners contend that their policy will apply only when one employee marries a co-
employee, but they are free to marry persons other than co-employees. The questioned policy
may not facially violate Article 136 of the Labor Code but it creates a disproportionate effect and
under the disparate impact theory, the only way it could pass judicial scrutiny is a showing that it
is reasonable despite the discriminatory, albeit disproportionate, effect. The failure of petitioners
to prove a legitimate business concern in imposing the questioned policy cannot prejudice the
employees right to be free from arbitrary discrimination based upon stereotypes of married
persons working together in one company.
Lastly, the absence of a statute expressly prohibiting marital discrimination in our
jurisdiction cannot benefit the petitioners. The protection given to labor in our jurisdiction is vast
and extensive that we cannot prudently draw inferences from the legislatures silence that
married persons are not protected under our Constitution and declare valid a policy based on a
prejudice or stereotype. Thus, for failure of petitioners to present undisputed proof of a
reasonable business necessity, we rule that the questioned policy is an invalid exercise of
management prerogative. Corollary, the issue as to whether respondents Simbol and Comia
resigned voluntarily has become moot and academic.
In the case of Estrella, the petitioner failed to adduce proof to justify her dismissal.
Hence, the Court ruled that it was illegal.

Page 347 of 745


TIU vs. PLATINUM PLANS PHILIPPINES
G.R. No. 163512, February 28, 2007

FACTS:

Respondent Platinum Plans Philippines, Inc. is a domestic corporation engaged in the


pre-need industry. From 1987 to 1989, petitioner Daisy B. Tiu was its Division Marketing
Director. On January 1, 1993, respondent re-hired petitioner as Senior Assistant Vice-President
and Territorial Operations Head in charge of its Hong Kong and Asean operations. The parties
executed a contract of employment valid for five years.
On September 16, 1995, petitioner stopped reporting for work. In November 1995, she became
the Vice-President for Sales of Professional Pension Plans, Inc., a corporation engaged also in
the pre-need industry.

Consequently, respondent sued petitioner for damages before the RTC of Pasig City,
Branch 261. Respondent alleged, among others, that petitioners employment with Professional
Pension Plans, Inc. violated the non-involvement clause in her contract of employment. In
upholding the validity of the non-involvement clause, the trial court ruled that a contract in
restraint of trade is valid provided that there is a limitation upon either time or place. In the case
of the pre-need industry, the trial court found the two-year restriction to be valid and reasonable.
On appeal, the Court of Appeals affirmed the trial courts ruling. It reasoned that petitioner
entered into the contract on her own will and volition. Thus, she bound herself to fulfill not only
what was expressly stipulated in the contract, but also all its consequences that were not against
good faith, usage, and law. The appellate court also ruled that the stipulation prohibiting non-
employment for two years was valid and enforceable considering the nature of respondents
business.

ISSUE:

Whether the Court of Appeals erred in sustaining the validity of the non-involvement
clause

HELD:

In this case, the non-involvement clause has a time limit: two years from the time
petitioners employment with respondent ends. It is also limited as to trade, since it only
prohibits petitioner from engaging in any pre-need business akin to respondents. More
significantly, since petitioner was the Senior Assistant Vice-President and Territorial Operations
Head in charge of respondents Hongkong and Asean operations, she had been privy to
confidential and highly sensitive marketing strategies of respondents business. To allow her to
engage in a rival business soon after she leaves would make respondents trade secrets
vulnerable especially in a highly competitive marketing environment. In sum, The Court finds
the non-involvement clause not contrary to public welfare and not greater than is necessary to
afford a fair and reasonable protection to respondent. Hence the restraint is valid and such
stipulation prevails.

Page 348 of 745


AVON COSMETICS vs. LUNA
511 SCRA 376

FACTS:

The present petition stemmed from a complaint[3] dated 1 December 1988, filed by
herein respondent Luna alleging, inter alia that she began working for Beautifont, Inc. in 1972,
first as a franchise dealer and then a year later, as a Supervisor. Sometime in 1978, Avon
Cosmetics, Inc. (Avon), herein petitioner, acquired and took over the management and
operations of Beautifont, Inc. Nonetheless, respondent Luna continued working for said
successor company. Aside from her work as a supervisor, respondent Luna also acted as a make-
up artist of petitioner Avons Theatrical Promotions Group, for which she received a per diem
for each theatrical performance.
The contract was that:

The Company agrees:

1) To allow the Supervisor to purchase at wholesale the products of the Company.

The Supervisor agrees:

1) To purchase products from the Company exclusively for resale and to be responsible for
obtaining all permits and licenses required to sell the products on retail.

The Company and the Supervisor mutually agree:

1) That this agreement in no way makes the Supervisor an employee or agent of the
Company, therefore, the Supervisor has no authority to bind the Company in any contracts with
other parties.

2) That the Supervisor is an independent retailer/dealer insofar as the Company is


concerned, and shall have the sole discretion to determine where and how products purchased
from the Company will be sold. However, the Supervisor shall not sell such products to stores,
supermarkets or to any entity or person who sells things at a fixed place of business.

3) That this agreement supersedes any agreement/s between the Company and the
Supervisor.

4) That the Supervisor shall sell or offer to sell, display or promote only and exclusively
products sold by the Company.

5) Either party may terminate this agreement at will, with or without cause, at any time
upon notice to the other.

Later, respondent Luna entered into the sales force of Sandre Philippines which caused
her termination for the alleged violation of the terms of the contract. The trial court ruled in favor
of Luna that the contract was contrary to public policy thus the dismissal was not proper. The
Court of Appeals affirmed the decision, hence this petition.

ISSUE:

Whether the Court of Appeals erred in ruling that the Supervisors Agreement was
invalid for being contrary to public policy

Whether there was subversion of the autonomy of contracts by the lower courts

Page 349 of 745


HELD:

Agreements in violation of orden pblico must be considered as those which conflict with
law, whether properly, strictly and wholly a public law (derecho) or whether a law of the person,
but law which in certain respects affects the interest of society. Plainly put, public policy is that
principle of the law which holds that no subject or citizen can lawfully do that which has a
tendency to be injurious to the public or against the public good. As applied to contracts, in the
absence of express legislation or constitutional prohibition, a court, in order to declare a contract
void as against public policy, must find that the contract as to the consideration or thing to be
done, has a tendency to injure the public, is against the public good, or contravenes some
established interests of society, or is inconsistent with sound policy and good morals, or tends
clearly to undermine the security of individual rights, whether of personal liability or of private
property.

From another perspective, the main objection to exclusive dealing is its tendency to
foreclose existing competitors or new entrants from competition in the covered portion of the
relevant market during the term of the agreement. Only those arrangements whose probable
effect is to foreclose competition in a substantial share of the line of commerce affected can be
considered as void for being against public policy. The foreclosure effect, if any, depends on the
market share involved. The relevant market for this purpose includes the full range of selling
opportunities reasonably open to rivals, namely, all the product and geographic sales they may
readily compete for, using easily convertible plants and marketing organizations.

Applying the preceding principles to the case at bar, there is nothing invalid or contrary
to public policy either in the objectives sought to be attained by paragraph 5, i.e., the exclusivity
clause, in prohibiting respondent Luna, and all other Avon supervisors, from selling products
other than those manufactured by petitioner Avon.

Having held that the exclusivity clause as embodied in paragraph 5 of the Supervisors
Agreement is valid and not against public policy, we now pass to a consideration of respondent
Lunas objections to the validity of her termination as provided for under paragraph 6 of the
Supervisors Agreement giving petitioner Avon the right to terminate or cancel such contract.
The paragraph 6 or the termination clause therein expressly provides that:

The Company and the Supervisor mutually agree:

6) Either party may terminate this agreement at will, with or without cause, at any time
upon notice to the other.
In the case at bar, the termination clause of the Supervisors Agreement clearly provides
for two ways of terminating and/or canceling the contract. One mode does not exclude the other.
The contract provided that it can be terminated or cancelled for cause, it also stated that it can be
terminated without cause, both at any time and after written notice. Thus, whether or not the
termination or cancellation of the Supervisors Agreement was for cause, is immaterial. The
only requirement is that of notice to the other party. When petitioner Avon chose to terminate the
contract, for cause, respondent Luna was duly notified thereof.
Worth stressing is that the right to unilaterally terminate or cancel the Supervisors
Agreement with or without cause is equally available to respondent Luna, subject to the same
notice requirement. Obviously, no advantage is taken against each other by the contracting
parties.

Hence, the petition was granted.

Page 350 of 745


DEL CASTILLO vs. RICHMOND
45 PHIL. REPORTS 679

FACTS:

The plaintiff alleges that the provisions and conditions contained in the third paragraph of
their contract constitute an illegal and unreasonable restriction upon his liberty to contract, are
contrary to public policy, and are unnecessary in order to constitute a just and reasonable
protection to the defendant; and asked that the same be declared null and void and of no effect.
The defendant interposed a general and special defense. In his special defense he alleges that
during the time the plaintiff was in the defendant's employ he obtained knowledge of his trade
and professional secrets and came to know and became acquainted and established friendly
relations with his customers so that to now annul the contract and permit plaintiff to establish a
competing drugstore in the town of Legaspi, as plaintiff has announced his intention to do, would
be extremely prejudicial to defendant's interest." The defendant further, in an amended answer,
alleges that this action not having been brought within four years from the time the contract
referred to in the complaint was executed, the same has prescribed.

ISSUE:

Whether the contract is valid and the autonomy of contracts be upheld

HELD:

Considering the nature of the business in which the defendant is engaged, in relation with
the limitation placed upon the plaintiff both as to time and place, The Court is of the opinion, and
so decide, that such limitation is legal and reasonable and not contrary to public policy,
otherwise, the autonomy of the contract will be subverted.

Page 351 of 745


ARWOOD INDUSTRIES, INC. vs. DM CONSUNJI, INC.
394 SCRA 11

FACTS:

Petitioner and respondent, as owner and contractor, respectively, entered into a civil,
structural and architectural works Agreement dated February 6, 1989 for the construction of
petitioners Westwood condominium at No. 23 Eisenhower St., Greenhills, San Juan, Metro
Manila. The contract price for the condominium project aggregated P20, 800,000.00.

Despite the completion of the condominium project, the amount of P962, 434.78 remain
unpaid by petitioner. Repeated demands by respondent for petitioner to pay went unheeded.

Thus on August 13, 1993, respondent as plaintiff in a civil case filed its complaint for the
recovery of the balance of the contract price and for damages against petitioner.

Respondent specifically prayed for the payment of the: (a) amount of P962, 434.78 with
interest of 2% per month or a fraction thereof, from November 1990 up to the time of payment;
(b) the amount of P250,000 as Attorneys fees and litigation expenses; (c) amount of
P150,000.00 as exemplary damages; and (d)cost of suit.

On appeal, the Court of Appeals affirmed the lower courts decision with modification

ISSUE:

Whether or not the imposition of two percent interest on the amount adjudged is proper.

RULING:

Yes. It must be noted that the agreement provided the contractor, respondent in this case,
two (2) options in case of delay in monthly payments, to wit: a) suspend works on the project
until payment is remitted by the owner or continue the work but the owner shall be required to
pay interest at a rate of two (2) percent per month or a fraction thereof. Evidently, respondent
chose the latter option, as the condominium project was in fact already completed. Since the
agreement stands as the law between the parties, the court cannot ignore the existence of such
provision providing for a penalty for every months delay.

Page 352 of 745


PASCUAL vs. RAMOS
384 SCRA 105

FACTS:

Ramos alleged that on 3 June 1987, for and in consideration of P150,000, the Spouses
Pascual executed in his favor a Deed of Absolute Sale with Right to Repurchase over two parcels
of land and the improvements thereon located in Bambang, Bulacan, Bulacan. This document
was annotated at the back of the title. The Pascuals did not exercise their right to repurchase the
property within the stipulated one-year period; hence, Ramos prayed that the title or ownership
over the subject parcels of land and improvements thereon be consolidated in his favor.

In their Answer, the Pascuals admitted having signed the Deed of Absolute Sale with
Right to Repurchase for a consideration of P150, 000 but averred that what the parties had
actually agreed upon and entered into was a real estate mortgage. They further alleged that there
was no agreement limiting the period within which to exercise the right to repurchase and that
they had even overpaid Ramos. The trial court found that the transaction between the parties was
actually a loan in the amount of P150,000, the payment of which was secured by a mortgage of
the property covered by TCT No. 305626. It also found that the Pascuals had made payments in
the total sum of P344,000, and that with interest at 7% per annum, they had overpaid the loan by
P141,500. Accordingly, in its Decision of 15 March 1995 the trial court ruled in favor of the
defendants. The Pascuals interposed the following defenses: (a) the trial court had no jurisdiction
over the subject or nature of the petition; (b) Ramos had no legal capacity to sue; (c) the cause of
action, if any, was barred by the statute of limitations; (d) the petition stated no cause of action;
(e) the claim or demand set forth in Ramoss pleading had been paid, waived, abandoned, or
otherwise extinguished; and (f) Ramos has not complied with the required confrontation and
conciliation before the barangay.

The Court of Appeals affirmed in toto the trial courts Orders of 5 June 1995 and 7
September 1995.

ISSUE:

Whether or not the contract entered into is a contract of loan.

RULING:

The Pascuals are actually raising as issue the validity of the stipulated interest rate. It
must be stressed that they never raised as a defense or as basis for their counterclaim the nullity
of the stipulated interest. While overpayment was alleged in the Answer, no ultimate facts which
constituted the basis of the overpayment was alleged. In their pre-trial brief, the Pascuals made a
long list of issues, but not one of them touched on the validity of the stipulated interest rate.
Their own evidence clearly shows that they have agreed on, and have in fact paid interest at, the
rate of 7% per month.

After the trial court sustained petitioners claim that their agreement with RAMOS was
actually a loan with real estate mortgage, the Pascuals should not be allowed to turn their back on
the stipulation in that agreement to pay interest at the rate of 7% per month. The Pascuals should
accept not only the favorable aspect of the courts declaration that the document is actually an
equitable mortgage but also the necessary consequence of such declaration, that is, that interest
on the loan as stipulated by the parties in that same document should be paid. Besides, when
Ramos moved for a reconsideration of the 15 March 1995 Decision of the trial court pointing out
that the interest rate to be used should be 7% per month, the Pascuals never lifted a finger to
oppose the claim. Admittedly, in their Motion for Reconsideration of the Order of 5 June 1995,
the Pascuals argued that the interest rate, whether it be 5% or 7%, is exorbitant, unconscionable,
unreasonable, usurious and inequitable. However, in their Appellants Brief, the only argument
raised by the Pascuals was that Ramoss petition did not contain a prayer for general relief and,
Page 353 of 745
hence, the trial court had no basis for ordering them to pay Ramos P511,000 representing the
principal and unpaid interest. It was only in their motion for the reconsideration of the decision
of the Court of Appeals that the Pascuals made an issue of the interest rate and prayed for its
reduction to 12% per annum.

It is a basic principle in civil law that parties are bound by the stipulations in the contracts
voluntarily entered into by them. Parties are free to stipulate terms and conditions which they
deem convenient provided they are not contrary to law, morals, good customs, public order, or
public policy.

The interest rate of 7% per month was voluntarily agreed upon by Ramos and the
Pascuals. There is nothing from the records and, in fact, there is no allegation showing that
petitioners were victims of fraud when they entered into the agreement with Ramos. Neither is
there a showing that in their contractual relations with Ramos, the Pascuals were at a
disadvantage on account of their moral dependence, ignorance, mental weakness, tender age or
other handicap, which would entitle them to the vigilant protection of the courts as mandated by
Article 24 of the Civil Code.

Page 354 of 745


PUP V. GOLDEN HORIZON
G.R. No. 183612 March 15, 2010

FACTS:

Petitioner National Development Company (NDC) is a government- owned and


controlled corporation, created under Commonwealth Act No. 182, as amended by Com. Act No.
311 and Presidential Decree (P.D.) No. 668. Petitioner Polytechnic University of the Philippines
(PUP) is a public, non-sectarian, non-profit educational institution created in 1978 by virtue of
P.D. No. 1341. In the early sixties, NDC had in its disposal a ten -hectare property located along
Pureza St., Sta. Mesa, Manila. The estate was popularly known as the NDC Compound and
covered by Transfer Certificate of Title Nos. 92885, 110301 and 145470.On September 7, 1977,
NDC entered into a Contract of Lease (C-33-77) with Golden Horizon Realty Corporation
(GHRC) over a portion of the property, with an area of 2,407 square meters for a period of ten
years, renewable for another ten years with mutual consent of the parties.On May 4, 1978, a
second Contract of Lease (C-12-78) was executed between NDC and GHRC covering 3,222.80
square meters, also renewable upon mutual consent after the expiration of the ten (10)-year lease
period. In addition, GHRC as lessee was granted the "option to purchase the area leased, the
price to be negotiated and determined at the time the option to purchase is exercised." Under the
lease agreements, GHRC was obliged to construct at its own expense buildings of strong
material at no less than the stipulated cost, and other improvements which shall automatically
belong to the NDC as lessor upon the expiration of the lease period. Accordingly, GHRC
introduced permanent improvements and structures as required by the terms of the contract.
After the completion of the industrial complex project, for which GHRC spent P5 million, it was
leased to various manufacturers, industrialists and other businessmen thereby generating
hundreds of jobs. On June 13, 1988, before the expiration of the ten (10)-year period under the
second lease contract, GHRC wrote a letter to NDC indicating its exercise of the option to renew
the lease for another ten years. As no response was received from NDC, GHRC sent another
letter on August 12, 1988, reiterating its desire to renew the contract and also requesting for
priority to negotiate for its purchase should NDC opt to sell the leased premises. NDC still did
not reply but continued to accept rental payments from GHRC and allowed the latter to remain in
possession of the property. Sometime after September 1988, GHRC discovered that NDC had
decided to secretly dispose the property to a third party. On October 21, 1988, GHRC filed in the
RTC a complaint for specific performance, damages with preliminary injunction and temporary
restraining order.
On February 20, 1989, the RTC issued a writ of preliminary injunction enjoining NDC
and its attorneys, representatives, agents and any other persons assisting it from proceeding with
the sale and disposition of the leased premises. On February 23, 1989, PUP filed a motion to
intervene as party defendant, claiming that as a purchaser pendente lite of a property subject of
litigation it is entitled to intervene in the proceedings. The RTC granted the said motion and
directed PUP to file its Answer-in-Intervention.PUP also demanded that GHRC vacate the
premises, insisting that the latters lease contract had already expired. Its demand letter unheeded
by GHRC, PUP filed an ejectment case (Civil Case No. 134416) before the Metropolitan Trial
Court (MeTC) of Manila on January 14, 1991.
Due to this development, GHRC filed an Amended and/or Supplemental Complaint to
include as additional defendants PUP, Honorable Executive Secretary Oscar Orbos and Judge
Ernesto A. Reyes of the Manila MeTC, and to enjoin the afore-mentioned defendants from
prosecuting Civil Case No. 134416 for ejectment. A temporary restraining order was
subsequently issued by the RTC enjoining PUP from prosecuting and Judge Francisco Brillantes,
Jr. from proceeding with the ejectment case.
On November 14, 2001, this Court rendered a decision in G.R. Nos. 143513 (Polytechnic
University of the Philippines v. Court of Appeals) and 143590 (National Development
Corporation v. Firestone Ceramics, Inc.),15 which declared that the sale to PUP by NDC of the
portion leased by Firestone pursuant to Memorandum Order No. 214 violated the right of first
refusal granted to Firestone under its third lease contract with NDC.

Page 355 of 745


ISSUE:

Whether or not our ruling in Polytechnic University of the Philippines v. Court of


Appeals applies in this case involving another lessee of NDC who claimed that the option
to purchase the portion leased to it was similarly violated by the sale of the NDC
Compound in favor of PUP pursuant to Memorandum Order No. 214.

HELD:

The CA was correct in declaring that there exists no justifiable reason not to apply the
same rationale in Polytechnic University of the Philippines v. Court of Appeals in the case of
respondent who was similarly prejudiced by petitioner NDCs sale of the property to PUP, as to
entitle the respondent to exercise its option to purchase until October 1988 inasmuch as the May
4, 1978 contract embodied the option to renew the lease for another ten (10) years upon mutual
consent and giving respondent the option to purchase the leased premises for a price to be
negotiated and determined at the time such option was exercised by respondent. It is to be noted
that Memorandum Order No. 214 itself declared that the transfer is "subject to such liens/leases
existing on the subject property."
The option in this case was incorporated in the contracts of lease by NDC for the benefit
of firestone which, in view of the total amount of its investments in the property, wanted to be
assured that it would be given the first opportunity to buy the property at a price for which it
would be offered. Consistent with their agreement, it was then implicit for NDC to have first
offered the leased premises of 2.60 hectares to FIRESTONE prior to the sale in favor of PUP.
Only if FIRESTONE failed to exercise its right of first priority could NDC lawfully sell the
property to petitioner PUP.
In the light of the foregoing, the Court held that respondent, which did not offer any
amount to petitioner NDC, and neither disputed the P1,500.00 per square meter actual value of
NDCs property at that time it was sold to PUP at P554.74 per square meter, as duly considered
by this Court in the Firestone case, should be bound by such determination. Accordingly, the
price at which the leased premises should be sold to respondent in the exercise of its right of first
refusal under the lease contract with petitioner NDC, which was pegged by the RTC at P554.74
per square meter, should be adjusted to P1,500.00 per square meter, which more accurately
reflects its true value at that time of the sale in favor of petitioner PUP. Indeed, basic is the rule
that a party to a contract cannot unilaterally withdraw a right of first refusal that stands upon
valuable consideration.40 We have categorically ruled that it is not correct to say that there is no
consideration for the grant of the right of first refusal if such grant is embodied in the same
contract of lease. Since the stipulation forms part of the entire lease contract, the consideration
for the lease includes the consideration for the grant of the right of first refusal. In entering into
the contract, the lessee is in effect stating that it consents to lease the premises and to pay the
price agreed upon provided the lessor also consents that, should it sell the leased property, then,
the lessee shall be given the right to match the offered purchase price and to buy the property at
that price. We have further stressed that not even the avowed public welfare or the constitutional
priority accorded to education, invoked by petitioner PUP in the Firestone case, would serve as
license for us, and any party for that matter, to destroy the sanctity of binding obligations. While
education may be prioritized for legislative and budgetary purposes, it is doubtful if such
importance can be used to confiscate private property such as the right of first refusal granted to
a lessee of petitioner NDC.42 Clearly, no reversible error was committed by the CA in sustaining
respondents contractual right of first refusal and ordering the reconveyance of the leased portion
of petitioner NDCs property in its favor. Hence the petition was denied.

Page 356 of 745


JOSELITO VILLEGAS and DOMINGA VILLEGAS vs. COURT OF APPEALS
G.R. No. 129977. February 1, 2001

FACTS:

Before September 6, 1973, Lot B-3-A, with an area of 4 hectares was registered under
TCT No. 68641 in the names of Ciriaco D. Andres and Henson Caigas. This land was also
declared for real estate taxation under Tax Declaration No. C2-4442. On September 6, 1973,
Andres and Caigas, with the consent of their respective spouses, Anita Barrientos and
Consolacion Tobias, sold the land to Fortune Tobacco Corporation for P60,000.00.
Simultaneously, they executed a joint affidavit declaring that they had no tenants on said lot. On
the same date, the sale was registered in the Office of the Register of Deeds of Isabela. TCT No.
68641 was cancelled and TCT No. T-68737 was issued in Fortunes name. On August 6, 1976,
Andres and Caigas executed a Deed of Reconveyance of the same lot in favor of Filomena
Domingo, the mother of Joselito Villegas, defendant in the case before the trial court. Although
no title was mentioned in this deed, Domingo succeeded in registering this document in the
Office of the Register of Deeds on August 6, 1976, causing the latter to issue TCT No. T-91864
in her name. It appears in this title that the same was a transfer from TCT No. T-68641. On April
13, 1981, Domingo declared the lot for real estate taxation under Tax Declaration No. 10-5633.
On December 4, 1976, the Office of the Register of Deeds of Isabela was burned together with
all titles in the office. On December 17, 1976, the original of TCT No. T-91864 was
administratively reconstituted by the Register of Deeds. On June 2, 1979, a Deed of Absolute
Sale of a portion of 20,000 square meters of Lot B-3-A was executed by Filomena Domingo in
favor of Villegas for a consideration of P1,000.00. This document was registered on June 3, 1981
and as a result TCT No. T-131807 was issued by the Register of Deeds to Villegas. On the same
date, the technical description of Lot B-3-A-2 was registered and TCT No. T-131808 was issued
in the name of Domingo. On January 22, 1991, this document was registered and TCT No.
154962 was issued to the defendant, Joselito Villegas.
On April 10, 1991, the trial court upon a petition filed by Fortune ordered the
reconstitution of the original of TCT No. T-68737. After trial on the merits, the trial court
rendered its assailed decision in favor of Fortune Tobacco, declaring it to be entitled to the
property. Petitioners thus appealed this decision to the Court of Appeals, which affirmed the trial
courts decision.

ISSUES:
Whether or not the Court of Appeals was correct in affirming the trial courts decision.

RULING:

Even if Fortune had validly acquired the subject property, it would still be barred from
asserting title because of laches. The failure or neglect, for an unreasonable length of time to do
that which by exercising due diligence could or should have been done earlier constitutes laches.
It is negligence or omission to assert a right within a reasonable time, warranting a presumption
that the party entitled to assert it has either abandoned it or declined to assert it. While it is by
express provision of law that no title to registered land in derogation of that of the registered
owner shall be acquired by prescription or adverse possession, it is likewise an enshrined rule
that even a registered owner may be barred from recovering possession of property by virtue of
laches.
Hence, petition was GRANTED and the Decision of the Court of Appeals was
REVERSED.

Page 357 of 745


EQUATORIAL REALTY DEVELOPMENT, INC. & CARMELO & BAUERMANN, INC
vs. MAYFAIR THEATER, INC
G.R. No. 106063 1996 Nov 21 264 SCRA 483

FACTS:

Carmelo owned a parcel of land, together with two 2-storey buildings constructed
thereon. On June 1, 1967 Carmelo entered into a contract of lease with Mayfair for the latters
lease of a portion of Carmelos property. Two years later, on March 31, 1969, Mayfair entered
into a second contract of lease with Carmelo for the lease of another portion of Carmelos
property.
Both contracts of lease provide identically worded paragraph 8, which reads:

That if the LESSOR should desire to sell the leased premises, the LESSEE shall be
given 30-days exclusive option to purchase the same.

In the event, however, that the leased premises is sold to someone other than the
LESSEE, the LESSOR is bound and obligated, as it hereby binds and obligates itself, to stipulate
in the Deed of Sale thereof that the purchaser shall recognize this lease and be bound by all the
terms and conditions thereof.

Mr. Henry Pascal of Carmelo informed Mr. Henry Yang, President of Mayfair, through a
telephone conversation that Carmelo was desirous of selling the entire Claro M. Recto property.
Mr. Pascal told Mr. Yang that a certain Jose Araneta was offering to buy the whole property for
US Dollars 1,200,000, and Mr. Pascal asked Mr. Yang if the latter was willing to buy the
property for Six to Seven Million Pesos.

Under your companys two lease contracts with our client, it is uniformly provided:

8. That if the LESSOR should desire to sell the leased premises the LESSEE shall be given 30-
days exclusive option to purchase the same. In the event, however, that the leased premises is
sold to someone other than the LESSEE, the LESSOR is bound and obligated, as it here binds
and obligates itself, to stipulate in the Deed of Sale thereof that the purchaser shall recognize this
lease and be bound by all the terms and conditions hereof.
Carmelo did not reply to this letter.

On September 18, 1974, Mayfair sent another letter to Carmelo purporting to express
interest in acquiring not only the leased premises but the entire building and other improvements
if the price is reasonable. However, both Carmelo and Equatorial questioned the authenticity of
the second letter.

Four years later, on July 30, 1978, Carmelo sold its entire C.M. Recto Avenue land and
building, which included the leased premises housing the Maxim and Miramar theatres, to
Equatorial by virtue of a Deed of Absolute Sale, for the total sum of P11,300,000.00.

In September 1978, Mayfair instituted the action a quo for specific performance and
annulment of the sale of the leased premises to Equatorial. It dismissed the complaint with costs
against the plaintiff. The Court of Appeals reversed the decision of the trial court.

ISSUE:

Whether or not the decision of the Court of Appeals decision was correct.

Page 358 of 745


RULING:
The Court agrees with the Court of Appeals that the aforecited contractual stipulation
provides for a right of first refusal in favor of Mayfair. It is not an option clause or an option
contract. It is a contract of a right of first refusal.

As early as 1916, in the case of Beaumont vs. Prieto, unequivocal was our
characterization of an option contract as one necessarily involving the choice granted to another
for a distinct and separate consideration as to whether or not to purchase a determinate thing at a
predetermined fixed price.

Further, what Carmelo and Mayfair agreed to, by executing the two lease contracts, was
that Mayfair will have the right of first refusal in the event Carmelo sells the leased premises. It
is undisputed that Carmelo did recognize this right of Mayfair, for it informed the latter of its
intention to sell the said property in 1974. There was an exchange of letters evidencing the offer
and counter-offers made by both parties. Carmelo, however, did not pursue the exercise to its
logical end. While it initially recognized Mayfairs right of first refusal, Carmelo violated such
right when without affording its negotiations with Mayfair the full process to ripen to at least an
interface of a definite offer and a possible corresponding acceptance within the 30-day
exclusive option time granted Mayfair, Carmelo abandoned negotiations, kept a low profile for
some time, and then sold, without prior notice to Mayfair, the entire Claro M. Recto property to
Equatorial.

Since Equatorial is a buyer in bad faith, this finding renders the sale to it of the property
in question rescissible. We agree with respondent Appellate Court that the records bear out the
fact that Equatorial was aware of the lease contracts because its lawyers had, prior to the sale,
studied the said contracts. As such, Equatorial cannot tenably claim to be a purchaser in good
faith, and, therefore, rescission lies.

Hence, the petition was denied.

Page 359 of 745


POLYTECHNIC UNIVERSITY OF THE PHILIPPINES vs. COURT OF APPEALS and
FIRESTONE CERAMICS, INC.
G.R. No. 143513. November 14, 2001

NATIONAL DEVELOPMENT CORPORATION


vs. FIRESTONE CERAMICS INC
G.R. No. 143590. November 14, 2001

FACTS:

In the early sixties, petitioner National Development Corporation (NDC), had in its
disposal a ten-hectare property located along Pureza St., Sta. Mesa, Manila. The estate was
popularly known as the NDC compound and covered by Transfer Certificates of Title Nos.
92885, 110301 and 145470. Private respondent Firestone Ceramics Inc. manifested its desire to
lease a portion of the property for its ceramic manufacturing business. NDC and FIRESTONE
entered into a contract of lease denominated as Contract No. C-30-65 covering a portion of the
property measured at 2.90118 hectares for use as a manufacturing plant for a term of ten years,
renewable for another ten years under the same terms and conditions. In consequence of the
agreement, FIRESTONE constructed on the leased premises several warehouses and other
improvements needed for the fabrication of ceramic products. Three and a half years later,
FIRESTONE entered into a second contract of lease with NDC over the latter's four-unit pre-
fabricated reparation steel warehouse stored in Daliao, Davao. FIRESTONE agreed to ship the
warehouse to Manila for eventual assembly within the NDC compound. The second contract,
denominated as Contract No. C-26-68, was for similar use as a ceramic manufacturing plant and
was agreed expressly to be "co-extensive with the lease of LESSEE with LESSOR on the 2.60
hectare-lot. The parties signed a similar contract concerning a six-unit pre-fabricated steel
warehouse which, as agreed upon by the parties, would expire on 2 December 1978. Prior to the
expiration of the aforementioned contract, FIRESTONE wrote NDC requesting for an extension
of their lease agreement. Consequently, the Board of Directors of NDC adopted the Resolution
extending the term of the lease, subject to several conditions among which was that in the event
NDC "with the approval of higher authorities, decide to dispose and sell these properties
including the lot, priority should be given to the LESSEE". In pursuance of the resolution, the
parties entered into a new agreement for a ten-year lease of the property, renewable for another
ten years, expressly granting FIRESTONE the first option to purchase the leased premises in the
event that it decided "to dispose and sell these properties including the lot.
The parties' lessor-lessee relationship went smoothly until early 1988 when FIRESTONE,
cognizant of the impending expiration of their lease agreement with NDC, informed the latter
through several letters and telephone calls that it was renewing its lease over the property. While
its letter of 17 March 1988 was answered by Antonio A. Henson, General Manager of NDC, who
promised immediate action on the matter, the rest of its communications remained
unacknowledged. FIRESTONE's predicament worsened when rumors of NDC's supposed plans
to dispose of the subject property in favor of petitioner Polytechnic University of the Philippines
came to its knowledge. Forthwith, FIRESTONE served notice on NDC conveying its desire to
purchase the property in the exercise of its contractual right of first refusal. Apprehensive that its
interest in the property would be disregarded, FIRESTONE instituted an action for specific
performance to compel NDC to sell the leased property in its favor. Following the denial of its
petition, FIRESTONE amended its complaint to include PUP and Executive Secretary Catalino
Macaraeg, Jr., as party-defendants, and sought the annulment of Memorandum Order No. 214.
After trial, judgment was rendered declaring the contracts of lease executed between
FIRESTONE and NDC covering the 2.60-hectare property and the warehouses constructed
thereon valid and existing until 2 June 1999. The Court of Appeals affirmed the decision of the
trial court ordering the sale of the property in favor of FIRESTONE.

ISSUE:

Whether or not the Court of Appeals decided a question of substance in a way definitely
not in accord with law or jurisprudence.

Page 360 of 745


RULING:

The courts a quo did not hypothesize, much less conjure, the sale of the disputed property
by NDC in favor of petitioner PUP. Aside from the fact that the intention of NDC and PUP to
enter into a contract of sale was clearly expressed in the Memorandum Order No. 214, a close
perusal of the circumstances of this case strengthens the theory that the conveyance of the
property from NDC to PUP was one of absolute sale, for a valuable consideration, and not a
mere paper transfer as argued by petitioners.
A contract of sale, as defined in the Civil Code, is a contract where one of the parties
obligates himself to transfer the ownership of and to deliver a determinate thing to the other or
others who shall pay therefore a sum certain in money or its equivalent. It is therefore a general
requisite for the existence of a valid and enforceable contract of sale that it be mutually
obligatory, i.e., there should be a concurrence of the promise of the vendor to sell a determinate
thing and the promise of the vendee to receive and pay for the property so delivered and
transferred. The Civil Code provision is, in effect, a "catch-all" provision which effectively
brings within its grasp a whole gamut of transfers whereby ownership of a thing is ceded for a
consideration.
Contrary to what petitioners PUP and NDC propose, there is not just one party involved in the
questioned transaction. Petitioners NDC and PUP have their respective charters and therefore
each possesses a separate and distinct individual personality.
Hence, the petition was denied.

Page 361 of 745


SPS. LITONJUA vs. L & R CORPORATION
G.R. No. 130722. December 9, 1999
320 SCRA 405

FACTS:

This stems from loans obtained by the spouses Litonjua from L&R Corporation in the
aggregate sum of P400,000.00; P200,000.00 of which was obtained on August 6, 1974 and the
remaining P200,000.00 obtained on March 27, 1978. The loans were secured by a mortgage
constituted by the spouses upon their two parcels of land and the improvements thereon The
mortgage was duly registered with the Register of Deeds.
Spouses Litonjua sold to Philippine White House Auto Supply, Inc. (PWHAS) the
parcels of land they had previously mortgaged to L & R Corporation for the sum of P430,000.00.
Meanwhile, with the spouses Litonjua having defaulted in the payment of their loans, L & R
Corporation initiated extrajudicial foreclosure proceedings with the Ex-Oficio Sheriff of Quezon
City. The mortgaged properties were sold at public auction to L & R Corporation as the only
bidder for the amount of P221,624.58.
The Deputy Sheriff informed L & R Corporation of the payment by PWHAS of the full
redemption price and advised it that it can claim the payment upon surrender of its owners
duplicate certificates of title. The spouses Litonjua presented for registration the Certificate of
Redemption issued in their favor to the Register of Deeds of Quezon City. The Certificate also
informed L & R Corporation of the fact of redemption and directed the latter to surrender the
owners duplicate certificates of title within five days.
On April 22, 1981, L & R Corporation wrote a letter to the Sheriff, copy furnished to the
Register of Deeds, stating: (1) that the sale of the mortgaged properties to PWHAS was without
its consent, in contravention of paragraphs 8 and 9 of their Deed of Real Estate Mortgage; and
(2) that it was not the spouses Litonjua, but PWHAS, who was seeking to redeem the foreclosed
properties, when under Articles 1236 and 1237 of the New Civil Code, the latter had no legal
personality or capacity to redeem the same.
On the other hand, the spouses Litonjua asked the Register of Deeds to annotate their
Certificate of Redemption as an adverse claim on the titles of the subject properties on account of
the refusal of L & R Corporation to surrender the owners duplicate copies of the titles to the
subject properties. With the refusal of the Register of Deeds to annotate their Certificate of
Redemption, the Litonjua spouses filed a Petition on July 17, 1981 against L & R Corporation
for the surrender of the owners duplicate of Transfer Certificates of Title No. 197232 and
197233 before the then CFI.
While the said case was pending, L & R Corporation executed an Affidavit of
Consolidation of Ownership. The Register of Deeds cancelled Transfer Certificates of Title No.
197232 and 197233 and in lieu thereof, issued Transfer Certificates of Title No. 280054 and
28055 in favor of L & R Corporation, free of any lien or encumbrance. A complaint for Quieting
of Title, Annulment of Title and Damages with preliminary injunction was filed by the spouses
Litonjua and PWHAS against herein respondents before the then CFI.

ISSUE:

Whether or not the Court of Appeals erred in its decision.

RULING:

In the case at bar, PWHAS cannot claim ignorance of the right of first refusal granted to
L & R Corporation over the subject properties since the Deed of Real Estate Mortgage
containing such a provision was duly registered with the Register of Deeds. As such, PWHAS is
presumed to have been notified thereof by registration, which equates to notice to the whole
world. Thus, the Decision appealed from was AFFIRMED with the following
MODIFICATIONS.

Page 362 of 745


JOSEFA VS. ZHANDONG TRADING CORPORATION
417 SCRA 269
G.R. NO. 150903 DECEMBER 8, 2003

FACTS:

Respondent Zhandong delivered to petitioner Josefa, who was introduced to it as a client


by Mr. Tan, the total volume of 313 crates of boards valued at P4,558,100.00 payable within 60
days from delivery. Instead of paying respondent, petitioner remitted his payments to Tan who in
turn delivered various checks to respondent, who accepted them upon Tans assurance that said
checks came from petitioner. When a number of the checks bounced, Tan issued his own checks
and those of his mother, but Tan later stopped payments. Respondent demanded payment from
Tan and petitioner but was ignored; hence he filed the instant complaint.

In his answer petitioner averred that he had already paid all his obligations to respondent
through Tan. Furthermore, he claimed he is not privy to the agreements between Tan and
respondent, and hence, in case his payments were not remitted to respondent, then it was not his
(petitioner) fault and that respondent should bear the consequences.

ISSUE:

Whether or not petitioner is liable for payment of the boards to respondent when he did
not negotiate the transaction with it, rather through Tan as intermediary.

RULING:

No. The transaction was negotiated between Tan and petitioner who only received the
goods delivered by respondent. Petitioner was not privy to the arrangement between Tan and
respondent. Petitioner has fully paid for the goods to Tan with whom he had arranged the
transaction.

Contracts take effect only between the parties, their successors in interest, heirs, and
assigns. When there is no privity of contract, there is likewise no obligation or liability and thus,
no cause of action arises. Petitioner, being not privy to the transaction between Tan and
respondent, should not be made liable for the failure of Tan to deliver the payment to respondent.

Therefore, respondent should recover the payment from Tan.

Page 363 of 745


SALUDO V. SBC
G.R. No. 184041 Oct 13, 2010

FACTS:

On 30 May 1996, Booklight was extended an omnibus line credit facility by SBC in the
amount of P10,000,000.00. Said loan was covered by a Credit Agreement and a Continuing
Suretyship with petitioner as surety, both documents dated 1 August 1996, to secure full payment
and performance of the obligations arising from the credit accommodation. Booklight drew
several availments of the approved credit facility from 1996 to 1997 and faithfully complied with
the terms of the loan. On 30 October 1997, SBC approved the renewal of credit facility of
Booklight in the amount of P10,000,000.00 under the prevailing security lending rate. From
August 3 to 14, 1998, Booklight executed nine promissory notes in favor of SBC in the
aggregate amount of P9,652,725.00. For failure to settle the loans upon maturity, demands were
made on Booklight and petitioner for the payment of the obligation but the duo failed to pay. As
of 15 May 2000, the obligation of Booklight stood at P10,487,875.41, inclusive of interest past
due and penalty. On 16 June 2000, SBC filed against Booklight and herein petitioner an action
for collection of sum of money with the RTC. Booklight initially filed a motion to dismiss,
which was later on denied for lack of merit. In his Answer, Booklight asserted that the amount
demanded by SBC was not based on the omnibus credit line facility of 30 May 1996, but rather
on the amendment of the credit facilities on 15 October 1996 increasing the loan line from
P8,000,000.00 to P10,000,000.00. Booklight denied executing the promissory notes. It also
claimed that it was not in default as in fact, it paid the sum of P1,599,126.11 on 30 September
1999 as a prelude to restructuring its loan for which it earnestly negotiated for a mutually
acceptable agreement until 5 July 2000, without knowing that SBC had already filed the
collection case.
In his Answer to the complaint, herein petitioner alleged that under the Continuing
Suretyship, it was the parties understanding that his undertaking and liability was merely as an
accommodation guarantor of Booklight. He countered that he came to know that Booklight
offered to pay SBC the partial payment of the loan and proposed the restructuring of the
obligation. Petitioner argued that said offer to pay constitutes a valid tender of payment which
discharged Booklights obligation to the extent of the offer. Petitioner also averred that the
imposition of the penalty on the supposed due and unpaid principal obligation based on the
penalty rate of 2% per month is clearly unconscionable. On 7 March 2005, Booklight was
declared in default. Consequently, SBC presented its evidence ex-parte. The case against
petitioner, however, proceeded and the latter was able to present evidence on his behalf. After
trial, the RTC ruled that petitioner is jointly and solidarily liable with Booklight under the
Continuing Suretyship Agreement. The Court of Appeals affirmed in toto the ruling of the RTC.
Petitioner filed a motion for reconsideration but it was denied by the Court of Appeals on 7
August 2008. Hence, the instant petition.

ISSUE:

Whether or not petitioner should be held solidarily liable for the second credit facility
extended to Booklight.

HELD:

We rule in the affirmative. There is no doubt that Booklight was extended two (2) credit
facilities, each with a one-year term, by SBC. Booklight availed of these two (2) credit lines.
While Booklight was able to comply with its obligation under the first credit line, it defaulted in
the payment of the loan obligation amounting to P9,652,725.00 under the second credit line.
There is likewise no dispute that the first credit line facility, with a term from 30 June 1996 to 30
June 1997, was covered by a Continuing Suretyship with petitioner acting as the surety. The
dispute is on the coverage by the Continuing Suretyship of the loan contracted under the second
credit facility. Comprehensive or continuing surety agreements are, in fact, quite commonplace

Page 364 of 745


in present day financial and commercial practice. A bank or financing company which
anticipates entering into a series of credit transactions with a particular company, normally
requires the projected principal debtor to execute a continuing surety agreement along with its
sureties. By executing such an agreement, the principal places itself in a position to enter into the
projected series of transactions with its creditor; with such suretyship agreement, there would be
no need to execute a separate surety contract or bond for each financing or credit accommodation
extended to the principal debtor.
Petitioner argues that the approval of the second credit facility necessitates his consent
considering the onerous and solidary liability of a surety. This is contrary to the express waiver
of his consent to such renewal, contained in paragraph 12 of the Continuing Suretyship.
Respondent, as last resort, harps on the novation of the first credit facility to exculpate itself from
liability from the second credit facility. At the outset, it must be pointed out that the Credit
Agreement is actually the principal contract and it covers all credit facilities now or hereafter
extended by SBC to Booklight; and that the suretyship agreement was executed precisely to
guarantee these obligations, i.e., the credit facilities arising from the credit agreement. The
principal contract is the credit agreement covered by the Continuing Suretyship. The two loan
facilities availed by Booklight under the credit agreement are the Omnibus Line amounting to
P10,000,000.00 granted to Booklight in 1996 and the other one is the Loan Line of the same
amount in 1997. Petitioner however seeks to muddle the issue by insisting that these two
availments were two separate principal contracts, conveniently ignoring the fact that it is the
credit agreement which constitutes the principal contract signed by Booklight in order to avail of
SBCs credit facilities. The two credit facilities are but loans made available to Booklight
pursuant to the credit agreement. On these facts the novation argument advanced by petitioner
must fail. There is no novation to speak of. It is the first credit facility that expired and not the
Credit Agreement. There was a second loan pursuant to the same credit agreement. The terms
and conditions under the Credit Agreement continue to apply and the Continuing Suretyship
continues to guarantee the Credit Agreement. Hence the petition is denied.

Page 365 of 745


PCI VS NG SHUENG NGOR
A.M. No. P-05-1973. March 18, 2005

FACTS:

Complainant EPCIB is the defendant in Civil Case No. CEB-26983 before the Regional
Trial Court (RTC), Branch 16, Cebu City, entitled, Ng Sheung Ngor, doing business under the
name and style Ken Marketing, Ken Appliance Division, Inc. and Benjamin Go, Plaintiffs, vs.
Equitable PCI Bank, Aimee Yu and Ben Apas, Defendants for Annulment and/or Reformation
of Documents and Contracts.
Respondents Antonio A. Bellones and Generoso B. Regalado are the sheriffs in Branches
9 and 16, respectively, of the RTC of Cebu City.
For garnishing accounts maintained by Equitable PCI Bank, Inc. (EPCIB) at Citibank,
N.A., and Hongkong and Shanghai Bank Corporation (HSBC), allegedly in violation of Section
9(b) of Rule 39 of the Rules of Court, a complaint for grave abuse of authority was filed by Atty.
Paulino L. Yusi against Sheriffs Antonio A. Bellones and Generoso B. Regalado. There was an
offer of other real property by petitioner.

ISSUE:

Did respondents violate the Rules of Court?

RULING:

By serving notices of garnishment on Citibank, N.A., HSBC and PNB, Sheriff Regalado
violated EPCIBs right to choose which property may be levied upon to be sold at auction for the
satisfaction of the judgment debt. Thus, it is clear that when EPCIB offered its real properties, it
exercised its option because it cannot immediately pay the full amount stated in the writ of
execution and all lawful fees in cash, certified bank check or any other mode of payment
acceptable to the judgment obligee.
In the case at bar, EPCIB cannot immediately pay by way of Managers Check so it
exercised its option to choose and offered its real properties. With the exercise of the option,
Sheriff Regalado should have ceased serving notices of garnishment and discontinued their
implementation. This is not true in the instant case. Sheriff Regalado was adamant in his
posture even if real properties have been offered which were sufficient to satisfy the judgment
debt.

Page 366 of 745


TERESITA DIO vs. ST. FERDINAND MEMORIALPARK, INC.
G.R. No. 169578 November 30, 2006
509 SCRA 453

FACTS:

On December 11, 1973, Teresita Dio agreed to buy, on installment basis, a memorial lot
from the St. Ferdinand Memorial Park, Inc. (SFMPI) in Lucena City. The purchase was
evidenced by a Pre-Need Purchase Agreement. She obliged herself to abide by all such rules and
regulations governing the SFMPI dated May 25, 1972. SFMPI issued a Deed of Sale and
Certificate of Perpetual. The ownership of Dio over the property was made subject to the rules
and regulations of SFMPI, as well as the government, including all amendments, additions and
modifications that may later be adopted. According to the Rules (Rule 69) Mausoleum building
and memorials should be constructed by the Park Personnel. Lot Owners cannot contract other
contractors for the construction of the said buildings and memorial, however, the lot owner is
free to give their own design for the mausoleum to be constructed, as long as it is in accordance
with the park standards. The construction shall be under the close supervision of the Park
Superintendent.

The mortal remains of Dios husband, father and daughter were interred in the lot at her
own expense, without the knowledge and intervention of SFMPI..

In October 1986, Dio informed SFMPI, through its president and controlling stockholder,
Mildred F. Tantoco, that she was planning to build a mausoleum on her lot and sought the
approval thereof. Dio showed to Tantoco the plans and project specifications accomplished by
her private contractor at an estimated cost of P60,000.00. The plans and specifications were
approved, but Tantoco insisted that the mausoleum be built by it or its agents at a minimum cost
of P100,000.00 as provided in Rule 69 of the Rules and Regulations the SFMPI issued on May
25, 1972. The total amount excluded certain specific designs in the approved plan which if
included would cost Dio much more. Dio, through counsel, demanded that she be allowed to
construct the mausoleum within 10 days, otherwise, she would be impelled to file the necessary
action/s against SFMPI and Tantoco. Dio filed a Complaint for Injunction with Damages against
SFMPI and Tantoco before the RTC. She averred that she was not aware of Rule 69 of the
SFMPI Rules and Regulations; the amount of P100,000.00 as construction cost of the
mausoleum was unconscionable and oppressive. She prayed that, after trial, judgment be
rendered in her favor, granting a final injunction perpetually restraining defendants from
enforcing the invalid Rule 69 of SFMPIs Rules for Memorial Work in the Mausoleum of the
Park or from refusing or preventing the construction of any improvement upon her property in
the park. The court issued a cease and desist order against defendants.
The trial court rendered judgment in favor of defendants. On appeal, the CA affirmed the
decision of the trial court.

ISSUE:
Whether or not petitioner had knowledge of Rule 69 of SFMPI Rules and Regulations for
memorial works in the mausoleum areas of the park when the Pre-Need Purchase Agreement and
the Deed of Sale was executed and whether the said rule is valid and binding upon petitioner.

RULING:

Plaintiffs allegation that she was not aware of the said Rules and Regulations lacks
credence. Admittedly, in her Complaint and during the trial, plaintiff testified that she informed
the defendants of her intention to construct a mausoleum. Even counsel for the plaintiff, who is
the son of the plaintiff, informed the Court during the trial in this case that her mother, the
plaintiff herein, informed the defendants of her plan to construct and erect a mausoleum. This act
of the plaintiff clearly shows that she was fully aware of the said rules and regulations otherwise
she should not consult, inform and seek permission from the defendants of her intention to build
a mausoleum if she is not barred by the rules and regulations to do the same. When she signed

Page 367 of 745


the contract with the defendants, she was estopped to question and attack the legality of said
contract later on.
Further, a contract of adhesion, wherein one party imposes a readymade form of contract
on the other, is not strictly against the law. A contract of adhesion is as binding as ordinary
contracts, the reason being that the party who adheres to the contract is free to reject it entirely.
Contrary to petitioners contention, not every contract of adhesion is an invalid agreement.
Thus, the petition was denied.

Page 368 of 745


PILIPINO TELEPHONE CORPORATION vs. DELFINO TECSON
G.R. No. 156966. May 7, 2004

FACTS:

On various dates in 1996, Delfino C. Tecson applied for 6 cellular phone subscriptions
with petitioner Pilipino Telephone Corporation (PILTEL), a company engaged in the
telecommunications business, which applications were each approved and covered, respectively,
by six mobiline service agreements. On 05 April 2001, respondent filed with the Regional Trial
Court a complaint against petitioner for a Sum of Money and Damages. Petitioner moved for
the dismissal of the complaint on the ground of improper venue, citing a common provision in
the mobiline service agreements to the effect that - Venue of all suits arising from this
Agreement or any other suit directly or indirectly arising from the relationship between PILTEL
and subscriber shall be in the proper courts of Makati, Metro Manila. Subscriber hereby
expressly waives any other venues. The Regional Trial Court of Iligan City, Lanao del Norte,
denied petitioners motion to dismiss and required it to file an answer within 15 days from
receipt thereof.
Petitioner filed a petition for certiorari before the Court of Appeals. The Court of
Appeals saw no merit in the petition and affirmed the assailed orders of the trial court.

ISSUE:
Whether or not the Court of Appeals erred in affirming the orders of the trial court.

RULING:

The contract herein involved is a contract of adhesion. But such an agreement is not per
se inefficacious. The rule instead is that, should there be ambiguities in a contract of adhesion,
such ambiguities are to be construed against the party that prepared it. If, however, the
stipulations are not obscure, but are clear and leave no doubt on the intention of the parties, the
literal meaning of its stipulations must be held controlling. A contract of adhesion is just as
binding as ordinary contracts. It is true that this Court has, on occasion, struck down such
contracts as being assailable when the weaker party is left with no choice by the dominant
bargaining party and is thus completely deprived of an opportunity to bargain effectively.
Nevertheless, contracts of adhesion are not prohibited even as the courts remain careful in
scrutinizing the factual circumstances underlying each case to determine the respective claims of
contending parties on their efficacy. In the case at bar, respondent secured 6 subscription
contracts for cellular phones on various dates. It would be difficult to assume that, during each of
those times, respondent had no sufficient opportunity to read and go over the terms and
conditions embodied in the agreements. Respondent continued, in fact, to acquire in the pursuit
of his business subsequent subscriptions and remained a subscriber of petitioner for quite
sometime.
Hence, the petition was granted by the Court and the decision of the Court of Appeals is
reversed and set aside. The Civil Case pending before the Regional Trial Court of Iligan City,
Branch 4, was DISMISSED without prejudice to the filing of an appropriate complaint by
respondent against petitioner with the court of proper venue.

Page 369 of 745


PHILIPPINE AIRLINES VS. COURT OF APPEALS
255 SCRA 48
G.R. No. 119706 March 14, 1996

FACTS:

On January 27, 1990, plaintiff Gilda C. Mejia shipped thru defendant, Philippine
Airlines, one (1) unit microwave oven under PAL Air Waybill No. 0-79-1013008-3, with a gross
weight of 33 kilograms from San Francisco, U.S.A. to Manila, Philippines. Upon arrival,
however, of said article in Manila, Philippines, plaintiff discovered that its front glass door was
broken and the damage rendered it unserviceable. Demands both oral and written were made by
plaintiff against the defendant for the reimbursement of the value of the damaged microwave
oven, and transportation charges paid by plaintiff to defendant company. But these demands fell
on deaf ears. This is because, according to petitioner, was filed out of time under paragraph 12, a
(1) of the Air Waybill which provides: "(a) the person entitled to delivery must make a complaint
to the carrier in writing in case: (1) of visible damage to the goods, immediately after discovery
of the damage and at the latest within 14 days from the receipt of the goods.

On September 25, 1990, Gilda C. Mejia filed an action for damages against the petitioner
in the lower court. The latter rendered a decision rendering PAL liable to pay, actual, moral and
exemplary damages as well as attorneys fees. On appeal, the Court of Appeals similarly ruled
in favor of private respondent by affirming in full the trial court's judgment, with costs against
petitioner.

ISSUE:

Whether or not the respondent court erred in affirming the conclusions of the trial court
that since the air waybill is a contract of adhesion, its provisions should be strictly construed
against herein petitioner.

RULING:

The Supreme Court affirmed the appealed decision.

The trial court relied on the ruling in the case of Fieldmen's Insurance Co., Inc. vs. Vda.
De Songco, et al. in finding that the provisions of the air waybill should be strictly construed
against petitioner.

The Air Waybill is a contract of adhesion considering that all the provisions thereof are
prepared and drafted only by the carrier. The only participation left of the other party is to affix
his signature thereto. In the earlier case of Angeles v. Calasanz, the Supreme Court ruled that the
terms of a contract of adhesion must be interpreted against the party who drafted the same.

Page 370 of 745


ERMITAO VS. COURT OF APPEALS
306 SCRA 218

FACTS:

Petitioner Luis Ermitao applied for a credit card from private respondent BPI Express
Card Corp. (BECC) on October 8, 1986 with his wife, Manuelita, as extension card holder. The
spouses were given credit limit of P10, 000.00. They often exceeded this credit limit without
protest from BCC.

On August 9, 1989, Manuelitas bag was snatched from her as she was shopping at the
greenbelt mall in Makati. Among the items inside the bag was her BECC credit card. That same
night she informed, by telephone, BECC of the loss. The call was received by BECC offices
through a certain Gina Banzon. This was followed by a letter dated August 30, 1989. She also
surrendered Luis credit card and requested for replacement cards. In her letter, Manuelita stated
that she shall not be responsible for any and all charges incurred [through the use of the lost
card] after August 29, 1989.

However, when Luis received his monthly billing statement from BECC dated September
20, 1989, the charges included amounts for purchases were made, one amounting to P2,350.05
and the other, P607.50. Manuelita received a billing statement dated October 20,1989 which
required her to immediately pay the total amount of P3,197.70 covering the same (unauthorized)
purchases. Manuelita wrote again BECC disclaiming responsibility for those charges, which
were made after she had served BECC with notice of loss of her card.

However, BECC, in a letter dated July 13, 1990, pointed to Luis the stipulation in their
contract. However, Luis stressed that the contract BECC was referring to was a contract of
adhesion and warned that if BECC insisted on charging him and his wife for the unauthorized
purchases, they will sue BECC continued to bill the spouses for said purchases.

ISSUE:

Whether or not the Court of Appeals gravely erred in relying on the case of Serra v. Court
of appeals, 229 SCRA 60, because unlike that case, petitioners have no chance at all to contest
the stipulations appearing in the credit card application that was drafted entirely by private
respondent, thus, a clear contract of adhesion.

RULING:

The contract between the parties in this case is indeed a contract of adhesion, so-called
because its terms are prepared by only one party while the other party merely affixes his
signature signifying his adhesion thereto. Such contracts are not void in themselves. They are as
binding as ordinary contracts. Parties who enter in to such contracts are free to reject the
stipulations entirely.

In this case, the cardholder, Manuelita, has complied with what was required of her under
the contract with BECC, She immediately notified BECC of loss of her card on the same day it
was lost and, the following day, she sent a written notice of the loss to BECC.

Clearly, what happened in this case was that BECC failed to notify promptly the
establishment in which the unauthorized purchases were made with the use of Manuelitas lost
card.

Page 371 of 745


UNIWIDE SALES REALTY AND RESOURCES CORPORATION,
vs. TITAN-IKEDA CONSTRUCTIONAND DEVELOPMENT CORPORATION
G.R. No. 126619 December 20, 2006
511 SCRA 335

FACTS:

PROJECT 1. The first agreement was a written Construction Contract entered into by
Titan and Uniwide sometime in May 1991 whereby Titan undertook to construct Uniwides
Warehouse Club and Administration Building in Libis, Quezon City for a fee of
P120,936,591.50, payable in monthly progress billings to be certified to by Uniwides
representative. The parties stipulated that the building shall be completed not later than 30
November 1991. As found by the CIAC, the building was eventually finished on 15 February
1992 and turned over to Uniwide.

PROJECT 2. Sometime in July 1992, Titan and Uniwide entered into the second
agreement whereby the former agreed to construct an additional floor and to renovate the latters
warehouse located at the EDSA Central Market Area in Mandaluyong City. There was no
written contract executed between the parties for this project. Construction was allegedly to be
on the basis of drawings and specifications provided by Uniwides structural engineers. The
parties proceeded on the basis of a cost estimate of P21,301,075.77 inclusive of Titans 20%
mark-up. Titan conceded in its complaint to having received P15,000,000.00 of this amount. This
project was completed in the latter part of October 1992 and turned over to Uniwide.
PROJECT 3. The parties executed the third agreement in May 1992. In a written
Construction Contract, Titan undertook to construct the Uniwide Sales Department Store
Building in Kalookan City for the price of P118,000,000.00 payable in progress billings to be
certified to by Uniwides representative. It was stipulated that the project shall be completed not
later than 28 February 1993. The project was completed and turned over to Uniwide in June
1993.
Uniwide asserted in its petition that: (a) it overpaid Titan for unauthorized additional
works in Project 1 and Project 3; (b) it is not liable to pay the Value-Added Tax for Project 1; (c)
it is entitled to liquidated damages for the delay incurred in constructing Project 1 and Project 3;
and (d) it should not have been found liable for deficiencies in the defectively constructed
Project 2.
The decision:
On Project 1 Libis: Uniwide is absolved of any liability for the claims made by [Titan]
on this Project.
Project 2 Edsa Central: Uniwide is absolved of any liability for VAT payment on this
project, the same being for the account of Titan. On the other hand, Titan is absolved of any
liability on the counterclaim for defective construction of this project. Uniwide is held liable for
the unpaid balance in the amount of P6,301,075.77 which is ordered to be paid to the Titan with
12% interest per annum commencing from 19 December 1992 until the date of payment.
On Project 3 Kalookan: Uniwide is held liable for the unpaid balance in the amount of
P5,158,364.63 which is ordered to be paid to Titan with 12% interest per annum commencing
from 08 September 1993 until the date of payment. Uniwide is held liable to pay in full the VAT
on this project, in such amount as may be computed by the Bureau of Internal Revenue to be
paid directly thereto. The BIR is hereby notified that Uniwide Sales Realty and Resources
Corporation has assumed responsibility and is held liable for VAT payment on this project. This
accordingly exempts Claimant Titan-Ikeda Construction and Development Corporation from this
obligation.

ISSUE:
Whether or not the decision rendered is correct.

RULING:

The petition is DENIED and the Decision of the Court of Appeals was AFFIRMED.

Page 372 of 745


HEIRS OF AUGUSTO L. SALAS, JR. vs. LAPERAL REALTY CORPORATION
G.R. NO. 135362. December 13, 1999

FACTS:

Salas, Jr. was the registered owner of a vast tract of land in Lipa City, Batangas spanning
1,484,354 square meters. On May 15, 1987, he entered into an Owner-Contractor Agreement
with respondent Laperal Realty Corporation to render and provide complete (horizontal)
construction services on his land. On September 23, 1988, Salas, Jr. executed a Special Power of
Attorney in favor of respondent Laperal Realty to exercise general control, supervision and
management of the sale of his land, for cash or on installment basis. On June 10, 1989, Salas, Jr.
left his home in the morning for a business trip to Nueva Ecija. He never returned.On August 6,
1996, Teresita Diaz Salas filed with the Regional Trial Court a verified petition for the
declaration of presumptive death of her husband, Salas, Jr., who had then been missing for more
than seven (7) years. It was granted on December 12, 1996.

Meantime, respondent Laperal Realty subdivided the land of Salas, Jr. and sold
subdivided portions thereof to respondents Rockway Real Estate Corporation and South Ridge
Village, Inc. on February 22, 1990; to respondent spouses Abrajano and Lava and Oscar Dacillo
on June 27, 1991; and to respondents Eduardo Vacuna, Florante de la Cruz and Jesus Vicente
Capalan on June 4, 1996.

On February 3, 1998, petitioners as heirs of Salas, Jr. filed in the Regional Trial Court a
Complaint for declaration of nullity of sale, reconveyance, cancellation of contract, accounting
and damages against herein respondents. Laperal Realty filed a Motion to Dismiss on the ground
that petitioners failed to submit their grievance to arbitration as required under Article VI of the
Agreement. Spouses Abrajano and Lava and respondent Dacillo filed a Joint Answer with
Counterclaim and Crossclaim praying for dismissal of petitioners Complaint for the same
reason.
The trial court issued an Order dismissing petitioners Complaint for non-compliance
with the arbitration clause.

ISSUE:

Whether or not the trial court erred in dismissing the complaint.

RULING:

A submission to arbitration is a contract. As such, the Agreement, containing the


stipulation on arbitration, binds the parties thereto, as well as their assigns and heirs. But only
they. Petitioners, as heirs of Salas, Jr., and respondent Laperal Realty are certainly bound by the
Agreement. If respondent Laperal Realty, had assigned its rights under the Agreement to a third
party, making the former, the assignor, and the latter, the assignee, such assignee would also be
bound by the arbitration provision since assignment involves such transfer of rights as to vest in
the assignee the power to enforce them to the same extent as the assignor could have enforced
them against the debtor or in this case, against the heirs of the original party to the Agreement.
However, respondents Rockway Real Estate Corporation, South Ridge Village, Inc., Maharami
Development Corporation, spouses Abrajano, spouses Lava, Oscar Dacillo, Eduardo Vacuna,
Florante de la Cruz and Jesus Vicente Capellan are not assignees of the rights of respondent
Laperal Realty under the Agreement to develop Salas, Jr.s land and sell the same. They are,
rather, buyers of the land that respondent Laperal Realty was given the authority to develop and
sell under the Agreement. As such, they are not assigns contemplated in Art. 1311 of the New
Civil Code which provides that contracts take effect only between the parties, their assigns and
heirs.

Page 373 of 745


Laperal Realty, as a contracting party to the Agreement, has the right to compel
petitioners to first arbitrate before seeking judicial relief. However, to split the proceedings into
arbitration for respondent Laperal Realty and trial for the respondent lot buyers, or to hold trial in
abeyance pending arbitration between petitioners and respondent Laperal Realty, would in effect
result in multiplicity of suits, duplicitous procedure and unnecessary delay. On the other hand, it
would be in the interest of justice if the trial court hears the complaint against all herein
respondents and adjudicates petitioners rights as against theirs in a single and complete
proceeding.
Hence, the trial courts decision was nullified and set aside. Said court was ordered to
proceed with the hearing.

Page 374 of 745


BIENVENIDO R. MEDRANO and IBAAN RURAL BANK vs. CA, PACITA G. BORBON,
JOSEFINA E. ANTONIO and ESTELA A. FLOR
G.R. No. 150678. February 18, 2005

FACTS:

Bienvenido R. Medrano was the Vice-Chairman of Ibaan Rural Bank, a bank owned by
the Medrano family. In 1986, Mr. Medrano asked Mrs. Estela Flor, a cousin-in-law, to look for a
buyer of a foreclosed asset of the bank, a 17-hectare mango plantation priced at P2,200,000.00.
Mr. Dominador Lee, a businessman from Makati City, was a client of respondent Mrs. Pacita G.
Borbon, a licensed real estate broker. Borbon relayed to her business associates and friends that
she had a ready buyer for a mango orchard. Flor then advised her that her cousin-in-law owned a
mango plantation which was up for sale. She told Flor to confer with Medrano and to give them
a written authority to negotiate the sale of the property. Thus, Medrano issued the Letter of
Authority in favor of Pacita G. Borbon and Josefina E. Antonio.
A Deed of Sale was eventually executed between the bank, represented by its
President/General Manager Teresa M. Ganzon (as Vendor) and KGB Farms, Inc., represented by
Dominador Lee (as Vendee), for the purchase price of P1,200,000.00. Since the sale of the
property was consummated, the respondents asked from the petitioners their commission, or 5%
of the purchase price. The petitioners refused to pay and offered a measly sum of P5,000.00
each. Hence, the respondents were constrained to file an action against herein petitioners.
The trial court rendered a Decision in favor of the respondents. It found that the letter of
authority was valid and binding as against Medrano and the Ibaan Rural bank. Medrano signed
the said letter for and in behalf of the bank, and as owner of the property, promising to pay the
respondents a 5% commission for their efforts in looking for a purchaser of the property. He is,
therefore, estopped from denying liability on the basis of the letter of authority he issued in favor
of the respondents. The trial court further stated that the sale of the property could not have been
possible without the representation and intervention of the respondents. As such, they are entitled
to the brokers commission of 5% of the selling price of P1,200,000.00 as evidenced by the deed
of sale. On appeal, the CA affirmed the trial courts decision.

ISSUE:
Whether or not the Court of Appeals erred in affirming the trial courts decision.

RULING:
There can be no other conclusion than the respondents are indeed the procuring cause of
the sale. If not for the respondents, Lee would not have known about the mango plantation being
sold by the petitioners. The sale was consummated. The bank had profited from such
transaction. It would certainly be iniquitous if the respondents would not be rewarded their
commission pursuant to the letter of authority. Hence, the Court of Appeals decision is affirmed.

Page 375 of 745


MANUEL B. TAN, GREGG M. TECSON and ALEXANDER SALDAA,
vs. EDUARDO R. GULLAS and NORMA S. GULLAS
G.R. No. 143978. December 3, 2002

FACTS:
Spouses Eduardo R. Gullas and Norma S. Gullas, were the registered owners of a parcel
of land measuring 104,114 sq. m., with Transfer Certificate of Title No. 31465. On June 29,
1992, they executed a special power of attorney authorizing petitioners Manuel B. Tan, a
licensed real estate broker, and his associates Gregg M. Tecson and Alexander Saldaa, to
negotiate for the sale of the land at P550.00 per square meter, at a commission of 3% of the gross
price. The power of attorney was non-exclusive and effective for one month from June 29, 1992.
On the same date, petitioner Tan contacted Engineer Ledesma, construction manager of the
Sisters of Mary of Banneaux, Inc. (hereafter, Sisters of Mary), a religious organization interested
in acquiring a property.
On 1, 1992, petitioner Tan visited the property with Engineer Ledesma. Thereafter, the
two men accompanied Sisters Michaela Kim and Azucena Gaviola, representing the Sisters of
Mary, who had seen and inspected the land, found the same suitable for their purpose and
expressed their desire to buy it. However, they requested that the selling price be reduced to
P530.00 per square meter instead of P550.00 per square meter. Private respondent Eduardo
Gullas referred the prospective buyers to his wife.
It was the first time that the buyers came to know that private respondent Eduardo Gullas
was the owner of the property. Private respondents agreed to sell the property to the Sisters of
Mary, and subsequently executed a special power of attorney in favor of Eufemia Caete, giving
her the special authority to sell, transfer and convey the land at a fixed price of P200.00 per
square meter. Attorney-in-fact Caete executed a deed of sale in favor of the Sisters of Mary for
the price of P20,822,800.00, or at the rate of P200.00 per square meter. The buyers subsequently
paid the corresponding taxes. Thereafter, the Register of Deeds of issued TCT No. 75981 in the
name of the Sisters of Mary of Banneaux, Inc.
Earlier, on July 3, 1992, petitioners went to see private respondent Eduardo Gullas to
claim their commission, but the latter told them that he and his wife have already agreed to sell
the property to the Sisters of Mary. Private respondents refused to pay the brokers fee and
alleged that another group of agents was responsible for the sale of land to the Sisters of Mary.
petitioners filed a complaint against the defendants for recovery of their brokers fee in
the sum of P1,655,412.60, as well as moral and exemplary damages and attorneys fees. They
alleged that they were the efficient procuring cause in bringing about the sale of the property to
the Sisters of Mary, but that their efforts in consummating the sale were frustrated by the private
respondents who, in evident bad faith, malice and in order to evade payment of brokers fee,
dealt directly with the buyer whom petitioners introduced to them. They further pointed out that
the deed of sale was undervalued obviously to evade payment of the correct amount of capital
gains tax, documentary stamps and other internal revenue taxes.
In their answer, private respondents countered that, contrary to petitioners claim, they were not
the efficient procuring cause in bringing about the consummation of the sale because another
broker, Roberto Pacana, introduced the property to the Sisters of Mary ahead of the petitioners.
Private respondents maintained that when petitioners introduced the buyers to private respondent
Eduardo Gullas, the former were already decided in buying the property through Pacana, who
had been paid his commission. Private respondent Eduardo Gullas admitted that petitioners were
in his office on July 3, 1992, but only to ask for the reimbursement of their cellular phone
expenses.
After trial, the lower court rendered judgment in favor of petitioners. Eduardo and Norma
Gullas were ordered to pay jointly and severally plaintiffs Manuel Tan, Gregg Tecson and
Alexander Saldaa the sum of P624,684.00 as brokers fee with legal interest at the rate of 6%
per annum from the date of filing of the complaint; and the sum of P50,000.00 as attorneys fees
and costs of litigation.
The Court of Appeals reversed and set aside the lower courts decision and rendered
another judgment dismissing the complaint.

Page 376 of 745


ISSUE:

Whether or not the Court of Appeals erred in dismissing the complaint.

RULING:

It is readily apparent that private respondents are trying to evade payment of the
commission which rightfully belongs to petitioners as brokers with respect to the sale. There was
no dispute as to the role that petitioners played in the transaction. At the very least, petitioners set
the sale in motion. They were not able to participate in its consummation only because they were
prevented from doing so by the acts of the private respondents. In the case of Alfred Hahn v.
Court of Appeals and Bayerische Motoren Werke Aktiengesellschaft (BMW) the SC ruled that,
An agent receives a commission upon the successful conclusion of a sale. On the other hand, a
broker earns his pay merely by bringing the buyer and the seller together, even if no sale is
eventually made. Clearly, therefore, petitioners, as brokers, should be entitled to the
commission whether or not the sale of the property subject matter of the contract was concluded
through their efforts.
Hence, the trial courts decision is reinstated.

Page 377 of 745


JESUS M. GOZUN vs. JOSE TEOFILO T. MERCADO
G.R. No. 167812 December 19, 2006

FACTS:

In the local elections of 1995, respondent vied for the gubernatorial post in Pampanga.
Upon respondents request, petitioner, owner of JMG Publishing House, a printing shop,
submitted to respondent draft samples and price quotation of campaign materials.
By petitioners claim, respondents wife had told him that respondent already approved
his price quotation and that he could start printing the campaign materials, hence, he did print
campaign materials. Given the urgency and limited time to do the job order, petitioner availed of
the services and facilities of Metro Angeles Printing and of St. Joseph Printing Press, owned by
his daughter Jennifer Gozun and mother Epifania Macalino Gozun, respectively.
Petitioner delivered the campaign materials to respondents headquarters.
On March 31, 1995, respondents sister-in-law, Lilian Soriano obtained from petitioner
cash advance of P253,000 allegedly for the allowances of poll watchers who were attending a
seminar and for other related expenses. Lilian acknowledged on petitioners 1995 diary receipt of
the amount.
Petitioner later sent respondent a Statement of Account in the total amount of P2,177,906
itemized as follows: P640,310 for JMG Publishing House; P837,696 for Metro Angeles Printing;
P446,900 for St. Joseph Printing Press; and P253,000, the cash advance obtained by Lilian.
Respondents wife partially paid P1,000,000 to petitioner who issued a receipt therefor. Despite
repeated demands and respondents promise to pay, respondent failed to settle the balance of his
account to petitioner.
Petitioner thus filed with the RTC a complaint against respondent to collect the remaining
amount of P1,177,906 plus inflationary adjustment and attorneys fees. The trial court
rendered judgment in favor of the petitioner. The CA however, reversed the trial courts decision
and dismissed the complaint for lack of cause of action.

ISSUE:

Whether or not the Court of Appeals erred in reversing the trial courts decision.

RULING:

Petitioner is the real party in interest in this case. The trial courts findings on the matter
were affirmed by the appellate court. It erred, however, in not declaring petitioner as a real party
in interest insofar as recovery of the cost of campaign materials made by petitioners mother and
sister are concerned, upon the wrong notion that they should have been, but were not, impleaded
as plaintiffs.
Thus, respondent has the obligation to pay the total cost of printing his campaign
materials delivered by petitioner in the total of P1,924,906, less the partial payment of
P1,000,000, or P924,906.

Page 378 of 745


STA. LUCIA REALTY V. SPS. BUENAVENTURA
G.R. No. 177113 Oct 2, 2009

FACTS:

Respondent-spouses Francisco Segismundo and Emilia Buenaventura, represented by


Ricardo Segismundo, filed before the Housing and Land Use Regulatory Board (HLRUB) a
Complaint against petitioner Sta. Lucia Realty & Development, Inc. for Specific Performance,
Damages and Attorneys Fees. Respondents alleged that they bought a lot known as Lot 3,
Block 4, Phase II at Greenwood Executive Village, Cainta, Rizal from Loida Gonzales Alfonso;
that the said lot is part of a subdivision project owned and being developed by petitioner; that in
the course of the construction of their house, respondents discovered that their lot had been
subdivided and occupied by Marilou Panlaque and Ma. Veronica Banez; and that like
respondents, the two occupants were also issued a construction permit by petitioner.
Respondents thus demanded from petitioner the rightful possession of their lot; but to no avail. In
its Answer, petitioner averred that respondents had no cause of action against it because it has no
transaction record regarding Lot 3, Block 4, Phase II; that the said lot actually belonged to ACL
Development Corporation, its joint-venture partner; that it was RCD Realty Corporation which
caused the subdivision of the lot and constructed separate residential buildings thereon; that RCD
Realty Corporations lot was actually Lot 3, Block 4, Phase II-A; and that respondents, in bad
faith and in a retaliatory manner, erected their own house on Lot 4 which belonged to a different
owner. Petitioner suggested that to remedy the situation, respondents, RCD Realty Corporation,
and the real owner of Lot 4, should agree to a three-way exchange of their respective properties
as it has been verified that the areas of their lots are the same.
On September 1, 1997, petitioner filed a third-party complaint against ACL Development
Corporation and RCD Realty Corporation. Petitioner prayed that in the event that it be adjudged
liable for any of the claims of respondents, ACL Development Corporation and RCD Realty
Corporation should be held jointly and severally liable for said claims or an amount equivalent
thereto. ACL Development Corporation alleged that petitioner was responsible for the issuance
of all construction permits on the subdivision project; hence, it was the one that caused the
confusion among all parties. On the other hand, RCD Realty Corporation alleged that it was a
builder in good faith. On June 16, 1998, the HLURBs Arbiter for the National Capital Region
Field Office issued a Decision directing respondent Sta. Lucia Realty and Development
Corporation, Inc. to cause to be vacated complainants lot denominated as Lot No. 3, Block No.
4, Phase II, Greenwood Executive Village, Cainta, Rizal; and In the alternative, the aforesaid
respondent is ordered to reimburse the complainant the current market value of the subdivision
lot which shall in no case be less than P4,500.00 per square meter, the prevailing price in the
area. On June 24, 1999, the HLURB Board of Commissioners affirmed the Decision of the
HLURB Arbiter with modification that the market value of the subject lot, stated in paragraph 2
of the dispositive portion, be reduced from P4,500.00 to P3,200.00 per square meter, plus 12%
interest per annum from the time of the filing of the complaint. On July 18, 2003, the Office of
the President issued a Decision affirming the June 24, 1999 Decision of the HLURB Board of
Commissioners. Subsequently, it issued a Resolution dated November 28, 2003 denying
petitioners Motion for Reconsideration. On December 21, 2006, the Court of Appeals affirmed
the Decision of the Office of the President. The appellate court found that it was petitioner who
caused the confusion in the identity of the lots by its issuance of a construction permit to RCD
Realty Corporation; that petitioner was remiss and negligent in complying with its obligations
towards its buyers, their heirs, assignees, and/or successors-in-interest when it failed to deliver
the property described in respondents title. On March 21, 2007, the Court of Appeals denied
petitioners Motion for Reconsideration. Hence, this Petition for Review on Certiorari.

ISSUE:

Whether or not the CA erred in affirming that the petitioner is liable in a complaint for
specific performance.

Page 379 of 745


HELD:

The Supreme Court held that the petition was without merit. Article 1311 of the New
Civil Code states that, contracts take effect only between the parties, their assigns and heirs,
except in case where the rights and obligations arising from the contract are not transmissible by
their nature, or by stipulation or by provision of law. In this case, the rights and obligations
between petitioner and Alfonso are transmissible. There was no mention of a contractual
stipulation or provision of law that makes the rights and obligations under the original sales
contract for Lot 3, Block 4, Phase II intransmissible. Hence, Alfonso can transfer her ownership
over the said lot to respondents and petitioner is bound to honor its corresponding obligations to
the transferee or new lot owner in its subdivision project. Having transferred all rights and
obligations over Lot 3, Block 4, Phase II to respondents, Alfonso could no longer be considered
as an indispensable party. An indispensable party is one who has such an interest in the
controversy or subject matter that a final adjudication cannot be made in his absence, without
injuring or affecting that interest. Contrary to petitioners claim, Alfonso no longer has an
interest on the subject matter or the present controversy, having already sold her rights and
interests on Lot 3, Block 4, Phase II to herein respondents. We agree with the appellate courts
finding that petitioner was remiss and negligent in the performance of its obligations towards its
buyers, their heirs, assignees, and/or successors-in-interest; and that it was petitioners
negligence which caused the confusion on the identity of the lot, which likewise resulted to the
erroneous construction done by RCD Realty Corporation. Petitioner cannot pass the blame to
RCD Realty Corporation because it is undisputed that it issued a construction permit for Lot 3,
Block 4, Phase II the property of respondents.
For its gross negligence which resulted to the erroneous construction on Lot 3, Block 4,
Phase II and caused respondents undue damage and prejudice, petitioner is rightfully adjudged
by the HLURB Arbiter liable for P100,000.00 moral damages, P50,0000.00 exemplary damages,
and P50,000.00 attorneys fees. We agree with the ruling of the HLURB Arbiter that it will be
more equitable and practicable to rescind the obligation of petitioner to deliver possession of Lot
3, Block 4, Phase II to respondents; and in exchange, pay the value of the lot by way of
reimbursement in accordance with the price modification stated by the HLURB Board of
Commissioners. Moreover, this ruling comes within the purview of respondents final prayer for
other reliefs, just or equitable under the premises and they are evidently in accord with such
outcome as they did not appeal the case or insist on claiming back their lot. However, we find
that the applicable interest rate for the amount to be reimbursed to respondents is 6% per annum,
reckoned from the time of the filing of the complaint, because the case at bar involves a breach
of obligation and not a loan or forbearance of money. Thus the petition for Review on Certiorari
is PARTIALLY GRANTED. The assailed Decision of the Court of Appeals in CA-G.R. SP No.
81732, affirming the July 18, 2003 Decision of the Office of the President in O.P. Case No. 20-
A-8937, and the Resolution denying the motion for reconsideration are AFFIRMED with
MODIFICATION that the applicable interest rate for the amount to be reimbursed to
respondents is 6% per annum, computed from the time of the filing of respondents complaint,
and 12% per annum from the finality of the judgment until the amount awarded is fully paid.

Page 380 of 745


JOSEPH CHAN, WILSON CHAN and LILY CHAN VS. BONIFACIO S. MACEDA, JR
402 SCRA
G.R. No. 142591 352 2003 Apr 30

FACTS:

On July 28, 1976, Bonifacio S. Maceda, Jr., herein respondent, obtained a P7.3 million
loan from the Development Bank of the Philippines for the construction of his New Gran Hotel
Project in Tacloban City. Thereafter, on September 29, 1976, respondent entered into a building
construction contract with Moreman Builders Co., Inc. They agreed that the construction would
be finished not later than December 22, 1977. Respondent purchased various construction
materials and equipment in Manila. Moreman, in turn, deposited them in the warehouse of
Wilson and Lily Chan, herein petitioners. The deposit was free of charge. Unfortunately,
Moreman failed to finish the construction of the hotel at the stipulated time. Hence, on February
1, 1978, respondent filed with the then CFI an action for rescission and damages against
Moreman. On November 28, 1978, the CFI rendered its Decision rescinding the contract
between Moreman and respondent and awarding to the latter P445,000.00 as actual, moral and
liquidated damages; P20,000.00 representing the increase in the construction materials; and
P35,000.00 as attorneys fees. Moreman interposed an appeal to the Court of Appeals but the
same was dismissed on March 7, 1989 for being dilatory. He elevated the case to the SC via a
petition for review on certiorari. In a Decision dated February 21, 1990, the Court denied the
petition. On April 23, 1990 an Entry of Judgment was issued.

Meanwhile, during the pendency of the case, respondent ordered petitioners to return to
him the construction materials and equipment which Moreman deposited in their warehouse.
Petitioners, however, told them that Moreman withdrew those construction materials in 1977.
Hence, on December 11, 1985, respondent filed with the RTC an action for damages with an
application for a writ of preliminary attachment against petitioners.

ISSUE:

Whether or not respondent have the right to demand the release of the said materials and
equipment or claim for damages.

RULING:

At the outset, the case should have been dismissed outright by the trial court because of
patent procedural infirmities. Even without such serious procedural flaw, the case should also be
dismissed for utter lack of merit. Under Article 1311 of the Civil Code, contracts are binding
upon the parties (and their assigns and heirs) who execute them. When there is no privity of
contract, there is likewise no obligation or liability to speak about and thus no cause of action
arises. Specifically, in an action against the depositary, the burden is on the plaintiff to prove the
bailment or deposit and the performance of conditions precedent to the right of action. A
depositary is obliged to return the thing to the depositor, or to his heirs or successors, or to the
person who may have been designated in the contract.

In the present case, the record is bereft of any contract of deposit, oral or written, between
petitioners and respondent. If at all, it was only between petitioners and Moreman. And
granting arguendo that there was indeed a contract of deposit between petitioners and Moreman,
it is still incumbent upon respondent to prove its existence and that it was executed in his favor.
However, respondent miserably failed to do so. The only pieces of evidence respondent
presented to prove the contract of deposit were the delivery receipts. Significantly, they are
unsigned and not duly received or authenticated by either Moreman, petitioners or respondent or
any of their authorized representatives. Hence, those delivery receipts have no probative value at
all. While our laws grant a person the remedial right to prosecute or institute a civil action
against another for the enforcement or protection of a right, or the prevention or redress of a
wrong, every cause of action ex-contractu must be founded upon a contract, oral or written,

Page 381 of 745


express or implied. Moreover, respondent also failed to prove that there were construction
materials and equipment in petitioners warehouse at the time he made a demand for their return.
Considering that respondent failed to prove (1) the existence of any contract of deposit between
him and petitioners, nor between the latter and Moreman in his favor, and (2) that there were
construction materials in petitioners warehouse at the time of respondents demand to return the
same, we hold that petitioners have no corresponding obligation or liability to respondent with
respect to those construction materials.

Page 382 of 745


TIMOTEO BALUYOT, et al. VS. COURT OF APPEALS
1999 Jul 22

FACTS:

Petitioners are residents of Barangay Cruz-na-Ligas. Diliman, Quezon City. The Cruz-
na-Ligas Homesite Association, Inc. is a non-stock corporation of which petitioners and other
residents of Barangay Cruz-na-Ligas are members.

Petitioners filed a complaint for specific performance and damages against private
respondent University of the Philippines before the RTC. The complaint was later on amended to
include private respondent Quezon City government as defendant.

that plaintiffs and their ascendants are owners since memory can no longer recall of that
parcel of riceland known Sitio Libis, Barrio Cruz-na-Ligas, Quezon City (now Diliman, Quezon
City), while the members of the plaintiff Association and their ascendants have possessed since
time immemorial openly, adversely, continuously and also in the concept of an owner, the rest of
the area embraced by and within the Barrio Cruz-na-Ligas, Diliman, Quezon City;

that since October 1972, the claims of the plaintiffs and/or members of plaintiff
Association have been the subject of quasi-judicial proceedings and administrative investigations
in the different branches of the government penultimately resulting in the issuance of that
Indorsement dated May 7, 1975 by the Bureau of Lands, and ultimately, in the issuance of the
Indorsement of February 12, 1985, by the office of the President of the Rep. of the Philippines
confirming the rights of the bonafide residents of Barrio Cruz-na-Ligas to the parcel of land they
have been possessing or occupying;

that defendant UP, pursuant to the said Indorsement from the Office of the President of
the Rep. of the Philippines, issued that Reply Indorsement wherein it approved the donation of
about 9.2 hectares of the site, directly to the residents of Brgy. Krus Na Ligas. After several
negotiations with the residents, the area was increased to 15.8 hectares (158,379 square meters);

that, however, defendant UP backed-out from the arrangement to donate directly to the
plaintiff Association for the benefit of the qualified residents and high-handedly resumed to
negotiate the donation thru the defendant Quezon City Government under the terms
disadvantageous or contrary to the rights of the bonafide residents of the Barrio; that plaintiff
Association forthwith amended its petition and prayed for a writ of preliminary injunction to
restrain defendant UP from donating the area to the defendant Quezon City Government which
was granted;

that in the hearing of the Motion for Reconsideration filed by defendant UP, plaintiff
Association finally agreed to the lifting of the said Order granting the injunction after defendant
UP made an assurance in their said Motion that the donation to the defendant Quezon City
Government will be for the benefit of the residents of Cruz-Na-Ligas;

that, however, defendant UP took exception to the aforesaid Order lifting the Order of
Injunction and insisted on the dismissal of the case;

that plaintiff manifested its willingness to the dismissal of the case, provided, that the
area to be donated thru the defendant Quezon City government be subdivided into lots to be
given to the qualified residents together with the certificate of titles, without cost;

that defendant UP failed to deliver the certificate of title covering the property to be
donated thus the defendant Quezon City Government was not able to register the ownership so
that the defendant Quezon City Government can legally and fully comply with their obligations
under the said deed of donation;that upon expiration of the period of eighteen (18) months, for
alleged non-compliance of the defendant Quezon City Government with terms and conditions

Page 383 of 745


quoted in par. 16 hereof, defendant UP thru its President, Mr. Jose Abueva, unilaterally,
capriciously, whimsically and unlawfully issued that Administrative Order No. 21 declaring the
deed of donation revoked and the donated property be reverted to defendant UP.
The petitioners, then, prayed that a writ of preliminary injunction or at least a temporary
restraining order be issued, ordering defendant UP to observe status quo; thereafter, after due
notice and hearing, a writ of preliminary injunction be issued; (a) to restrain defendant UP or to
their representative from ejecting the plaintiffs from and demolishing their improvements on the
riceland or farmland situated at Sitio Libis; (b) to order defendant UP to refrain from executing
another deed of donation in favor another person or entity and in favor of non-bonafide residents
of Barrio Cruz-na-Ligas different from the Deed of Donation, and after trial on the merits,
judgment be rendered:declaring the Deed of Donation as valid and subsisting and ordering the
defendant UP to abide by the terms and conditions thereof.
The Court of Appeals reversed the decision of the trial court.

ISSUE:
Whether or not defendant UP could execute another deed of donation in favor of third
person.

RULING:

The Court found all the elements of a cause of action contained in the amended complaint
of petitioners. While, admittedly, petitioners were not parties to the deed of donation, they
anchor their right to seek its enforcement upon their allegation that they are intended
beneficiaries of the donation to the Quezon City government. Art. 1311, second paragraph, of
the Civil Code provides:

If a contract should contain some stipulation in favor of a third person, he may demand its
fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere
incidental benefit or interest of a person is not sufficient. The contracting parties must have
clearly and deliberately conferred a favor upon a third person.
Under this provision of the Civil Code, the following requisites must be present in order
to have a stipulation pour autrui:(1) there must be a stipulation in favor of a third person; (2) the
stipulation must be a part, not the whole of the contract;(3) the contracting parties must have
clearly and deliberately conferred a favor upon a third person, not a mere incidental benefit or
interest; (4) the third person must have communicated his acceptance to the obligor before its
revocation; and (5) neither of the contracting parties bears the legal representation or
authorization of the third party.
The allegations in the following paragraphs of the amended complaint are sufficient to
bring petitioners action within the purview of the second paragraph of Art. 1311 on stipulations
pour autrui:

1. Paragraph 17, that the deed of donation contains a stipulation that the Quezon City
government, as donee, is required to transfer to qualified residents of Cruz-na-Ligas, by way of
donations, the lots occupied by them;

2. The same paragraph, that this stipulation is part of conditions and obligations imposed by UP,
as donor, upon the Quezon City government, as donee;

3. Paragraphs 15 and 16, that the intent of the parties to the deed of donation was to confer a
favor upon petitioners by transferring to the latter the lots occupied by them;

4. Paragraph 19, that conferences were held between the parties to convince UP to surrender the
certificates of title to the city government, implying that the donation had been accepted by
petitioners by demanding fulfillment thereof and that private respondents were aware of such
acceptance; and

Page 384 of 745


5. All the allegations considered together from which it can be fairly inferred that neither of
private respondents acted in representation of the other; each of the private respondents had its
own obligations, in view of conferring a favor upon petitioners.

The amended complaint further alleges that respondent UP has an obligation to transfer
the subject parcel of land to the city government so that the latter can in turn comply with its
obligations to make improvements on the land and thereafter transfer the same to petitioners but
that, in breach of this obligation, UP failed to deliver the title to the land to the city government
and then revoked the deed of donation after the latter failed to fulfill its obligations within the
time allowed in the contract. For the purpose of determining the sufficiency of petitioners cause
of action, these allegations of the amended complaint must be deemed to be hypothetically true.
So assuming the truth of the allegations, we hold that petitioners have a cause of action against
UP.

The decision of the Court of Appeals is reversed and the case is remanded to the RTC of
Quezon City for trial on the merits.

Page 385 of 745


SPOUSES ADELINA S. CUYCO and FELICIANO U. CUYCO
vs.
SPOUSES RENATO CUYCO and FILIPINA CUYCO
G.R. No. 168736 April 19, 2006

FACTS:

Petitioners obtained a loan in the amount of P1,500,000.00 from respondents payable


within one year at 18% interest per annum, and secured by a Real Estate Mortgage over a parcel
of land with improvements thereon situated in Cubao, Quezon City covered by a TCT.

Subsequently, petitioners obtained additional loans from the respondents in the aggregate
amount of P1,250,000.00, broken down as follows: (1) P150,000.00 on May 30, 1992; (2)
P150,000.00 on July 1, 1992; (3) P500,000.00 on September 5, 1992; (4) P200,000.00 on
October 29, 1992; and (5) P250,000.00 on January 13, 1993.

Petitioners made payments amounting to P291,700.00, but failed to settle their


outstanding loan obligations. Respondents filed a complaint for foreclosure of mortgage with the
RTC. They alleged that petitioners loans were secured by the real estate mortgage; that as of
August 31, 1997, their indebtedness amounted to P6,967,241.14, inclusive of the 18% interest
compounded monthly; and that petitioners refusal to settle the same entitles the respondents to
foreclose the real estate mortgage.

Petitioners filed a motion to dismiss on the ground that the complaint states no cause of
action which was denied by the RTC for lack of merit. Petitioners admitted their loan obligations
but argued that only the original loan of P1,500,000.00 was secured by the real estate mortgage
at 18% per annum and that there was no agreement that the same will be compounded monthly.

The RTC rendered judgment in favor of the respondents and ordered the petitioners to
pay to the Court or to the respondents the amounts of P6,332,019.84, plus interest until fully
paid, P25,000.00 as attorneys fees, and costs of suit, within a period of 120 days from the entry
of judgment, and in case of default of such payment and upon proper motion, the property shall
be ordered sold at public auction to satisfy the judgment.
The CA partially granted the petition and modified the RTC decision insofar as the
amount of the loan obligations secured by the real estate mortgage. It held that by express
intention of the parties, the real estate mortgage secured the original P1,500,000.00 loan and the
subsequent loans of P150,000.00 and P500,000.00 obtained on July 1, 1992 and September 5,
1992, respectively. As regards the loans obtained on May 31, 1992, October 29, 1992 and
January 13, 1993 in the amounts of P150,000.00, P200,000.00 and P250,000.00, respectively, the
appellate tribunal held that the parties never intended the same to be secured by the real estate
mortgage.
Hence, this petition.

ISSUE:

Whether or not petitioners must pay respondents legal interest of 12% per annum on the
stipulated interest of 18% per annum, computed from the filing of the complaint until fully paid.

RULING:

Applying the rules in the computation of interest, the principal amount of loans subject of
the real estate mortgage must earn the stipulated interest of 18% per annum, which interest, as
long as unpaid, also earns legal interest of 12% per annum, computed from the date of the filing
of the complaint on September 10, 1997 until finality of the Courts Decision. Such interest is
not due to stipulation but due to the mandate of the law as embodied in Article 2212 of the Civil
Code. From such date of finality, the total amount due shall earn interest of 12% per annum until
satisfied

Page 386 of 745


Certainly, the computed interest from the filing of the complaint on September 10, 1997
would no longer be true upon the finality of this Courts decision. In accordance with the rules
laid down in Eastern Shipping Lines, Inc. v. Court of Appeals, the SC derived the following
formula for the RTCs guidance:

TOTAL AMOUNT DUE = [principal + interest + interest on interest] - partial payments


made
Interest = principal x 18 % per annum x no. of years from due date until finality of
judgment
Interest on interest = Interest computed as of the filing of the complaint (September 10,
1997) x 12% x no. of years until finality of judgment
Total amount due as of the date of finality of judgment will earn an interest of 12% per
annum until fully paid.

Hence, the SC affirmed the CA decision with modifications. It ordered petitioners to pay
the respondents (1) the total amount due, as computed by the RTC in accordance with the
formula specified above, (2) the legal interest of 12% per annum on the total amount due from
such finality until fully paid, (3) the reasonable amount of P25,000.00 as attorneys fees, and (4)
the costs of suit, within a period of not less than 90 days nor more than 120 days from the entry
of judgment, and in case of default of such payment the property shall be sold at public auction
to satisfy the judgment.

Page 387 of 745


GO V. CORDERO
G.R. No. 164703 May 4, 2010

FACTS:

Mortimer F. Cordero, Vice-President of Pamana Marketing Corporation (Pamana),


ventured into the business of marketing inter-island passenger vessels. After contacting various
overseas fast ferry manufacturers from all over the world, he came to meet Tony Robinson, an
Australian national based in Brisbane, Australia, who is the Managing Director of Aluminium
Fast Ferries Australia (AFFA). Between June and August 1997, Robinson signed documents
appointing Cordero as the exclusive distributor of AFFA catamaran and other fast ferry vessels
in the Philippines. As such exclusive distributor, Cordero offered for sale to prospective buyers
the 25-meter Aluminium Passenger catamaran known as the SEACAT 25. After negotiations
with Felipe Landicho and Vincent Tecson, lawyers of Allan C. Go who is the owner/operator of
ACG Express Liner of Cebu City, a single proprietorship, Cordero was able to close a deal for
the purchase of two SEACAT 25. Accordingly, the parties executed Shipbuilding Contract No.
7825 for one high-speed catamaran (SEACAT 25) for the price of US$1,465,512.00. Per
agreement between Robinson and Cordero, the latter shall receive commissions totalling
US$328,742.00, or 22.43% of the purchase price, from the sale of each vessel. Cordero made
two trips to the AFFA Shipyard in Brisbane, Australia, and on one occasion even accompanied
Go and his family and Landicho, to monitor the progress of the building of the vessel. He
shouldered all the expenses for airfare, food, hotel accommodations, transportation and
entertainment during these trips. He also spent for long distance telephone calls to communicate
regularly with Robinson, Go, Tecson and Landicho. However, Cordero later discovered that Go
was dealing directly with Robinson when he was informed by Dennis Padua of Wartsila
Philippines that Go was canvassing for a second catamaran engine from their company which
provided the ship engine for the first SEACAT 25. Padua told Cordero that Go instructed him to
fax the requested quotation of the second engine to the Park Royal Hotel in Brisbane where Go
was then staying. Cordero tried to contact Go and Landicho to confirm the matter but they were
nowhere to be found, while Robinson refused to answer his calls. Cordero immediately flew to
Brisbane to clarify matters with Robinson, only to find out that Go and Landicho were already
there in Brisbane negotiating for the sale of the second SEACAT 25. Despite repeated follow-up
calls, no explanation was given by Robinson, Go, Landicho and Tecson who even made Cordero
believe there would be no further sale between AFFA and ACG Express Liner. In a handwritten
letter dated June 24, 1998, Cordero informed Go that such act of dealing directly with Robinson
violated his exclusive distributorship and demanded that they respect the same, without prejudice
to legal action against him and Robinson should they fail to heed the same. Corderos lawyer,
Atty. Ernesto A. Tabujara, Jr. of ACCRA law firm, also wrote ACG Express Liner assailing the
fraudulent actuations and misrepresentations committed by Go in connivance with his lawyers in
breach of Corderos exclusive distributorship appointment. On August 21, 1998, Cordero
instituted Civil Case No. 98-35332 seeking to hold Robinson, Go, Tecson and Landicho liable
jointly and solidarily for conniving and conspiring together in violating his exclusive
distributorship in bad faith and wanton disregard of his rights, thus depriving him of his due
commissions (balance of unpaid commission from the sale of the first vessel in the amount of
US$31,522.01 and unpaid commission for the sale of the second vessel in the amount of
US$328,742.00) and causing him actual, moral and exemplary damages, including P800,000.00
representing expenses for airplane travel to Australia, telecommunications bills and
entertainment, on account of AFFAs untimely cancellation of the exclusive distributorship
agreement. Cordero also prayed for the award of moral and exemplary damages, as well as
attorneys fees and litigation expenses. The trial court rendered its decision in favor of Plaintiff
and against defendants Allan C. Go, Tony Robinson, Felipe Landicho, and Vincent Tecson. As
prayed for, defendants are hereby ordered to pay Plaintiff jointly and solidarilY. On January 29,
2001, the CA rendered judgment granting the petition for certiorari hence the appeal.

Page 388 of 745


ISSUE:

Whether or not the CA erred in holding the prtitioner liable for the breach.

HELD:
In the case at bar, it was established that petitioner Cordero was not paid the balance of
his commission by respondent Robinson. From the time petitioner Go and respondent Landicho
directly dealt with respondent Robinson in Brisbane, and ceased communicating through
petitioner Cordero as the exclusive distributor of AFFA in the Philippines, Cordero was no
longer informed of payments remitted to AFFA in Brisbane. In other words, Cordero had clearly
been cut off from the transaction until the arrival of the first SEACAT 25 which was sold
through his efforts. When Cordero complained to Go, Robinson, Landicho and Tecson about
their acts prejudicial to his rights and demanded that they respect his exclusive distributorship,
Go simply let his lawyers led by Landicho and Tecson handle the matter and tried to settle it by
promising to pay a certain amount and to purchase high-speed catamarans through Cordero.
However, Cordero was not paid anything and worse, AFFA through its lawyer in Australia even
terminated his exclusive dealership insisting that his services were engaged for only one
transaction, that is, the purchase of the first SEACAT 25 in August 1997.
We find that contrary to the claims of petitioner Cordero, there was indeed no sufficient
evidence that respondents actually purchased a second SEACAT 25 directly from AFFA. But
this circumstance will not absolve respondents from liability for invading Corderos rights under
the exclusive distributorship. Respondents clearly acted in bad faith in bypassing Cordero as
they completed the remaining payments to AFFA without advising him and furnishing him with
copies of the bank transmittals as they previously did, and directly dealt with AFFA through
Robinson regarding arrangements for the arrival of the first SEACAT 25 in Manila and
negotiations for the purchase of the second vessel pursuant to the Memorandum of Agreement
which Cordero signed in behalf of AFFA. As a result of respondents actuations, Cordero
incurred losses as he was not paid the balance of his commission from the sale of the first vessel
and his exclusive distributorship revoked by AFFA. While it is true that a third person cannot
possibly be sued for breach of contract because only parties can breach contractual provisions, a
contracting party may sue a third person not for breach but for inducing another to commit such
breach. Article 1314 of the Civil Code provides that any third person who induces another to
violate his contract shall be liable for damages to the other contracting party. The elements of
tort interference are: (1) existence of a valid contract; (2) knowledge on the part of the third
person of the existence of a contract; and (3) interference of the third person is without legal
justification. Thus the petitions was denied. The Decision dated March 16, 2004 as modified by
the Resolution dated July 22, 2004 of the Court of Appeals in CA-G.R. CV No. 69113 are
hereby affirmed with modification in that the awards of moral and exemplary damages are
hereby reduced to P300,000.00 and P200,000.00.

Page 389 of 745


TAYAG VS. COURT OF APPEALS
219 SCRA 481

FACTS:

Petitioners are the heirs of Juan Galicia, Sr. who are seeking to rescind the deed of
conveyance executed by Galicia, Sr. together with Celerina Labuguin, in favor of Albrigido
Leyva, respondent involving the undivided one-half portion of a piece of land situated at
Poblacion, Guimba, Nueva Ecija. They contend that respondent is in breach of the conditions of
the deed. Contained in the deed were stipulations regarding the payment and settlement of the
purchase price of the land. The respondent however did not strictly comply this with. Despite
the posterior payments however, petitioners accepted them. Respondent, on the contention that
he fulfilled his obligation to pay filed this case for specific performance by the petitioners.

The court of origin which tried the suit for specific performance on account of the herein
petitioners reluctance to abide by the covenant, ruled in favor of the vendee while respondent
court practically agreed with the trial court except as to the amount to be paid to petitioners and
the refund to private respondent are concerned.

ISSUE:

The issue is whether or not petitioners prayer for the rescission of the deed can prosper.

RULING:

The Supreme Court affirmed the decision of the lower courts.

The suggestion of petitioners that the covenant must be cancelled in the light of private
respondents so-called breach seems to overlook petitioners demeanor who, instead of
immediately filing the case precisely to rescind the instrument because of non-compliance,
allowed private respondent to effect numerous payments posterior to the grace periods provided
in the contract. This apathy of petitioners, who even permitted private respondent to take the
initiative in filing the suit for specific performance against them, is akin to waiver of
abandonment of the right to rescind.

Page 390 of 745


SO PING BUN VS. COURT OF APPEALS
314 SCRA 751

FACTS:

In 1963, Tek Hua Trading Co., through its managing partner, So Pek Giok, entered into
lease agreements with lessor Dee C. Chuan and Sons Inc (DCCSI). Subjects of four (4) lease
contracts were premises located at Nos. 930, 930- Int., 924-B and 924-C, Soler Street, Binondo,
Manila. Tek Hua used the areas to store its textiles. The contracts each had a one year term.
They provided that should the lessee continue to occupy the premises after the term, the lease
shall be on a month to month basis.

When the contracts expired, the parties did not renew the contracts, but Tek Hua
continued to occupy the premises in 1976 Tek Hua Trading Corp. was dissolved. Later, the
original members of Tek Hua Trading Co., including Manuel C.Tiong, formed Tek Hua
Enterprising Corp., herein respondent corporation.

So Pek Giok, managing partner of Tek Hua Trading, died in 1986. So Pek Gioks
grandson, petitioner So Ping Bun, occupied the warehouse for his own textile business,
Trendsetter Marketing.

On August 1, 1989, lessor DCCSI sent letters addressed to Tek Hua enterprises,
informing the latter of the 25% increase in rent effective September 1, 1989. The rent increase
was later on reduced to 20% effective January 1, 1990, upon other lessees demand. Again on
December 1, 1990, the lessor implemented a 30% rent increase. Enclosed in these letters were
new lease contracts for signing. DCCSI warned that failure of the lessee to accomplish the
contracts shall be deemed as lack of interest on the lessees part, and agreement to the
termination of the lese. Private respondents did not answer any of these letters. Still, the lease
contracts were not rescinded.

On March 1, 1991, private respondent Tiong sent a letter to petitioner asking Mr. So Ping
Bun to vacate the premise because he used a warehouse.

Petitioner refused to vacate. On March 4, 1992, petitioner requested formal contracts of


lease with DCCSI in favor Trendsetter Marketing. So Ping Bun claimed that after the death of
his grandfather, So Pek Giok, he had been occupying the premises for his textile business and
religiously paid rent. DCCSI acceded to petitioners request. The lease contracts in favor of
Trendsetter were executed.

ISSUE:

Whether the appellate court erred in affirming the trial courts decision finding So Ping
Bun guilty of tortuous interference of contact.

RULING:

In the instant case, it is clear that petitioner So Ping Bun prevailed upon DCCSI to lease
the warehouse to his enterprise at the expense of respondent corporation. Though petitioner took
interest in the property of respondent corporation and benefited from it, nothing on record
imputes deliberate wrongful motives or malice on him.

A duty which the law of torts is concerned with is respect for the property of others, and
cause of action ex delicto may be predicated upon an unlawful interference by one person of the
enjoyment by the other of his private property. This may pertain to a situation where a third
person induces a party to renege on or violate his undertaking under a contract. In the case
before us, petitioners Trendsetter Marketing asked DCCSI to execute lease contracts in its favor,
and as a result petitioner deprived respondent corporation of the latters property right. Clearly,

Page 391 of 745


and as correctly viewed by the appellate court, the three elements of tort interference above
mentioned are present in the instant case.

Authorities debate on whether interference may be justified where the defendant acts for
the sole purpose of furthering his own financial or economic interest. One view is that, as a
general rule, justification for interfering with the business relations of another exist where the
actors motive is to benefit himself. Such justification does not exist where his sole motive is to
cause harm to the other. Added to this, some authorities believe that it is not necessary that the
interferers interest outweigh that of the party whose rights are invaded, and that an individual
acts under an economic interest that is substantial, not merely I de minimis for he acts in self
protection. Moreover, justification for protecting ones financial position should not be made to
depend on a comparison of his economic interest in the subject matter with that of others. It is
sufficient if the impetus of his conduct lies in a proper business interest rather than in wrongful
motives.

As early as Gilchrist vs. Cuddy we held that where there was no malice in the
interference of a contract, and the impulse behind ones conduct lies in a proper business interest
rather than in wrongful motives, a party cannot be a malicious interferer. Where the alleged
interferer is financially interested and such interest motivates his conduct it cannot be said that he
is an officious or malicious intermeddler.

Page 392 of 745


INTERNATIONAL FREEPORT V. DANZAS
G.R. No. 181833, January 26, 2011

FACTS:

Petitioner International Freeport Traders, Inc. (IFTI) ordered a shipment of Toblerone


chocolates and assorted confectioneries from Jacobs Suchard Tobler Ltd. of Switzerland through
its Philippine agent, Colombo Merchants Phils., Inc., under the delivery term "F.O.B. Ex-
Works." To ship the goods, Jacobs dealt with Danmar Lines of Switzerland which issued to
Jacobs negotiable house bills of lading [1] signed by its agent, respondent Danzas
Intercontinental, Inc.. The bills of lading stated that the terms were "F.O.B." and "freight
payable at destination," with Jacobs as the shipper, China Banking Corporation as the consignee,
and IFTI as the party to be notified of the shipment. The shipment was to be delivered at the
Clark Special Economic Zone with Manila as the port of discharge. The goods were also
covered by Letters of Credit MK-97/0467 and MK-97/0468 under a "freight collect"
arrangement.

Since Danmar did not have its own vessel, it contracted Orient Overseas Container Line
(OOCL) to ship the goods from Switzerland. OOCL issued a non-negotiable master bill of
lading, stating that the freight was prepaid with Danmar as the shipper and Danzas as the
consignee and party to be notified. The shipment was to be delivered at Angeles City in
Pampanga. Danmar paid OOCL an arbitrary fee of US$425.00 to process the release of the
goods from the port and ship the same to Clark in Angeles City. The fee was to cover brokerage,
trucking, wharfage, arrastre, and processing expenses.The goods were loaded on board the
OOCL vessel on April 20, 1997 and arrived at the port of Manila on May 14, 1997. Upon
learning from Danmar that the goods had been shipped, Danzas immediately informed IFTI of its
arrival. IFTI prepared the import permit needed for the clearing and release of the goods from
the Bureau of Customs and advised Danzas on May 20, 1997 to pick up the document. Danzas
got the import permit on May 26, 1997. At the same time, it asked IFTI to surrender the original
bills of lading to secure the release of the goods, and 2) submit a bank guarantee inasmuch as the
shipment was consigned to China Banking Corporation to assure Danzas that it will be
compensated for freight and other charges. But IFTI did not provide Danzas a bank guarantee,
claiming that letters of credit already covered the shipment. IFTI insisted that Danzas should
already endorse the import permit and bills of lading to OOCL since the latter had been paid an
arbitrary fee. But Danzas did not do this. Because IFTI did not provide Danzas with the original
bills of lading and the bank guarantee, the latter withheld the processing of the release of the
goods. Danzas reiterated to IFTI that it could secure the release of the goods only if IFTI
submitted a bank guarantee. Ultimately, IFTI yielded to the request and applied for a bank
guarantee which was approved on May 23, 1997. It claimed to have advised Danzas on even
date of its availability for pick up but Danzas secured it only on June 6, 1997.

On January 2, 2002, [3] the MeTC rendered a decision in favor of Danzas and ordered
IFTI to pay (1) P181,809.45 plus legal interest to be computed from March 26, 1998 until fully
paid; (2) P25,000.00 as attorney's fees; and (3) the costs of suit. On appeal, however, the
Regional Trial Court (RTC) [4] of Paraaque City, Branch 274, dismissed the complaint. Danzas
elevated the case to the Court of Appeals (CA) which reversed the RTC decision. The CA ruled
that IFTI's fax letters dated June 10, 1997 showed the parties engaged in negotiation stage.
When IFTI heeded Danzas' request for a bank guarantee, its action brought about a perfected
contract of lease of service. The bank guarantee, procured by IFTI, contained all the requisites
of a perfected contract. The cause of the contract was the release of the goods from the port and
its delivery at Clark; the consideration was the compensation for the release and delivery of the
goods to IFTI.

Page 393 of 745


ISSUES:

Whether or not a contract of lease of service exists between IFTI and Danzas; and
Whether or not IFTI is liable to Danzas for the costs of the delay in the release of the goods from the
port

HELD:

The facts show the existence of several contracts: one between IFTI and Jacobs,
another between Jacobs and Danmar, and still another between Danmar and OOCL. IFTI bought
chocolates and confectioneries from Jacobs; Jacobs got Danmar to deliver the goods to its
destination; Danmar got OOCL to carry the goods for it by ship to Manila. For this purpose,
Danmar paid OOCL an arbitrary fee to process the release of the goods from the port of Manila
and deliver the same to Clark. In all these transactions, Danzas acted as an agent of Danmar who
signed the house bills of lading in favor of Jacobs. What is clear to the Court is that, by acceding
to all the documentary requirements that Danzas imposed on it, IFTI voluntarily accepted its
services. The bank guarantee IFTI gave Danzas assured the latter that it would eventually be paid
all freight and other charges arising from the release and delivery of the goods to it. Every
contract has the elements of consent of the contracting parties; object certain which is the subject
matter of the contract; and cause of the obligation which is established. A contract is perfected
by mere consent, which is manifested by the meeting of the offer and the acceptance upon the
thing and the cause which are to constitute the contract.
There is no dispute that under arbitrary
shipments, imported goods are allowed to stay, free of charge, in the port for three working days,
and in the storage for five to six calendar days. Beyond this period, storage fees, electric
charges, and the demurrage are due. Since the goods arrived at the Port of Manila on May 14,
1997, they could remain there until May 20, 1997 free of charge. The fact that IFTI had the
import permit ready by May 20, 1997 was immaterial since it had not yet given the bank
guarantee required of it. The Court is not convinced that IFTI had the bank guarantee ready as
early as May 23, 1997 for, if that were the case, surely it did not make sense for it not to hand
over such document to Danzas when the latter claimed the import permit on May 26, 1997. Since
the delay in the processing of the release of the goods was due to IFTI's fault, the CA rightly
adjudged it liable for electric charges, demurrage, and storage fees of P122,191.75 from May 20,
1997 to June 13, 1999. Hence the Court denied the petition and affirmed the decision dated
October 25, 2007 of the Court of Appeals in CA-G.R. SP 79597

Page 394 of 745


ROCKLAND CONSTRUCTION COMPANY, INC vs. MID-PASIG LAND
DEVELOPMENT CORPORATION
G.R. No. 164587, February 04, 2008
FACTS:

Rockland Construction Company, Inc. in a letter dated March 1, 2000, offered to lease
from Mid-Pasig Land Development Corporation the latters 3.1-hectare property in Pasig City.
This property is covered by Transfer Certificate of Title Nos. 469702 and 337158 under the
control of the Presidential Commission on Good Government. Upon instruction of Mid-Pasig to
address the offer to the PCGG, Rockland wrote the PCGG on April 15, 2000. The letter,
addressed to PCGG Chairman Magdangal Elma, included Rockland proposed terms and
conditions for the lease. This letter was also received by Mid-Pasig on April 18, 2000, but Mid-
Pasig made no response.
Again, in another letter dated June 8, 2000 addressed to the Chairman of Mid-Pasig, Mr.
Ronaldo Salonga, Rockland sent a Metropolitan Bank and Trust Company Check No.
2930050168 for P1 million as a sign of its good faith and readiness to enter into the lease
agreement under the certain terms and conditions stipulated in the letter. Mid-Pasig received this
letter on July 28, 2000.
In a subsequent follow-up letter dated February 2, 2001, Rockland then said that it
presumed that Mid-Pasig had accepted its offer because the P1 million check it issued had been
credited to Mid-Pasigs account on December 5, 2000.
Mid-Pasig, however, denied it accepted Rocklands offer and claimed that no check was
attached to the said letter. It also vehemently denied receiving the P1 million check, much less
depositing it in its account.
In its letter dated February 6, 2001, Mid-Pasig replied to Rockland that it was only upon
receipt of the latters February 2 letter that the former came to know where the check came from
and what it was for. Nevertheless, it categorically informed Rockland that it could not entertain
the latters lease application. Mid-Pasig reiterated its refusal of Rocklands offer in a letter dated
February 13, 2001.
Rockland then filed an action for specific performance. Rockland sought to compel Mid-
Pasig to execute in Rocklands favor, a contract of lease over a 3.1-hectare portion of Mid-
Pasigs property in Pasig City.
The RTCs decision:

1. the plaintiff and the defendant have duly agreed upon a valid and enforceable lease
agreement of subject portions of defendants properties comprising an area of 5,000
square meters, 11,000 square meters and 15,000 square meters, or a total of 31,000
square meters;
2. the principal terms and conditions of the aforesaid lease agreement are as stated in
plaintiffs June 8, 2000 letter;
3. defendant to execute a written lease contract in favor of the plaintiff containing the
principal terms and conditions mentioned in the next-preceding paragraph, within sixty
(60) days from finality of this judgment, and likewise ordering the plaintiff to pay rent to
the defendant as specified in said terms and conditions;
4. defendant to keep and maintain the plaintiff in the peaceful possession and enjoyment of
the leased premises during the term of said contract;
5. defendant to pay plaintiff attorneys fees in the sum of One Million Pesos
(P1,000,000.00), plus P2,000.00 for every appearance made by counsel in court;
6. The temporary restraining order dated April 2, 2001 is made PERMANENT;
7. Dismissed defendants counterclaim.

The Court of Appeals reversed the trial courts decision.

ISSUES:
1. Was there a perfected contract of lease?
2. Had estoppel in pais set in?

Page 395 of 745


RULING:

1. A close review of the events in this case, in the light of the parties evidence,
shows that there was no perfected contract of lease between the parties. Mid-Pasig was not aware
that Rockland deposited the P1 million check in its account. It only learned of Rocklands check
when it received Rocklands February 2, 2001 letter. Mid-Pasig, upon investigation, also learned
that the check was deposited at the Philippine National Bank San Juan Branch, instead of PNB
Ortigas Branch where Mid-Pasig maintains its account. Immediately, Mid-Pasig wrote Rockland
on February 6, 2001 rejecting the offer, and proposed that Rockland apply the P1 million to its
other existing lease instead. These circumstances clearly show that there was no concurrence of
Rocklands offer and Mid-Pasigs acceptance.
2. Mid-Pasig is also not in estoppel in pais. The doctrine of estoppel is based on the
grounds of public policy, fair dealing, good faith and justice, and its purpose is to forbid one to
speak against his own act, representations, or commitments to the injury of one to whom they
were directed and who reasonably relied thereon. Since estoppel is based on equity and justice, it
is essential that before a person can be barred from asserting a fact contrary to his act or conduct,
it must be shown that such act or conduct has been intended and would unjustly cause harm to
those who are misled if the principle were not applied against him.

Hence, the petition was denied.

Page 396 of 745


METROPOLITAN MANILA DEVELOPMENT AUTHORITY, VS. JANCOM
ENVIRONMENTAL CORPORATION
G.R. No. 147465 January 30, 2002

FACTS:

The Philippine Government under the Ramos Administration, and through the Metro
Manila Development Authority (MMDA) Chairman, and the Cabinet Officer for Regional
Development-National Capital Region (CORD-NCR), entered into a contract with respondent
JANCOM, on waste-to-energy projects for the waste disposal sites in San Mateo, Rizal and
Carmona, Cavite under the build-operate-transfer (BOT) scheme.

However, before President Ramos could have signed the said contract, there was a
change in the Administration and EXECOM. Said change caused the passage of the law, the
Clean Air Act, prohibiting the incineration of garbage and thus, against the contents of said
contract. The Philippine Government, through the MMDA Chairman, declared said contract
inexistent for several reasons. Herein respondent filed a suit against petitioner. The Regional
Trial Court ruled in favor of the respondent. Instead of filing an appeal to the decision, petitioner
filed a writ of certiorari on the Court of Appeals, which the latter granted. The Regional Trial
Court declared its decision final and executory, for which the petitioner appealed to the CA,
which the CA denied such appeal and affirming RTCs decision.

ISSUE:

Whether or not a valid contract is existing between herein petitioner and respondent.

RULING:

Under Article 1305 of the Civil Code, a contract is a meeting of minds between two
persons whereby one binds himself, with respect to the other, to give something or to render
some service. A contract undergoes three distinct stages- preparation or negotiation, its
perfection, and finally, its consummation. Negotiation begins from the time the prospective
contracting parties manifest their interest in the contract and ends at the moment of agreement of
the parties. The perfection or birth of the contract takes place when the parties agree upon the
essential elements of the contract. The last stage is the consummation of the contract wherein
the parties fulfill or perform the terms agreed upon in the contract, culminating in the
extinguishment thereof. Article 1315 of the Civil Code, provides that a contract is perfected by
mere consent. Consent, on the other hand, is manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are to constitute the contract. In the case at bar,
the signing and execution of the contract by the parties clearly show that, as between the parties,
there was a concurrence of offer and acceptance with respect to the material details of the
contract, thereby giving rise to the perfection of the contract. The execution and signing of the
contract is not disputed by the parties. As the Court of Appeals aptly held: Contrary to
petitioners insistence that there was no perfected contract, the meeting of the offer and
acceptance upon the thing and the cause, which are to constitute the contract (Arts. 1315 and
1319, New Civil Code), is borne out by the records.

Admittedly, when petitioners accepted private respondents bid proposal (offer), there
was, in effect, a meeting of the minds upon the object (waste management project) and the cause
(BOT scheme). Hence, the perfection of the contract. In City of Cebu vs. Heirs of Candido
Rubi, the Supreme Court held that the effect of an unqualified acceptance of the offer or
proposal of the bidder is to perfect a contract, upon notice of the award to the bidder.

In fact, in asserting that there is no valid and binding contract between the parties,
MMDA can only allege that there was no valid notice of award; that the contract does not bear

Page 397 of 745


the signature of the President of the Philippines; and that the conditions precedent specified in
the contract were not complied with.

In asserting that the notice of award to JANCOM is not a proper notice of award, MMDA
points to the Implementing Rules and Regulations of Republic Act No. 6957, otherwise known
as the BOT Law, which require that i) prior to the notice of award, an Investment Coordinating
Committee clearance must first be obtained; and ii) the notice of award indicate the time within
which the awardee shall submit the prescribed performance security, proof of commitment of
equity contributions and indications of financing resources.

Admittedly, the notice of award has not complied with these requirements. However, the
defect was cured by the subsequent execution of the contract entered into and signed by
authorized representatives of the parties; hence, it may not be gainsaid that there is a perfected
contract existing between the parties giving to them certain rights and obligations (conditions
precedents) in accordance with the terms and conditions thereof. We borrow the words of the
Court of Appeals:

Petitioners belabor the point that there was no valid notice of award as to constitute
acceptance of private respondents offer. They maintain that former MMDA Chairman Oretas
letter to JANCOM EC dated February 27, 1997 cannot be considered as a valid notice of award
as it does not comply with the rules implementing Rep. Act No. 6957, as amended. The
argument is untenable.

Page 398 of 745


ROCKLAND CONSTRUCTION COMPANY, INC vs. MID-PASIG LAND
DEVELOPMENT CORPORATION
G.R. No. 164587, February 04, 2008
FACTS:

Rockland Construction Company, Inc. in a letter dated March 1, 2000, offered to lease
from Mid-Pasig Land Development Corporation the latters 3.1-hectare property in Pasig City.
This property is covered by Transfer Certificate of Title Nos. 469702 and 337158 under the
control of the Presidential Commission on Good Government. Upon instruction of Mid-Pasig to
address the offer to the PCGG, Rockland wrote the PCGG on April 15, 2000. The letter,
addressed to PCGG Chairman Magdangal Elma, included Rockland proposed terms and
conditions for the lease. This letter was also received by Mid-Pasig on April 18, 2000, but Mid-
Pasig made no response.
Again, in another letter dated June 8, 2000 addressed to the Chairman of Mid-Pasig, Mr.
Ronaldo Salonga, Rockland sent a Metropolitan Bank and Trust Company Check No.
2930050168 for P1 million as a sign of its good faith and readiness to enter into the lease
agreement under the certain terms and conditions stipulated in the letter. Mid-Pasig received this
letter on July 28, 2000.
In a subsequent follow-up letter dated February 2, 2001, Rockland then said that it
presumed that Mid-Pasig had accepted its offer because the P1 million check it issued had been
credited to Mid-Pasigs account on December 5, 2000.
Mid-Pasig, however, denied it accepted Rocklands offer and claimed that no check was
attached to the said letter. It also vehemently denied receiving the P1 million check, much less
depositing it in its account.
In its letter dated February 6, 2001, Mid-Pasig replied to Rockland that it was only upon
receipt of the latters February 2 letter that the former came to know where the check came from
and what it was for. Nevertheless, it categorically informed Rockland that it could not entertain
the latters lease application. Mid-Pasig reiterated its refusal of Rocklands offer in a letter dated
February 13, 2001.
Rockland then filed an action for specific performance. Rockland sought to compel Mid-
Pasig to execute in Rocklands favor, a contract of lease over a 3.1-hectare portion of Mid-
Pasigs property in Pasig City.
The RTCs decision:

8. the plaintiff and the defendant have duly agreed upon a valid and enforceable lease
agreement of subject portions of defendants properties comprising an area of 5,000
square meters, 11,000 square meters and 15,000 square meters, or a total of 31,000
square meters;
9. the principal terms and conditions of the aforesaid lease agreement are as stated in
plaintiffs June 8, 2000 letter;
10. defendant to execute a written lease contract in favor of the plaintiff containing the
principal terms and conditions mentioned in the next-preceding paragraph, within sixty
(60) days from finality of this judgment, and likewise ordering the plaintiff to pay rent to
the defendant as specified in said terms and conditions;
11. defendant to keep and maintain the plaintiff in the peaceful possession and enjoyment of
the leased premises during the term of said contract;
12. defendant to pay plaintiff attorneys fees in the sum of One Million Pesos
(P1,000,000.00), plus P2,000.00 for every appearance made by counsel in court;
13. The temporary restraining order dated April 2, 2001 is made PERMANENT;
14. Dismissed defendants counterclaim.

The Court of Appeals reversed the trial courts decision.

ISSUES:
3. Was there a perfected contract of lease?
4. Had estoppel in pais set in?

Page 399 of 745


RULING:

3. A close review of the events in this case, in the light of the parties evidence,
shows that there was no perfected contract of lease between the parties. Mid-Pasig was not aware
that Rockland deposited the P1 million check in its account. It only learned of Rocklands check
when it received Rocklands February 2, 2001 letter. Mid-Pasig, upon investigation, also learned
that the check was deposited at the Philippine National Bank San Juan Branch, instead of PNB
Ortigas Branch where Mid-Pasig maintains its account. Immediately, Mid-Pasig wrote Rockland
on February 6, 2001 rejecting the offer, and proposed that Rockland apply the P1 million to its
other existing lease instead. These circumstances clearly show that there was no concurrence of
Rocklands offer and Mid-Pasigs acceptance.
4. Mid-Pasig is also not in estoppel in pais. The doctrine of estoppel is based on the
grounds of public policy, fair dealing, good faith and justice, and its purpose is to forbid one to
speak against his own act, representations, or commitments to the injury of one to whom they
were directed and who reasonably relied thereon. Since estoppel is based on equity and justice, it
is essential that before a person can be barred from asserting a fact contrary to his act or conduct,
it must be shown that such act or conduct has been intended and would unjustly cause harm to
those who are misled if the principle were not applied against him.

Hence, the petition was denied.

Page 400 of 745


MANILA METAL CONTAINER CORPORATION, petitioner
REYNALDO C. TOLENTINO, intervenor,
vs.
PHILIPPINE NATIONAL BANK, respondent,
DMCI-PROJECT DEVELOPERS, INC., intervenor
G.R. No. 166862 December 20, 2006

FACTS:

Petitioner was the owner of a 8,015 square meter parcel of land and to secure a
P900,000.00 loan it had obtained from respondent PNB, petitioner executed a real estate
mortgage over the lot. Respondent PNB later granted petitioner a new credit accommodation of
P1,000,000.00; and, on November 16, 1973, petitioner executed an Amendment of Real Estate
Mortgage over its property. On March 31, 1981, petitioner secured another loan of P653,000.00
from respondent PNB, payable in quarterly installments of P32,650.00, plus interests and other
charges.
PNB filed a petition for extrajudicial foreclosure of the real estate mortgage and sought to
have the property sold at public auction for P911,532.21, petitioner's outstanding obligation to
respondent PNB as of June 30, 1982, plus interests and attorney's fees. After due notice and
publication, the property was sold at public auction where respondent PNB was declared the
winning bidder for P1,000,000.00. The period to redeem the property was to expire on February
17, 1984. Petitioner sent a letter dated August 25, 1983 to respondent PNB, requesting that it be
granted an extension of time to redeem/repurchase the property. Respondent PNB informed
petitioner that the request had been referred to its Pasay City Branch for appropriate action and
recommendation
Petitioner reiterated its request for a one year extension from February 17, 1984 within
which to redeem/repurchase the property on installment basis. It reiterated its request to
repurchase the property on installment. Meanwhile, some PNB Pasay City Branch personnel
informed petitioner that as a matter of policy, the bank does not accept "partial redemption.
Since petitioner failed to redeem the property, the Register of Deeds cancelled TCT No.
32098 and issued a new title in favor of respondent PNB. Petitioner's offers had not yet been
acted upon by respondent PNB.
Meanwhile, the Special Assets Management Department (SAMD) had prepared a
statement of account, and as of June 25, 1984 petitioner's obligation amounted to P1,574,560.47.
This included the bid price of P1,056,924.50, interest, advances of insurance premiums,
advances on realty taxes, registration expenses, miscellaneous expenses and publication cost.
When apprised of the statement of account, petitioner remitted P725,000.00 to respondent PNB
as "deposit to repurchase," and an Official Receipt was issued. The SAMD recommended to the
management of respondent PNB that petitioner be allowed to repurchase the property for
P1,574,560.00. In a letter dated November 14, 1984, the PNB management informed petitioner
that it was rejecting the offer and the recommendation of the SAMD. It was suggested that
petitioner purchase the property for P2,660,000.00, its minimum market value. Respondent PNB
gave petitioner until December 15, 1984 to act on the proposal; otherwise, its P725,000.00
deposit would be returned and the property would be sold to other interested buyers.
Petitioner, however, did not agree to respondent PNB's proposal. Instead, it wrote another
letter dated December 12, 1984 requesting for a reconsideration. Respondent PNB replied in a
letter dated December 28, 1984, wherein it reiterated its proposal that petitioner purchase the
property for P2,660,000.00. PNB again informed petitioner that it would return the deposit
should petitioner desire to withdraw its offer to purchase the property. On February 25, 1985,
petitioner, through counsel, requested that PNB reconsider its letter dated December 28, 1984.
Petitioner declared that it had already agreed to the SAMD's offer to purchase the property for
P1,574,560.47, and that was why it had paid P725,000.00. Petitioner warned respondent PNB
that it would seek judicial recourse should PNB insist on the position.
On June 4, 1985, respondent PNB informed petitioner that the PNB Board of Directors
had accepted petitioner's offer to purchase the property, but for P1,931,389.53 in cash less the
P725,000.00 already deposited with it. Petitioner did not respond, so PNB requested petitioner in
a letter dated June 30, 1988 to submit an amended offer to repurchase. Petitioner rejected

Page 401 of 745


respondent's proposal in a letter dated July 14, 1988. It maintained that respondent PNB had
agreed to sell the property for P1,574,560.47, and that since its P725,000.00 downpayment had
been accepted, respondent PNB was proscribed from increasing the purchase price of the
property. Petitioner averred that it had a net balance payable in the amount of P643,452.34.
Respondent PNB, however, rejected petitioner's offer to pay the balance of P643,452.34 in a
letter dated August 1, 1989.
Petitioner filed a complaint against respondent PNB for "Annulment of Mortgage and
Mortgage Foreclosure, Delivery of Title, or Specific Performance with Damages. Respondent
PNB averred, as a special and affirmative defense, that it had acquired ownership over the
property after the period to redeem had elapsed. It claimed that no contract of sale was perfected
between it and petitioner after the period to redeem the property had expired. The trial court
rendered judgment dismissing the amended complaint and respondent PNB's counterclaim. It
ordered respondent PNB to refund the P725,000.00 deposit petitioner had made. The trial court
ruled that there was no perfected contract of sale between the parties; hence, petitioner had no
cause of action for specific performance against respondent. The Court of Appeals affirmed the
RTCs decision.

ISSUE:
Whether or not petitioner and respondent PNB had entered into a perfected contract for
petitioner to repurchase the property from respondent.

RULING:

The ruling of the appellate court that there was no perfected contract of sale between the
parties is correct.
It appears that although respondent requested petitioner to conform to its amended
counter-offer, petitioner refused and instead requested respondent to reconsider its amended
counter-offer. Petitioner's request was ultimately rejected and respondent offered to refund its
P725,000.00 deposit. In sum, then, there was no perfected contract of sale between petitioner and
respondent over the subject property.

Page 402 of 745


MONTECILLO VS. REYNES
385 SCRA 244

FACTS:

Respondents Ignacia Reynes and spouses Abucay filed on June 20, 1984 a complaint for
Declaration of Nullity and Quieting of Title against petitioner Rico Montecillo. Reynes asserted
that she is the owner of a lot situated in Mabolo, Cebu City. In 1981 Reynes sold 185 square
meters of the Mabolo Lot to the Abucay Spouses who built a residential house on the lot they
bought.

Reynes alleged further that she signed a Deed of Sale of the Mabolo Lot in favor of
Montecillo. Reynes, being illiterate signed by affixing her thumb-mark on the document.
Montecillo promised to pay the agreed P47,000.00 purchase price within one month from the
signing of the Deed of Sale. And that Montecillo failed to pay the purchase price after the lapse
of the one-month period, prompting Reynes to demand from Montecillo the return of the Deed of
Sale. Since Montecillo refused to return the Deed of Sale, Reynes executed a document
unilaterally revoking the sale and gave a copy of the document to Montecillo.

Subsequently, on May 23, 1984 Reynes signed a Deed of Sale transferring to the Abucay
Spouses the entire Mabolo Lot, at the same time confirming the previous sale in 1981 of a 185
square meter portion of the lot.

Reynes and the Abucay Spouses alleged that they received information that the Register
of Deeds of Cebu City issued a Certificate of Title in the name of Montecillo for the Mabolo Lot.
They argued that for lack for consideration there (was no meeting of the minds) between
Reynes and Montecillo. Thus, the trial court should declare null and void ab initio Monticellos
Deed of sale, and order the cancellation of certificates of title No. 90805 in the name of
Montecillo.

In his Answer, Montecillo a bank executive claimed he was a buyer in good faith and had
actually paid the P47,000.00 consideration stated on his Deed of Sale. Montecillo however
admitted he still owned Reynes a balance of P10,000.00. He also alleged that he paid P50,000.00
for the release of the chattel mortgage which he argued constituted a lien on the Mabolo Lot. He
further alleged that he paid for the real property tax as well as the capital gains tax on the sale of
the Mabolo Lot.

In their reply, Reynes and the Abucay Spouses contended that Montecillo did not have
authority to discharge the chattel mortgage especially after Reynes revoked Montecillos Deed of
Sale and gave the mortgagee a copy of the document of revocation. Reynes and the Abucay
Spouses claimed that Montecillo secured the release of the chattel mortgage through
machination. They further asserted that Montecillo took advantage of the real property taxes paid
by the Abucay Spouses and surreptitiously caused the transfer of the title to the Mabolo Lot in
his name.
During pre-trial Montecillo claimed that the consideration for the sale of the Mabolo Lot
was the amount he paid to Cebu Iced and Cold Storage Corporation for the mortgage debt of
Bienvenido Jayag. Montecillo argued that the release of the mortgage was necessary since the
mortgage constituted a lien on the Mabolo Lot.

Reynes, however stated that she had nothing to do with Jayags mortgage debt except that
the house mortgaged by Jayag stood on a portion of the Mabolo Lot. Reynes further stated that
the payment by Montecillo to release the mortgage on Jayags house is a matter between
Montecillo and Jayag. The mortgage on the house being a chattel mortgage could not be
interpreted in any way as an encumbrance on the Mabolo Lot. Reynes further claimed that the
mortgage debt had long prescribed since the P47,000.00 mortgage debt was due for payment on
January 30,1967.

Page 403 of 745


ISSUE:

Whether or not there was a valid consent in the case at bar to have a valid contract.

RULING:

One of the three essential requisites of a valid contract is consent of the parties on the
object and cause of the contract. In a contract of sale, the parities must agree not only on the
price, but also on the manner of payment of the price. An agreement on the price but a
disagreement on the manner of its payment will not result in consent, thus preventing the
existence of a valid contract for a lack of consent. This lack of consent is separate and distinct for
lack of consideration where the contract states that the price has been paid when in fact it has
never been paid.

Reynes expected Montecillo to pay him directly the P47, 000.00 purchase price within
one month after the signing of the Deed of Sale. On the other hand, Montecillo thought that his
agreement with Reynes required him to pay the P47,000.00-purchase price to Cebu Ice Storage
to settle Jayags mortgage debt. Montecillo also acknowledged a balance of P10, 000.00 in favor
of Reynes although this amount is not stated in Montecillos Deed of Sale. Thus, there was no
consent or meeting of the minds, between Reynes and Montecillo on the manner of payment.
This prevented the existence of a valid contract because of lack of consent.

In summary, Montecillos Deed of Sale is null and void ab initio not only for lack of
consideration, but also for lack of consent. The cancellation of TCT No. 90805 in the name of
Montecillo is in order as there was no valid contract transferring ownership of the Mabolo Lot
from Reynes to Montecillo.

Page 404 of 745


JASMIN SOLER VS. COURT OF APPEALS
G.R. No. 123892 May 2, 2001

FACTS:

Petitioner is a professional interior designer. In November 1986, her friend Rosario Pardo
asked her to talk to Nida Lopez, who was manager of the COMBANK Ermita Branch for they
were planning to renovate the branch offices. Even prior to November 1986, petitioner and Nida
Lopez knew each other because of Rosario Pardo, the latters sister. During their meeting,
petitioner was hesitant to accept the job because of her many out of town commitments, and also
considering that Ms. Lopez was asking that the designs be submitted by December 1986, which
was such a short notice. Ms. Lopez insisted, however, because she really wanted petitioner to do
the design for renovation. Petitioner acceded to the request. Ms. Lopez assured her that she
would be compensated for her services. Petitioner even told Ms. Lopez that her professional fee
was P10,000.00, to which Ms. Lopez acceded.

During the November 1986 meeting between petitioner and Ms. Lopez, there were
discussions as to what was to be renovated. Ms. Lopez again assured petitioner that the bank
would pay her fees. After a few days, petitioner requested for the blueprint of the building so that
the proper design, plans and specifications could be given to Ms. Lopez in time for the board
meeting in December 1986. Petitioner then asked her draftsman Jackie Barcelon to go to the
jobsite to make the proper measurements using the blue print. Petitioner also did her research on
the designs and individual drawings of what the bank wanted. Petitioner hired Engineer Ortanez
to make the electrical layout, architects Frison Cruz and De Mesa to do the drafting. For the
services rendered by these individuals, petitioner paid their professional fees. Petitioner also
contacted the suppliers of the wallpaper and the sash makers for their quotation. So come
December 1986, the lay out and the design were submitted to Ms. Lopez. She even told
petitioner that she liked the designs.

Subsequently, petitioner repeatedly demanded payment for her services but Ms. Lopez
just ignored the demands. In February 1987, by chance petitioner and Ms. Lopez saw each other
in a concert at the Cultural Center of the Philippines. Petitioner inquired about the payment for
her services, Ms. Lopez curtly replied that she was not entitled to it because her designs did not
conform to the banks policy of having a standard design, and that there was no agreement
between her and the bank.

Petitioner, through her lawyers, who wrote Ms. Lopez, demanding payment for her
professional fees in the amount of P10,000.00 which Ms. Lopez ignored. The lawyers wrote Ms.
Lopez once again demanding the return of the blueprint copies petitioner submitted which Ms.
Lopez refused to return. The petitioner then filed at the trial court a complaint against
COMBANK and Ms. Lopez for collection of professional fees and damages.

In its answer, COMBANK stated that there was no contract between COMBANK and
petitioner; that Ms. Lopez merely invited petitioner to participate in a bid for the renovation of
the COMBANK Ermita Branch; that any proposal was still subject to the approval of the
COMBANKs head office.

The trial court rendered judgment in favor of plaintiff. On appeal, the Court of Appeals
reversed the decision. Hence, this petition.

ISSUE:
Whether or not the Court of Appeals erred in ruling that there was no contract between
petitioner and respondents, in the absence of the element of consent.

RULING:

Page 405 of 745


A contract is a meeting of the minds between two persons whereby one binds himself to
give something or to render some service to bind himself to give something to render some
service to another for consideration. There is no contract unless the following requisites concur:
1. Consent of the contracting parties; 2. Object certain which is the subject matter of the contract;
and 3. Cause of the obligation which is established.

In the case at bar, there was a perfected oral contract. When Ms. Lopez and petitioner met
in November 1986, and discussed the details of the work, the first stage of the contract
commenced. When they agreed to the payment of the P10,000.00 as professional fees of
petitioner and that she should give the designs before the December 1986 board meeting of the
bank, the second stage of the contract proceeded, and when finally petitioner gave the designs to
Ms. Lopez, the contract was consummated. Petitioner believed that once she submitted the
designs she would be paid her professional fees. Ms. Lopez assured petitioner that she would be
paid.

It is familiar doctrine that if a corporation knowingly permits one of its officers, or any
other agent, to act within the scope of an apparent authority, it holds him out to the public as
possessing the power to do those acts; and thus, the corporation will, as against anyone who has
in good faith dealt with it through such agent, be estopped from denying the agents authority.
Also, petitioner may be paid on the basis of quantum meruit. "It is essential for the proper
operation of the principle that there is an acceptance of the benefits by one sought to be charged
for the services rendered under circumstances as reasonably to notify him that the lawyer
performing the task was expecting to be paid compensation therefor. The doctrine of quantum
meruit is a device to prevent undue enrichment based on the equitable postulate that it is unjust
for a person to retain benefit without paying for it."
The designs petitioner submitted to Ms. Lopez were not returned. Ms. Lopez, an officer
of the bank as branch manager used such designs for presentation to the board of the bank. Thus,
the designs were in fact useful to Ms. Lopez for she did not appear to the board without any
designs at the time of the deadline set by the board.
Decision reversed and set aside. Decision of the trial court affirmed.

Page 406 of 745


PALATTAO VS. COURT OF APPEALS
381 SCRA 681 MAY 7, 2002

FACTS:

Petitioner Yolanda Palattao entered into a lease contract whereby she leased to private
respondent a house and a 490-square-meter lot located in 101 Caimito Road, Caloocan City,
covered by a Transfer Certificate of Title and registered in the name of petitioner. The duration
of the lease contract was for three years, commencing from January 1, 1991, to December 31,
1993, renewable at the option of the parties. The agreed monthly rental was P7,500.00 for the
first year; P 8,000.00 for the second year: and P8,500.l00 for the third year. The contract gave
respondent lessee the first option to purchase the leased property.

During the last year of the contract, the parties began negotiations for the sale of the
leased premises to private respondent. In a letter, petitioner offered to sell to private respondents
413.28 square meters of the leased lot at P 7,800.00 per square meter, or for the total amount of
P3,223,548.00. Private respondents replied on April 15, 1993 wherein he informed petitioner that
he shall definitely exercise his option to buy the leased property. Private respondent, however,
manifested his desire to buy the whole 490-square meters inquired from petitioner the reason
why only 413.28 square meters of the leased lot were being offered for sale. In a letter dated
November 6, 1993, petitioner made a final offer to sell the lot at P7,500.00 per square meter with
a down payment of 50% upon the signing of the contract of conditional sale, the balance payable
in one year with a monthly lease/interest payment P 14,000.00 which must be paid on or before
the fifth day every month that the balance is still outstanding. Private respondents accepted
petitioners offer and reiterated his request for respondent accepted petitioners offers and
reiterated his request for clarification as to the size of the lot for sale. Petitioner acknowledged
private respondents acceptance of the offer in his letter dated November 10, 1993.

Petitioner gave private respondent on or before November 24, 1993, within which to pay
the 50% downpayment in cash or managers check. Petitioner stressed that failure to pay the
downpayment on the stipulated period will enable petitioner to freely sell her property to others.
Petitioner likewise notified private respondent, that she is no longer renewing the lease
agreement upon its expiration on December 31, 1993.

Private respondent did not accept the terms proposed by petitioner. Neither were there
any documents of sale nor payment by private respondent of the required downpayment. Private
respondent wrote a letter to petitioner on November 29, 1993 manifesting his intention to
exercise his option to renew their lease contract for another three years, starting January 1, 1994
to December 31, 1996. This was rejected by petitioner, reiterating that she was no longer
renewing the lease. Petitioner demanded that private respondent vacate the premises, but the
latter refused.

Hence, private respondent filed with the Regional Trial Court a case for specified
performance seeking to compel petitioner to sell to him the leased property. Private respondent
further prayed for the issuance of a writ preliminary injunction to prevent petitioner from filing
an ejectment case upon the expiration of the lease contract on December 31, 1993.

During the proceedings in the specific performance case, the parties agreed to maintain
the status quo. After they failed to reach an amicable settlement, petitioner filed the instant
ejectment case before the Metropolitan Trial Court. In his answer, private respondent alleged that
he refused to vacate the leased premises because there was a perfected contract of sale of the
leased property between him and petitioner. Private respondent argued that he did not abandon
his option to buy the leased property and that his proposal to renew the lease was but an
alternative proposal to the sale. He further contended that the filing of the ejectment case violated
their agreement to maintain the status quo.

ISSUE:

Page 407 of 745


Whether or not there was a valid consent in the case at bar.

RULING:

There was no valid consent in the case at bar.

Contracts that are consensual in nature, like a contract of sale, are perfected upon mere
meeting of the minds. Once there is concurrence between the offer and the acceptance upon the
subject matter, consideration, and terns of payment, a contract is produced. The offer must be
certain. To convert the offer into a contract, the acceptance must be absolute and must not
qualify the terms of the offer; it must be plain, unequivocal, unconditional, and without variance
of any sort from the proposal. A qualified acceptance, or one that involves a new proposal,
constitutes a counter-offer and is a rejection of the original offer. Consequently, when something
is desired which is not exactly is proposed in the offer, such acceptance is not sufficient to
generate consent because any modification or variation from the terms of the offer annuals the
offer.

In the case at bar, while it is true that private respondent informed petitioner that he is
accepting the latters offer to sell the leased property, it appears that they did not reach an
agreement as to the extent of the lot subject of the proposed sale.

Letters reveal that private respondent did not give his consent to buy only 413.28 square
meters of the leased lot, as he desired to purchase the whole 490 square-meter- leased premises
which, however, was not what was exactly proposed in petitioners offer. Clearly, therefore,
private respondents acceptance of petitioners offer was not absolute, and will consequently not
generate consent that would perfect a contract.

Page 408 of 745


ABS-CBN BROADCASTING CORPORATION VS. COURT OF APPEALS
301 SCRA 573
G.R. No. 128690 January 21, 1999

FACTS:

In 1990, ABS-CBN and VIVA executed a Film Exhibition Agreement whereby Viva
gave ABS-CBN an exclusive right to exhibit some Viva films. Viva, through defendant Del
Rosario, offered ABS-CBN, through its vice-president Charo Santos-Concio, a list of three film
packages (36 title) from which ABS-CBN may exercise its right of first refusal under the afore-
said agreement. ABS-CBN, however through Mrs. Concio, "can tick off only ten titles" (from the
list) "we can purchase" and therefore did not accept said list. The titles ticked off by Mrs. Concio
are not the subject of the case at bar except the film "Maging Sino Ka Man."

On February 27, 1992, defendant Del Rosario approached ABS-CBNs Ms. Concio, with
a list consisting of 52 original movie titles (i.e., not yet aired on television) including the 14 titles
subject of the present case, as well as 104 re-runs (previously aired on television) from which
ABS-CBN may choose another 52 titles, as a total of 156 titles, proposing to sell to ABS-CBN
airing rights over this package of 52 originals and 52 re-runs for P60,000,000.00 of which
P30,000,000.00 will be in cash and P30,000,000.00 worth of television spots.

On April 2, 1992, defendant Del Rosario and ABS-CBNs general manager, Eugenio
Lopez III discussed the package proposal of VIVA. Mr. Lopez testified that he and Mr. Del
Rosario allegedly agreed that ABS-CBN was granted exclusive film rights to fourteen (14) films
for a total consideration of P36 million; that he allegedly put this agreement as to the price and
number of films in a "napkin" and signed it and gave it to Mr. Del Rosario. On the other hand,
Del Rosario denied having made any agreement with Lopez regarding the 14 Viva films; denied
the existence of a napkin in which Lopez wrote something; and insisted that what he and Lopez
discussed at the lunch meeting was Vivas film package offer of 104 films (52 originals and 52
re-runs) for a total price of P60 million.

Del Rosario and Mr. Graciano Gozon of RBS Senior vice-president for Finance discussed
the terms and conditions of Vivas offer to sell the 104 films, after the rejection of the same
package by ABS-CBN. On the following day, Del Rosario received a draft contract from Ms.
Concio which contains a counter-proposal of ABS-CBN on the offer made by VIVA including
the right of first refusal to 1992 Viva Films. However, the proposal was rejected by the Board of
Directors of VIVA and such was relayed to Ms. Concio.
On April 29, 1992, after the rejection of ABS-CBN and following several negotiations
and meetings defendant Del Rosario and Vivas President Teresita Cruz, in consideration of P60
million, signed a letter of agreement dated April 24, 1992, granting RBS the exclusive right to air
104 Viva-produced and/or acquired films including the fourteen films subject of the present case.

On 27 May 1992, ABS-CBN filed before the RTC a complaint for specific performance
with a prayer for a writ of preliminary injunction and/or temporary restraining order against
private respondents Republic Broadcasting System (now GMA Network Inc.) On 28 May 1992,
the RTC issued a temporary restraining order.

The RTC then rendered decision in favor of RBS and against ABS-CBN. On appeal, the
same decision was affirmed. Hence, this decision.

ISSUE:
Whether or not there exists a perfected contract between ABS-CBN and VIVA.

RULING:

Page 409 of 745


A contract is a meeting of minds between two persons whereby one binds himself to give
something or render some service to another [Art. 1305, Civil Code.] for a consideration. There
is no contract unless the following requisites concur:
(1) consent of the contracting parties;
(2) object certain which is the subject of the contract; and
(3) cause of the obligation, which is established. [Art. 1318, Civil Code.]

A contract undergoes three stages:


(a) preparation, conception, or generation, which is the period of negotiation and
bargaining rending at the moment of agreement of the parties;
(b) perfection or birth of the contract, which is the moment when the parties come to
agree on the terms of the contract; and
(c) consummation or death, which is the fulfillment or performance of the terms
agreed upon in the contract.

In the present case, when Mr. Del Rosario of Viva met Mr. Lopez of ABS-CBN on 2
April 1992 to discuss the package of films, said package of 104 VIVA films was VIVAs offer to
ABS-CBN to enter into a new Film Exhibition Agreement. But ABS-CBN, sent through Ms.
Concio, counter-proposal in the form a draft contract proposing exhibition of 53 films for a
consideration of P35 million. This counter-proposal could be nothing less than the counter-offer
of Mr. Lopez during his conference with Del Rosario at Tamarind Grill Restaurant. Clearly,
there was no acceptance of VIVAs offer, for it was met by a counter-offer which substantially
varied the terms of the offer.

Furthermore, ABS-CBN made no acceptance of VIVAs offer hence, they underwent


period of bargaining. ABS-CBN then formalized its counter-proposals or counter-offer in a draft
contract. VIVA through its Board of Directors, rejected such counter-offer. Even if it be
conceded arguendo that Del Rosario had accepted the counter-offer, the acceptance did not bind
VIVA, as there was no proof whatsoever that Del Rosario had the specific authority to do so.

The instant petition was GRANTED.

Page 410 of 745


LOURDES ONG LIMSON VS. COURT of APPEALS, et al
357 SCRA 209
G. R. No. 135929 April 20, 2001

FACTS:

In July 1978, respondent spouses Lorenzo de Vera and Asuncion Santos-de Vera, through
their agent Marcosa Sanchez, offered to sell to petitioner Lourdes Ong Limson a parcel of land.
The respondent spouses were the owners of the subject property.

On July 31, 1978, she agreed to but the property at the price of P34. 00 per square meter
and gave P20, 000.00 as earnest money. The respondent spouses signed a receipt thereafter
and gave her a 10-day option period to purchase the property. Respondent spouses informed
petitioner that the subject property was mortgaged to Emilio Ramos and Isidro Ramos. Petitioner
was asked to pay the balance of the purchase price to enable the respondent spouses to settle
their obligation with the Ramoses. Petitioner agreed to meet respondent spouses and the
Ramoses on August 5, 1978, to consummate the transaction; however, the respondent spouses
and the Ramoses did not appear, same with their second meeting.

On August 23, 1978, petitioner allegedly gave respondent spouses three checks for the
settlement the back taxes of property. On September 5, 1978, the agent of the respondent
spouses informed petitioner that the property was the subject of a negotiation for the sale to
respondent Sunvar Realty Development Corporation.

Petitioner alleged that it was only on September 15, 1978, that TCT No. S-72946
covering the property was issued to respondent spouses. On the same day, petitioner filed and
Affidavit of Adverse Claim with the Office of the Registry of Deeds of Makati, Metro Manila.
The Deed of Sale between respondent spouses and respondent Sunvar was executed on
September 15, 1978 and TCT No. S-72377 was issued in favor of Sunvar on September 26, 1978
with the Adverse Claim of petitioner annotated thereon.

Respondent spouses and Sunvar filed their Answers and Answers to Cross-Claim,
respectively. On appeal, the Court of Appeals completely reversed the decision of the trial court
and ordered the Register of Deeds of Makati City to lift the Adverse Claim and ordered
petitioner to pay respondent Sunvar and respondent spouses exemplary and nominal damages
and attorneys fees. Hence, this petition.

ISSUE:

Whether or not the agreement between petitioner and respondent spouses was a mere
option or a contract to sell.

RULING:

The Supreme Court held that the agreement between the parties was a contract of option
and not a contract to sell. An option is continuing offer or contract by which the owner stipulates
with another that the latter shall have the right to buy the property at a fixed price within a time
certain, or under, or in compliance with, certain terms and conditions, or which gives the owner
of the property the right to sell or demand a sale. It is also sometimes called an unaccepted
offer. An option is not of itself a purchase, but merely secures the privilege to buy. It is not a
sale of property but a sale of the right to purchase. Its distinguishing characteristic is that it
imposes no binding obligation on the person holding the option, aside from the consideration for
the offer.

Page 411 of 745


REYNALDO VILLANUEVA vs. PHILIPPINE NATIONAL BANK
G.R. NO. 154493 December 6, 2006

FACTS:

The Special Assets Management Department (SAMD) of PNB issued an advertisement


for the sale thru bidding of certain PNB properties including Lot No. 17, covered by TCT No. T-
15042, with an advertised floor price of P1,409,000.00, and Lot No. 19, covered by TCT No. T-
15036, with an advertised floor price of P2,268,000.00. Bidding was subject to the following
conditions: 1) that cash bids be submitted not later than April 27, 1989; 2) that said bids be
accompanied by a 10% deposit in managers or cashiers check; and 3) that all acceptable bids be
subject to approval by PNB authorities.

In a June 28, 1990 letter to the Manager, Reynaldo Villanueva offered to purchase Lot
Nos. 17 and 19 for P3,677,000.00. He also manifested that he was depositing P400,000.00 to
show his good faith but with the understanding that said amount may be treated as part of the
payment of the purchase price only when his offer is accepted by PNB. At the bottom of said
letter there appears an unsigned marginal note stating that P400,000.00 was deposited into
Villanuevas account (Savings Account No. 43612) with PNB-General Santos Branch.

Guevara, the vice-president informed Villanueva that only Lot No. 19 is available and
that the asking price therefor is P2,883,300.00. PNB also stated that if quoted price is acceptable
to Villanueva, then the latter must submit a revised offer to purchase. And Sale shall be subject
to its Board of Directors approval and to other terms and conditions imposed by the Bank on
sale of acquired assets.

Instead of submitting a revised offer, Villanueva merely inserted at the bottom of


Guevaras letter a July 11, 1990 marginal note, which reads:

C O N F O R M E:

PRICE OF P2,883,300.00 (downpayment of P600,000.00 and the balance payable in


two (2) years at quarterly amortizations.)

Villanueva paid P200,000.00 to PNB which issued O.R. No. 16997 to acknowledge
receipt of the partial payment deposit on offer to purchase. On the dorsal portion of Official
Receipt No. 16997, Villanueva signed a typewritten note, stating:

This is a deposit made to show the sincerity of my purchase offer with the understanding
that it shall be returned without interest if my offer is not favorably considered or be forfeited if
my offer is approved but I fail/refuse to push through the purchase.

Also, on July 24, 1990, P380,000.00 was debited from Villanuevas Savings Account No.
43612 and credited to SAMD.

On October 11, 1990, however, Guevara wrote Villanueva that upon orders of the PNB
Board of Directors to conduct another appraisal and public bidding of Lot No. 19, SAMD is
deferring negotiations with him over said property and returning his deposit of P580,000.00.
Undaunted, Villanueva attempted to deliver postdated checks covering the balance of the
purchase price but PNB refused the same.

Hence, Villanueva filed with the RTC a Complaint for specific performance and damages
against PNB. The RTC rendered judgment in favor of the plaintiff and against the defendant
directing it to execute a deed of sale in favor of the plaintiff over Lot 19 comprising after
payment of the balance in cash in the amount of P2,303,300.00 and to pay the plaintiff

Page 412 of 745


P1,000,000.00 as moral damages; P500,000.00 as attorneys fees, plus litigation expenses and
costs of the suit.

PNB appealed to the CA which reversed and set aside the RTC decision.

ISSUE:

Whether or not a perfected contract of sale exists between petitioner and respondent
PNB.

RULING:

The Court sustained the CA. The CA held that the case at bench, consent, in respect to
the price and manner of its payment, is lacking. The record shows that appellant, thru Guevaras
July 6, 1990 letter, made a qualified acceptance of appellees letter-offer dated June 28, 1990 by
imposing an asking price of P2,883,300.00 in cash for Lot 19. The letter dated July 6, 1990
constituted a counter-offer (Art. 1319, Civil Code), to which appellee made a new proposal, i.e.,
to pay the amount of P2,883,300.00 in staggered amounts, that is, P600,000.00 as downpayment
and the balance within two years in quarterly amortizations.

A qualified acceptance, or one that involves a new proposal, constitutes a counter-offer


and a rejection of the original offer (Art. 1319, id.). Consequently, when something is desired
which is not exactly what is proposed in the offer, such acceptance is not sufficient to generate
consent because any modification or variation from the terms of the offer annuls the offer.
Appellees new proposal, which constitutes a counter-offer, was not accepted by appellant, its
board having decided to have Lot 19 reappraised and sold thru public bidding.

Page 413 of 745


CATALAN vs. BASA
JULY 31, 2007

FACTS:

On October 20, 1948, FELICIANO CATALAN Feliciano was discharged from active
military service. The Board of Medical Officers of the Department of Veteran Affairs found that
he was unfit to render military service due to his schizophrenic reaction, catatonic type, which
incapacitates him because of flattening of mood and affect, preoccupation with worries,
withdrawal, and sparse and pointless speech.
On September 28, 1949, Feliciano married Corazon Cerezo.
On June 16, 1951, a document was executed, titled Absolute Deed of Donation,
wherein Feliciano allegedly donated to his sister MERCEDES CATALAN one-half of the real
property described, viz:
A parcel of land located at Barangay Basing, Binmaley, Pangasinan. Bounded on the
North by heirs of Felipe Basa; on the South by Barrio Road; On the East by heirs of Segundo
Catalan; and on the West by Roman Basa. Containing an area of Eight Hundred One (801)
square meters, more or less. The donation was registered with the Register of Deeds.
On December 11, 1953, Peoples Bank and Trust Company filed a Special Proceedings
before the Court of First Instance to declare Feliciano incompetent. On December 22, 1953, the
trial court issued its Order for Adjudication of Incompetency for Appointing Guardian for the
Estate and Fixing Allowance of Feliciano. The following day, the trial court appointed Peoples
Bank and Trust Company as Felicianos guardian. Peoples Bank and Trust Company has been
subsequently renamed, and is presently known as the Bank of the Philippine Islands (BPI).
On November 22, 1978, Feliciano and Corazon Cerezo donated Lots 1 and 3 of their
property, registered under Original Certificate of Title (OCT) No. 18920, to their son Eulogio
Catalan.
Mercedes sold the property in issue in favor of her children Delia and Jesus Basa. The
Deed of Absolute Sale was registered with the Register of Deeds and a Tax Declaration was
issued in the name of respondents.
Feliciano and Corazon Cerezo donated Lot 2 of the aforementioned property registered
under OCT No. 18920 to their children Alex Catalan, Librada Catalan and Zenaida Catalan. On
February 14, 1983, Feliciano and Corazon Cerezo donated Lot 4 (Plan Psu-215956) of the same
OCT No. 18920 to Eulogio and Florida Catalan.
BPI, acting as Felicianos guardian, filed a case for Declaration of Nullity of Documents,
Recovery of Possession and Ownership, as well as damages against the herein respondents. BPI
alleged that the Deed of Absolute Donation to Mercedes was void ab initio, as Feliciano never
donated the property to Mercedes. In addition, BPI averred that even if Feliciano had truly
intended to give the property to her, the donation would still be void, as he was not of sound
mind and was therefore incapable of giving valid consent. Thus, it claimed that if the Deed of
Absolute Donation was void ab initio, the subsequent Deed of Absolute Sale to Delia and Jesus
Basa should likewise be nullified, for Mercedes Catalan had no right to sell the property to
anyone. BPI raised doubts about the authenticity of the deed of sale, saying that its registration
long after the death of Mercedes Catalan indicated fraud. Thus, BPI sought remuneration for
incurred damages and litigation expenses.
On August 14, 1997, Feliciano passed away. The original complaint was amended to
substitute his heirs in lieu of BPI as complainants in Civil Case No. 17666.
The trial court found that the evidence presented by the complainants was insufficient to
overcome the presumption that Feliciano was sane and competent at the time he executed the
deed of donation in favor of Mercedes Catalan. Thus, the court declared, the presumption of
sanity or competency not having been duly impugned, the presumption of due execution of the
donation in question must be upheld. The Court of Appeals upheld the trial courts decision.

ISSUE:

Whether said decision of the lower courts is correct.

Page 414 of 745


RULING:

Petitioners questioned Felicianos capacity at the time he donated the property, yet did
not see fit to question his mental competence when he entered into a contract of marriage with
Corazon Cerezo or when he executed deeds of donation of his other properties in their favor.
The presumption that Feliciano remained competent to execute contracts, despite his illness, is
bolstered by the existence of these other contracts. Competency and freedom from undue
influence, shown to have existed in the other acts done or contracts executed, are presumed to
continue until the contrary is shown.
Needless to state, since the donation was valid, Mercedes had the right to sell the
property to whomever she chose. Not a shred of evidence has been presented to prove the claim
that Mercedes sale of the property to her children was tainted with fraud or falsehood. It is of
little bearing that the Deed of Sale was registered only after the death of Mercedes. What is
material is that the sale of the property to Delia and Jesus Basa was legal and binding at the time
of its execution. Thus, the property in question belongs to Delia and Jesus Basa.
petitioners raised the issue of prescription and laches for the first time on appeal before
this Court. It is sufficient for this Court to note that even if the present appeal had prospered, the
Deed of Donation was still a voidable, not a void, contract. As such, it remained binding as it
was not annulled in a proper action in court within four years.
IN VIEW WHEREOF, there being no merit in the arguments of the petitioners, the
petition is DENIED. The CA decision was affirmed in toto.

Page 415 of 745


DOMINGO V. COURT OF APPEALS
G.R. No. 127540. October 17, 2001

FACTS:

Paulina Rigonan owned three parcels of land including the house and warehouse on one parcel.
She allegedly sold them to private respondents, the spouses Felipe and Concepcion Rigonan,
who claim to be her relatives. In 1966, petitioners who claim to be her closest surviving
relatives, allegedly took possession of the properties by means of stealth, force and intimidation,
and refused to vacate the same. According to defendants, the alleged deed of absolute sale was
void for being spurious as well as lacking consideration. They said that Paulina Rigonan did not
sell her properties to anyone. As her nearest surviving kin within the fifth degree of
consanguinity, they inherited the three lots and the permanent improvements thereon when
Paulina died. They said they had been in possession of the contested properties for more than 10
years.

ISSUE:

1.) Whether or not the consideration in Deed of Sale can be used to impugn the validity of the
Contract of Sale.
2.) Whether or not the alleged Deed of Sale executed by Paulina Rigonan in favor of the private
respondents is valid.

RULING:

1.) Consideration is the why of a contract, the essential reason which moves the contracting
parties to enter into the contract. The Court had seen no apparent and compelling reason for her
to sell the subject 9 parcels of land with a house and warehouse at a meager price of P850 only.
On record, there is unrebutted testimony that Paulina as landowner was financially well off. She
loaned money to several people. Undisputably, the P850.00 consideration for the nine (9) parcels
of land including the house and bodega is grossly and shockingly inadequate, and the sale is null
and void ab initio.

2.) The Curt ruled in the negative. Private respondents presented only a carbon copy of this deed.
When the Register of Deeds was subpoenaed to produce the deed, no original typewritten deed
but only a carbon copy was presented to the trial court. None of the witnesses directly testified
to prove positively and convincingly Paulinas execution of the original deed of sale. The carbon
copy did not bear her signature, but only her alleged thumbprint. Juan Franco testified during the
direct examination that he was an instrumental witness to the deed. However, when cross-
examined and shown a copy of the subject deed, he retracted and said that said deed of sale was
not the document he signed as witness.

Page 416 of 745


MENDOZANA, ET AL. V. OZAMIZ ET AL.
G.R. No. 143370, February 6, 2002

FACTS:

Petitioner spouses Mario J. Mendezona and Teresita M. Mendezona, petitioner spouses


Luis J. Mendezona and Maricar L. Mendezona, and petitioner Teresita Adad Vda. de Mendezona
own a parcel of land each with almost similar areas of 3,462 square meters, 3,466 square meters
and 3,468 square meters. The petitioners ultimately traced their titles of ownership over their
respective properties from a notarized Deed of Absolute Sale executed in their favor by Carmen
Ozamiz. The petitioners initiated the suit to remove a cloud on their said respective titles caused
by the inscription thereon. The respondents opposed the petitioners claim of ownership of the
said parcels of land alleging that the titles issued in the petitioners names are defective and
illegal, and the ownership of the said property was acquired in bad faith and without value
inasmuch as the consideration for the sale is grossly inadequate and unconscionable.
Respondents further alleged that at the time of the sale as alleged, Carmen Ozamiz was already
ailing and not in full possession of her mental faculties; and that her properties having been
placed in administration, she was in effect incapacitated to contract with petitioners. They argue
that the Deed of Absolute sale is a simulated contract.

ISSUE:

Whether or not the Deed of Absolute Sale in the case at bar was simulated.

RULING:

The Court ruled that the Deed in the case at bar is not a simulated contract. Simulation is
defined as the declaration of a fictitious will, deliberately made by agreement of the parties, in
order to produce, for the purposes of deception, the appearances of a juridical act which does not
exist or is different from what that which was really executed. The requisites of simulation are:
(a) an outward declaration of will different from the will of the parties; (b) the false appearance
must have been intended by mutual agreement; and (c) the purpose is to deceive third persons.
None of these were clearly shown to exist in the case at bar. The Deed of Absolute Sale is a
notarized document duly acknowledged before a notary public. As such, it has in its favor the
presumption of regularity, and it carries the evidentiary weight conferred upon it with respect to
its due execution. It is admissible in evidence without further proof of its authenticity and is
entitled to full faith and credit upon its face. The burden fell upon the respondents to prove their
allegations attacking the validity and due execution of the said Deed of Absolute Sale.
Respondents failed to discharge that burden; hence, the presumption in favor of the said deed
stands.

Page 417 of 745


LIM VS. COURT OF APPEALS
G.R. No. 55201, February 3, 1994

FACTS:

The deceased spouses Tan Quico and Josefa Oraa, who both died intestate left 96
hectares of land. The late spouses were survived by four children; Cresencia, Lorenzo,
Hermogenes and Elias. Elias died on May 2, 1935. Cresencia died on December 20, 1967. She
was survived by her husband, Lim Chay Sing, and children, Mariano, Jaime, Jose Jovita,
Anacoreta, Antonietta, Ruben, Benjamin and Rogelio who are now the petitioners in the case at
bench.
The Cresencia only reached the second grade of elementary school. She could not read or
write in English. On the other hand, Lorenzo is a lawyer and a CPA. Heirs of Cresencia alleged
that since the demise of the spouses Tan Quico and Josefa Oraa, the subject properties had been
administered by respondent Lorenzo. They claimed that before her death, Cresencia had
demanded their partition from Lorenzo. After Cresencias death, they likewise clamored for their
partition. Their effort proved fruitless.
Respondents Lorenzo and Hermogenes unyielding stance against partition is based on
various contentions. They cited as evidence the Deed of Confirmation of Extra Judicial
Settlement of the Estate of Tan Quico and Josefa Oraa and a receipt of payment. Principally,
they urge that the properties had already been partitioned, albeit, orally; and during her lifetime,
the late Cresencia had sold and conveyed all her interests in said properties to respondent
Lorenzo.

ISSUE:

Whether or not there is error or mistake in the signing of the Deed.

RULING:

There is an error in the signing of the Deed.


Article 1332 of the Civil Code provides: When one of the parties is unable to read, or if
the contract is in a language not understood by him, and mistake or fraud is alleged, the person
enforcing the contract must show that the terms thereof have been fully explained to the former.
In the case at bar, the questioned Deed is written in English, a language not understood
by Cresencia an illiterate in the said language. It was prepared by the respondent Lorenzo, a
lawyer and CPA. Lorenzo did not cause the notarization of the Deed. Considering these
circumstances, the burden was on private respondents to prove that the content of the Deed was
explained to the illiterate Cresencia before she signed it. In this regard, the evidence adduced by
the respondents failed to discharge their burden.
This substantive law came into being due to the finding of the Code Commission that
there is still a fairly large number of illiterates in this country, and documents are usually drawn
up in English or Spanish. It is also in accord with our state policy of promoting social justice. It
also supplements Article 24 of the Civil Code which calls on court to be vigilant in the protection
of the rights of those who are disadvantaged in life.

Page 418 of 745


RUIZ VS. COURT OF APPEALS
G.R. NO. 146942 APRIL 22, 2003

FACTS:

Petitioner Corazon Ruiz is engaged in the business of buying and selling jewelry. She
obtained loans from private respondent Consuelo Torres on different occasions and in different
amounts. Prior to their maturity, the loans were consolidated under 1 promissory note worth
P750 000 secured by real estate mortgage of a land registered to petitioner.
Petitioner obtained 3 more loans from private respondent worth P100 000 each. These
combined loans of P300 000 were secured by jewelry pledged by petitioner to private respondent
worth P571 000.
Petitioner paid the stipulated 3% monthly interest on the P750 000 loan, amounting to
P270 000. After March 1996, petitioner was unable to make interest payments as she had
difficulties collecting from her clients in her jewelry business.
Because of petitioners failure to pay the principal loan of P750 000, as well as the
interest payment, private respondent demanded payment not only of the P750 000 loan but also
of the P300 000 loan. When petitioner failed to pay, private respondent sought the extrajudicial
foreclosure of the aforementioned real estate mortgage.

ISSUE:

Whether or not there is undue influence in the signing of the promissory note.

RULING:

The fact that petitioner and private respondent had entered into not only one but several
loan transactions shows that petitioner was not in any way compelled to accept the terms
allegedly imposed by private respondent.
The promissory notes in question did not contain any fine print provision which could
have escaped the attention of the petitioner. Petitioner had all the time to go over and study the
stipulations embodied in the promissory notes. These promissory notes contain similar terms and
conditions, with a little variance in the terms of interests and surcharges. Moreover, petitioner,
in her complaint never claimed that she was forced to sign the subject note.

Page 419 of 745


DELA CRUZ V. SISON
G.R. No. 163770 February 17, 2005

FACTS:

Epifania Dela Cruz alleged that in 1992, she discovered that her rice land in has been
transferred and registered in the name of her nephew, Eduardo C. Sison, without her knowledge
and consent, purportedly on the strength of a Deed of Sale she executed.
Epifania then filed a complaint praying to declare the deed of sale null and void. She alleged
that Eduardo tricked her into signing the Deed of Sale, by inserting the deed among the
documents she signed pertaining to the transfer of her residential land, house and camarin, in
favor of Demetrio, her foster child and the brother of Eduardo.
Respondents, spouses Eduardo and Eufemia Sison denied that they employed fraud or trickery in
the execution of the Deed of Sale. They claimed that they purchased the property from Epifania
for P20 000 and that the deed was duly notarized, complied with all requisites for its registration,
as evidenced by the Investigation Report by the Department of Agrarian Reform, Affidavit of
Seller/Transferor, Affidavit of Buyer/Transferee, Certification issued by the Provincial Agrarian
Reform Officer, Letter for the Secretary of Agrarian Reform, Certificate Authorizing Payment of
Capital Gains Tax, and the payment of the registration fees. Some of these documents even bore
the signature of Epifania which only proves that she agreed to the transfer of the property.

ISSUE:

1.) Whether fraud attended the execution of a contract


2.) Whether the deed of absolute sale is valid.

RULING:

1.) A comparison of the deed of sale in favor of Demetrio and the deed of sale in favor Eduardo,
draws out the conclusion that there was no trickery employed. One can readily see that the first
deed of sale is in all significant respects different from the second deed of sale. A casual perusal,
even by someone as old as Epifania, would enable one to easily spot the differences. Epifania
could not have failed to miss them.
The Court is bound by the appellate courts findings, unless they are contrary to those of the trial
court, in which case we may wade into the factual dispute to settle it with finality.

2.) After a careful perusal of the records, we sustain the Court of Appeals ruling that the Deed of
Absolute Sale dated November 24, 1989 is valid.
There being no evidence adduced to support her bare allegations, thus, Epifania failed to
satisfactorily establish her inability to read and understand the English language.
Although Epifania was 79 years old at the time of the execution of the assailed contract, her age
did not impair her mental faculties as to prevent her from properly and intelligently protecting
her rights. Even at 83 years, she exhibited mental astuteness when she testified in court. It is,
therefore, inconceivable for her to sign the assailed documents without ascertaining their
contents, especially if, as she alleges, she did not direct Eduardo to prepare the same.

Page 420 of 745


RURAL BANK OF ST. MARIA, PANGASINAN V. COURT OF APPEALS
G.R. No. 110672. September 14, 1999

FACTS:

Real Estate Mortgage as a security for loans obtained amounting to P156 270 was
executed by Manuel Behis on a land in favor of Rural Bank of St. Maria, Pangasinan. But
Manuel, being a delinquent, sold the land, evidenced by a Deed of Absolute Sale with
Assumption of Mortgage to Rayandayan and Arceo for the sum of P250 000. On the same day,
Rayandayan and Arceo, together with Manual Behis executed another Agreement embodying
the consideration of the sale of the land in the sum of P2.4 million. The land, however, remained
in the name of Behis because the former did not present to the Register of Deeds the contracts.
Rayandaran and Arceo presented the Deed of Absolute Sale to the bank and negotiated
with the principal stockholder of the bank for the assumption of the indebtedness of Manuel
Behis and the subsequent release of the mortgage on the property by the bank. Rayandaran and
Arceo did not show to the bank the agreement with Manuel Behis providing for the real
consideration of P2.4 million. Subsequently, the bank consented to the substitution of plaintiffs
as mortgage debtors in place of Manuel Behis in a Memorandum of Agreement between private
respondents and the bank with restricted and liberalized terms for the payment of the mortgage
debt including the initial payment of P143 782.22.
Due to the appearance of Christina Behis, Manuels wife and a co-signatory in the
mortgaged land alleging that her signature in the deed of sale was forged, the bank discontinued
to comply with the Memorandum of Agreement considering it to be void.
In a letter, plaintiffs demanded that the bank comply with its obligation under the
Memorandum of Agreement to which the latter denied. Petitioner bank argued that the
Memorandum of Agreement is voidable on the ground that its consent to enter said agreement
was vitiated by fraud because private respondents withheld from petitioner bank the material
information that the real consideration for the sale with assumption of mortgage of the property
by Manuel Behis to Rayandayan and Arceo is P2,400,000.00, and not P250,000.00 as
represented to petitioner bank. According to petitioner bank, had it known for the real
consideration for the sale, i.e. P2.4 million, it would not have consented into entering the
Memorandum of Agreement with Rayandayan and Arceo as it was put in the dark as to the real
capacity and financial standing of private respondents to assume the mortgage from Manuel
Behis.

ISSUE:

Whether or not there existed a fraud in the case at bar.

RULING:

The Court ruled that there was no fraud in the case at bar. It is believed that the non-
disclosure to the bank of the purchase price of the sale of the land between private respondents
and Manuel Behis cannot be the fraud contemplated by Article 1338 of the Civil Code.
The kind of fraud that will vitiate a contract refers to those insidious words or
machinations resorted to by one of the contracting parties to induce to the other to enter into a
contract which without them he would not have agreed to. Simply stated, the fraud must be
determining cause of the contract, or must have caused the consent to be given.
Pursuant to Art. 1339 of the Code, silence or concealment, by itself, does not constitute
fraud unless there is a special duty to disclose certain facts. In the case at bar, private
respondents had no duty to do such.
From the sole reason submitted by the petitioner bank that it was kept in the dark as to the
financial capacity of private respondents, the Court cannot see how the omission or concealment
of the real purchase price could have induced the bank into giving its consent to the agreement;
or that the bank would not have otherwise given its consent had it known of the real purchase
price.

Page 421 of 745


CARABEO VS DINGCO
G.R. No. 190823, April 04, 2011

FACTS:
On July 10, 1990, Domingo Carabeo (petitioner) entered into a contract denominated as
"Kasunduan sa Bilihan ng Karapatan sa Lupa" with Spouses Norberto and Susan Dingco
(respondents) whereby petitioner agreed to sell his rights over a 648 square meter parcel of
unregistered land situated in Purok III, Tugatog, Orani, Bataan to respondents for P38,000.
Respondents tendered their initial payment of P10,000 upon signing of the contract, the
remaining balance to be paid on September 1990. Respondents were later to claim that when
they were about to hand in the balance of the purchase price, petitioner requested them to keep it
first as he was yet to settle an on-going "squabble" over the land. Sometime in 1994, respondents
learned that the alleged problem over the land had been settled and that petitioner had caused its
registration in his name on December 21, 1993 under Transfer Certificate of Title No. 161806.
They thereupon offered to pay the balance but petitioner declined, drawing them to file a
complaint before the Katarungan Pambarangay. No settlement was reached, however, hence,
respondent filed a complaint for specific performance before the Regional Trial Court (RTC) of
Balanga, Bataan.
The trial court ruled in favor of respondents. CA affirmed RTC. Hence this petition.

ISSUE:

Whether or not the CA erred in their decision by favoring respondents.

RULING:

The Supreme Court denied the petition. The court contends that the KASUNDUAN
which pertinent portion reads Na ako ay may isang partial na lupa na matatagpuan sa Purok
111, Tugatog, Orani Bataan, na may sukat na 27 x 24 metro kuwadrado, ang nasabing lupa ay
may sakop na dalawang punong santol at isang punong mangga, kaya't ako ay nakipagkasundo
sa mag-asawang Norby Dingco at Susan Dingco na ipagbili sa kanila ang karapatan ng nasabing
lupa sa halagang P38,000.00, That the kasunduan did not specify the technical boundaries of the
property did not render the sale a nullity. The requirement that a sale must have for its object a
determinate thing is satisfied as long as, at the time the contract is entered into, the object of the
sale is capable of being made determinate without the necessity of a new or further agreement
between the parties. As the above-quoted portion of the kasunduan shows, there is no doubt that
the object of the sale is determinate. In the present case, respondents are pursuing a property
right arising from the kasunduan, whereas petitioner is invoking nullity of the kasunduan to
protect his proprietary interest. Assuming arguendo, however, that the kasunduan is deemed
void, there is a corollary obligation of petitioner to return the money paid by respondents, and
since the action involves property rights. The death of a client immediately divests the counsel of
authority. Thus, in filing a Notice of Appeal, petitioner's counsel of record had no personality to
act on behalf of the already deceased client who, it bears reiteration, had not been substituted as a
party after his death.

Page 422 of 745


CHAVEZ VS. PUBLIC ESTATES AUTHORITY
G.R. No. 133250, 9 July 2002

FACTS:

The Senate Blue Ribbon Committee and Committee on Accountability of Public Officers
conducted public hearings to determine the actual market value of the public lands along Roxas
Boulevard under controversy. The investigation found out that the sale of such was lands grossly
undervalued based on official documents submitted by the proper government agencies during
the investigations. It was found out that the Public Estates Authority, under the Joint Venture
Agreement, sold it to Amari Coastal Bay Development Corporation 157.84 hectares of reclaimed
public lands totaling to P 1.89 B or P 1,200 per square meter. However during the investigation
process, the BIR pitted the value at P 7,800 per square meter, while the Municipal Assessor of
Paraaque at P 6,000 per square meter and by the Commission on Audit (COA) at P21,333 per
square meter. Based on the official appraisal of the COA, the actual loss on the part of the
government is a gargantuan value of P 31.78 B. However, PEA justified the purchase price based
from the various appraisals of private real estate corporations, amounting from P 500 1,000 per
square meter. Further, it was also found out that there were various offers from different private
entities to buy the reclaimed public land at a rate higher than the offer of Amari, but still, PEA
finalized the JVA with Amari. During the process of investigation, Amari did not hide the fact
that they agreed to pay huge commissions and bonuses to various persons for professional efforts
and services in successfully negotiating and securing for Amari the JVA. The amount
constituting the commissions and bonuses totaled to a huge P 1.76 B; an indicia of great bribery.

ISSUE:

Whether or not the sale of public lands between PEA and Amari is constitutional.

RULING:

The Court found that the sale is unconstitutional, because what was sold or alienated are
lands of the public domain. Taking the fact the sold parcel of land is submerged land is
inalienable. As unequivocally stated in Article XII, Section 2 of the Constitution, all lands of the
public domain, waters, minerals, coals, petroleum, forces which are potential energies, fisheries,
forests or timber, wildlife, flora and fauna, and other natural resources, with the exception of
agricultural lands, are inalienable. Submerged lands fall within the scope of such provision.
Ergo, the submerged lands, being inalienable and outside the commerce of man, could
not be the subject of the commercial transactions specified in the Amended JVA. Hence, the
contract between Amari and the PEA is void.

Page 423 of 745


MELLIZA VS. CITY OF ILOILO
G.R No. L-24732, April 30, 1968

FACTS:

Juliana Melliza owned three parcels of residential land. She sold to the Municipality of
Iloilo a certain lot to serve as site for the municipal hall. The donation was however revoked by
the parties for the reason that area was found inadequate to meet the requirements of the
development plan. Subsequently the said lot was divided into several divisions. She then sold
her remaining interest on the said lot to Remedios San Villanueva. Remedios in turn transferred
the rights to said portion of land to Pio Sian Melliza. The transfer Certificate of title in Mellizas
name bears on annotation stating that a portion of said lot belongs to the Municipality of Iloilo.
Later the City of Iloilo donated the city hall site to the University of the Philippines,
Iloilo which fenced the same with iron wires.
Pio Sian Melliza then filed action against Iloilo City and the University of the Philippines
for recovery of the parcel of land or of its value.
Petitioner contends that the claimed lot was not included in those lots which were sold by
Juliana Melliza to Iloilo City and further asserts that the Deed of Sale invalid because the law
requires as an essential element of sale, determinate object, which was blur in the case at bar.

ISSUE:

Whether or not the Deed of Sale should be declared invalid because the object is not determinate
as required by law.

RULING:

Article 1460 of the Civil Code states that the sale must have for its object a determinate
thing, is fulfilled as long as, at the time the contract is entered into, the object of the sale is cable
of being determinate without the necessity of a new or further agreement between the parties.
The specific mention of some of the lots plus the statement that the lots object of the sale
are the ones needed for city hall site sufficient provides a basis, as of the time, of the execution
of the contract, for rendering determinate said lots without the need of a new further agreement
of the parties.

Page 424 of 745


CATINDIG VS. VDA. DE MENESES
G.R. No. 165851 : February 02, 201

FACTS:

The property subject of this controversy pertains to a parcel of land situated in Malolos,
Bulacan, with an area of 49,139 square meters, titled in the name of the late Rosendo Meneses,
Sr., under Transfer Certificate of Title (TCT) No. T-1749. Respondent Aurora Irene C. Vda. de
Meneses is the surviving spouse of the registered owner, Rosendo Meneses, Sr.. She was issued
Letters of Administration over the estate of her late husband. On May 17, 1995, respondent, in
her capacity as administratrix of her husband's estate, filed a Complaint for Recovery of
Possession, Sum of Money and Damages against petitioners Manuel Catindig and Silvino Roxas,
Sr. before the Regional Trial Court of Malolos, Bulacan, to recover possession over the
Masusuwi Fishpond.
Respondent alleged that in September 1975, petitioner Catindig, the first cousin of her
husband, deprived her of the possession over the Masusuwi Fishpond, through fraud, undue
influence and intimidation.
Petitioner Catindig maintained that he bought the Masusuwi Fishpond from respondent
and her children in January 1978, as evidenced by a Deed of Absolute Sale. Catindig further
argued that even assuming that respondent was indeed divested of her possession of the
Masusuwi Fishpond by fraud, her cause of action had already prescribed considering the lapse of
about 20 years from 1975, which was allegedly the year when she was fraudulently deprived of
her possession over the property.
After trial, the trial court ruled in favor of respondent.
The CA dismissed both the petitioners' appeals and affirmed the RTC.

ISSUE:

Whether the Court of Appeals seriously and gravely erred in disregarding the
genuineness and due execution of the deed of absolute sale.

RULING:

The Supreme Court denied the petition. The Supreme Court is convinced that the Deed of
Absolute Sale relied upon by the defendants, petitioners herein is simulated and fictitious and has
no consideration. On its face, the Deed of Absolute sale is not complete and is not in due form.
It is a 3-page document but with several items left unfilled or left blank, like the day the
document was supposed to be entered into, the tax account numbers of the persons appearing as
signatories to the document and the names of the witnesses. In other words, it was not witnessed
by any one. More importantly, it was not notarized.
The Court also finds no compelling reason to depart from the court a quo's finding that
respondent never received the consideration stipulated in the simulated deed of sale. Defendant
[petitioner herein] Catindig declared that plaintiff and her children signed the instrument freely
and voluntarily and that the consideration of P150,000.00 as so stated in the document was paid
by him to plaintiff . However, it is not denied that the title to this property is still in the name of
Rosendo Meneses, Sr., and the owner's duplicate copy of the title is still in the possession of the
plaintiff.
Since it was well established that the Deed of Sale is simulated and, therefore void,
petitioners' claim that respondent's cause of action is one for annulment of contract, which
already prescribed, is unavailing, because only voidable contracts may be annulled. On the other
hand, respondent's defense for the declaration of the inexistence of the contract does not
prescribe.

Page 425 of 745


ORDUA VS. FUENTEBELLA et. Al
G.R. No. 176841 : June 29, 2010

FACTS:

This case involves a residential lot with an area of 74 square meters located at Fairview
Subdivision, Baguio City, originally registered in the name of Armando Gabriel, Sr. under
Transfer Certificate of Title (TCT) No. 67181 of the Registry of Deeds of Baguio City.
Sometime in 1996 or thereabouts, Gabriel Sr. sold the subject lot to petitioner Antonita
Ordua, but no formal deed was executed to document the sale. The contract price was apparently
payable in installments as Antonita remitted from time to time and Gabriel Sr. accepted partial
payments. One of the Orduas would later testify that Gabriel Sr. agreed to execute a final deed of
sale upon full payment of the purchase price.
In 1979, Antonita and her sons, Dennis and Anthony Ordua, were already occupying the
subject lot on the basis of some arrangement undisclosed in the records and even constructed
their house thereon. They also paid real property taxes for the house and declared it for tax
purposes, as evidenced by Tax Declaration in which they place the assessed value of the
structure at PhP 20,090.
After the death of Gabriel Sr., his son and namesake, respondent Gabriel Jr., secured TCT
No. T-71499 over the subject lot and continued accepting payments from the petitioners. On
December 12, 1996, Gabriel Jr. wrote Antonita authorizing her to fence off the said lot and to
construct a road in the adjacent lot. On December 13, 1996, Gabriel Jr. acknowledged receipt of
a PhP 40,000 payment from petitioners. Through a letter dated May 1, 1997, Gabriel Jr.
acknowledged that petitioner had so far made an aggregate payment of PhP 65,000, leaving an
outstanding balance of PhP 60,000. A receipt Gabriel Jr. issued dated November 24, 1997
reflected a PhP 10,000 payment. Despite all those payments made for the subject lot, Gabriel Jr.
would later sell it to Bernard Banta (Bernard) obviously without the knowledge of petitioners.
On July 3, 2001, petitioners, joined by Teresita, filed a Complaint for Annulment of Title,
Reconveyance with Damages against the respondents before the RTC.
The RTC ruled for the respondents. The CA dismissed the appeal, hence this petition.

ISSUE:

a. Whether or not the sale of the subject lot by Gabriel Sr. to Antonita is unenforceable
under the Statute of Frauds;
b. Whether or not such sale has adequate consideration;
c. Whether the instant action has already prescribed; and whether or not respondents are
purchasers in good faith.

RULING:

On the first issue, the court notices that Gabriel Sr., during his lifetime, sold the subject
property to Antonita, the purchase price payable on installment basis. Gabriel Sr. appeared to
have been a recipient of some partial payments. After his death, his son duly recognized the sale
by accepting payments and issuing what may be considered as receipts therefor. Gabriel Jr., in a
gesture virtually acknowledging the petitioners' dominion of the property, authorized them to
construct a fence around it. And no less than his wife, Teresita, testified as to the fact of sale and
of payments received. Eduardo's assertion in his Answer that "persons appeared in the property"
only after "he initiated ejectment proceedings" is clearly baseless.
On the second issue, the trial court's posture, with which the CA effectively concurred, is
patently flawed. For starters, they equated incomplete payment of the purchase price with
inadequacy of price or what passes as lesion, when both are different civil law concepts with
differing legal consequences, the first being a ground to rescind an otherwise valid and
enforceable contract. Perceived inadequacy of price, on the other hand, is not a sufficient ground
for setting aside a sale freely entered into, save perhaps when the inadequacy is shocking to the
conscience. The Court to be sure takes stock of the fact that the contracting parties to the 1995 or

Page 426 of 745


1996 sale agreed to a purchase price of PhP 125,000 payable on installments. But the original lot
owner, Gabriel Sr., died before full payment can be effected. Nevertheless, petitioners continued
remitting payments to Gabriel, Jr., who sold the subject lot to Bernard on June 30, 1999. Gabriel,
Jr., as may be noted, parted with the property only for PhP 50,000. On the other hand, Bernard
sold it for PhP 80,000 to Marcos and Benjamin. From the foregoing price figures, what is
abundantly clear is that what Antonita agreed to pay Gabriel, Sr., albeit in installment, was very
much more than what his son, for the same lot, received from his buyer and the latter's buyer
later. The Court, therefore, cannot see its way clear as to how the RTC arrived at its simplistic
conclusion about the transaction between Gabriel Sr. and Antonita being without "adequate
consideration."
On the third issue, the court finds no quibbling about the fraudulent nature of the
conveyance of the subject lot effected by Gabriel Jr. in favor of Bernard. It is understandable that
after his father's death, Gabriel Jr. inherited subject lot and for which he was issued TCT No. T-
71499. Since the Gabriel Sr. - Antonita sales transaction called for payment of the contract price
in installments, it is also understandable why the title to the property remained with the Gabriels.
And after the demise of his father, Gabriel Jr. received payments from the Orduas and even
authorized them to enclose the subject lot with a fence. In sum, Gabriel Jr. knew fully well about
the sale and is bound by the contract as predecessor-in-interest of Gabriel Sr. over the property
thus sold. The prescriptive period for the reconveyance of fraudulently registered real property is
10 years, reckoned from the date of the issuance of the certificate of title, if the plaintiff is not in
possession, but imprescriptible if he is in possession of the property. Thus, one who is in actual
possession of a piece of land claiming to be the owner thereof may wait until his possession is
disturbed or his title is attacked before taking steps to vindicate his right. As it is, petitioners'
action for reconveyance is imprescriptible.
In view of this case, the court ruled that petitioner Antonita Ordua is recognized to have
the right of ownership over subject lot covered by TCT No. T-3276 of the Baguio Registry
registered in the name of Eduardo J. Fuentebella and therefore granted the petition and set aside
the decision of the lower court.

Page 427 of 745


ASKAY V. COSALAN
46 PHIL 179 September 15, 1924

FACTS:

Petitioner Askay is an illiterate Igorrote, aging between 70 and 80, who at various times
has been the owner of mining property. While defendant Fernando A. Cosalan, the nephew by
marriage of Askay, and municipal president, who likewise has been interested along with his
uncle in mining enterprises. Askay obtained title to the Pet Kel Mineral Claim located in Tublay,
Benguet then Askay sold this to Cosalan. Nine years later Askay instituted action in the Court of
First Instance to have the sale of the Pet Kel Mineral Claim declared null, to secure possession
of the mineral claim, and to obtain damages from the defendant in the amount of P10,500.
Following the presentation of various pleadings including the answer of the defendant, and
following trial before Judge of First Instance, judgment was rendered dismissing the complaint
and absolving the defendant from the same, with costs against the plaintiff. On being informed
of the judgment of the trial court, plaintiff attacked the decision on two grounds: First,
jurisdictional, and the second, formal. Both motions were denied and an appeal was perfected.

ISSUE:

Whether or not the plaintiff has established his cause of action by a preponderance of the
evidence.

RULING:

Plaintiff contends that the sale of the Pet Kel Mineral Claim was accomplished through
fraud and deceit on the part of the defendant. Plaintiff may be right but in our judgment he has
failed to establish his claim. Fraud must be both alleged and proved. One fact exists in plaintiffs
favor, and this is the age and ignorance of the plaintiff who could be easily by the defendant, a
man of greater intelligence. Another fact is the inadequacy of the consideration for the transfer
which, according to the conveyance, consisted of P1 and other valuable consideration, and
which, according to the oral testimony, in reality consisted of P107 in cash, a bill-fold, one sheet,
one cow, and two carabaos. Gross inadequacy naturally suggest fraud is some evidence thereof,
so that it may be sufficient to show it when taken in connection with other circumstances, such as
ignorance or the fact that one of the parties has an advantage over the other. But the fact that the
bargain was a hard one, coupled with mere inadequacy of price when both parties are in a
position to form an independent judgment concerning the transaction, is not a sufficient ground
for the cancellation of a contract.
The Court concludes, therefore, that the complaint was properly dismissed. As a result,
judgment is affirmed

Page 428 of 745


HEIRS OF THE LATE SPOUSES AURELIO AND ESPERANZA BALITE VS. LIM
G.R. No. 152168, December 10, 2004

FACTS:

The spouses Aurelio and Esperanza Balite were the owners of a parcels of land. When
Aurelio died intestate, his wife Esperanza and their children inherited the subject property and
became co-owners thereof. Esperanza became ill and was in dire need of money for her hospital
expenses. She, through her daughter, Cristeta, offered to sell to Rodrigo Lim, her undivided
share for the price of P1,000,000.00. Esperaza and Rodrigo agreed that under the Deed of
Absolute Sale, it will be made to appear that the purchase price of the property would be
P150,000.00 although the actual price agreed upon by them for the property was P1,000,000.00.
On April 16, 1996, Esperanza executed a Deed of Absolute Sale in favor of Rodrigo. They also
executed on the same day a Joint Affidavit under which they declared that the real price of the
property was P1,000,000.00 payable to Esperanza by installments. Only Esperanza and two of
her children Antonio and Cristeta knew about the said transaction. When the rest of the children
knew of the sale, they wrote to the Register of Deeds saying that their mother did not inform
them of the sale of a portion of the said property nor did they give consent thereto. Nonetheless,
Rodrigo made partial payments to Antonio who is authorized by his mother through a Special
Power of Attorney.

Esperanza signed a letter addressed to Rodrigo informing the latter that her children did
not agree to the sale of the property to him and that she was withdrawing all her commitments
until the validity of the sale is finally resolved. Then Esperanza died intestate and was survived
by her children. Meanwhile, Rodrigo caused to be published the Deed of Absolute Sale.

Petitioners filed a complaint against Rodrigo for the annulment of sale, quieting of title,
injunction and damages. Rodrigo secured a loan from the Rizal Commercial Banking
Corporation in the amount of P2,000,000.00 and executed a Real Estate Mortgage over the
property as security thereof. On motion of the petitioners, they were granted leave to file an
amended complaint impleading the bank as additional party defendant. The court issued an
order rejecting the amended complaint of the petitioners. Likewise, the trial court dismissed the
complaint. It held that pursuant to Article 493 of the Civil Code, a co-owner is not invalidated
by the absence of the consent of the other co-owners. Hence, the sale by Esperanza of the
property was valid; the excess from her undivided share should be taken from the undivided
shares of Cristeta and Antonio, who expressly agreed to and benefit from the sale. The Court of
Appeals likewise held that the sale was valid and binding insofar as Esperanza Balites undivided
share of the property was concerned. It affirmed the trial courts ruling that the lack of consent
of the co-owners did not nullify the sale.

ISSUE:

Whether or not the Deed of Absolute Sale is null and void on the ground that it is
falsified; it has an unlawful cause; and it is contrary to law and/or public policy.

RULING:

The petition was denied and the ruling of the court below was affirmed by the Court.

The Deed of Sale is not null and void. It is an example of a simulated contract which
Article 1345 of the Civil Code governs. The simulation of a contract may either be absolute or
relative. In absolute simulation, there is a colorable contract but without any substance, because
the parties have no intention to be bound by it. An absolutely simulated contract is void, and the
parties may recover from each other what they may have given under the contract. On the
other hand, if the parties state a false cause is relatively simulated. Here, the parties real
agreement binds them. In the present case, the parties intended to be bound by the Contract, even
if it did not reflect the actual purchase price of the property. The letter of Esperanza to

Page 429 of 745


respondent and petitioners admission that there was partial payment made on the basis of the
Absolute Sale reveals that the parties intended the agreement to produce legal effect.

Since the Deed of Absolute Sale was merely relatively simulated, it remains valid and
enforceable. All the essential requisites prescribed by law for the validity and perfection of
contracts is present. However, the parties shall be bound by their real agreement for a
consideration of P1,000,000 as reflected by their Joint Affidavit..

Page 430 of 745


SUNTAY V. COURT OF APPEALS
G.R. No. 114950, December 19, 1995

FACTS:

Respondent Federico Suntay is the owner of a parcel of land and a rice mill, warehouse,
and other improvements situated in the said land. A rice miller, Federico, in a letter applied as a
miller-contractor of the National Rice and Corn Corporation (NARIC). He informed the NARIC
that he had a daily rice mill output of 400 cavans of palay and warehouse storage capacity of
150,000 cavans of palay. His application, although prepared by his nephew-lawyer, Rafael
Suntay, was disapproved, because at that time he was tied up with several unpaid loans.
For purposes of circumvention, he had thought of allowing Rafael to make the
application for him. Rafael prepared an absolute deed of sale whereby Federico, for and in
consideration of P20,000.00 conveyed to Rafael said parcel of land with all its existing
structures. Said deed was notarized as Document No. 57 and recorded on Page 13 of Book 1,
Series of 1962, of the Notarial Register of Atty. Herminio V. Flores. Less than three months
after this conveyance, a counter sale was prepared and signed by Rafael who also caused its
delivery to Federico. Through this counter conveyance, the same parcel of land with all its
existing structures was sold by Rafael back to Federico for the same consideration of
P20,000.00. Although on its face, this second deed appears to have been notarized as Document
No. 56 and recorded on Page 15 of Book 1, Series of 1962, of the notarial register of Atty.
Herminio V. Flores, an examination thereof will show that, recorded as Document No. 56 on
Page 13, is not the said deed of sale but a certain "real estate mortgage on a parcel of land with
TCT No. 16157 to secure a loan of P3,500.00 in favor of the Hagonoy Rural Bank."
Nowhere on page 13 of the same notarial register could be found any entry pertaining to
Rafael's deed of sale. Testifying on this irregularity, Atty. Flores admitted that he failed to
submit to the Clerk of Court a copy of the second deed. Neither was he able to enter the same in
his notarial register. Even Federico himself alleged in his Complaint that, when Rafael delivered
the second deed to him, it was neither dated nor notarized.
Upon the execution and registration of the first deed, Certificate of Title No. 0-2015 in
the name of Federico was cancelled and in lieu thereof, TCT No. T-36714 was issued in the
name of Rafael. Even after the execution of the deed, Federico remained in possession of the
property sold in concept of owner. Significantly, notwithstanding the fact that Rafael became the
titled owner of said land and rice mill, he never made any attempt to take possession thereof at
any time, while Federico continued to exercise rights of absolute ownership over the property.
In a letter, dated August 14, 1969, Federico, through his new counsel, Agrava & Agrava,
requested that Rafael deliver his copy of TCT No. T-36714 so that Federico could have the
counter deed of sale in his favor registered in his name. The request having been obviously
turned down, Agrava & Agrava filed a petition with the Court of First Instance of Bulacan
asking Rafael to surrender his owner's duplicate certificate of TCT No. T-36714. In opposition
thereto, Rafael chronicled the discrepancy in the notarization of the second deed of sale upon
which said petition was premised and ultimately concluded that said deed was a counterfeit or "at
least not a public document which is sufficient to transfer real rights according to law." On
September 8, 1969, Agrava & Agrava filed a motion to withdraw said petition, and, on
September 13, 1969, the Court granted the same.
On July 8, 1970, Federico filed a complaint for reconveyance and damages against
Rafael. In his answer, Rafael scoffed at the attack against the validity and genuineness of the
sale to him of Federico's land and rice mill. Rafael insisted that said property was "absolutely
sold and conveyed . . . for a consideration of P20,000.00, Philippine currency, and for other
valuable consideration".
While the trial court upheld the validity and genuineness of the deed of sale executed by
Federico in favor of Rafael, which deed is referred to above as Exhibit A, it ruled that the
counter-deed, referred to as Exhibit B, executed by Rafael in favor of Federico, was simulated
and without consideration, hence, null and void ab initio.
Moreover, while the trial court adjudged Rafael as the owner of the property in dispute, it
did not go to the extent of ordering Federico to pay back rentals for the use of the property as the
court made the evidential finding that Rafael simply allowed his uncle to have continuous

Page 431 of 745


possession of the property because or their understanding that Federico would subsequently
repurchase the same.
From the aforecited decision of the trial court, both Federico and Rafael appealed. The
Court of Appeals rendered judgment affirming the trial court's decision, with a modification that
Federico was ordered to surrender the possession of the disputed property to Rafael. Counsel of
Federico filed a motion for reconsideration of the aforecited decision. While the motion was
pending resolution, Atty. Ricardo M. Fojas entered his appearance in behalf of the heirs of
Rafael who had passed away on November 23, 1988. Atty. Fojas prayed that said heirs be
substituted as defendants-appellants in the case. The prayer for substitution was duly noted by
the court in a resolution dated April 6, 1993. Thereafter, Atty. Fojas filed in behalf of the heirs an
opposition to the motion for reconsideration. The parties to the case were heard on oral
argument on October 12, 1993. On December 15, 1993, the Court of Appeals reversed itself and
rendered an amended judgment.

ISSUE:

Whether or not the deed of sale executed by Federico in favor of Rafael is simulated and
fictitious and, hence, null and void.

RULING:

In the aggregate, the evidence on record demonstrate a combination of circumstances


from which may be reasonably inferred certain badges of simulation that attach themselves to the
deed of sale in question. The complete absence of an attempt on the part of the buyer to assert
his rights of ownership over the land and rice mill in question is the most protuberant index of
simulation.
The deed of sale executed by Federico in favor of his now deceased nephew, Rafael, is
absolutely simulated and fictitious and, hence, null and void, said parties having entered into a
sale transaction to which they did not intend to be legally bound. As no property was validly
conveyed under the deed, the second deed of sale executed by the late Rafael in favor of his
uncle, should be considered ineffective and unavailing.
The allegation of Rafael that the lapse of seven years before Federico sought the issuance
of a new title in his name necessarily makes Federico's claim stale and unenforceable does not
hold water. Federico's title was not in the hands of a stranger or mere acquaintance; it was in the
possession of his nephew who, being his lawyer, had served him faithfully for many years.
Federico had been all the while in possession of the land covered by his title and so there was no
pressing reason for Federico to have a title in his name issued. Even when the relationship
between the late Rafael and Federico deteriorated, and eventually ended, it is not at all strange
for Federico to have been complacent and unconcerned about the status of his title over the
disputed property since he has been possessing the same actually, openly, and adversely, to the
exclusion of Rafael. It was only when Federico needed the title in order to obtain a collaterized
loan that Federico began to attend to the task of obtaining a title in his name over the subject land
and rice mill.

Page 432 of 745


UY V. COURT OF APPEALS
G.R. No. 120465, September 9, 1999

FACTS:

Being agents and authorized to sell eight (8) parcels of land by the owners thereof,
petitioners William Uy and Rodel Roxas, by virtue of such authority, offered to sell the lands, to
respondent National Housing Authority (NHA) to be utilized and developed as a housing project.
NHA approved the acquisition of the said parcels of land with an area of 31.8231 hectares at the
cost of P23.867 million, pursuant to which the parties executed a series of Deeds of Absolute
Sale covering the subject lands. NHA eventually cancelled the sale over three (3) parcels of land
of the eight parcels of lands because of the report it received from the Land Geosciences Bureau
of the Department of Environment and Natural Resources that the remaining area is located at an
active landslide area and therefore, not suitable for development into a housing project.
Petitioners then filed a complaint for damages but the trial court rendered the cancellation
of contract to be justified and awarded P1.255 million as damages in favor of petitioners. Upon
appeal by petitioners, the Court of Appeals reversed the decision and entered a new one
dismissing the complaint including the award of damages.

ISSUE:
1.) Whether or not the contention of petitioner is correct.
2.) Whether or not a partys entry into a contract affects the validity of the contract.

RULING:

1.) The Petitioners are not correct. They confuse the cancellation of the contract by the
NHA as a rescission of the contract under Article 1191 of the Civil Code. The right to rescission
is predicated on a breach of faith by the other party that violates the reciprocity between them.
The power to rescind is given to the injured party. In this case, the NHA did not rescind the
contract. Indeed, it did not have the right to do so for the other parties to the contract, the
vendors did not commit any breach, much less a substantial breach, of their obligation. The
NHA did not suffer any injury. The cancellation was not therefore a rescission under Article
1191. Rather, it was based on the negation of the cause arising from the realization that the
lands, which were the objects of the sale, were not suitable for housing.
2.) The general rule is that a partys motives for entering into a contract do not affect the
contract. However, when the motive predetermines the cause, the motive may be regarded as the
cause. As held in Liguez v. CA, It is well to note, however, that Manresa himself, while
maintaining the distinction and upholding the inoperativess of the motives of the parties to
determine the validity of the contract, expressly excepts from the rule those contracts that are
conditioned upon the attainment of the motives of either party.

Page 433 of 745


CATLY VS. NAVARRO
G.R. No. 174719 : May 05, 2010

FACTS:
This case involves Lot No. 9 which has 1,007 square meter parcel of land located at
Kinasang-an, Pardo, Cebu City and fronting the Cebu provincial highway. The lot originally
belonged to Pastor Pacres who left it intestate to his heirs Margarita, Simplicia, Rodrigo,
Francisco, Mario and Vearanda. Petitioners admitted that at the time of Pastor's death in 1962,
his heirs were already occupying definite portions of Lot No. 9. The front portion along the
provincial highway was occupied by the co-owned Pacres ancestral home, and beside it stood
Rodrigo's hut. Mario's house stood at the back of the ancestral house according to Valentina's
testimony in 1968. On the same year, the heirs leased "the ground floor of the ancestral home
together with a lot area of 300 square meters including the area occupied by the house" to
respondent Hilario Ramirez, who immediately took possession thereof. Subsequently in 1974,
four of the Pacres sibling namely, Rodrigo, Francisco, Simplicia and Margarita sold their shares
in the ancestral home and the lot on which it stood to Ramirez. The deeds of sale described the
subjects thereof as "part and portion of the 300 square meters actually in possession and
enjoyment by vendee and her spouse, Hilario Ramirez, by virtue of a contract of lease in their
favor."

In 1984, Ygoa filed a petition to survey and segregate the portions she bought from Lot
No. 9. Mario objected on the ground that he wanted to exercise his right as co-owner to redeem
his siblings' shares. Vendee Rodrigo also opposed on the ground that he wanted to annul the sale
for failure of consideration. On the other hand, Margarita and the widow of Francisco both
manifested their assent to Ygoa's petition. By virtue of such manifestation, the court issued a writ
of possession respecting Margarita's and Francisco's shares in favor of Ygoa.

On June 18, 1993, the Republic of the Philippines, through the Department of Public
Works and Highways (DPWH), expropriated the front portion of Lot No. 9 for the expansion of
the Cebu south road.

On September 30, 1994, Mario, petitioners' predecessor-in-interest, filed an ejectment


suit against Ramirez' successor-in-interest Vicentuan. Mario claimed sole ownership of the lot
occupied by Ramirez/Vicentuan by virtue of the oral partition. He argued that
Ramirez/Vicentuan should pay rentals to him for occupying the front lot and should transfer to
the rear of Lot No. 9 where the lots of Ramirez's vendors are located.
The trial court ruled in favor of respondents. The appellate court sustained the ruling of
the trial court. Hence this petition.

ISSUE:
a. Whether petitioners were able to prove the existence of the alleged oral agreements
such as the partition and the additional obligations of surveying and titling
b. Whether the issue of ownership regarding the front portion of Lot No. 9 and
entitlement to the expropriation payment may be resolved in this action

RULING:

On the first issue, the court find no compelling reason to deviate from the foregoing rule
and disturb the trial and appellate courts' factual finding that the existence of an oral partition
was not proven. Our examination of the records indicates that, contrary to petitioners' contention,
the lower courts' conclusion was justified. Petitioners' only piece of evidence to prove the alleged
oral partition was the joint affidavit supposedly executed by some of the Pacres siblings and their
heirs in 1993, to the effect that such an oral partition had previously been agreed upon.
Petitioners did not adequately explain why the affidavit was executed only in 1993, several years
after respondents Ygoa and Ramirez took possession of the front portions of Lot No. 9.
On the second issue, the Supreme Court affirmed the decision of the Court of Appeals,
they found that the parties did not provide the Court with the pleadings filed in the expropriation

Page 434 of 745


case, which makes it impossible to know the extent of the issues already submitted by the parties
in the expropriation case and thereby assess whether there was forum-shopping. Nonetheless,
while the court cannot rule on the existence of forum-shopping for insufficiency of evidence, it is
correct that the issue of ownership should be litigated in the expropriation court. The court
hearing the expropriation case is empowered to entertain the conflicting claims of ownership of
the condemned property and adjudge the rightful owner thereof, in the same expropriation case.
This is due to the intimate relationship of the issue of ownership with the claim for the
expropriation payment. Petitioners' objection regarding respondents' claim over the expropriation
payment should have been brought up in the expropriation court as opposition to respondent's
motion. The SC cannot agree with the trial court's order to partition the lot in accordance with
Exhibit No. 1 or the sketch prepared by petitioner Valentina. To do so would resolve the issue of
ownership over portions of Lot No. 9 and effectively preempt the expropriation court, based
solely on actual occupation.

In sum, the Supreme Court denied the petition.

Page 435 of 745


LIGUEZ V. COURT OF APPEALS
G.R. No. L-11240, December 18, 1957

FACTS:

Liguez filed a complaint against the widow and heirs of the late Salvador P. Lopez to
recover a parcel of 51.84 hectares of land. Plaintiff averred to be its legal owner, pursuant to a
deed of donation of said land, executed in her favor by the late owner, Salvador P. Lopez. The
defense interposed that the donation was null and void for having an illicit cause or
consideration, which was plaintiff's entering into marital relations with Salvador P. Lopez, a
married man; and that the property had been adjudicated to the appellees as heirs of Lopez by the
court.The Court of Appeals held that the deed of donation was inoperative, and null and void (1)
because the husband, Lopez, had no right to donate conjugal property to the plaintiff appellant;
and (2) because the donation was tainted with illegal causa or consideration (illicit sexual
relation), of which donor and donee were participants.
Appellant vigorously contends that the Court of First Instance as well as the Court of
Appeals erred in holding the donation void for having an illicit cause or consideration. It is
argued that under Article 1274 of the Civil Code of 1889 (which was the governing law in 1943,
when the donation was executed), "in contracts of pure beneficence the consideration is the
liberality of the donor", and that liberality per se can never be illegal, since it is neither against
law or morals or public policy.

ISSUE:

Whether or not the deed of donation made by Lopez in favor of Liguez was valid.

RULING:

Under Article 1274, liberality of the donor is deemed causa only in those contracts that
are of "pure" beneficence; that is to say, contracts designed solely and exclusively to procure the
welfare of the beneficiary, without any intent of producing any satisfaction for the donor;
contracts, in other words, in which the idea of self-interest is totally absent on the part of the
transferor.
Here the fact that the late Salvador P. Lopez was not moved exclusively by the desire to
benefit appellant Conchita Liguez, but also to secure her cohabiting with him, so that he could
gratify his sexual impulses. This is clear from the confession of Lopez to the witnesses
Rodriguez and Ragay that he was in love with appellant, but her parents would not agree unless
he donated the land in question to her. Actually, therefore, the donation was but one part of an
onerous transaction (at least with appellant's parents) that must be viewed in its totality. Thus
considered, the conveyance was clearly predicated upon an illicit causa.
Appellant seeks to differentiate between the alleged liberality of Lopez, as causa for the
donation in her favor, and his desire for cohabiting with appellant, as motives that impelled him
to make the donation, and quotes from Manresa and the jurisprudence of this Court on the
distinction that must be maintained between causa and motives. It is well to note, however, that
Manresa himself, while maintaining the distinction and upholding the inoperativeness of the
motives of the parties to determine the validity of the contract, expressly excepts from the rule
those contracts that are conditioned upon the attainment of the motives of either party.
Appellees, as successors of the late donor, being thus precluded from pleading the
defense of immorality or illegal causa of the donation, the total or partial ineffectiveness of the
same must be decided by different legal principles. In this regard, the Court of Appeals correctly
held that Lopez could not donate the entirety of the property in litigation, to the prejudice of his
wife Maria Ngo, because said property was conjugal in character, and the right of the husband to
donate community property is strictly limited by law.
Appellant Conchita Liguez was declared by the Supreme Court entitled to so much of the
donated property as may be found, upon proper liquidation, not to prejudice the share of the
widow Maria Ngo in the conjugal partnership with Salvador P. Lopez or the legitimes of the
forced heirs of the latter.

Page 436 of 745


PHILIPPINE BANKING CORPORATION V. LUI SHE,
21 SCRA 52

FACTS:

Justina who inherited parcels of land in Manila executed a contract of lease in favor of Wong,
covering a portion already leased to him and another portion of the property. The lease was for
50 years, although the lessee was give the right to withdraw at anytime from the agreement with
a stipulated monthly rental.
She executed another contract giving Wong the option to buy the leased premises for
P120,000 payable within 10 years at monthly installment of P1,000. The option was conditioned
on his obtaining Philippine citizenship, which was then pending. His application for
naturalization was withdrawn when it was discovered that he was a resident of Rizal.
She executed two other contracts one extending the term to 99 years and the term fixing
the term of the option of 50 years. In the two wills, she bade her legatees to respect the contract
she had entered into with Wong, but it appears to have a change of heart in a codicil. Claiming
that the various contracts were made because of her machinations and inducements practiced by
him, she now directed her executor to secure the annulment of the contracts.
The complaint alleged that Wong obtained the contracts through fraud. Wong denied
having taken advantage of her trust in order to secure the execution of the contracts on question.
He insisted that the various contracts were freely and voluntarily entered into by the parties.
The lower court declared all the contracts null and void with the exception of the first,
which is the contract of lease.

ISSUE:

Whether or not the contracts entered into by the parties are void.

RULING:

The contract is void. The Court held the lease and the rest of the contracts were obtained
with the consent of Justina freely given and voluntarily, hence the claim that the consent was
vitiated due to fraud or machination is bereft of merit. However the contacts are not necessarily
valid because the Constitution provides that aliens are not allowed to own lands in the
Philippines. The illicit purpose then becomes the illegal causa, rendering the contracts void.
It does not follow from what has been said that because the parties are in pari delicto they
will be left where they are, without relief. For one thing, the original parties who were guilty of
violation of fundamental charter have died and have since substituted by their administrators to
whom it would e unjust to impute their guilt. For another thing, Article 1416 of the Civil Code
provides an exception to the pari de licto, that when the agreement is not illegal per se but is
merely prohibited, and the prohibition of the law is designed for the protection of the plaintiff, he
may recover what he has paid or delivered.

Page 437 of 745


LONDRES V. COURT OF APPEALS
G.R. No. 136427, December 17, 2002

FACTS:

The present case stemmed from a battle of ownership over Lots 1320 and 1333 both
located in Barrio Baybay, Roxas City, Capiz. Paulina originally owned these two parcels of land.
After Paulinas death, ownership of the lots passed to her daughter, Filomena. The surviving
children of Filomena, namely, Sonia Fuentes Londres, Armando V. Fuentes, Chi-Chita Fuentes
Quintia, Roberto V. Fuentes, Leopoldo V. Fuentes and Marilou Fuentes Esplana, herein
petitioners, now claim ownership over Lots 1320 and 1333. On the other hand, private
respondents Consolacion and Elena anchor their right of ownership over Lots 1320 and 1333 on
the Absolute Sale executed by Filomena on April 24, 1959. Filomena sold the two lots in favor
of Consolacion and her husband, Julian. Elena is the daughter of Consolacion and Julian.
On March 30, 1989, petitioners filed a complaint for the declaration of nullity of contract,
damages and just compensation. Petitioners sought to nullify the Absolute Sale conveying Lots
1320 and 1333 and to recover just compensation from public respondents DPWH and DOTC.
Petitioners claimed that as the surviving children of Filomena, they are the owners of Lots 1320
and 1333. Petitioners claimed that these two lots were never sold to Julian. Petitioners doubt the
validity of the Absolute Sale because it was tampered. The cadastral lot number of the second lot
mentioned in the Absolute Sale was altered to read Lot 1333 when it was originally written as
Lot 2034. Petitioners pointed out that Lot 2034, situated in Barrio Culasi, Roxas City, Capiz, was
also owned by their grandmother, Paulina. And that it was only recently that they learned of the
claim of private respondents when Consolacion filed a petition for the judicial reconstitution of
the original certificates of title of Lots 1320 and 1333 with the Capiz Cadastre. Upon further
inquiry, petitioners discovered that there exists a notarized Absolute Sale executed on April 24,
1959 registered only on September 22, 1982 in the Office of the Register of Deeds of Roxas
City. The private respondents copy of the Absolute Sale was tampered so that the second parcel
of lot sold, Lot 2034 would read as Lot 1333. However, the Records Management and Archives
Office kept an unaltered copy of the Absolute Sale. This other copy shows that the objects of the
sale were Lots 1320 and 2034.
Private respondents maintained that they are the legal owners of Lots 1333 and 1320.
Julian purchased the lots from Filomena in good faith and for a valid consideration. Private
respondents explained that Julian was deaf and dumb and as such, was placed in a
disadvantageous position compared to Filomena. Julian had to rely on the representation of other
persons in his business transactions. After the sale, Julian and Consolacion took possession of the
lots. Up to now, the spouses successors-in-interest are in possession of the lots in the concept
owners. Private respondents claimed that the alteration in the Absolute Sale was made by
Filomena to make it conform to the description of the lot in the Absolute Sale. Private
respondents filed a counterclaim with damages.
The cross-claim of petitioners against public respondents was for the recovery of just
compensation. Petitioners claimed that during the lifetime of Paulina, public respondents took a
3,200-square meter portion of Lot 1320. The land was used as part of the Arnaldo Boulevard in
Roxas City without any payment of just compensation. In 1988, public respondents also
appropriated a 1,786-square meter portion of Lot 1333 as a vehicular parking area for the Roxas
City Airport. Sonia, one of the petitioners, executed a deed of absolute sale in favor of the
Republic of the Philippines over this portion of Lot 1333. According to petitioners, the vendee
agreed to pay petitioners P214,320.00. Despite demands, the vendee failed to pay the stipulated
amount.
The trial court issued its decision upholding the validity of the Absolute Sale. This was
affirmed by the Court of Appeals.

ISSUE:

Whether or not the notarized copy should prevail.

Page 438 of 745


RULING:

Decision affirmed with the modification that the cross-claim against public respondents is
dismissed.
Among others, petitioners harp on the fact that the notarized and registered copy of the
Absolute Sale should have, been correspondingly corrected. Petitioners believe that the notarized
and archived copy should prevail. We disagree. A contract of sale is perfected at the moment
there is a meeting of the minds upon the thing which is the object of the contract and upon the
price. Being consensual, a contract of sale has the force of law between the contracting parties
and they are expected to abide in good faith with their respective contractual commitments.
Article 1358 of the Civil Code, which requires certain contracts to be embodied in a public
instrument, is only for convenience, and registration of the instrument is needed only to
adversely affect third parties. Formal requirements are, therefore, for the purpose of binding or
informing third parties. Non-compliance with formal requirements does not adversely affect the
validity of the contract or the contractual rights and obligations of the parties.

Page 439 of 745


SPOUSES ANTONIO & LETICIA VEGA V. SSS
GR No. 181672, September 20, 2010

FACTS:

Magdalena V. Reyes (Reyes) owned a piece of titled land in Pilar Village, Las Pias
City. On August 17, 1979 she got a housing loan from respondent Social Security System (SSS)
for which she mortgaged her land. In late 1979, however, she asked the petitioner spouses
Antonio and Leticia Vega (the Vegas) to assume the loan and buy her house and lot since she
wanted to emigrate.

Upon inquiry with the SSS, an employee there told the Vegas that the SSS did not
approve of members transferring their mortgaged homes. The Vegas could, however, simply
make a private arrangement with Reyes provided they paid the monthly amortizations on
time. This practice, said the SSS employee, was commonplace. Armed with this information, the
Vegas agreed for Reyes to execute in their favor a deed of assignment of real property with
assumption of mortgage and paid Reyes P20,000.00 after she undertook to update the
amortizations before leaving the country. The Vegas then took possession of the house in
January 1981.

But Reyes did not readily execute the deed of assignment. She left the country and gave
her sister, Julieta Reyes Ofilada (Ofilada), a special power of attorney to convey ownership of
the property. Sometime between 1983 and 1984, Ofilada finally executed the deed promised by
her sister to the Vegas. Ofilada kept the original and gave the Vegas two copies. The latter gave
one copy to the Home Development Mortgage Fund and kept the other. Unfortunately, a storm
in 1984 resulted in a flood that destroyed the copy left with them.

ISSUE:

Whether or not the Vegas presented adequate proof of Reyes sale of the subject property
to them

RULING:

The CA ruled that the Vegas were unable to prove that Reyes assigned the subject
property to them, given that they failed to present the deed of assignment in their favor upon a
claim that they lost it. But the rule requiring the presentation of the original of that deed of
assignment is not absolute. Secondary evidence of the contents of the original can be adduced,
as in this case, when the original has been lost without bad faith on the part of the party offering
it.

Here, not only did the Vegas prove the loss of the deed of assignment in their favor and what the
same contained, they offered strong corroboration of the fact of Reyes sale of the property to
them. They took possession of the house and lot after they bought it. Indeed, they lived on it
and held it in the concept of an owner for 13 years before PDC came into the picture. They also
paid all the amortizations to the SSS with Antonio Vegas personal check, even those that Reyes
promised to settle but did not. And when the SSS wanted to foreclose the property, the Vegas
sent a managers check to it for the balance of the loan. Neither Reyes nor any of her relatives
came forward to claim the property. The Vegas amply proved the sale to them.

Page 440 of 745


BALATBAT V. COURT OF APPEALS
G.R. No. 109410, August 28, 1996

FACTS:

The lot in question covered by Transfer Certificate of Title No. 51330 was acquired by
plaintiff Aurelio Roque and Maria Mesina during their conjugal union and the house constructed
thereon was likewise built during their marital union. Out of their union, plaintiff and Maria
Mesina had four children. When Maria Mesina died on August 28, 1966, the only conjugal
properties left are the house and lot above stated of which plaintiff herein, as the legal spouse, is
entitled to one-half share pro-indiviso thereof. With respect to the one-half share pro-indiviso
now forming the estate of Maria Mesina, plaintiff and the four children, the defendants here, are
each entitled to one-fifth (1/5) share pro-indiviso.
Aurelio Roque then entered into a contract of Absolute Sale with the spouses Aurora and
Jose Repuyan. However, on August 20, 1980, Aurelio filed a complaint for Rescission of
Contract against Spouses Repuyan for the latters failure to pay the balance of the purchase price.
A deed of absolute sale was then executed on February 4, 1982 between Aurelio S. Roque,
Corazon Roque, Feliciano Roque, Severa Roque and Osmundo Roque and Clara Balatbat,
married to Alejandro Balatbat. On April 14, 1982, Clara Balatbat filed a motion for the issuance
of a writ of possession which was granted by the trial court on September 14, 1982 "subject,
however, to valid rights and interest of third persons over the same portion thereof, other than
vendor or any other person or persons privy to or claiming any rights or interests under it." The
corresponding writ of possession was issued on September 20, 1982. The lower court then
rendered judgment in favor of the Spouses Repuyan and declared the Deed of Absolute Sale as
valid. On appeal by petitioner Balatbat, the Court of Appeals affirmed the lower courts decision.

ISSUE:
Whether or not the delivery of the owners certificate of title to spouses Repuyan by
Aurelio Roque is for convenience or for validity or enforceability.

RULING:

The provision of Article 1358 on the necessity of a public document is only for
convenience, not for validity or enforceability. It is not a requirement for the validity of a
contract of sale of a parcel of land that this be embodied in a public instrument.
The Supreme Court found that the sale between Aurelio and the Spouses Repuyan is not
merely for the reason that there was no delivery of the subject property and that
consideration/price was not fully paid but the sale as consummated, hence, valid and enforceable.
The non-delivery of the possession of the subject property to the private respondent,
suffice it to say that ownership of the thing sold is acquired only from the time of delivery
thereof, either actual or constructive. Article 1498 of the Civil Code provides that when the sale
is made through a public instrument, the execution thereof shall be equivalent to the delivery of
the thing which is the object of the contract, if from the deed the contrary does not appear or
cannot be inferred. The execution of the public instrument, without actual delivery of the thing,
transfers the ownership from the vendor to the vendee, who may thereafter exercise the rights of
an owner over the same. In the instant case, vendor Roque delivered the owner's certificate of
title to herein private respondent. It is not necessary that vendee be physically present at every
square inch of the land bought by him, possession of the public instrument of the land is
sufficient to accord him the rights of ownership. Thus, delivery of a parcel of land may be done
by placing the vendee in control and possession of the land (real) or by embodying the sale in a
public instrument (constructive).
A contract of sale being consensual, it is perfected by the mere consent of the parties.
Delivery of the thing bought or payment of the price is not necessary for the perfection of the
contract; and failure of the vendee to pay the price after the execution of the contract does not
make the sale null and void for lack of consideration but results at most in default on the part of
the vendee, for which the vendor may exercise his legal remedies. Tthe petition for review is
hereby dismissed for lack of merit.

Page 441 of 745


UNIVERSAL ROBINA SUGAR MILLING CORPORATION V. HEIRS OF ANGEL
TEVES
G.R. No. 128574, September 18, 2002

FACTS:

Andres Abanto owned two parcels of land situated in Campuyo, Manjuyod, Negros
Oriental. One lot is registered in his name and the other lot is unregistered. When he died, his
heirs executed an "Extrajudicial Settlement of the Estate of the Deceased and Simultaneous
Sale." In this document, Abanto's heirs adjudicated unto themselves the two lots and sold the
unregistered lot to the United Planters Sugar Milling Company, Inc. (UPSUMCO), and the
registered lot to Angel M. Teves, for a total sum of P115,000.00. The sale was not registered.
Out of respect for his uncle Montenegro, who was UPSUMCO's founder and president,
Teves verbally allowed UPSUMCO to use the registered lot for pier and loading facilities, free of
charge, subject to the condition that UPSUMCO shall shoulder the payment of real property
taxes and that its occupation shall be co-terminus with its corporate existence. UPSUMCO then
built a guesthouse and pier facilities on the property. Years later, UPSUMCOs properties were
acquired by the Philippine National Bank (PNB). Later, PNB transferred the same properties to
the Asset Privatization Trust (APT) which, in turn, sold the same to the Universal Robina Sugar
Milling Corporation (URSUMCO). URSUMCO then took possession of UPSUMCOs
properties, including Teves' lot.
Upon learning of the acquisition of his lot, Teves formally asked the corporation to turn
over to him possession thereof or the corresponding rentals. He stated in his demand letters that
he merely allowed UPSUMCO to use his property until its corporate dissolution; and that it was
not mortgaged by UPSUMCO with the PNB and, therefore, not included among the foreclosed
properties acquired by URSUMCO.
URSUMCO refused to heed Teves' demand, claiming that it acquired the right to occupy
the property from UPSUMCO which purchased it from Andres Abanto; and that it was merely
placed in the name of Angel Teves, as shown by the "Deed of Transfer and Waiver of Rights and
Possession" dated November 26, 1987. Under this document, UPSUMCO transferred to
URSUMCO its application for agricultural and foreshore lease. The same document partly states
that the lands subject of the foreshore and agricultural lease applications are bounded on the
north by the "titled property of Andres Abanto bought by the transferor (UPSUMCO) but placed
in the name of Angel Teves". URSUMCO further claimed that it was UPSUMCO, not Teves,
which has been paying the corresponding realty taxes.
Consequently, Teves filed a complaint for recovery of possession of real property with
damages against URSUMCO. However, on September 4, 1992, Teves died and was substituted
by his heirs. On April 6, 1994, the RTC held that URSUMCO has no personality to question the
validity of the sale of the property between the heirs of Andres Abanto and Angel Teves since it
is not a party thereto; that Teves' failure to have the sale registered with the Registry of Deeds
would not vitiate his right of ownership, unless a third party has acquired the land in good faith
and for value and has registered the subsequent deed; that the list of properties acquired by
URSUMCO from the PNB does not include the disputed lot and, therefore, was not among those
conveyed by UPSUMCO to URSUMCO.
On appeal by URSUMCO, the Court of Appeals affirmed the RTC decision, holding that
the transaction between Angel Teves and Andres Abanto's heirs is a contract of sale, not one to
sell, because ownership was immediately conveyed to the purchaser upon payment of
P115,000.00. On October 29, 1996, URSUMCO filed a motion for reconsideration but was
denied by the Appellate Court. Hence, the instant petition for review on certiorari.

ISSUE:

Whether or not the respondents have established a cause of action against petitioner.

Page 442 of 745


RULING:

There is no established cause of action. Petitioner URSUMCO contends that respondents


have no cause of action because the "Extrajudicial Settlement of the Estate of the Deceased
Andres Abanto and Simultaneous Sale" is merely a promise to sell and not an absolute deed of
sale, hence, did not transfer ownership of the disputed lot to Angel Teves. Assuming that the
document is a contract of sale, the same is void for lack of consideration because the total price
of P115,000.00 does not specifically refer to the registered lot making the price uncertain.
Furthermore, the transaction, being unregistered, does not bind third parties.
Petitioner's contentions lack merit. As held by the RTC and the Court of Appeals, the
transaction is not merely a contract to sell but a contract of sale. In a contract of sale, title to the
property passes to the vendee upon delivery of the thing sold; while in a contract to sell,
ownership is, by agreement, reserved in the vendor and is not to pass to the vendee until full
payment of the purchase price. In the case at bar, the subject contract, duly notarized, provides
that the Abanto heirs sold to Teves the lot covered by TCT No. H-37. There is no showing that
the Abanto heirs merely promised to sell the said lot to Teves.
The absolute ownership over the registered land was indeed transferred to Teves is
further shown by his acts subsequent to the execution of the contract. As found by the trial court,
it was Teves, not Andres Abanto's heirs, who allowed UPSUMCO to construct pier facilities and
guesthouse on the land. When the property was erroneously included among UPSUMCO's
properties that were transferred to petitioner URSUMCO, it was Teves, not the heirs of Andres
Abanto, who informed petitioner that he owns the same and negotiated for an arrangement
regarding its use. Teves even furnished petitioner documents and letters showing his ownership
of the lot, such as a copy of the "Extrajudicial Settlement of the Estate of the Deceased Andres
Abanto and Simultaneous Sale" and a certified true copy of TCT No. H-37 covering the disputed
lot. Indeed, the trial court and the Court of Appeals correctly ruled that Teves purchased the lot
from the Abanto heirs.

That the contract of sale was not registered does not affect its validity. Being consensual
in nature, it is binding between the parties, the Abanto heirs and Teves. Article 1358 of the New
Civil Code, which requires the embodiment of certain contracts in a public instrument, is only
for convenience, and the registration of the instrument would merely affect third persons.
Formalities intended for greater efficacy or convenience or to bind third persons, if not done,
would not adversely affect the validity or enforceability of the contract between the contracting
parties themselves. Thus, by virtue of the valid sale, Angel Teves stepped into the shoes of the
heirs of Andres Abanto and acquired all their rights to the property.

Page 443 of 745


SARMING VS. DY
383 SCRA 131, JUNE 6, 2002

FACTS:

A controversy arose regarding the sale of Lot 4163 which was half-owned by the original
defendant, Silveria Flores, although it was solely registered under her name. The other half was
originally owned by Silverias brother, Jose. On January 1956, the heirs of Jose entered into a
contract with plaintiff Alejandra Delfino, for the sale of their one-half share of Lot 4163 after
offering the same to their co-owner, Silveria, who declined for lack of money. Silveria did not
object to the sale of said portion to Alejandra.
Atty. Deogracias Pinili, Alejandras lawyer then prepared the document of sale. In the
preparation of the document however, OCT no. 4918-A, covering Lot 5734, and not the correct
title covering Lot 4163 was the one delivered to Pinili.
Unaware of the mistake committed, Alejandra immediately took possession of Lot 4163
and introduced improvements on the said lot.
Two years later, when Alejandra Delfino purchased the adjoinin portion of the lot she had
been occupying, she discovered that what was designated in the deed, Lot 5734, was the wrong
lot. Thus, Alejandra and the vendors filed for the feformation of the Deed of Sale.

ISSUE:

Whether or not reformation is proper in this case.

RULING:

The Court ruled that reformation is proper in the case at bar. Reformation is that remedy
in equity by means of which a written instrument is made or construed so as to express or inform
to the real intention of the parties.
An action for reformation of instrument under this provision of law may prosper only
upon the concurrence of the following requisites:
(1) there must have been a meeting of the minds of the parties to the contract;
(2) the instrument does not express the true intention of the parties; and
(3) the failure of the instrument to express the true intention of the parties is due
to mistake, fraud, inequitable conduct or accident.
All of these requisites are present in this case. There was a meeting of the minds between
the parties to the contract but the deed did not express the true intention ot the parties due to the
designation of the lot subject of the deed. There is no dispute as to the intention of the parties to
sell the land to Alejandra Delfino but there was a mistake as to the designation of the lot intended
to be sold as stated in the Settlement of Estate and Sale.

Page 444 of 745


CEBU CONTRACTORS CONSORTIUM CO. V. COURT OF APPEALS
G.R. No. 107199, July 22, 2003

FACTS:

MLFC alleges that a lease agreement relating to various equipment was entered into
between MLFC, as lessor, and CCCC, as lessee. The terms and conditions of the lease were
defined in said agreement and in two lease schedules of payment. To secure the lease rentals, a
chattel mortgage, and a subsequent amendment thereto, were executed in favor of MLFC over
other various equipment owned by CCCC.
CCCC began defaulting on the lease rentals, prompting MLFC to send demand letters.
When the demand letters were not heeded, MLFC filed a complaint for the payment of the
rentals due and prayed that a writ of replevin be issued in order to obtain possession of the
equipment leased and to foreclose on the equipment mortgaged.
CCCs position is that it is no longer indebted to MLFC because the total amounts
collected by the latter from the Ministry of Public Highways, by virtue of the deed of
assignment, and from the proceeds of the foreclosed chattels were more than enough to cover
CCCs liabilities. CCC submits that in any event, the deed of assignment itself already freed
CCC from its obligation to MLFC.
The trial court rendered decision upholding the lease agreement and finding CCC liable
to MLFC in lease rentals. On appeal, the appellate court affirmed the trial courts decision.

ISSUE:
Whether or not respondent court erred in upholding the so- called sale-lease back scheme
of the private respondent when the same is in reality nothing but an equitable mortgage.

RULING:

The Court affirms the decision of the court below.


MLFCs own evidence discloses that it offers two types of financing lease: a direct lease
and a sale- lease back. The client sells to MLFC equipment that it owns, which will be leased
back to him. The transaction between CCC and MLFC involved the second type of financing
lease.CCC argues that the sale and lease back scheme is nothing more than an equitable
mortgage and consequently, asks for its reformation. The right of action for reformation accrued
from the date of execution of the contract of lease in 1976. This was properly exercised by CCC
when it filed its answer with counterclaim to MLFCs complaint in 1978 and asked for the
reformation of the lease contract.

Page 445 of 745


ADR SHIPPING SERVICESS, INC V. GALLARDO
G.R. No. 134873, September 17, 2002

FACTS:

Petitioner ADR Shipping Services, Inc. entered into a contract with private respondent
Gallardo for the use of the formers vessel MV Pacific Breeze to transport logs to Taiwan. The
logs were the subject of a sales agreement between private respondent as seller being a timber
concessionaire and log dealer, and Stywood Philippines, as buyer. Private respondent paid an
advance charter fee of P242,000 representing ten percent of the agreed charter fee. Under the
charter agreement, the boat should be ready to load by February 5, 1988.
The boat failed to arrive on time, prompting private respondent to notify petitioner of its
cancellation of the charter contract and the withdrawal of the advance payment deposited to the
account of ADR shipping. ADR Shipping refused to return the advance payment to Gallardo
claiming that the agreement on the date of February 5, 1988 was just the reference commencing
date and the true loading date was February 16, 1988. This prompted the latter to file a case for
sum of money and damages. The Regional Trial Court ordered ADR Shipping to pay Gallardo
the advance payment with 6 percent interest per annum and attorneys fees. The decision of the
trial court was affirmed by the Court of Appeals. Hence, this petition.

ISSUE:

Whether or not private respondent is entitled to the refund of the advance payment
representing his deposit for the charter of the ship provided by petitioner.

RULING:

There was ambiguity in the interpretation of the contract provisions as to the date of the
loading of the ship. Ambiguities in a contract are interpreted strictly, albeit not unreasonably,
against the drafter thereof when justified in light of the operative facts and surrounding
circumstances. In this case, ambiguity must be construed strictly against ADR which drafted and
caused the inclusion of the ambiguous provisions.
The charter agreement explicitly states that February 5, 1988 is the intended date when
the ship is expected ready to load while February 16, 1988 is merely the canceling date.
Considering that the subject contract contains the foregoing express provisions, the parties have
no other recourse but to apply the literal meaning of the stipulations. The cardinal rule is that
when the terms of the contract are clear, leaving no doubt as to the intention of the parties, the
literal meaning of its stipulations is controlling.
Pursuant to the provision of Art 1191 of the Civil Code, the power to rescind obligations
is implied in reciprocal ones in case one of the obligors should not comply with what is
incumbent upon him, and the injured party may rescind the obligation, with payment of
damages. In this case the private respondent is entitled to the return of his down payment,
subject to a legal interest of 6 percent per annum, and to the payment of damages.

Page 446 of 745


MOVIDO VS. PASTOR
G.R. No. 172279 : February 11, 2010

FACTS:

Respondent Luis Reyes Pastor filed a complaint for specific performance in the Regional
Trial Court of Imus, Cavite, praying that petitioner Valentin Movido be compelled to cause the
survey of a parcel of land subject of their contract to sell. In his complaint, respondent alleged
that he and petitioner executed a kasunduan sa bilihan ng lupa where the latter agreed to sell a
parcel of land located in Paliparan, Dasmarias, Cavite with an area of some 21,000 sq. m. out of
the 22,731 sq. m. covered by Transfer Certificate of Title. Respondent further alleged that
another kasunduan was later executed supplementing the kasunduan sa bilihan ng lupa. It
provided that, if a Napocor power line traversed the subject lot, the purchase price would be
lowered to P200/sq. m. beyond the distance of 15 meters on both sides from the center of the
power line while the portion within a distance of 15 meters on both sides from the center of the
power line would not be paid.Lastly, respondent alleged that he already paid petitioner P5
million out of the original purchase price of P8.4 million stated in the kasunduan sa bilihan ng
lupa . He was willing and ready to pay the balance of the purchase price but due to petitioner's
refusal to have the property surveyed despite incessant demands, his unpaid balance could not be
determined with certainty.In his answer, petitioner alleged that the original negotiation for the
sale of his property involved the entire area of 22,731 sq. m. However, as respondent was not
sure whether a Napocor power line traversed the property, they then executed the kasunduan .
After respondent personally inspected the property, a final agreementthe kasunduan sa bilihan ng
lupa was executed where the area to be sold was 21,000 sq. m. for P400/sq. m. for a total sum of
P8.4 million. The final agreement also listed a schedule of payments of the purchase price and
included a penalty clause in case of default.The RTC ruled in favor of petitioner and held that the
kasunduan preceded the kasunduan sa bilihan ng lupa. The CA reversed the RTC and held that
the kasunduan sa bilihan ng lupa was the first document executed by the parties, not the
kasunduan. Movido's motion for reconsideration did not have its desired result, hence, this
petition.

ISSUE:

Whether the KASUNDUAN comes first and not the kasunduan sa bilihan ng lupa.

RULING:

The supreme court dismissed the petition. It explains that both contracts were executed
and notarized on the same day , December 6, 1993. More importantly, both contracts, even
independent of the time of their execution but, taken together, clearly spell out in full the
respective rights and obligations of the parties. A reading of the kasunduan sa bilihan ng lupa
and the kasunduan would readily reveal that payment of the purchase price does not depend on
the survey of the property. In other words, the purchase price should be paid whether or not the
property is surveyed. The survey of the property is important only insofar as the right of
respondent to the reduction of the purchase price is concerned. If respondent pays a higher
amount without the property being surveyed first (compared to what he is liable to pay after the
survey of the property) it will not be a problem because the excess of the amount paid can easily
be refunded to him. Such would be the plain application of the provisions of the kasunduan . On
the other hand, petitioner cannot successfully reject respondent's demand for petitioner to
perform his obligation to have the property surveyed. Under the kasunduan sa bilihan ng lupa ,
petitioner is obligated to conduct the survey on or before the due date of the last installment.
Corollary to this, the CA erred when it proceeded to determine the remaining balance of
respondent by applying a reduced rate on certain portions of the property. Luis Reyes Pastor
should thereafter pay the balance of the purchase price, after which, Marginito should execute
the kasulatan ng ganap na bilihan ng lupa (deed of absolute sale) in favor of Luis Reyes Pastor,
reflecting as purchase price the amount actually paid by the latter.

Page 447 of 745


TSPIC CORPORATION VS. TSPIC EMPLOYEES UNION
G.R No. 163419. February 13, 2008

FACTS:
TSPI Corporation entered into a Collective Bargaining Agreement with the corporation
Union for the increase of salary for the latters members for the year 2000 to 2002 starting from
January 2000. thus, the increased in salary was materialized on January 1, 2000. However, on
October 6, 2000, the Regional Tripartite Wage and production Board raised daily minimum
wage from P 223.50 to P 250.00 starting November 1, 2000. Conformably, the wages of the 17
probationary employees were increased to P250.00 and became regular employees therefore
receiving another 10% increase in salary. In January 2001, TSPIC implemented the new wage
rates as mandated by the CBA. As a result, the nine employees who were senior to the 17
recently regularized employees, received less wages. On January 19, 2001, TSPICs HRD
notified the 24 employees who are private respondents, that due to an error in the automated
payroll system, they were overpaid and the overpayment would be deducted from their salaries
starting February 2001. The Union on the other hand, asserted that there was no error and the
deduction of the alleged overpayment constituted diminution of pay.

ISSUE:

Whether the alleged overpayment constitutes diminution of pay as alleged by the Union.

RULING:

Yes, because it is considered that Collective Bargaining Agreement entered into by


unions and their employers are binding upon the parties and be acted in strict compliance
therewith. Thus, the CBA in this case is the law between the employers and their employees.

Therefore, there was no overpayment when there was an increase of salary for the
members of the union simultaneous with the increasing of minimum wage for workers in the
National Capital Region. The CBA should be followed thus, the senior employees who were first
promoted as regular employees shall be entitled for the increase in their salaries and the same
with lower rank workers.

Page 448 of 745


SPOUSES RAFAEL ESTANISLAO v. EASTWEST BANKING CORPORATION
G.R. No. 178537,February 11, 2008

FACTS:

On July 24,1997, petitioner obtained a loan fro the respondent in the amount of
P3,925,000 evidenced by a promissory note and secured by two deeds of chattel mortgage
covering two dump trucks and a bull dozer . Petitioner defaulted entire obligation became due
and demandable. A deed of assignment was drafted by the respondent on October 6, 2000 and
March 8, 2001 respectively. Petitioners completed the delivery of heavy equipment mentioned in
the deed of assignment to respondent which accepted the same without protest or objection.
Respondent manifested to admit an amended complaint for the seizure and delivery of two more
heavy equipment which are covered under the second deed of the chattel mortgage. RTC ruled
that the deed of assignment and the petitioners delivery of the heavy equipment effectively
extinguished the petitioners obligation and respondent as stopped. CA reversed the decision
ordering the petitioner the outstanding debt of P4,275,919.69 plus interests.

ISSUE:

Did the Deed of Assignment operate to extinguish petitioners debt to the respondent
such that the replevin suit could no longer prosper?

RULING:

The deed of assignment was a perfected agreement which extinguished petitioners total
outstanding obligation to the respondent. The nature of the assignment was a dacion en pago
whereby property is alienated to the creditor in the satisfaction of a debt in money. Since the
agreement was consummated by the delivery of the last unit of heavy equipment under the deed,
petitioners are deemed to have been released from all their obligations from the respondents.

Page 449 of 745


AQUINTEY v. SPOUSES TIBONG
G.R. No. 166704,December 20, 2006

FACTS:

On May 6, 1999, petitioner Aquintey filed before RTC Baguio, a complaint for sum of
money and damages against respondents. Agrifina alleged that Felicidad secured loans from her
on several occasions at monthly interest rates of 6% to 7%. Despite demands, spouses Tibong
failed to pay their outstanding loans of P773,000,00 exclusive of interests. However, spouses
Tiong alleged that they had executed deeds of assignment in favor of Agrifina amounting to
P546,459 and that their debtors had executed promissory notes in favor of Agrifina. Spouses
insisted that by virtue of these documents, Agrifina became the new collector of their debts.
Agrifina was able to collect the total amount of P301,000 from Felicdads debtors. She tried to
collect the balance of Felicidad and when the latter reneged on her promise, Agrifina filed a
complaint in the office of the barangay for the collection of P773,000.00. There was no
settlement. RTC favored Agrifina. Court of Appeals affirmed the decision with modification
ordering defendant to pay the balance of total indebtedness in the amount of P51,341,00 plus 6%
per month.

ISSUE:

Whether or not the deeds of assignment in favor of petitioner has the effect of payment of
the original obligation that would partially extinguish the same

RULING:

Substitution of the person of the debtor ay be affected by delegacion. Meaning, the debtor
offers, the creditor accepts a third person who consent of the substitution and assumes the
obligation. It is necessary that the old debtor be released fro the obligation and the third person or
new debtor takes his place in the relation . Without such release, there is no novation. Court of
Appeals correctly found that the respondents obligation to pay the balance of their account with
petitioner was extinguished pro tanto by the deeds of credit. CA decision is affirmed with the
modification that the principal amount of the respondents is P33,841.

Page 450 of 745


CRUZ V. COURT OF APPEALS
G.R. NO.122904, April 15,2005

FACTS:

The Complaint alleged that petitioners and Arnel Cruz were co-owners of a parcel of land
situated in Taytay, Rizal. Yet the property, which was then covered by Transfer Certificate of
Title (TCT) No. 495225, was registered only in the name of Arnel Cruz. According to
petitioners, the property was among the properties they and Arnel Cruz inherited upon the death
of Delfin Cruz, husband of Adoracion Cruz.
Petitioners and Arnel Cruz executed a Deed of Partial Partition, distributing to each of
them their shares consisting of several lots previously held by them in common. Among the
properties adjudicated to defendant Cruz was the parcel of land covered at the time by TCT No.
495225. It is the subject of this case.
Subsequently, the same parties to the Deed of Partition agreed in writing to share equally
in the proceeds of the sale of the properties although they have been subdivided and individually
titled in the names of the former co-owners pursuant to the Deed of Partition. This arrangement
was embodied in a Memorandum of Agreement executed on August 23, 1977 or a day after the
partition. The tenor of the Memorandum of Agreement was annotated at the back of the TCT No.
495225 on September 1, 1977.
Sometime in January 1983, petitioner Thelma Cruz discovered that TCT No. 514477 was
issued on October 18, 1982 in the name of Summit. Upon investigation, petitioners learned that
Arnel Cruz had executed a Special Power of Attorney on May 16, 1980 in favor of one Nelson
Tamayo, husband of petitioner Nerissa Cruz Tamayo, authorizing him to obtain a loan in the
amount of One Hundred Four Thousand Pesos from respondent Summit, to be secured by a real
estate mortgage on the subject parcel of land.
Since the loan remained outstanding on maturity, Summit instituted extra-judicial
foreclosure proceedings, and at the foreclosure sale, it was declared the highest bidder.
Consequently, Sheriff Sta. Ana issued a Certificate of Sale to respondent Summit which more
than a year later consolidated its ownership of the foreclosed property. Upon presentation of the
affidavit of consolidation of ownership, the Acting Register of Deeds of Rizal cancelled TCT
No. 495225 and issued and in lieu thereof, TCT No. 514477 in the name of respondent Summit.
In their complaint before the RTC, petitioners asserted that they co-owned the properties
with Arnel Cruz, as evidenced by the Memorandum of Agreement. Hence, they argued that the
mortgage was void since they did not consent to it.

ISSUE:

Whether or not the real estate mortgage on the property is valid.

RULING:

A reading of the provisions of the Deed of Partition, no other meaning can be gathered
other than that petitioners and Arnel Cruz had put an end to the co-ownership. In the aforesaid
deed, the shares of petitioners and Arnel Cruzs in the mass of co-owned properties were
concretely determined and distributed to each of them. In particular, to Arnel Cruz was assigned
the disputed property. There is nothing from the words of said deed which expressly or impliedly
stated that petitioners and Arnel Cruz intended to remain as co-owners with respect to the
disputed property or to any of the properties for that matter.
Petitioners do not question the validity or efficacy of the Deed of Partial Partition. In
fact, they admitted its existence in their pleadings and submitted it as a part of their evidence.
Thus, the deed is accorded its legal dire effect. Since a partition legally made confers upon each
heir their exclusive ownership of the property adjudicated to him, it follows that Arnel Cruz
acquired absolute ownership over the specific parcels of land assigned to him in the Deed of
Partial Partition, including the property subject of this case. As the absolute owner thereof then,
Arnel Cruz had the right to enjoy and dispose of the property, as well as the right to constitute a
real estate mortgage over the same without securing the consent of the petitioners.

Page 451 of 745


On the other hand, there is absolutely nothing in the Memorandum of Agreement which
diminishes the right of Arnel Cruz to alienate or encumber the properties allotted to him in the
deed of partition.
As correctly held by the Court of Appeals, the parties only bound themselves to share in
the proceeds of the sale of the properties. The agreement does not direct reconveyance of the
properties to reinstate the common ownership of the properties.
Moreover, to ascertain the intent of the parties in a contractual relationship, it is
imperative that the various stipulations provided for in the contracts be construed together,
consistent with the parties contemporaneous and subsequent acts as regards the execution of the
contract. Subsequent to the execution of the Deed of Partition and Memorandum of Agreement,
the properties were titled individually in the names of the co-owners to which they were
respectively adjudicated, to the exclusion of the other co-owners. Petitioners Adoracion Cruz
and Thelma Cruz separately sold the properties distributed to them as absolute owners thereof.
Being clear manifestations of sole and exclusive dominion over the properties affected, the acts
signify total incongruence with the state of co-ownership claimed by the petitioners.
The real estate mortgage on the disputed property is valid and does not contravene the
agreement of the parties.

Page 452 of 745


GONZALES VS. COURT OF APPEALS
354 SCRA 8

FACTS:

Private respondents, Mr. and Mrs. Gabriel Caballero, are the registered owneres of two
parcels of land situated in Cubao, Quezon City described in Transfer Certificate fo Title No.
247309 (Lot 1) and TCT No. 247310 (Lot 2). The spouses residence stood in Lot 2.
Sometime in 1979, they obtained a loan from the Cavite Development Bank in the
amount of P225,000.00. The two lots were mortgaged to secure their loan. The loan matured in
1984. To pay the loan they offered Lot 1 for sale. The offer was advertised in the Bulletin
Today. However, offers to purchase from prospective buyers did not materialize.
On October 24, 1985, a certain Mrs. Lagrimas approached the spouses offering to broker
the sale to an interested buyer. Initially, the spouses told the broker that they were selling only to
direct buyers. Nonetheless, Mrs. Lagrimas brought to the spouses her buyer, herein petitioner
Napoleon H. Gonzales, who turned out to be Mrs. Lagrimas relative.
Petitioner offered to buy the vacant lot for P470,000.00. Initially, respondents refused to
reduce their asking price. Petitioner bargained for a lower price with the suggestion that on
paper the price will be markedly lower so the spouses would pay lower capital gains tax.
Petitioner assured the spouses this could be done since he had connections with the Bureau of
Internal Revenue. The spouses agreed to sell at P470.000.00. Petitioners paid the bank
P375,000.00, to be deducted from the purchase price. After the mortgage was cancelled and
upon release of the two titles, Gonzales asked for the deeds of sale of the two lots and delivery of
the titles to him. Defendants signed the deed of sale covering only Lot 1 but refused to deliver
its title until petitioner paid the remaining balance of P70,000.00
This prompted petitioner to file a complaint for specific performance and damages.

ISSUE:

Whether or not the sale involved only Lot 1 and not both Lots.

RULING:

The sale covers only one of the lots. Principally, the issue here is whether the contract of
sale between the parties involved Lot 1 and 2 as claimed by petitioner or only Lot 1 as private
respondents contend. In a case where we have to judge conflicting claims on the intent of the
parties, as in this instance, judicial determination of the parties intention is mandated.
Contemporaneous and subsequent acts of the parties material to the case are to be considered.
Petitioner admits he himself caused the preparation of the deed of sale presented before the lower
court. Yet he could not explain why I referred only to the sale of Lot 1 and not to the two lots, if
the intention of the parties was really to cover the sale of two lots. As the courts a quo observed,
even if it were true that two lots were mortgaged and were about to be foreclosed, the ads private
respondents placed in the Bulletin Today offered only Lot 1 and was strong indication that they
did not intend to sell Lot 2. The 501 sq.m. lot was offered for P1,150.00 per sq.m. It alone
would have fetched P576,150.00. The loan still to be paid the bank was only P375,000.00 which
was what petitioner actually paid the bank. As the trial court observed, it was incomprehensible
why the spouses would part with two lots, one with a 2-storey house, and both situated at a prime
commercial district for less than the price of one lot. Contrary to what petitioner would make us
believe, the sale of Lot 1 valued at P576,150.00 for P470,000.00, with petitioner assuming the
bank loan of P375,000.00 as well as payment of the capital gains tax, appears more pla

Page 453 of 745


ALMIRA V. COURT OF APPEALS
399 SCRA 351

FACTS:

Petitioners are the wife and the children of the late Julio Garcia who inherited from his
mother, Ma. Alibudbud, a portion of a 90,655 square meter property denominated as lot 1642 of
the Sta. Rosa Estate in Brgy. Caingin Sta. Rosa Laguna. The lot was co-owned and registered in
the names of three persons with the following shares: Vicente de Guzman (1/2), Enrique
Hemedes (1/4) and Francisco Alibudbud, the father of Ma. Alibudbud (1/4). Although there wad
no separate title in the name of Julio Garcia, there were tax declaration in his name to the intent
of his grandfathers share covering the area of 21460 square meter.

On July 5, 1984, petitioner as heirs of Julio Garcia, and respondent Federico Brines
entered a Kasunduan ng Pagbibilihan (Kasunduan for Brevity) over the 21460 square meter
portion for the sum of P150.000.00. Respondent paid P65, 000.00 upon execution of the contract
while the balance of P85, 000.00 was made payable within six (6) months from the date of the
execution of the instrument. The time of the execution of the kasunduan, petitioners allegedly
informed respondent that TCT No. RT-1076 was in the possession of their cousin, Conchila
Alibudbud, who having bought Vicente de Guzmans shares, owned the bigger portion of lot
1642. This standing notwithstanding, respondent willingly entered into the Kasunduan provided
that the full payment of the purchase price will be made upon delivery to him of the title.

Respondent took possession of the property subject of the Kasunduan and made various
payments to petitioiners amountiong to P58500.00. However upon failure of petitionere to
deliver to him a separate title to the property in the name of Julio Garcia he refused to make
further payments, prompting petitioner to file a civil action before the RTC for a rescission of the
Kasunduan, return by respondent to petitioner of the possession of the subject parcel of land, and
payment by respondent of damages in favour of petitioners.

ISSUE:

Whether or not the petitioner may rescind the Kasunduan pursuant to Article 1191 of the
Civil Code for the failure of respondent to give full payment of the balance of the purchase price.

RULING:

NO, the right of the parties are governed by the terms ands the nature of the contract they
entered. Hence, although the nature of the Kasunduan was never places in dispute by both
parties, it is necessary to ascertain whether the Kasunduan is a contract to sell or a contract of
Sale. Although both parties have consistency referred to the Kasunduan as a contract to Sell, a
careful reading of the provision of the Kasunduan reveals that it is a contract of Sale. A deed of
sale is absolute in nature in the absence of an any stipulation reserving title to the vendor until
full payment of the purchase price. The delivery of a separation title in the name of Julio Garcia
was a condition imposed on respondents obligation to pay the balance of the purchase price. It
was not a condition imposed in the perfection of the contract of Sale.

The rescission will not prosper since the power to rescind is only given to the injured
party. The injured party is the party who has faithfully fulfilled his obligation. In the case at bar,
the petitioners were not ready, willing and able to comply with their obligation to deliver a
separate title in the name of Julio Garcia to respondent therefore, thy are not in a position to ask
for rescission. Failure to comply with a condition imposed on the performance of an obligation
gives the other party the option either to refuse to proceed with the sale or to waive the condition
under Art 1545 of the civil code. Hence it is the respondent who has the option.

Page 454 of 745


PHILIPPINE BANK OF COMMUNICATIONS V. LIM
G.R. NO. 158138, April 12, 2005

FACTS:

Petitioner filed a complaint against respondents for the collection of a deficiency


amounting to P4,014,297.23 exclusive of interest. Petitioner alleged that respondents obtained a
loan from it and executed a continuing surety in favor of petitioner for all loans, credits, etc., that
were extended or may be extended in the future to respondents. Petitioner granted a renewal of
said loan upon respondents request as evidenced by a promissory note renewal BD-Variable No.
8298021001 on the amount of P3,000,000.00. it was expressly stipulated therein that the venue
for any legal action that may arise out of said promissory note shall be Makati City to the
excklusion of all other courts. Respondent allegedly failed to pay said obligation upon
maturity. Thus petitioner foreclosed the real estate mortgage executed by the respondents valued
at P1,081,600.00 leaving a deficiency balance of P4,014,297.23
Respondents moved to dismiss the complaint on the ground of improper venue, invoking
the stipulation contained in the last paragraph of the promissory note with respect to the
restriction/exclusive venue. The trial court denied said motion asseverating that petitioners had
separate causes of action arising from the promissory note and the continuing surety agreement.

ISSUE:

Whether or not the complementary-contracts-construed together principle is applicable


in the case at bar.

RULING:

The aforementioned doctrine is applicable to the present case. In capable of standing by


itself, the surety agreement can be enforced only in conjuction with the promissory note. The
latter documents the debt that is sought to be collected in the action against the sureties
According to this principle, an accessory contract must be read in its entirety and together
with the principal agreement. This principle is used in construing contractual stipulations in
order to arrive at their true meaning; certain stipulations cannot be segregated and then made to
control. This no-segregation principle is based on Article 1374 of the Civil Code.
Notably, the promissory note was a contract of adhesion that petitioner required
the principal debtor to execute as a condition of the approval of the loan. It was made in the
form and language prepared by the bank. By inserting the provision of that Makati City would
be the venue for any legal action that may arise out of the promissory note, petitioner also
restricted the venue of actions against the sureties. The legal action against the sureties arose not
only from the security agreement but also from the promissory note.

Page 455 of 745


RIGOR V. CONSOLIDATED ORIX LEASING AND FINANCE CORPORATION
G.R. No. 136423. August 20, 2002

FACTS:

Petitioners obtained a loan from private respondent Consolidated Orix Leasing and
Finance Corporation in the amount of P1,630,320.00. Petitioners executed a promissory note
promising to pay the loan in 24 equal monthly installments every fifth day of the month
commencing on September 5, 1996. The promissory note also provides that default in paying
any installment renders the entire unpaid amount due and payable. To secure payment of the
loan, petitioners executed in favor of private respondent a deed of chattel mortgage over two
dump trucks. Petitioners failed to pay several installments despite demand from private
respondent.
Private respondent sought to foreclose the chattel mortgage by filing a complaint for
Replevin with Damages against petitioners. After service of summons, petitioners moved to
dismiss the complaint on the ground of improper venue based on a provision in the promissory
note which states that, x x x all legal actions arising out of this note or in connection with the
chattels subject hereof shall only be brought in or submitted to the proper court in Makati City,
Philippines. Private respondent opposed the motion to dismiss and argued that venue was
properly laid in Dagupan City where it has a branch office based on a provision in the deed of
chattel mortgage which states that, x x x in case of litigation arising out of the transaction that
gave rise to this contract, complete jurisdiction is given the proper court of the city of Makati or
any proper court within the province of Rizal, or any court in the city, or province where the
holder/mortgagee has a branch office, waiving for this purpose any proper venue. After a further
exchange of pleadings, the Dagupan trial court denied petitioners motion to dismiss Not
satisfied with the orders, petitioners filed a petition for certiorari before the Court of Appeals
imputing grave abuse of discretion by the Dagupan trial court in denying the motion to dismiss
which was denied.

ISSUE:

Whether or not venue was properly laid under the provisions of the chattel mortgage
contract in the light of Article 1374 of the Civil Code.

RULING:

The Court holds that private respondent is not barred from filing its case against
petitioners in Dagupan City where private respondent has a branch office as provided for in the
deed of chattel mortgage.
Art. 1374 of the Civil Code provides that the various stipulations of a contract shall be
interpreted together, attributing to the doubtful ones that sense which may result from all of them
taken jointly.
Applying the doctrine to the instant case, we cannot sustain petitioners contentions. The
promissory note and the deed of chattel mortgage must be construed together. Private
respondent explained that its older standard promissory notes confined venue in Makati City
where it had its main office. After it opened a branch office in Dagupan City, private respondent
made corrections in the deed of chattel mortgage, but due to oversight, failed to make the
corresponding corrections in the promissory notes. Petitioners affixed their signatures in both
contracts. The presumption is applied that a person takes ordinary care of his concerns. It is
presumed that petitioners did not sign the deed of chattel mortgage without informing themselves
of its contents. As aptly stated in a case, they being of age and businessmen of experience, it
must be presumed that they acted with due care and have signed the documents in question with
full knowledge of their import and the obligation they were assuming thereby. In any event,
petitioners did not contest the deed of chattel mortgage under Section 8, Rule 8 of the Revised
Rules of Civil Procedure.

Page 456 of 745


VELASQUEZ V. COURT OF APPEALS
G.R. No. 124049, June 30, 1999

FACTS:

]The Pick-up Fresh Farms, Inc. (PUFFI), of which petitioner Velasquez was an officer
and stockholder, filed an application for a loan of P7,500,000.00 with PCIB under the
government's Guarantee Fund for Small and Medium Enterprises (GFSME). The parties
executed the corresponding loan agreement. As security for the loan, promissory notes
numbered TL 121231 and TL 121258 for the amounts of P4,000,000.00 and P3,500,000.00,
respectively, were signed by officers of and for both PUFFI and Aircon and Refrigeration
Industries, Inc. (ARII). A chattel mortgage was also executed by ARII over its equipment and
machineries in favor of PCIB. Petitioner along with other officers also executed deeds of
suretyship in favor of PCIB. Separate deeds of suretyship were further executed. When PUFFI
defaulted in the payment of its obligations PCIB foreclosed the chattel mortgage. The proceeds
of the sale amounted to P678,000.00.
Thus, PCIB filed an action to recover the remaining balance of the entire obligation
including interests, penalties and other charges. Exemplary damages and attorneys fees of 25%
of the total amount due were also sought. A writ of preliminary attachment was granted by the
trial court. The trial court rendered a summary judgment in favor of PCIB holding petitioner and
Canilao solidarily liable to pay P7,227,624.48 plus annual interest of 17%, and P700,000.00 as
attorneys fees and the costs of suit. The case was dismissed without prejudice with regard to the
other defendants as they were not properly served with summons.

ISSUE:

Whether or not the appellate court committed reversible error in sustaining or affirming
the summary judgment despite the existence of genuine triable issues of facts and in refusing to
set aside the default order against petitioner.

RULING:

The more appropriate doctrine in this case is that of the complementary contracts
construed together doctrine. The surety bond must be read in its entirety and together with the
contract between the NPC and the contractors. The provisions must be construed together to
arrive at their true meaning. Certain stipulations cannot be segregated and then made to control.
That the complementary contracts construed together doctrine applies in this case finds
support in the principle that the surety contract is merely an accessory contract and must be
interpreted with its principal contract, which in this case was the loan agreement. This doctrine
closely adheres to the spirit of Art. 1374 of the Civil Code.

Page 457 of 745


QUIRONG VS. DBP
G.R. No. 173441 : December 3, 2009

FACTS:

When the late Emilio Dalope died, he left a 589-square meter untitled lot in Sta. Barbara,
Pangasinan, to his wife, Felisa Dalope and their nine children, one of whom was Rosa Dalope-
Funcion. To enable Rosa and her husband Antonio Funcion get a loan from respondent
Development Bank of the Philippines (DBP), Felisa sold the whole lot to the Funcions. With the
deed of sale in their favor and the tax declaration transferred in their names, the Funcions
mortgaged the lot with the DBP. On February 12, 1979, after the Funcions failed to pay their
loan, the DBP foreclosed the mortgage on the lot and consolidated ownership in its name on June
17, 1981. Four years later or on September 20, 1983 the DBP conditionally sold the lot to Sofia
Quirong for the price of P78,000.00. In their contract of sale, Sofia Quirong waived any warranty
against eviction. The contract provided that the DBP did not guarantee possession of the property
and that it would not be liable for any lien or encumbrance on the same. Quirong gave a down
payment of P14,000.00. Two months after that sale or on November 28, 1983 Felisa and her
eight children filed an action for partition and declaration of nullity of documents with damages
against the DBP and the Funcions before the Regional Trial Court (RTC) of Dagupan City.

On December 16, 1992 the RTC rendered a decision, declaring the DBP's sale to Sofia
Quirong valid only with respect to the shares of Felisa and Rosa Funcion in the property. The
DBP resisted the writ by motion to quash, claiming that the decision could not be enforced
because it failed to state by metes and bounds the particular portions of the lot that would be
assigned to the different parties in the case.

The RTC denied the DBP's motion. The Court of Appeals (CA) reversed the RTC
decision and dismissed the heirs' action on the ground of prescription. Hence, this petition.

ISSUE:

a. Whether or not the Quirong heirs' action for rescission of respondent DBP's sale of the
subject property to Sofia Quirong was already barred by prescription; and

b. Whether or not the heirs of Quirong were entitled to the rescission of the DBP's sale of
the subject lot to the late Sofia Quirong as a consequence of her heirs having been evicted from
it.

RULING:

On the first issue, the court find that the incident did not affect the finality of the decision,
the prescriptive period remained to be reckoned from January 28, 1993, the date of such finality.

On the second issue, the remedy of "rescission" is not confined to the rescissible
contracts enumerated under Article 1381. Article 1191 of the Civil Code gives the injured party
in reciprocal obligations, such as what contracts are about, the option to choose between
fulfillment and "rescission." "Rescission" is a subsidiary action based on injury to the plaintiff's
economic interests as described in Articles 1380 and 1381. "Resolution," the action referred to in
Article 1191, on the other hand, is based on the defendant's breach of faith, a violation of the
reciprocity between the parties. As an action based on the binding force of a written contract,
therefore, rescission (resolution) under Article 1191 prescribes in 10 years. Ten years is the
period of prescription of actions based on a written contract under Article 1144.

The supreme court conclusion is that the Court has reached respecting the first issue
presented in this case, it would serve no useful purpose for it to further consider the issue of
whether or not the heirs of Quirong would have been entitled to the rescission of the DBP's sale

Page 458 of 745


of the subject lot to Sofia Quirong as a consequence of her heirs having been evicted from it. As
the Court has ruled, their action was barred by prescription. The CA acted correctly in reversing
the RTC decision and dismissing their action.

In view of the case, the supreme court denied the petition and affirm the decision of the
CA.

Page 459 of 745


LEE VS. BANGKOK BANK PUBLIC COMPANY

G.R. No. 173349, February 09, 2011

FACTS:

Midas Diversified Export Corporation (MDEC) and Manila Home Textile, Inc. (MHI)
entered into two separate Credit Line Agreements (CLAs) with Respondent Bangkok Bank
Public Company, Limited (Bangkok Bank) on November 29, 1995 and April 17, 1996,
respectively. MDEC and MHI are owned and controlled by the Lee family: Thelma U. Lee,
Maybelle L. Lim, Daniel U. Lee and Samuel U. Lee (Samuel). Both corporations have
interlocking directors and management led by the Lee family; and engaged in the manufacturing
and export of garments, ladies' bags and apparel.

On July 25, 1996, MDEC was likewise granted a loan facility by Asiatrust Development
Bank, Inc. (Asiatrust). This facility had an available credit line of forty million pesos (PhP
40,000,000) for letters of credit, advances on bills and export packing; and a separate credit line
of two million dollars (USD 2,000,000) for bills purchase.

In the meantime, in May 1997, Samuel bought several parcels of land in Cupang,
Antipolo, and later entered into a joint venture with Louisville Realty and Development
Corporation to develop the properties into a residential subdivision, called Louisville
Subdivision. These properties in Cupang, Antipolo are the subject properties in the instant case
(Antipolo properties) and are covered by Transfer Certificate of Title.

MDEC and MHI initially had made payments with their CLAs until they defaulted and
incurred aggregate obligations to Bangkok Bank in the amount of USD 1,998,554.60 for MDEC
and USD 800,000 for MHI. Similarly, the Lee corporations defaulted in their obligations with
other creditors

On February 16, 1998, MDEC, MHI, and three other corporations owned by the Lee
family filed before the Securities and Exchange Commission (SEC) a Consolidated Petition for
the Declaration of a State of Suspension of Payments and for Appointment of a Management
Committee/Rehabilitation Receiver.

On February 20, 1998, the SEC issued a Suspension Order enjoining the Lee corporations
from disposing of their property in any manner except in the ordinary course of business, and
from making any payments outside the legitimate expenses of their business during the pendency
of the petition.

On July 20, 1999, Bangkok Bank filed the instant case before the RTC. The RTC
dismissed the case. However, the CA granted the appeal, and reversed and set aside the RTC
decision. Hence, this petition.

ISSUE:

Whether or not Bangkok Bank can maintain an action to rescind the REM on the subject
Antipolo properties despite its failure to exhaust all legal remedies to satisfy its claim.

RULING:

The Supreme Court ruled that under Sec. 5.2 of RA 8799, the SEC's original and
exclusive jurisdiction over all cases enumerated under Sec. 5 of PD 902-A was transferred to the
appropriate RTC. RA 8799, Sec. 5.2, however, expressly stated as an exception, that the "the

Page 460 of 745


Commission shall retain jurisdiction over pending suspension of payment/rehabilitation cases
filed as of 30 June 2000 until finally disposed." Accordingly, the Consolidated Petition for the
Declaration of a State of Suspension of Payments and for Appointment of a Management
Committee/Rehabilitation Receiver filed on February 16, 1998 by MDEC, MHI and three other
corporations owned by the Lee family, remained under the jurisdiction of the SEC until finally
disposed of pursuant to the last sentence of Sec. 5.2 of RA 8799.

The SEC's jurisdiction is evident from the statutorily vested power of jurisdiction,
supervision and control by the SEC over all corporations, partnerships or associations, which are
grantees of primary franchise, license or permit issued by the government to operate in the
Philippines, and its then original and exclusive jurisdiction over petitions for suspension of
payments of said entities. Secs. 3 and 5 of PD 902-A pertinently provides:

Sec. 3. The Commission shall have absolute jurisdiction, supervision and control over all
corporations, partnerships or associations, who are the grantees of primary franchise and/or a
license or permit issued by the government to operate in the Philippines; and in the exercise of its
authority, it shall have the power to enlist the aid and support of any and all enforcement
agencies of the government, civil or military.

Sec. 5. In addition to the regulatory and adjudicative functions of the Securities and
Exchange Commission over corporations, partnerships and other forms of associations registered
with it as expressly granted under existing laws and decrees, it shall have original and exclusive
jurisdiction to hear and decide cases involving: (d) Petitions of corporations, partnerships or
associations to be declared in the state of suspension of payments in cases where the corporation,
partnership or association possesses sufficient property to cover all its debts but foresees the
impossibility of meeting them when they respectively fall due or in cases where the corporation,
partnership or association has no sufficient assets to cover its liabilities, but is under the
management of a Rehabilitation Receiver or Management Committee created pursuant to this
Decree.
In sum, the Supreme Court granted the petition.

Page 461 of 745


EQUATORIAL REALTY DEVELOPMENT, INC. V. MAYFAIR THEATER, INC.
G.R. No. 136221 May 12, 2000

FACTS:

Carmelo & Bauermann, Inc. (Carmelo) used to own a parcel of land, together with two
two-storey buildings constructed thereon. On June 1, 1967, Carmelo entered into a lease with
Mayfair Theater, Inc. (Mayfair) for a period of 20 years. The lease covered a portion of the
second floor and mezzanine. Two (2) years later, Mayfair entered into a second lease with
Carmelo for the lease of another property, a part of the second floor and two spaces on the
ground floor. The lease was also for a period of twenty (20) years. Both leases contained a
provision granting Mayfair a right of first refusal to purchase the said properties. However, on
July 30, 1978, within the 20-year-lease term, Carmelo sold the subject properties to Equatorial
Realty Development, Inc. (Equatorial) for the sum of P11.3M without their first being offered to
Mayfair.
As a result, Mayfair filed a complaint for specific performance and damages. After trial,
the court ruled in favor of Equatorial. On appeal, the Court of Appeals (CA) reversed and set
aside the judgment of the lower court. On November 21, 1996, the Supreme Court denied
Equatorials petition for review and declared the contract between Carmelo and Equatorial
rescinded. The decision became final and executory and Mayfair filed a motion for its
execution, which the court granted on April 25, 1997. However, Carmelo could no longer be
located thus Mayfair deposited with the court its payment to Carmelo. The lower court issued a
deed of reconveyance in favor of Carmelo and issued new certificates in the name of Mayfair.
On September 18, 1997, Equatorial filed an action for the collection of sum of money
against Mayfair claiming payment of rentals or reasonable compensation for the defendants use
of the premises after its lease contracts had expired. The lower court debunked the claim of the
petitioner for unpaid rentals, holding that the rescission of the Deed of Absolute Sale in the
mother case did not confer on Equatorial any vested or residual proprietary rights, even in
expectancy.

ISSUE:

Whether or not Equatorial may collect rentals or reasonable compensation for Mayfairs
use of subject premises after its lease contracts had expired.

RULING:

Equitorial may not collect rentals or reasonable compensation for Mayfairs use of the
subject premises after its lease contracts had expired. Rent is a civil fruit that belongs to the
owner of the property producing it by right of accession. Consequently and ordinarily, the
rentals that fell due from the time of the perfection of the sale to petitioner until its rescission by
final judgment should belong to the owner of the property during that period.

Petitioner never took actual control and possession of the property sold, in view of the
respondents timely objection to the sale and continued actual possession of the property. The
objection took the form of a court action impugning the sale that was rescinded by a judgment
rendered by the Court in the mother case. It has been held that the execution of a contract of sale
as a form of constructive delivery is a legal fiction. It holds true only when there is no
impediment that may prevent the passing of the property from the hands of the vendor into those
of the vendee. When there is such impediment, fiction yields to reality; the delivery has not been
effected. Hence, respondents opposition to the transfer of property by way of sale to Equatorial
was a legally sufficient impediment that effectively prevented the passing of the property into the
latters hands.
Article 1386 of the Civil Code provides rescission, which creates the obligation to return
the things, which were the object of the contract, together with their fruits, and the price with its
interest, but also the rentals paid, if any, had to be returned by the buyer.

Page 462 of 745


SIGUAN V. LIM
G.R. No. 134685, November 19, 1999

FACTS:

Lim issued two Metrobank checks in the sums of P300,000 and P241,668, respectively,
payable to "cash." Upon presentment by petitioner with the drawee bank, the checks were
dishonored for the reason "account closed." Demands to make good the checks proved futile.
As a consequence, a criminal case for violation of Batas Pambansa were filed by petitioner
against Lim.
The court a quo convicted Lim as charged. The case is pending before this Court for
review and docketed as G.R. No. 134685. It also appears that on 31 July 1990, Lim was
convicted of estafa by the RTC of Quezon City in Criminal Case No. Q-89-22162 filed by a
certain Victoria Suarez. This decision was affirmed by the Court of Appeals. On appeal,
however, the Supreme Court, in a decision promulgated on 7 April 1997, acquitted Lim but held
her civilly liable in the amount of P169,000, as actual damages, plus legal interest.
Meanwhile, on 2 July 1991, a Deed of Donation conveying parcels of land and
purportedly executed by Lim on 10 August 1989 in favor of her children, Linde, Ingrid and Neil,
was registered with the Office of the Register of Deeds of Cebu City. New transfer certificates
of title were thereafter issued in the names of the donees.
On 23 June 1993, petitioner filed an accion pauliana against Lim and her children before
Branch 18 of the RTC of Cebu City to rescind the questioned Deed of Donation and to declare as
null and void the new transfer certificates of title issued for the lots covered by the questioned
Deed. The complaint was docketed as Civil Case No. CEB-14181. Petitioner claimed therein
that sometime in July 1991, Lim, through a Deed of Donation, fraudulently transferred all her
real property to her children in bad faith and in fraud of creditors, including her; that Lim
conspired and confederated with her children in antedating the questioned Deed of Donation, to
petitioner's and other creditors' prejudice; and that Lim, at the time of the fraudulent conveyance,
left no sufficient properties to pay her obligations. On the other hand, Lim denied any liability to
petitioner. She claimed that her convictions in Criminal Cases Nos. 22127-28 were erroneous,
which was the reason why she appealed said decision to the Court of Appeals. As regards the
questioned Deed of Donation, she maintained that it was not antedated but was made in good
faith at a time when she had sufficient property. Finally, she alleged that the Deed of Donation
was registered only on 2 July 1991 because she was seriously ill.
In its decision of 31 December 1994 the trial court ordered the rescission of the
questioned deed of donation; (2) declared null and void the transfer certificates of title issued in
the names of private respondents Linde, Ingrid and Neil Lim; (3) ordered the Register of Deeds
of Cebu City to cancel said titles and to reinstate the previous titles in the name of Rosa Lim; and
(4) directed the LIMs to pay the petitioner, jointly and severally, the sum of P10,000 as moral
damages; P10,000 as attorney's fees; and P5,000 as expenses of litigation.
On appeal, the Court of Appeals, in a promulgated on 20 February 1998, reversed the
decision of the trial court and dismissed petitioner's accion pauliana. It held that two of the
requisites for filing an accion pauliana were absent, namely, (1) there must be a credit existing
prior to the celebration of the contract; and (2) there must be a fraud, or at least the intent to
commit fraud, to the prejudice of the creditor seeking the rescission.
According to the Court of Appeals, the Deed of Donation, which was executed and
acknowledged before a notary public, appears on its face to have been executed on 10 August
1989. Under Section 23 of Rule 132 of the Rules of Court, the questioned Deed, being a public
document, is evidence of the fact which gave rise to its execution and of the date thereof. No
antedating of the Deed of Donation was made, there being no convincing evidence on record to
indicate that the notary public and the parties did antedate it.
Since Lim's indebtedness to petitioner was incurred in August 1990, or a year after the
execution of the Deed of Donation, the first requirement for accion pauliana was not met.
Anent petitioner's contention that assuming that the Deed of Donation was not antedated
it was nevertheless in fraud of creditors because Victoria Suarez became Lims creditor on 8
October 1987, the Court of Appeals found the same untenable, for the rule is basic that the fraud
must prejudice the creditor seeking the rescission.

Page 463 of 745


ISSUE:

Whether or not the deed of donation is valid.

RULING:

The Supreme Court upheld the validity of the deed of donation.

Article 1381 of the Civil Code enumerates the contracts which are rescissible, and among
them are "those contracts undertaken in fraud of creditors when the latter cannot in any other
manner collect the claims due them."

The action to rescind contracts in fraud of creditors is known as accion pauliana. For this
action to prosper, the following requisites must be present:
(1) the plaintiff asking for rescission has a credit prior to the alienation,
although demandable later;
(2) the debtor has made a subsequent contract conveying a patrimonial
benefit to a third person;
(3) the creditor has no other legal remedy to satisfy his claim;
(4) the act being impugned is fraudulent;
(5) the third person who received the property conveyed, if it is by onerous
title, has been an accomplice in the fraud.
The general rule is that rescission requires the existence of creditors at the time of the
alleged fraudulent alienation, and this must be proved as one of the bases of the judicial
pronouncement setting aside the contract. Without any prior existing debt, there can neither be
injury nor fraud. While it is necessary that the credit of the plaintiff in the accion pauliana must
exist prior to the fraudulent alienation, the date of the judgment enforcing it is immaterial. Even
if the judgment be subsequent to the alienation, it is merely declaratory, with retroactive effect to
the date when the credit was constituted.

In the instant case, the alleged debt of Lim in favor of petitioner was incurred in August
1990, while the deed of donation was purportedly executed on 10 August 1989.
The Supreme Court is not convinced with the allegation of the petitioner that the
questioned deed was antedated to make it appear that it was made prior to petitioner's credit.
Notably, that deed is a public document, it having been acknowledged before a notary public.
As such, it is evidence of the fact which gave rise to its execution and of its date, pursuant to
Section 23, Rule 132 of the Rules of Court.
In the present case, the fact that the questioned Deed was registered only on 2 July 1991
is not enough to overcome the presumption as to the truthfulness of the statement of the date in
the questioned deed, which is 10 August 1989. Petitioner's claim against Lim was constituted
only in August 1990, or a year after the questioned alienation. Thus, the first two requisites for
the rescission of contracts are absent.
Even assuming arguendo that petitioner became a creditor of Lim prior to the celebration of
the contract of donation, still her action for rescission would not fare well because the third
requisite was not met. Under Article 1381 of the Civil Code, contracts entered into in fraud
of creditors may be rescinded only when the creditors cannot in any manner collect the
claims due them. Also, Article 1383 of the same Code provides that the action for rescission
is but a subsidiary remedy which cannot be instituted except when the party suffering
damage has no other legal means to obtain reparation for the same. The term "subsidiary
remedy" has been defined as "the exhaustion of all remedies by the prejudiced creditor to
collect claims due him before rescission is resorted to." It is, therefore, essential that the
party asking for rescission prove that he has exhausted all other legal means to obtain
satisfaction of his claim. Petitioner neither alleged nor proved that she did so. On this score,
her action for the rescission of the questioned deed is not maintainable even if the fraud
charged actually did exist." The fourth requisite for an accion pauliana to prosper is not
present either.

Page 464 of 745


KHE HONG CHENG, alias FELIX KHE, SANDRA JOY KHE and RAY STEVEN KHE,
petitioners,
vs.COURT OF APPEALS, HON. TEOFILO GUADIZ, RTC 147, MAKATI CITY and
PHILAM INSURANCE CO., INC., respondents.
G.R. No. 144169 March 28, 200

FACTS:

Petitioner Khe Hong Chang is the owner of the vessel which said vessel shipped 3,400 bags of
copra at Masbate owned by the Philippine Agricultural Trading Corporation. The shipment of
copra was covered by an insurance issued by American Home Insurance Company. The vessel
sank while at sea which resulted to the loss of bags of copra. The insurer paid the amount of Php
345,000.00 to the consignee.
The American Home filed a case for the recovery of the money paid to the consignee,
based on breach of contract of carriage. During the pendency of the case, petitioner executed
deed of donation in favor of his children Sandra and Ray.
The trial court rendered its deciusion in favor of the plaintiff however when the Sheriff
executed the writ of executuin they found out that petitioner no longer had any property and that
he conveyed the subject propertiues to his children.
Respondent Philam filed a complaint for the rescission of the deeds of donation executed by
petitioner Khe Hong Cheng in favor of his children and for the nullification of their titles.
Respondent Philam alleged, inter alia, that petitioner Khe Hong Cheng executed the aforesaid
deeds in fraud of his creditors, including respondent Philam.
The RTC rendered its decision in favoir of Philam. The Ca affirmed the decision of RTC.

ISSUE:

When does accion pauliano accrues?

RULING:

An accion pauliana accrues only when the creditor discovers that he has no other legal
remedy for the satisfaction of his claim against the debtor other than an accion pauliana. The
accion pauliana is an action of a last resort. For as long as the creditor still has a remedy at law
for the enforcement of his claim against the debtor, the creditor will not have any cause of action
against the creditor for rescission of the contracts entered into by and between the debtor and
another person or persons. Indeed, an accion pauliana presupposes a judgment and the issuance
by the trial court of a writ of execution for the satisfaction of the judgment and the failure of the
Sheriff to enforce and satisfy the judgment of the court. It presupposes that the creditor has
exhausted the property of the debtor. The date of the decision of the trial court against the debtor
is immaterial. What is important is that the credit of the plaintiff antedates that of the fraudulent
alienation by the debtor of his property. After all, the decision of the trial court against the debtor
will retroact to the time when the debtor became indebted to the creditor.
WHEREFORE, premises considered, the petition is hereby DENIED for lack of merit.

Page 465 of 745


RAFAEL G. SUNTAY, substituted by his heirs, namely: ROSARIO, RAFAEL, JR.,
APOLINARIO, RAYMUND, MARIA VICTORIA, MARIA ROSARIO and MARIA
LOURDES, all surnamed SUNTAY, petitioners,
vs.THE HON. COURT OF APPEALS and FEDERICO C. SUNTAY, respondents.
G.R. No. 114950 December 19, 1995

FACTS:

Federico Suntay was the registered owner of a parcel of land in dispute. He applied as a
miller contractor of the National Rice and Corn Corporation (NARIC) but the same was
disapproved by NARIC because he was tied up with several unpaid loans. For purposes of
circumvention, he asked his nephew-lawyer, Rafael to prepare an absolute deed of sale of the
said land in dispute in consideration of Php 20,000.00 in favor of Rafael. Less that 3 months after
his conveyance, the same parcel of land was sold back to Federico for the same consideration.
However on the second sale there was irregularity because it appears that said land was not sold
but was mortgaged in favor of the Hagonoy Rural Bank. Moreover, after the execution of the
deed, Federico remained in possession of the property sold.
Federico requested Rafael to deliver his copy of TCT no. T-36714 so that Federico could
have the counter deed of sale in his favor registered on his name but Rafael refuses.
Federico filed a complaint for reconveyance and damages against Rafael. The trial court
rendered its decision that Rafael is the owner of the property in dispute but not to the extent of
ordering Federico to pay back rentals for the use of the propert.
The CA rendered its decision in favor of Federico.

ISSUE:

Whether or not said second deed of absolute sale is null and void.

RUKING:

The cumulative effect of the evidence on record as chronicled aforesaid identified badges of
simulation proving that the sale by Federico to his deceased nephew of his land and rice mill,
was not intended to have any legal effect between them. Though the notarization of the deed of
sale in question vests in its favor the presumption of regularity, it is not the intention nor the
function of the notary public to validate and make binding an instrument never, in the first place,
intended to have any binding legal effect upon the parties thereto. The intention of the parties
still and always is the primary consideration in determining the true nature of a contract.
The SC hold that the deed of sale executed by Federico in favor of his now deceased nephew,
Rafael, is absolutely simulated and fictitious and, hence, null and void, said parties having
entered into a sale transaction to which they did not intend to be legally bound. As no property
was validly conveyed under the deed, the second deed of sale executed by the late Rafael in
favor of his uncle, should be considered ineffective and unavailing.

Page 466 of 745


MANGAHAS VS. BROBIO

G.R. No. 183852 : October 20, 2010

FACTS:

On January 10, 2002, Pacifico S. Brobio died intestate, leaving three parcels of land. He
was survived by his wife, respondent Eufrocina A. Brobio, and four legitimate and three
illegitimate children; petitioner Carmela Brobio Mangahas is one of the illegitimate children.

On May 12, 2002, the heirs of the deceased executed a Deed of Extrajudicial Settlement
of Estate of the Late Pacifico Brobio with Waiver. In the Deed, petitioner and Pacificos other
children, in consideration of their love and affection for respondent and the sum of P150,000.00,
waived and ceded their respective shares over the three parcels of land in favor of respondent.
According to petitioner, respondent promised to give her an additional amount for her share in
her fathers estate. Thus, after the signing of the Deed, petitioner demanded from respondent the
promised additional amount, but respondent refused to pay, claiming that she had no more
money.

A year later, while processing her tax obligations with the Bureau of Internal Revenue
(BIR), respondent was required to submit an original copy of the Deed. Left with no more
original copy of the Deed, respondent summoned petitioner to her office on May 31, 2003 and
asked her to countersign a copy of the Deed. Petitioner refused to countersign the document,
demanding that respondent first give her the additional amount that she promised. Considering
the value of the three parcels of land (which she claimed to be worth P20M), petitioner asked for
P1M, but respondent begged her to lower the amount. Petitioner agreed to lower it to
P600,000.00. Because respondent did not have the money at that time and petitioner refused to
countersign the Deed without any assurance that the amount would be paid, respondent executed
a promissory note. Petitioner agreed to sign the Deed when respondent signed the promissory
note.

When the promissory note fell due, respondent failed and refused to pay despite demand.
Petitioner made several more demands upon respondent but the latter kept on insisting that she
had no money. On January 28, 2004, petitioner filed a Complaint for Specific Performance with
damagesaw against respondent.

The Regional Trial Court (RTC) rendered a decision in favor of petitioner. The CA
reversed the RTC decision and dismissed the complaint. Hence, this petition.

ISSUE:

The Honorable Court of Appeals erred in the appreciation of the facts of this case when
it found that intimidation attended the execution of the promissory note subject of this case.

RULING:

The Supreme Court ruled that contracts are voidable where consent thereto is given
through mistake, violence, intimidation, undue influence, or fraud. In determining whether
consent is vitiated by any of these circumstances, courts are given a wide latitude in weighing the
facts or circumstances in a given case and in deciding in favor of what they believe actually
occurred, considering the age, physical infirmity, intelligence, relationship, and conduct of the
parties at the time of the execution of the contract and subsequent thereto, irrespective of whether
the contract is in a public or private writing. It is alleged that mistake, violence, fraud, or
intimidation attended the execution of the promissory note. Still, respondent insists that she was
"forced" into signing the promissory note because petitioner would not sign the document

Page 467 of 745


required by the BIR. The fact that respondent may have felt compelled, under the circumstances,
to execute the promissory note will not negate the voluntariness of the act. As rightly observed
by the trial court, the execution of the promissory note in the amount of P600,000.00 was, in fact,
the product of a negotiation between the parties. Respondent herself testified that she bargained
with petitioner to lower the amount. The remedy suggested by the CA is not the proper one under
the circumstances. An action for partition implies that the property is still owned in common.
Considering that the heirs had already executed a deed of extrajudicial settlement and waived
their shares in favor of respondent, the properties are no longer under a state of co-ownership;
there is nothing more to be partitioned, as ownership had already been merged in one person.

Wherefore, the decision of the CA is reversed and set aside and the decision of the RTC
is reinstated.

Page 468 of 745


HERNANDEZ VS. HERNANDEZ
G.R. No. 158576, March 09, 2011

FACTS:

This case involves the controversy between the parties which began when the Republic of
the Philippines, through the Department of Public Works and Highways (DPWH), offered to
purchase a portion of a parcel of land with an area of 80,133 square meters, covered by the
Registry of Deeds for Tanauan, Batangas, located at San Rafael, Sto. Tomas, Batangas, for use
in the expansion of the South Luzon Expressway. The land is pro-indiviso owned by Cornelia
M. Hernandez petitioner herein, Atty. Jose M. Hernandez, deceased father of respondent Cecilio
F. Hernandez represented by Paciencia Hernandez and Mena Hernandez, also deceased and
represented by her heirs. The initial purchase price that was offered by the government was
allegedly at Thirty-Five pesos (P35.00) per square meter for 14,643 square meters of the
aforementioned land. The Hernandez family rejected the offer. After a series of negotiations
with the DPWH, the last offer stood at Seventy Pesos (P70.00) per square meter. They still did
not accept the offer and the government was forced to file an expropriation case. On 9 August
1993, an expropriation case was filed by the Republic of the Philippines, through the DPWH,
before the Regional Trial Court, Tanauan, Batangas.

During the course of the expropriation proceedings, an Order dated 13 September 1996
was issued by the RTC Branch 83, informing the parties of the appointment of commissioners to
help determine the just compensation.

On 18 October 1996, Cornelia, and her other co-owners who were also signatories of the
11 November 1993 letter, executed an irrevocable Special Power of Attorney (SPA) appointing
Cecilio Hernandez as their "true and lawful attorney" with respect to the expropriation of the
subject property. The SPA stated that the authority shall be irrevocable and continue to be
binding all throughout the negotiation. It further stated that the authority shall bind all
successors and assigns in regard to any negotiation with the government until its consummation
and binding transfer of a portion to be sold to that entity with Cecilio as the sole signatory in
regard to the rights and interests of the signatories therein. There was no mention of the
compensation scheme for Cecilio, the attorney-in-fact.

Cecilio, despite the service of summons and copy of the complaint failed to file an
answer. The trial court explained further that Cecilio was present in the address supplied by the
petitioner but refused to receive the copy. The trial court even gave Cecilio ten (10) more days,
from his refusal to accept the summons, to file his answer. Upon the motion of the petitioner,
respondent Cecilio was declared in default.

The RTC denied the motion and nullified the quitclaim in favor of Cecilio. Cecilio
appealed the Decision of the trial court. The appellate court, in its Decision dated 29 May 2003
reversed and set aside the ruling of the trial court. Hence, this petition.

ISSUE:

Whether or not the CA erred in holding the validity of the receipt and quitclaim
document contrary to law and jurisprudence.

RULING:

The supreme court ruled that a contract where consent is given through mistake, violence,
intimidation, undue influence, or fraud is voidable. In determining whether consent is vitiated by
any of the circumstances mentioned, courts are given a wide latitude in weighing the facts or
circumstances in a given case and in deciding in their favor what they believe to have actually

Page 469 of 745


occurred, considering the age, physical infirmity, intelligence, relationship, and the conduct of
the parties at the time of the making of the contract and subsequent thereto, irrespective of
whether the contract is in public or private writing. And, in order that mistake may invalidate
consent, it should refer to the substance of the thing which is the object of the contract, or those
conditions which have principally moved one or both parties to enter the contract.
It was the rejection likewise of the last offer that led to the filing of the expropriation case
on 9 August 1993. Clear as day, the conditions that moved the parties to the contract were the
base price at P70.00 per square meter, the increase of which would be compensated by 20% of
whatever may be added to the base price; and the ceiling price of P300.00 per square meter,
which was considerably high reckoned from the base at P70.00, which would therefore, allow
Cecilio to get all that which would be in excess of the elevated ceiling. The ceiling was, from
the base, extraordinarily high, justifying the extraordinary grant to Cornelio of all that would
exceed the ceiling.
In view of this case, the decision of the CA is reversed and set aside. The decision of the
RTC is reinstated with modification.

Page 470 of 745


FUENTES V ROCA
G.R. NO. 178902, 21 APRIL 2010

FACTS:

On October 11, 1982, Sabrina Taroza sold to her own son Tarciano T. Roca her titled
of 358 sq.m lot located at canelar, zamboanga under a deed of absolute sale. Six years later,
Tarciano T. Roca offered to the spouses Fuentes the same titlle of land bought to her mother with
stipulations that Fuentes should pay a downpayment of 60,000.00 php for the trnasfer of lot to
them and within 6 months Tarciano would have to vacate the lot of structures , occupants and
secure the consent of his stranged wife. upon compliance, Fuentes spouses must have to pay
Tarciano the amount of 140,000.00 php.

On January 11, 1989 a document of absolute sale as issued to the Fuentes. One year
after, Tarciano T. Roca died, which was followed by his wife 9 months after. the children of
Roca filed for an action of annulment of sale and reconveynace of the land against the Fuentes
on the ground that tarciano's wife didn't gave her consent upon her husband and that fraud and
forgery. Spouses Fuentes denied such allegations and claim that the forgery case is personal to
Rosario the wife of Tarciano and she alone could claim it besaides the 4-year prescriptive
period for nullifying the sale on the ground of fraud had already elapsed. The RTC ruled in
favor of the Fuentes, however the Court of Appelas reversed the decision of the RTC.

ISSUE :

Whether or not Rosario's signature was forged.

Whether or not, Roca's action for declaration nullity of that sale to the spouses Fuentes
had alreadry prescribed.

HELD:

Yes, the Supreme Court agrees with CA's observation that Rosario's signature strokes
on the affidavit apperas heavy, deliberate and forced. Her specimen signature on the other hand
are, consitently of a lighter stroke and more fluid. The way the letter "R" and "S" were written is
also remarkably different. The variance is obvious even to the untrained eye.

For the second issue, the SC held its decision based on Art. 173 which provides that
inorder that the wife may bring an action for annulment of sale on the ground of lack os spousal
consent during the marriage within 10 years from the transaction. Consequently, the action that
the Rocas, her heirs, brought in 1997 fell within ten years of the January 11, 1989 sale. Therefore
it did not yet prescribe. Even if the claim of the spouses for prescription was based on fraud and
forgery and that the prescriptive period to be applied is 4 years, the answer is still No, because
the sale was void from the beginning and thus the land remained the property of Tarciano and
Rosario despite that sale. When the two died, they passed on the ownership to their heirs, namely
the Rocas, and as lawful owners thaey had the right to exclude any person from its enjoyment
and disposal (Art 429 of the Civil Code). In fairness to the Fuentes, the SC held that they should
be entitled among other things, to be recovered from the Tarciano's heirs the amount of 200,
000.00php with legal interest until fully paid chargeable against his estate. They are also to be
entitled to a reimbursement with the improvements they inroduced with a right of retention until
reimbursement is made (Art. 448).

Page 471 of 745


ASSOCIATED BANK V MONTANO ET.AL.
G.R.NO. 166383, 16 OCTOBER, 2009

FACTS:

In 1964 spouse Monatano owned 3 parcels of land situated in Tanza, Cavite hich was
utilized as an integrated farm and a stud farm used for raising horses. Respondent Monatano
went on self exile in USA to avoid the harrasment of Pres. Marcos during the Martial Law
regime, upon which they transfered said properties to Tres Cruces Agro- Industrial
Corporation(TCAIC) in exchange for shares of stocks in the company with a 98% control over
TCAIC.

After a year, the TCAIC sold the properties to Inetrenational Country Club
Incorporation (ICCI)for 6,000,000.09 php, thus the title of properties were now transfered to the
ICCI. The ICCI then mortgaged the parcels of land to the Citizens bank and Trust corporation
now Associated Bank for an amount of 2,000,000.00 php. The mortgaged become mature but
remain unpaid thereby promting the Associated Bank to forclosed the mortgaged and put in in a
public auction. Associated Bank as the higgest bidder then buy the property with an amount of
5,7000,000.00 php.

Meanwhile, the Montano returned to the country and after discovering the transfer of
the properties the Montano immediately took physical possession of the same and began
cultivating it. They also filed for a petition of reconveyance and pray for the declaration of
nullity upon transfer of CTC. On the other hand, the associated bank filed its Motion for
Preliminary Hearing on the affirmative defense and motion to dismiss for the complaint stated
no cause of action, and that the case was already barred by the statute of limitations.

ISSUES:

Whether or not motion to dismiss is on its propriety.

Whether or not the complaint for reconveynace should be dismissed.

HELD:

As to the first issue, Yes the motion to dismiss was on its propriety. The SC held that
the rule is based on practicality, as when the issues involved in a particular case can be disposed
of in a preliminary hearing and if there is no motion to dismiss was filed then the pleading
gorund as affirmative defenses can be heard in a preliminary hearing as that of the motion to
dismiss. Respondent on the other hand fails to oppose the motion to dismiss despite having been
given the opportunity to do so, any right to contest the same was already waived by them.

As to the second issue, It is true that the action for reconveyance of property resulting
from fraud may be barred by the statute of limitations which requires that the action shall be filed
within 4 years from discovery of fraud, but be it noted that the basis of reconveyance by the
respondent is threat, duress and intimidation. As provided in Art. 1391 of the civil code an action
for annulment for it shall be brought within four years, thus when Marcos ouster from power on
February 21, 1986 and since the respondents filed its complaint for reconveynace on September
15, 1989 the four years prescriptive period was not prescribed. The SC denied for the dismissal
of reconveyance and remitted the case to the RTC for trial with cost against the petitioner.

Page 472 of 745


WILLIAM ALAIN MIAILHE, petitioner,
vs. COURT OF APPEALS and REPUBLIC OF THE PHILIPPINES, respondents.
G.R. No. 108991 March 20, 2001

FACTS:

Petitioner, William Alain Miailhe, on his own behalf and on behalf of Victoria Desbarats-
Miailhe, Monique Miailhe-Sichere and Elaine Miailhe-Lencquesaing filed a Complaint for
Annulment of Sale, Reconveyance and Damages against [Respondent] Republic of the
Philippines and defendant Development Bank of the Philippines.
The petitioner alleged that DBP forged, threatened and intimidated petitioner to sell the property
to DBP for the grossly low price. The RTC and CA rendered their decision in favor of DBP and
that the action is already prescribed.

ISSUE:

Whether or not extrajudicial demands did not interrupt prescription.

RULING:

In the present case, there is as yet no obligation in existence. Respondent has no


obligation to reconvey the subject lots because of the existing Contract of Sale. Although
allegedly voidable, it is binding unless annulled by a proper action in court.12 Not being a
determinate conduct that can be extrajudically demanded, it cannot be considered as an
obligation either. Since Article 1390 of the Civil Code states that voidable "contracts are binding,
unless they are annulled by a proper action in court," it is clear that the defendants were not
obligated to accede to any extrajudicial demand to annul the Contract of Sale.13

Page 473 of 745


FIRST PHILIPPINE HOLDINGS CORPORATION V TRANS MIDDLE EAST
EQUITIES INC.
G.R. NO. 179505, 04 DECEMBER 2009

FACTS:

FHPC formerly known as Meralco Securities Corporation incorporated on 30 June


1961 by Filipino Entreprenuers led by Eugenio Lopez Sr. sold its 6,299,179.00 php shares of
common stock in Philippine Commercial International Bank (PCIB), now Equitable PCIB to
TMEE. Such shares according to the FHPC were obtained by the TMEE through fraud, acts
contrary to Law, Morals, Good Customs and Public Policy and such acquisition is either
voidable, void or un forceable. FHPC filed then its motion for leave to intervene and admit
complaint in intervention and was granted by the court. On the otehr hand, TMEE filed its
motion to dismiss the complaint-in-intervention by the FHPC on the ground that the action of
FHPC has already prescribed under Article 1391 of the Civil Code. Since the action was filed
only on 28 December 1988 and the sale was 24 May 1984 the action was laready 7 months late
from the date of prescription.

ISSUE :

Whether or not the sale of property is void and the prescriptive period had elapsed.

HELD:

No, the SC found that the sale is not void for a suit for the annulment of voidbale
contract on account of fraud shall be filed within four years from the discovery of the same, here,
from the time the questioned sale transaction on May 24, 1984 took place, FHPC didn't deny that
it had actual knowledge of the same. Simply, petitioner was fully aware of the sale of the PCIB
shares to TMEE and espite full knowledge petitioners did not question the said sale from its
inception and sometime thereafter. it was only four years and seven months had elapsed
following the knowledge or discovery of the alleged fraudulent sale that the petitioner assailed
the same, by then it was too late for the petitioners to beset same transaction, since the
prescriptive period had already come into play.

The SC therefore denied the instant petition and affirmed the resolution of the SB with
cost against the petitioner.

Page 474 of 745


SANCHEZ vs. MAPALAD
541 SCRA 397

FACTS:

Respondent Mapalad was the registered owner of four (4) parcels of land located along
Roxas Boulevard, Baclaran, Paraaque
The PCGG issued writs of sequestration for Mapalad and all its properties.
Josef, Vice president/treasurer and General Manager of Mapalad discovered that the 4 TCTs
were missing, however the four missing tcts turned out to be in possession of Nordelak
Development Corporation. Nordelak came into possession of the 4 TCTs by deed of sale
purportedly executed by Miguel Magsaysay in his capacity as President and Board Chairman of
Mapalad.

Mapalad filed an action for annulment of deed of sale and reconveyance of title with
damages against Nordelak.

RTC ruled in favour of Nordelak. The Ca reversed the decision of RTC.

ISSUE:

Whether or not there was a valid sale between Mapalad and Nordelak.

RULING:

In the present case, consent was purportedly given by Miguel Magsaysay, the person who
signed for and in behalf of Mapalad in the deed of absolute sale dated November 2, 1989.
However, as he categorically stated on the witness stand during trial, he was no longer connected
with Mapalad on the said date because he already divested all his interests in said corporation as
early as 1982. Even assuming, for the sake of argument, that the signatures purporting to be his
were genuine, it would still be voidable for lack of authority resulting in his incapacity to give
consent for and in behalf of the corporation.

Lack of consideration makes a contract of sale fictitious. A fictitious sale is void ab initio.
The alleged deed of absolute sale dated November 2, 1989 notwithstanding, the contract of sale
between Mapalad and Nordelak is not only voidable on account of lack of valid consent on the
part of the purported seller, but also void ab initio for being fictitious on account of lack of
consideration.

WHEREFORE, the petition is hereby DENIED and the appealed Court of Appeals
decision AFFIRMED in toto.

Page 475 of 745


OESMER, Petitioners,
vs PARAISO DEVELOPMENT CORPORATION, Respondent.
G.R. No. 157493 February 5, 2007

FACTS:

Petitioner Ernesto to meet with a certain Sotero Lee, President of respondent Paraiso
Development Corporation, at Otani Hotel in Manila. The said meeting was for the purpose of
brokering the sale of petitioners properties to respondent corporation.
A Contract to Sell was drafted. A check in the amount of P100,000.00, payable to Ernesto, was
given as option money. Sometime thereafter, Rizalino, Leonora, Bibiano, Jr., and Librado also
signed the said Contract to Sell. However, two of the brothers, Adolfo and Jesus, did not sign the
document. However petitioners informed respondent corporation about their intention to rescind
the Contract to Sell and to return the amount of Php 100,000.00. respondent did not respond to
the aforesaid letter. Petitioners, therefore, filed a complaint for Declaration of Nullity or for
Annulment of Option Agreement or Contract to Sell with damages.
The RTC rendered its decision in favor to respondent. CA affirmed the decision of RTC with
modification.

ISSUE:

Whether ot not Contract to Sell is void considering that on of the heirs did not sign it as
to indicate its consent to be bound by its terms.

RULING:

It is well-settled that contracts are perfected by mere consent, upon the acceptance by the
offeree of the offer made by the offeror. From that moment, the parties are bound not only to the
fulfillment of what has been expressly stipulated but also to all the consequences which,
according to their nature, may be in keeping with good faith, usage and law. To produce a
contract, the acceptance must not qualify the terms of the offer. However, the acceptance may be
express or implied. For a contract to arise, the acceptance must be made known to the offeror.
Accordingly, the acceptance can be withdrawn or revoked before it is made known to the offeror.

In the case at bar, the Contract to Sell was perfected when the petitioners consented to the
sale to the respondent of their shares in the subject parcels of land by affixing their signatures on
the said contract. Such signatures show their acceptance of what has been stipulated in the
Contract to Sell and such acceptance was made known to respondent corporation when the
duplicate copy of the Contract to Sell was returned to the latter bearing petitioners signatures.

Page 476 of 745


PERPETUA VDA. DE APE, petitioner,
vs.THE HONORABLE COURT OF APPEALS and GENOROSA CAWIT VDA. DE
LUMAYNO, respondents
G.R. No. 133638 April 15, 2005

FACTS:

Generosa Cawit de Lumayno (private respondent herein), joined by her husband, Braulio,
instituted a case for "Specific Performance of a Deed of Sale with Damages" against Fortunato
and his wife Perpetua (petitioner herein).

She supposedly demanded that Fortunato execute the corresponding deed of sale and to
receive the balance of the consideration. However, Fortunato unjustifiably refused to heed her
demands. Private respondent, therefore, prayed that Fortunato be ordered to execute and deliver
to her "a sufficient and registrable deed of sale involving his one-eleventh (1/11) share or
participation in Lot No. 2319 of the Escalante Cadastre

Private respondent testified that Fortunato went to her store at the time when their lease
contract was about to expire. He allegedly demanded the rental payment for his land but as she
was no longer interested in renewing their lease agreement, they agreed instead to enter into a
contract of sale which Fortunato acceded to provided private respondent bought his portion of
Lot No. 2319 for P5,000.00. Thereafter, she asked her son-in-law Flores to prepare the
aforementioned receipt.

ISSUE:

Whether or not the receipt signed by Fortunato proves the existence of a contrct of sale
between him and private respondent.

RULING:

Under Article 1332 of the Civil Code which provides that "[w]hen one of the parties is
unable to read, or if the contract is in a language not understood by him, and mistake or fraud is
alleged, the person enforcing the contract must show that the terms thereof have been fully
explained to the former."

As can be gleaned from Flores's testimony, while he was very much aware of Fortunato's
inability to read and write in the English language, he did not bother to fully explain to the latter
the substance of the receipt (Exhibit "G"). He even dismissed the idea of asking somebody else
to assist Fortunato considering that a measly sum of thirty pesos was involved. Evidently, it did
not occur to Flores that the document he himself prepared pertains to the transfer altogether of
Fortunato's property to his mother-in-law. It is precisely in situations such as this when the
wisdom of Article 1332 of the Civil Code readily becomes apparent which is "to protect a party
to a contract disadvantaged by illiteracy, ignorance, mental weakness or some other handicap

Page 477 of 745


JULIAN FRANCISCO petitioner,
vs.PASTOR HERRERA, respondent.
G.R. No. 139982 November 21, 2002

FACTS:

Petitioner bought 2 parcels of land from Eligio Herrera Sr. The children of Eligio, Sr.
conteneded that the contract price for the two parcels of land was grossly inadequate so they tried
to negotiate with petitioner. However petitioner refused.

The children of Herrera filed a complaint for annulment of sale. The RTC rendered its
decision in favor of the children that Ca affirmed the decision of RTC.

ISSUE:

Whether or not said contract is void.

RULING:

In the present case, it was established that the vendor Eligio, Sr. entered into an
agreement with petitioner, but that the formers capacity to consent was vitiated by senile
dementia. Hence, we must rule that the assailed contracts are not void or inexistent per se; rather,
these are contracts that are valid and binding unless annulled through a proper action filed in
court seasonably.

An annullable contract may be rendered perfectly valid by ratification, which can be


express or implied. Implied ratification may take the form of accepting and retaining the benefits
of a contract. As found by the trial court and the Court of Appeals, upon learning of the sale,
respondent negotiated for the increase of the purchase price while receiving the installment
payments. It was only when respondent failed to convince petitioner to increase the price that the
former instituted the complaint for reconveyance of the properties. Clearly, respondent was
agreeable to the contracts, only he wanted to get more. Further, there is no showing that
respondent returned the payments or made an offer to do so. This bolsters the view that indeed
there was ratification. One cannot negotiate for an increase in the price in one breath and in the
same breath contend that the contract of sale is void.

Page 478 of 745


ROSARIO L. DE BRAGANZA, ET AL., petitioners,
vs.FERNANDO F. DE VILLA ABRILLE, respondent.
G.R. No. L-12471 April 13, 1959

FACTS:

Rosario L. de Braganza and her sons Rodolfo and Guillermo petition for review of the
Court of Appeal's decision whereby they were required solidarily to pay Fernando F. de Villa
Abrille the sum of P10,000 plus 2 % interest from October 30, 1944. Because payment had not
been made, Villa Abrille sued them in March 1949.

The RTC and CA rendered its decision in favor of Abrile despite the fact tht Guillermo
and Rodolfo are minors.

ISSUE:

Whether or not Guillermo and Rodolfo can be held liable to pay the loan.

RULING:

The SC held that being minors, Rodolfo and Guillermo could not be legally bound by
their obligation.These minors may not be entirely absolved from monetary responsibility. In
accordance with the provisions of Civil Code, even if their written contact is unenforceable
because of non-age, they shall make restitution to the extent that they have profited by the money
they received. (Art. 1340) There is testimony that the funds delivered to them by Villa Abrille
were used for their support during the Japanese occupation. Such being the case, it is but fair to
hold that they had profited to the extent of the value of such money, which value has been
authoritatively established in the so-called Ballantine Schedule: in October 1944, P40.00
Japanese notes were equivalent to P1 of current Philippine money.

Page 479 of 745


MIGUEL KATIPUNAN, INOCENCIO VALDEZ, EDGARDO BALGUMA and
LEOPOLDO BALGUMA, JR., petitioners,
vs.BRAULIO KATIPUNAN, JR., respondent.
G.R. No. 132415 January 30, 2002

FACTS:

Respondent Braulio Katipunan, Jr. is the owner of a 203 square meter lot and a five-door
apartment constructed thereon located at 385-F Matienza St., San Miguel, Manila.
Petitioner Miguel Katipunan, entered into a Deed of Absolute Sale4 with brothers Edgardo
Balguma and Leopoldo Balguma, Jr. (co-petitioners), represented by their father Atty. Leopoldo
Balguma, Sr., involving the subject property for a consideration of P187,000.00.

Respondent filed a complaint for annulment of the Deed of Absolute Sale. He contended
that the said contract was obtained through insidious words and machinations.
The TRC dismissed the complaint. The CA reversed the decision of RTC.

ISSUE:

Whether or not CA ered when it overturned the factual findings of the trial court which
are amply supported by the evidence on record.

RULING:

The circumstances surrounding the execution of the contract manifest a vitiated consent
on the part of respondent. Undue influence was exerted upon him by his brother Miguel and
Inocencio Valdez (petitioners) and Atty. Balguma. It was his brother Miguel who negotiated
with Atty. Balguma. However, they did not explain to him the nature and contents of the
document. Worse, they deprived him of a reasonable freedom of choice. It bears stressing that he
reached only grade three. Thus, it was impossible for him to understand the contents of the
contract written in English and embellished in legal jargon.

A contract where one of the parties is incapable of giving consent or where consent is
vitiated by mistake, fraud, or intimidation is not void ab initio but only voidable and is binding
upon the parties unless annulled by proper Court action. Since the Deed of Absolute Sale
between respondent and the Balguma brothers is voidable and hereby annulled, then the
restitution of the property and its fruits to respondent is just and proper. Petitioners should turn
over to respondent all the amounts they received starting January, 1986 up to the time the
property shall have been returned to the latter.

Page 480 of 745


NILO R. JUMALON, petitioner,
vs.COURT OF APPEALS, HON. RUBEN D. TORRES, in his capacity as Executive
Secretary, HOUSING AND LAND USE REGULATORY BOARD, and MA. ASUNCION
DE LEON, respondents.
G.R. No. 127767 January 30, 2002
FACTS:

Complainant De Leon and herein petitioner, Nilo R. Jumalon, executed a conditional


sales agreement whereby the former purchased from the latter a house and lot. Jumalon executed
in favor of De Leon a Deed of Absolute Sale.
De Leon learned regarding the danger posed by the wires over the property. Also, De
Leon was informed by HLURB Enforcement Center, that construction of houses and buildings of
whatever nature is strictly prohibited within the right-of way of the transmission line.
De Leon filed a case for declaration of nullity or annulment of sale of real property which
was subsequently dismissed. De Leon then, filed a complaint before the HLURB seeking the
rescission of the conditional sales agreement and the Absolute Deed of Sale.
HLURB arbiter rendered judgement in favor of De Leon. The Board of Commissioners
of HLURB affirmed the decision of arbiter. The CA affirmed the appealed decision.

ISSUE:

Whether the Court of Appeals erred in affirming the decision of Executive Secretary
Ruben D. Torres and the HLURB declaring the rescission of the contract of sale of a house and
lot between the petitioner and private respondent

RULING:

The SC agree with the Court of Appeals that respondent de Leon was entitled to annul the
sale. There was fraud in the sale of the subject house. It is not safely habitable. It is built in a
subdivision area where there is an existing 30-meter right of way of the Manila Electric
Company (Meralco) with high-tension wires over the property, posing a danger to life and
property. The construction of houses underneath the high tension wires is prohibited as
hazardous to life and property because the line carries 115,000 volts of electricity, generates
tremendous static electricity and produces electric sparks whenever it rained.

Page 481 of 745


CABALES, ET. AL vs COURT OF APPEALS
August 31, 2007
FACTS:

Saturnina and her children Bonifacio, Albino, Francisco, Leonara, Alberto and petitioner
Rito inherited a parcel of land. They sold such property to Dr. Cayetano Corrompido with a right
to repurchase within 8 years.
Alberto secured a note from Dr. Corrompido in the amount of Php 300.00.
Alberto died leaving a wife and son, petitioner Nelson.
Within the 8-year redemption period, Bonifacio and Albino tendered their payment to Dr.
Corrompido. But Dr. Corrompido only released the document of sale with pacto de retro after
Saturnina paid the share of her deceased son, Alberto, plus the note.
Saturnina and her children executed an affidavit to the effect that petitioner Nelson would
only receive the amount of Php 176.34 from respondents-spouses when he reaches the age if 21
considering that Saturnina paid Dr. Corrompido Php 966.66 for the obligation of petitioner
Nelsons late father Alberto.

ISSUE:

Whether or not the slae entered into is valid and binding.

RULING:

The legal guardian only has the plenary power of administration of the minors property.
It does not include the power to alienation which needs judicial authority. Thus when Saturnina,
as legal guardian of petitioner Rito, sold the latters pro indiviso share in subject land, she did not
have the legal authority to do so. The contarct of sale as to the pro indiviso share of Petitioner
Rito was unenforceable. However when he acknowledged receipt of the proceeds of the sale on
July24, 1986, petitioner Rito effectively ratified it. This act of ratification rendered the sale valid
and binding as to him.

Page 482 of 745


ANUNCIACION VDA. DE OUANO V. REPUBLIC OF THE PHILIPPINES
G.R. NO. 168770, 9 FEBRUARY 2011

FACTS:

In 1949, the National Airport Corporation (NAC), MCIAAs predecessor agency


pursued a program to expand the Lahug Airport in Cebu City. As an assurance from the
government, there is a promise of reconveyance or repurchase of said property so long as Lahug
ceases its operation or transfer its operation to Mactan Cebu Airport. Some owners refused to
sell, and that the Civil Aeronautics Administration filed a complaint for the expropriation of said
properties for the expansion of the Lahug Airport. The trial court then declared said properties to
be used upon the expansion of said projects and order for just compensation to the land owners,
at the same time directed the latter to transfer certificate or ownership or title in the name of the
plaintiff. At the end of 1991, Lahug Airport completely ceased its operation while the Mactan-
Cebu airport opened to accommodate incoming and outgoing commercial flights. This then
prompted the land owners to demand for the reconveynace of said properties being expropriated
by the trial court under the power of eminent domain. Hence these two consolidated cases arise.

In G.R. No. 168812 MCIAA is hereby ordered by court to reconvey said properties to
the land owners plus attorneys fee and cost of suit, while in G.R. No. 168770, the RTC ruled in
favor of the petitioners Oaunos and against the MCIAA for the reconveynace of their properties
but was appealed by the latter and the earlier decision was reversed, the case went up to the CA
but the CA affirmed the reversed decision of the RTC.

ISSUE:

Whether or not the testimonials of the petitioners proving the promises, assurances and
representations by the airport officials and lawyers are inadmissible under the Statue of Frauds.

HELD:

The SC ruled that since the respondent didnt object during trial to the admissibility of
petitioners testimonial evidenc under the Statute of Frauds, it means then that they have waived
their objection and are now barred from raising the same. In any event, the Statute of Frauds is
not applicable herein. Consequently, petitioners pieces of evidence are admissible and should be
duly given weight and credence, since the records tend to support that the MCIAA did not as the
Ouanos and Inocians posit, object the introduction of parole evidence to prove its commitment to
allow the fromer landowners to repurchase their properties upon the occurrence of certain events.

Page 483 of 745


SHOEMAKER vs. LA TONDENA
68 Phil 24

FACTS:

Defendant company, La tondena, Inc. entered into a written contract of lease of services
with plaintiff Harry Ives Shoemaker for a period of 5 years, with a compensation consisting of
8% of the net earnings of defendant. That during each year that the contract was in force,
plaintiff would receive monthly during the period of the contract of the sum of Php 1,500.00 or
Php 18,000.00 per annum as minimum compensation if 8% of the net earnings of the
aforementioned alleged business would not reach the amount.
The defendant company alleged that there were changes in the contract in which both the
parties agreed upon.
Plaintiff filed a complaint against defendant company. The defendant interposed a
demurrer based on the ground that the facts therein alleged do not constitute a cause of action,
since it is not averred that the alleged mutual agreement modifying the contract of lease of
services, has been put in writing, whereas it states that its terms and conditions may only be
modified upon the written consent of both parties.

ISSUE:

Whether or not the ocurt a quo ered in sustaining the demurrer interposed by the
defendant company to the second amended complaint filed by plaintiff, on the ground that the
facts alleged therein do not constitute a couse of action.

RULING:

When in an oral contract which by its terms, is not to be performed within 1 year from
the execution thereof, one of the contracting parties has complied within the year with the
obligations imposed on him said contract, the other party cannot avoid the fulfillment of what is
incumbent on him under the same contract by invoking the statute of frauds because the latter
aims to prevent and not to protect fraud.

Page 484 of 745


PNB vs. PHILIPPINE VEGETABLE OIL COMPANY
49 Phil 897

FACTS:

This appeal involves the legal right of the PNB to obtain a judgement against Vegetable Oil Co.,
Inc., for Php 15,812,454 and to foreclose a mortgage on the property of the PVOC for Php
17,000,000.00 and the legal right of the Phil C. Whitaker as intervenor to obtain a judgement
declaring the mortgage which the PNB seeks to foreclose to be without force and effect,
requiring an accouting from the PNB of the sales of the property and assets of the Vegetable Co.
and ordering the PVOC and the PNB to pay him the sum of Php 4,424,418.37
In 1920, the Vegetable Oil Company, found itself in financial straits. It was in debt to the extent
of approximately Php 30,000,000.00. The PNB was the largest creditor. The VOC owed the bank
Php 17,000,000.00. The PNB was securedly principally by a real and chattel mortgage in favor
of the bank on its vessels Tankerville and H.S. Everett to guarantee the payment of sums not
exceed Php 4,000,000.00

ISSUE:

Whether or not the plaintiff had failed to comply with the contract, that it was alleged to have
celebrated with the defendant and the intervenor, that it would furnish funds to the defendant so
that it could continue operating its factory.

RULING:

In the present instance, it is found that the Board of Directors of the PNB had not consented to an
agreement for practically unlimited backing of the V corporation and had not ratified any
promise to trhat effect made by its general manager.
All the evidence, documentary and oral, pertinent to the issue considered and found to disclose
no binding promise, tacit, or express made by the PNB to continue indefinitely the operation of
the V corporation. Accordingly, intervenor Whitaker is not entitled to recover damages from the
bank.

Page 485 of 745


ANUNCIACION VDA. DE OUANO V. REPUBLIC OF THE PHILIPPINES
G.R. NO. 168770, 9 FEBRUARY 2011

FACTS:

In 1949, the National Airport Corporation (NAC), MCIAAs predecessor agency


pursued a program to expand the Lahug Airport in Cebu City. As an assurance from the
government, there is a promise of reconveyance or repurchase of said property so long as Lahug
ceases its operation or transfer its operation to Mactan Cebu Airport. Some owners refused to
sell, and that the Civil Aeronautics Administration filed a complaint for the expropriation of said
properties for the expansion of the Lahug Airport. The trial court then declared said properties to
be used upon the expansion of said projects and order for just compensation to the land owners,
at the same time directed the latter to transfer certificate or ownership or title in the name of the
plaintiff. At the end of 1991, Lahug Airport completely ceased its operation while the Mactan-
Cebu airport opened to accommodate incoming and outgoing commercial flights. This then
prompted the land owners to demand for the reconveynace of said properties being expropriated
by the trial court under the power of eminent domain. Hence these two consolidated cases arise.

In G.R. No. 168812 MCIAA is hereby ordered by court to reconvey said properties to
the land owners plus attorneys fee and cost of suit, while in G.R. No. 168770, the RTC ruled in
favor of the petitioners Oaunos and against the MCIAA for the reconveynace of their properties
but was appealed by the latter and the earlier decision was reversed, the case went up to the CA
but the CA affirmed the reversed decision of the RTC.

ISSUE:

Whether or not the testimonials of the petitioners proving the promises, assurances and
representations by the airport officials and lawyers are inadmissible under the Statue of Frauds.

HELD:

The SC ruled that since the respondent didnt object during trial to the admissibility of
petitioners testimonial evidenc under the Statute of Frauds, it means then that they have waived
their objection and are now barred from raising the same. In any event, the Statute of Frauds is
not applicable herein. Consequently, petitioners pieces of evidence are admissible and should be
duly given weight and credence, since the records tend to support that the MCIAA did not as the
Ouanos and Inocians posit, object the introduction of parole evidence to prove its commitment to
allow the fromer landowners to repurchase their properties upon the occurrence of certain events.

Page 486 of 745


MUNICIPALITY OF HAGONOY, BULACAN ET. AL. V HON. SIMEON P. DUMDUM,
JR. ET. AL
G.R. NO. 168289, 22 MARCH 2010

FACTS:

Private respondent, Emily Rose Go Ko Lim Chao, who is engaged in buy and sell
business of surplus business, equipment machineries, spare parts and related supplies filed a
complaint for collection of sum of money, including damages against the petitioners,
Municipality of Hagonoy, Bulacan and its ormer chief executive, Mayor Felix V. Ople in his
official and personal capacity. The private respondent claimed that because of Oples earnest
representation that funds had already been allowed for the project, she agreed to deliver from her
personal principal business in Cebu City twenty-one motor vehicles whose valued totaled to
5,820,000.00 php but the petitioners here instead filed a motion to dismiss on the ground that the
claim on which the action had been brought was unenforceable under the statute of frauds,
pointing out that there was no written contract or document that would evince the supposed
agreement they entered into with the respondent. The petitioners also filed for Motion to
Dissolve and /or Discharge the Writ of Preliminary Attachment already issued by the court
invoking immunity of the State from suit, unenforceability of contract, and failure to substantiate
the allegation of fraud. But the trial court denied all the petitions of the petitioners; hence the
petitioners brought this case to CA believing that the trial court committed grave abuse of
discretion upon issuing two orders .

ISSUES:

Whether or not complaint is unenforceable under the Statutes of Fraud.

Whether or not there is valid reason to deny petitioners motion to dismiss the Writ of
Preliminary Attachment.

HELD:

The SC held that Statute of frauds is descriptive of statutes that require certain classes
of contracts to be in writing, and that do not deprive the parties of the right to contract with
respect to the matters therein involved, but merely regulate the formalities of the contract
necessary to render its enforceability. In other words, the Statute of fraud only lays down the
method by which the enumerated contracts maybe proved. It does not also declare any contract
invalid because they are not reduced into writing inasmuch as, by law, contracts are obligatory in
whatever form they may have been entered into provided that all their essential requisites for
validity are present. Thus the claim of the respondent is well-substantiated.

For the second issue, the Sc held that the Writ of Preliminary Attachment should be
dismissed because it writ of attachment in this case would only prove to be useless and
unnecessary under the premises since the property of the Municipality may not, in the event that
respondents claim is validated unless there has been a valid appropriation provided by law.

The petition is hereby granted in part, but affirmed the decision of CA in CA-G.R. NO.
81888 is affirmed as it was held by the Regional Trial Court.

Page 487 of 745


TAN vs VILLAPAZ
475 SCRA 720 November 22, 2005

FACTS:

Respondent Carmelito Villapaz issued a Philippine Bank of Communications (PBCom)


crossed check in the amount of P250,000.00, payable to the order of petitioner Tony Tan.
The Malita, Davao del Sur Police issued an invitation-request to petitioner Antonio Tan
inviting him to appear before the Deputy Chief of Police Office on June 27, 1994 at 9:00 oclock
in the morning in connection with the request of [herein respondent] Carmelito Villapaz, for
conference of vital importance.
The invitation-request was received by petitioner Antonio Tan on June 22, 1994 but on the
advice of his lawyer, he did not show up at the Malita, Davao del Sur Police Office.
Respondent filed a Complaint for sum of money against petitioners-spouses, alleging that, , his
issuance of the February 6, 1992 PBCom crossed check which loan was to be settled interest-free
in six (6) months; on the maturity date of the loan or on August 6, 1992, petitioner Antonio Tan
failed to settle the same, and despite repeated demands, petitioners never did.
Petitioners alleged that they never received from respondent any demand for payment, be it
verbal or written, respecting the alleged loan; since the alleged loan was one with a period
payable in six months, it should have been expressly stipulated upon in writing by the parties but
it was not.

ISSUE:

Whether or not Honorable Court of Appeals erred in concluding that the transaction in
dispute was a contract of loan and not a mere matter of check encashment as found by the trial
court.

RULING:

At all events, a check, the entries of which are no doubt in writing, could prove a loan
transaction.

That petitioner Antonio Tan had, on February 6, 1992, an outstanding balance of more
than P950,000.00 in his account at PBCom Monteverde branch where he was later to deposit
respondents check did not rule out petitioners securing a loan. It is pure naivete to believe that
if a businessman has such an outstanding balance in his bank account, he would have no need to
borrow a lesser amount.

In fine, as petitioners side of the case is incredible as it is inconsistent with the principles
by which men similarly situated are governed, whereas respondents claim that the proceeds of
the check, which were admittedly received by petitioners, represented a loan extended to
petitioner Antonio Tan is credible, the preponderance of evidence inclines on respondent.

Page 488 of 745


SPOUSES VENANCIO DAVID and PATRICIA MIRANDA DAVID and FLORENCIA
VENTURA VDA. DE BASCO, petitioners,
vs. ALEJANDRO and GUADALUPE TIONGSON, respondents.
G.R. No. 108169 August 25, 1999

FACTS:

Three sets of plaintiffs, namely spouses Ventura, spouses David and Vda. De Basco, filed
a complaint for specific performance with damges, against private respondents spouses
Tiongson, alleging that the latter sold to them lots located in Pampanga.
The parties expressly agredd that in case of payment has been fully paid respondents
would execute an individual deed of absolute sale in plaintiffs flavor.
The respondents demanded the executuion of a deed of sale and issuance of certificate of
titile but the respondents refused to issue the same.
The trial court rendered its decision in favor of the respondents. However the CA ruled
that contract of sale was not been perfrected between spouses David and/or Vda. De Basco and
respondents. As with regard to the spouses Ventura, the CA affirmed the RTC.

ISSUE:

Whether or not contract of sale has not been perfected but petitioners and respondents.

RULING:

The SC ruled that there was a perfected contact. However, the statute of frauds is
inapplicable. The rule is settled that the statute of frauds applies only to executor and not to
completed, executed or partially executed contract. In the case of spouses David, the payment
made rendered the sales contract beyong the ambit of the statutre of frauds/
The CA erred in concluding that there was no perfected contract of sale. However, in
view of the stipulation of the parties that the deed of sale and corresponding certificate of title
would be issued after full payment, then, they ad entered into a contract to sell and not a contract
of sale.

Page 489 of 745


GENARO CORDIAL, petitioner, vs. DAVID MIRANDA, respondent.
December 14, 2000

FACTS:

David Miranda, a businessman from Angeles City, was engaged in rattan business. Gener
Buelva was the supplier of David but the former met an accident and died. Genero Cordial and
Miranda met through Buelvas widow, Cecilla.
They agreed that Cordial will be his supplier of rattan poles. Cordial shipped rattan poles
as to the agreed number of pieces and sizes however Miranda refused to pay the cost of the rattan
poles delivered. Miranda alleged that there exist no privity of contract between Miranda and
Cordial.
Cordial filed a complaint againt Miranda. The RTC rendered its decision in favor of the
petitioner. The CA reversed the decision of the RTC.

ISSUE:

Whether or not Statute of Frauds applies in this case.

RULING:

The CA and respondent Miranda stress the absence of a written memorandum of the
alleged contract between the parties. Respondent implicity agrues that the alleged contract is
unenforceable under the Statute of Frauds however, the statute of frauds applies only to executor
and not to completed, executed, or partially executed contracts. Thus, were one party has
performed ones obligation, oral evidence will be admitted to prove the agreement. In the present
case, it has already been established that petitioner had delivered the rattan poles to respondent.
The contract was partially executed, the Statute of Frauds does not apply.

Page 490 of 745


VI,LLANUEVA-MIJARES petitioners,
vs.THE COURT OF APPEALS, respondents.
G.R. No. 108921 April 12, 2000

FACTS:
During the lifetime, Felipe, owned real property, a parcel of land situated at Estancia,
Kalibo, Capiz. Upong Felipes death, ownership of the land was passed on to his children. Pedro,
on of the children, got his share. The remaining undivided portion of the land was held in trust by
leon. His co-heirs made several seasonable and lawful demands upon him to subdivide the
partition the property, but no subdivision took place.
After the death of Leon, private respondents discovered that the shares of four of the heirs
of Felipe was purchased by Leon as evidenced by Deed of Sale.

ISSUE:

Whether or not the appellate court erred in declaring the Deed of Sale unenforceable
against the private respondent fro being unauthorized contract.

RULING:

The court has ruled that the nullity of the unenforceable contract is of a permanent nature
and it will exist as long the unenforceable contract is not duly ratifired. The mere lapse of time
cannot igve efficacy to such a contract. The defect is such that it cannot be cured except by the
subsequent ratification of the unenforceable contract by the person in whose name the contract
was executed. In the instant case, there is no showing of any express or implied ratification of the
assailed Deed of Sale by the private respondents Procerfina, Ramon,. Prosperidad, and Rosa.
Thus, the said Deed of Sale must remain unenforceable as to them.

Page 491 of 745


ROSENCOR DEVELOPMENT CORPORATION and RENE JOAQUIN, petitioners,
vs.PATERNO INQUING, IRENE GUILLERMO, FEDERICO BANTUGAN, FERNANDO
MAGBANUA and LIZZA TIANGCO, respondents.
G.R. No. 140479 March 8, 2000

FACTS:

Plaintiffs and plaintiffs-intervenors averred that they are the lessess since 1971 of a two-
story residential apartment and owned by spouses Faustino and Cresencia Tiangco. The lease
was nocovered by any contract. The lesses were renting the premises then for Php 150.00 a
month and were allegedly verbally granted by the lessors the pre-emptive right to purchase the
property if ever they decide to sell the same.

Upon the death of the spouses Tiangco, the management of the property was adjudicated
to their heirs who were represented by Eufrocina deLeon.
The lessees received a letter from de Leon advising them that the heirs of the late spouses have
already sold the property to Resencor.

The lessees filed an action f\before th RTC praying for the following: a) rescission of the
Deed of Absolute Sale between de Leon and Rocencor, b) the defendants Rosencor/Rene Joaquin
be ordered to reconvey the property to de Leon, c) de Leon be ordered to reimburse the plaintiffs
for the repair of the property or apply the said amount as part of the purchase of the property.
The RTC dismissed the complaint while the Ca reversed the decision of the RTC.

ISSUE:

Whether or not a right of first refusal is indeed covered by the provisions of the NCC on
the Statute of Frauds.

RULING:

A right of first refusal is not among those listed as unenforceable under the statute of
frauds. Furthermore, the application of Article 1403, par. 2(e) of the NCC, presupposes the
existence of a perfected, albeit unwritten, contract of sale. A right of first refusal, such as the one
involved in the instant case, is not by any means a perfected contract of sale of real property. At
best, it is a contractual grant, not of the sale of the real property involed byt of the right of first
refusal over the property sought to be sold.
It is thus evident that the statute of frauds does not contemplate cases involving a right of
right of first refusal. As such, a right of first refusal need not be written to be enforceable and
may be proven by oral evidence.

Page 492 of 745


SPOUSES CONSTANTE FIRME AND AZUCENA E. FIRME, petitioners,
vs.UKAL ENTERPRISES AND DEVELOPMENT CORPORATION, respondent.
G.R. No. 146608 October 23, 2003

FACTS:

Petitioner Spouses Firme are the registered owner of a parcel of land located on Dahlia
Avenue, Fairview Park, Quezon City.
Bukal Enterprises filed a complaint for specific performance and damges with the trial
court, aleeging that the Spouses Firme reneged on their agreement to sell the property. The
complaint asked the trial court to order the Spouses Firme to execute the deed of sale and to
delover the title of the property to Bukal Enterpises upon payment of the agreed purchase price.
The RTC rendered its decision against Bukal. The CA reversed and set aside the decision
of the RTC.

ISSUE:

Whether or not Statute of Frauds is applicable.

RULING:

The CA held that partial performance of the contract of sale takes the oral contract out of
the scope of Statute of Frauds. This conclusion arose from the appellate courts erronoues
finding that there was a perfected contract of sale. The recors shoe that there was no perfected
contract of sale. There is therefore no basis for the application of the Stature of Frauds. The
application of the Statute of Frauds presupposes the existence of a perfected contract.

Page 493 of 745


HEIRS OF M. DORONIO vs. HEIR OF F. DORONIO
541 SCRA 479

FACTS:

Petitioners are the heirs of Maralino Doronio, while respondents are the heirs of
Fortunato Doronio.
The property in dispute is one of a private deed of donation propter nuptias who was
executed by Spouses Simeon Doronio and Cornelia Gante in facor of Maralino Doronio and his
wife Veronica Pico.
The heirs of Fortuanto Doronio contended that only the half of the property was actually
incorporated in the deed of donation because it stated that Fortunato is the owner of the adjacent
property. Eager to obtain the entire property, the heirs of Marcelino filed a petition For the
Registration of a Private Deed of Donation. The RTC granted the petition.
The heirs of Fortunato files a pleading in the form of petition. In the petition, they prayed
that an order be issued declaring null and void the registration of the private deed of donation.
The RTC ruled in favor of the heirs of Marcelino. The CA reversed the decision of RTC>

ISSUE:

Whether or not the donation propter nuptias is valid.

RULING:

Article 633 of the OCC provides that figts of real property , in order to be valid, must
appear in a public document. It is settled that a donation of real estate propter nuptias is void
unless made by public instrument.
In the instant case, the donation propter nuptias did not become valid. Neither did it
create any right because it was not made in a public instrument. Hence, it conveyed no title to the
land in question to petitioners predecessors.

Page 494 of 745


NATIVIDAD ARIAGA VDA. DE GURREA, CARLOS GURREA, JULIETA GURREA,
TERESA GURREA-RODRIGUEZ, RICARDO GURREA, Jr., MA. VICTORIA
GURREA-CANDEL, and RAMONA GURREA-MONTINOLA, Petitioners,
vs ENRIQUE SUPLICO, Respondent
G.R. No. 144320 April 26, 2006

FACTS:

The petition arose from a complaint for anuulment of tilte with prayer for preliminary
injunction filed with the court of First Instance by Rosalina Gurrea in her capacity as attorney-in-
fact of the heirs of Ricardo Gurrea. The complaint was filed against Atty. Enrique Suplico.
Atty. Suplico alleged that the property in dispurte was for the payment of his services
rendered to the late Ricardo Gurrrea which the offered to him as payment.

ISSUE:

Whether or not petitioners are entitled to the cancellation of respondent attorneys title
over the subject property and the reconveyance thereof to the herein petitioners or to be the estate
of the Late Ricardo.

RULING:

Having been established that the subject property was still the object of litigation at the
time the subject deed of Transfer of Rights and Interest was executed, the assignment of rights
and interest over the subject property in favor of respondent is null and void for being violative
of the provisions of Article 1491 of the Civil Code which expressly prohibits lawyers from
acquiring property or rights which may be the object of any litigation in which they may take
part by virtue of their profession.
It follows that respondents title over the subject property should be cancelled and the property
reconveyed to the estate of Ricardo, the same to be distributed to the latter?s heirs. This is
without prejudice, however, to respondent?s right to claim his attorney?s fees from the estate of
Ricardo, it being undisputed that he rendered legal services for the latter.

Page 495 of 745


ALFRED FRITZ FRENZEL, petitioner, vs.EDERLINA P. CATITO, respondent.
G.R. No. 143958 July 11, 2003

FACTS:

Alfred Frenzel and Ederlina Catito had an amorous relationship which started in Kings
Cross, a night spot in Sydney.
During their relationship Alfred bought properties in the Philippines in the name of
Ederlina. Their relationship started to deteriorate when the husband of Ederlina threatened
Ederlina that he would file a bigamy case against her for having an illicit affair with Alfred, who
was also married.
Alfred filed a complaint against Ederlina for specific performance, declaration of real and
personal properties, sum of money and damages.

ISSUE:

Whether or not acquisition of a parcel of land is valid.

RULING:

The sales of three parcels of land in favor of the petitioner who is a foreigner is illegal per
se. The transactions are void ab initio because they were entered into in violation of the
Constitution. Thus, to allow the petitioner to recover the properties or the money used in the
purchase of the parcels of land would be subversive of public policy.

An action for recovery of what has been paid without just cause has been designated as
an accion in rem verso. This provision does not apply if, as in this case, the action is proscribed
by the Constitution or by the application of the pari delicto doctrine. 68 It may be unfair and
unjust to bar the petitioner from filing an accion in rem verso over the subject properties, or from
recovering the money he paid for the said properties, but, as Lord Mansfield stated in the early
case of Holman vs. Johnson:69 "The objection that a contract is immoral or illegal as between
the plaintiff and the defendant, sounds at all times very ill in the mouth of the defendant. It is not
for his sake, however, that the objection is ever allowed; but it is founded in general principles of
policy, which the defendant has the advantage of, contrary to the real justice, as between him and
the plaintiff."

Page 496 of 745


LA BUGAAL-BLAAN vs RAMOS
December 1, 2004

FACTS:

The Petition for Prohibition and Mandamus before the Court challenges the constitutionality of
(1) Republic Act No. [RA] 7942 (The Philippine Mining Act of 1995); (2) its Implementing
Rules and Regulations (DENR Administrative Order No. [DAO] 96-40); and (3) the FTAA dated
March 30, 1995, executed by the government with Western Mining Corporation (Philippines),
Inc. (WMCP).
On January 27, 2004, the Court en banc promulgated its Decision granting the Petition and
declaring the unconstitutionality of certain provisions of RA 7942, DAO 96-40, as well as of the
entire FTAA executed between the government and WMCP, mainly on the finding that FTAAs
are service contracts prohibited by the 1987 Constitution.

ISSUE:

Whether or nor it is a void contract.

RULING:

Section 7.9 of the WMCP FTAA has effectively given away the State's share without
anything in exchange. Moreover, it constitutes unjust enrichment on the part of the local and
foreign stockholders in WMCP, because by the mere act of divestment, the local and foreign
stockholders get a windfall, as their share in the net mining revenues of WMCP is automatically
increased, without having to pay anything for it.Being grossly disadvantageous to government
and detrimental to the Filipino people, as well as violative of public policy, Section 7.9 must
therefore be stricken off as invalid.

Section 7.8(e) of the WMCP FTAA likewise is invalid, since by allowing the sums spent
by government for the benefit of the contractor to be deductible from the State's share in net
mining revenues, it results in benefiting the contractor twice over. This constitutes unjust
enrichment on the part of the contractor, at the expense of government. For being grossly
disadvantageous and prejudicial to government and contrary to public policy, Section 7.8(e) must
also be declared without effect. It may likewise be stricken off without affecting the rest of the
FTAA.

Page 497 of 745


AGAN vs. PIATCO
January 21, 2004

FACTS:

Asias Emerging Dragon Corp. (AEDC) submitted an unsolicited proposal to the Philippine
Government through the Department of Transportation and Communication (DOTC) and Manila
International Airport Authority (MIAA) for the construction and development of the NAIA IPT
III under a build-operate-and-transfer arrangement pursuant to R.A. No. 6957, as amended by
R.A. No. 7718 (BOT Law).
The DOTC issued the notice of award for the NAIA IPT III project to the Paircargo Consortium,
which later organized into herein respondent PIATCO.
Various petitions were filed before this Court to annul the 1997 Concession Agreement, the
ARCA and the Supplements and to prohibit the public respondents DOTC and MIAA from
implementing them.
In a decision dated May 5, 2003, this Court granted the said petitions and declared the 1997
Concession Agreement, the ARCA and the Supplements null and void.
Respondent PIATCO, respondent-Congressmen and respondents-intervenors now seek the
reversal of the May 5, 2003 decision and pray that the petitions be dismissed.

ISSUE:

Whether or not the contract is valid.

RULING:

Section 19, Article XII of the 1987 Constitution mandates that the State prohibit or regulate
monopolies when public interest so requires. Monopolies are not per se prohibited. Given its
susceptibility to abuse, however, the State has the bounden duty to regulate monopolies to
protect public interest. Such regulation may be called for, especially in sensitive areas such as the
operation of the countrys premier international airport, considering the public interest at stake.
By virtue of the PIATCO contracts, NAIA IPT III would be the only international passenger
airport operating in the Island of Luzon, with the exception of those already operating in Subic
Bay Freeport Special Economic Zone ("SBFSEZ"), Clark Special Economic Zone ("CSEZ") and
in Laoag City. Undeniably, the contracts would create a monopoly in the operation of an
international commercial passenger airport at the NAIA in favor of PIATCO.

Page 498 of 745


COMMISSION ON ELECTIONS petitioner, vs. JUDGE MA. LUISA QUIJANO-
PADILLA respondents.
389 SCRA 353

FACTS:

The Philippine Congress passed Republic Act No. 8189, otherwise known as the "Voter's
Registration Act of 1996," providing for the modernization and computerization of the voters'
registration list and the appropriate of funds therefor "in order to establish a clean, complete,
permanent and updated list of voters."
The COMELEC issued invitations to pre-qualify and bid for the supply and installations of
information technology equipment and ancillary services for its VRIS Project. Private respondent
Photokina Marketing Corporation (PHOTOKINA) won the bid however the budget appropriated
by the Congress for the COMELECs modernization project was only 1B which was not
sufficient to PHOTOKINA bid in the amount of 6.588B.
Senator Edgardo J. Angara directed the creation of a technical working group to assist the
COMELEC in evaluating all programs for the modernization of the COMELEC which will also
consider the PHOTOKINA contract as an alternative program and various competing programs
for the purpose.
PHOTOKINA filed a petition for mandamus, prohibition and damages (with prayer for
temporary restraining order, preliminary prohibitory injunction and preliminary mandatory
injunction) against the COMELEC and all its Commissioners.
Judge Luisa Quijano-Padilla rendered her decision in favor of PHOTOKINA.

ISSUE:

May a successful bidder compel a government agency to formalize a contract with it


notwithstanding that its bid exceeds the amount appropriated by Congress for the project?

RULING:

The SC cannot accede to PHOTOKINA's contention that there is already a perfected


contract. While we held in Metropolitan Manila Development Authority vs. Jancom
Environmental Corporation[50] that "the effect of an unqualified acceptance of the offer or
proposal of the bidder is to perfect a contract, upon notice of the award to the bidder," however,
such statement would be inconsequential in a government where the acceptance referred to is yet
to meet certain conditions. To hold otherwise is to allow a public officer to execute a binding
contract that would obligate the government in an amount in excess of the appropriations for the
purpose for which the contract was attempted to be made.
In the case at bar, there seems to be an oversight of the legal requirements as early as the bidding
stage. The first step of a Bids and Awards Committee (BAC) is to determine whether the bids
comply with the requirements. The BAC shall rate a bid "passed" only if it complies with all the
requirements and the submitted price does not exceed the approved budget for the contract.
The SC ruled that PHOTOKINA, though the winning bidder, cannot compel the COMELEC to
formalize the contract. Since PHOTOKINAs bid is beyond the amount appropriated by
Congress for the VRIS Project, the proposed contract is not binding upon the COMELEC and is
considered void; and that in issuing the questioned preliminary writs of mandatory and
prohibitory injunction and in not dismissing Special Civil Action No. Q-01-45405, respondent
judge acted with grave abuse of discretion. Petitioners cannot be compelled by a writ of
mandamus to discharge a duty that involves the exercise of judgment and discretion, especially
where disbursement of public funds is concerned.

Page 499 of 745


SENATOR ROBERT S. JAWORSKI, petitioner,
vs.PHILIPPINE AMUSEMENT AND GAMING CORPORATION and SPORTS AND
GAMES ENTERTAINMENT CORPORATION, respondents.
G.R. No. 144463 January 14, 2004

FACTS:

PAGCORs board of directors approved an instrument denominated as "Grant of Authority and


Agreement for the Operation of Sports Betting and Internet Gaming", which granted SAGE the
authority to operate and maintain Sports Betting station in PAGCOR?s casino locations, and
Internet Gaming facilities to service local and international bettors, provided that to the
satisfaction of PAGCOR, appropriate safeguards and procedures are established to ensure the
integrity and fairness of the games.
Petitioner, in his capacity as member of the Senate and Chairman of the Senate Committee on
Games, Amusement and Sports, files the instant petition, praying that the grant of authority by
PAGCOR in favor of SAGE be nullified.

ISSUE:
Whether not not respondent PAGCORs legislative franchise includes to operate Internet
gambling.

RULING:

While PAGCOR is allowed under its charter to enter into operator?s and/or management
contracts, it is not allowed under the same charter to relinquish or share its franchise, much less
grant a veritable franchise to another entity such as SAGE. PAGCOR can not delegate its power
in view of the legal principle of delegata potestas delegare non potest, inasmuch as there is
nothing in the charter to show that it has been expressly authorized to do so. In Lim v.
Pacquing,10 the Court clarified that "since ADC has no franchise from Congress to operate the
jai-alai, it may not so operate even if it has a license or permit from the City Mayor to operate the
jai-alai in the City of Manila." By the same token, SAGE has to obtain a separate legislative
franchise and not "ride on" PAGCOR?s franchise if it were to legally operate on-line Internet
gambling.

Page 500 of 745


RIZALINO, substituted by his heirs, JOSEFINA, ROLANDO and FERNANDO,
ERNESTO, LEONORA, BIBIANO, JR., LIBRADO and ENRIQUETA, all surnamed
OESMER, Petitioners, vs. PARAISO DEVELOPMENT CORPORATION, Respondent.
G.R. No. 157493 February 5, 2007

FACTS:

Petitioner Ernesto to meet with a certain Sotero Lee, President of respondent Paraiso
Development Corporation, at Otani Hotel in Manila. The said meeting was for the purpose of
brokering the sale of petitioners properties to respondent corporation.
A Contract to Sell was drafted. A check in the amount of P100,000.00, payable to Ernesto, was
given as option money. Sometime thereafter, Rizalino, Leonora, Bibiano, Jr., and Librado also
signed the said Contract to Sell. However, two of the brothers, Adolfo and Jesus, did not sign the
document. However petitioners informed respondent corporation about their intention to rescind
the Contract to Sell and to return the amount of Php 100,000.00. respondent did not respond to
the aforesaid letter. Petitioners, therefore, filed a complaint for Declaration of Nullity or for
Annulment of Option Agreement or Contract to Sell with damages.
The RTC rendered its decision in favor to respondent. CA affirmed the decision of RTC with
modification.

ISSUE:

Whether ot not Contract to Sell is void considering that on of the heirs did not sign it as
to indicate its consent to be bound by its terms.

RULING:

It is well-settled that contracts are perfected by mere consent, upon the acceptance by the
offeree of the offer made by the offeror. From that moment, the parties are bound not only to the
fulfillment of what has been expressly stipulated but also to all the consequences which,
according to their nature, may be in keeping with good faith, usage and law. To produce a
contract, the acceptance must not qualify the terms of the offer. However, the acceptance may be
express or implied. For a contract to arise, the acceptance must be made known to the offeror.
Accordingly, the acceptance can be withdrawn or revoked before it is made known to the offeror.
In the case at bar, the Contract to Sell was perfected when the petitioners consented to the sale to
the respondent of their shares in the subject parcels of land by affixing their signatures on the
said contract. Such signatures show their acceptance of what has been stipulated in the Contract
to Sell and such acceptance was made known to respondent corporation when the duplicate copy
of the Contract to Sell was returned to the latter bearing petitioners signatures

Page 501 of 745


HEIRS OF THE LATE SPOUSES AURELIO AND ESPERANZA BALITE petitioners, vs
RODRIGO N. LIM, respondent.
G.R. No. 152168 December 10, 2004

FACTS:

The spouses Aurelio and Esperanza Balite the owners of the disputed land, located at
Nothern Samar.
Aurelio died intestate, Esperanza and their children became co-owners of the said
property. The said property remained undivided.
Esperanza became ill and decided to sell the property without informing the other
children of the said sale to Rodrigo Lim, only Antonio and Cristeta knew of the said sale.

ISSUE:

When the other children knew about it, Esperanza signed a letter addressed to Rodrigo
informing the latter that her children did not agree to the sale of the property to him and that she
was withdrawing all her commitments until the validity of the sale is finally resolved.

Whether or not Deed of Absolute Sale is null and void.

RULING:

In the present case, the parties intended to be bound by the Contract, even if it did not reflect the
actual purchase price of the property. That the parties intended the agreement to produce legal
effect is revealed by the letter of Esperanza Balite to respondent dated October 23, 1996 and
petitioners? admission that there was a partial payment of P320,000 made on the basis of the
Deed of Absolute Sale. There was an intention to transfer the ownership of over 10,000 square
meters of the property . Clear from the letter is the fact that the objections of her children
prompted Esperanza to unilaterally withdraw from the transaction.
Since the Deed of Absolute Sale was merely relatively simulated, it remains valid and
enforceable. All the essential requisites prescribed by law for the validity and perfection of
contracts are present. However, the parties shall be bound by their real agreement for a
consideration of P1,000,000 as reflected in their Joint Affidavit.
The juridical nature of the Contract remained the same. What was concealed was merely the
actual price. Where the essential requisites are present and the simulation refers only to the
content or terms of the contract, the agreement is absolutely binding and enforceable between the
parties and their successors in interest.

Page 502 of 745


ALEJANDRIA PINEDA and SPOUSES ADEODATO DUQUE, JR., and EVANGELINE
MARY JANE DUQUE, petitioners,
vs.COURT OF APPEALS and SPOUSES NELSON BAEZ and MERCEDES BAEZ
G.R. No. 127094, February 6, 2002

FACTS:

Appellees Nelson Baez and Mercedes Baez and the appellees and Alejandria Pineda, together
with the latters spouse Alfredo Caldona, executed an ?Agreement to Exchange Real
PropertiesIn the agreement, the parties agreed to: 1) exchange their respective properties; 2)
Pineda to pay an earnest money in the total amount of $12,000.00 on or before the first week of
February 1983; and 3) to consummate the exchange of properties not later than June 1983. It
appears that the parties undertook to clear the mortgages over their respective properties. At the
time of the execution of the exchange agreement, the White Plains property was mortgaged with
the Government Service Insurance System (GSIS) while the California property had a total
mortgage obligation of $84,000.00
In the meantime, the appellees were allowed to occupy or lease to a tenant Pineda?s California
property and Pineda was authorized to occupy appellees? White Plains property.
unknown to the appellees, Alejandria Pineda and the appellants Adeodato C. Duque, Jr. and
Evangeline Mary Jane Duque executed an ?Agreement to Sell? over the White Plains property
whereby Pineda sold the property to the appellants for the amount of P1,600,000.00
A series of communications ensued between the representatives of the appellees and Ms. Pineda
with regards to the status of the exchange agreement which resulted in its rescission for failure of
Pineda to clear her mortgage obligation of the California property. Negotiations for the purchase
of the property were held between the appellants and the appellees but the same failed which
resulted in the appellees demanding for the appellants to vacate the property.

ISSUE:

Whether petitioners validly acquired the subject property.

RULING:

The Civil Code provides that in a sale of a parcel of land or any interest therein made through an
agent, a special power of attorney is essential.This authority must be in writing, otherwise the
sale shall be void. In his testimony, petitioner Adeodato Duque confirmed that at the time he
"purchased" respondents property from Pineda, the latter had no Special Power of Authority to
sell the property.
A special power of attorney is necessary to enter into any contract by which the ownership of an
immovable is transmitted or acquired for a valuable consideration. Without an authority in
writing, petitioner Pineda could not validly sell the subject property to petitioners Duque. Hence,
any "sale" in favor of petitioners Duque is void.

Page 503 of 745


EDILBERTO CRUZ and SIMPLICIO CRUZ, petitioners, vs. BANCOM FINANCE
CORPORATION (NOW UNION BANK OF THE PHILIPPINES), respondent.
397 SCRA 490

FACTS:

Brothers Rev. Fr. Edilberto Cruz and Simplicio Cruz, plaintiffs herein, were the registered
owners of a parcel of agricultural land together with improvements located in Bulacan
Sometime in May 1978, defendant Norma Sulit, after being introduced by Candelaria Sanchez to
Fr. Cruz, offered to purchase the land. Plaintiffs asking price for the land was P700,000.00, but
Norma only had P25,000.00 which Fr. Cruz accepted as earnest money with the agreement that
titles would be transferred to Norma upon payment of the balance of P675,000.00.
Norma succeeded in having the plaintiffs execute a document of sale of the land in favor of
Candelaria who would then obtain a bank loan in her name using the plaintiffs land as collateral.
On account of Normas failure to pay the amount stipulated in the Special Agreement and her
subsequent disappearance from her usual address, plaintiffs were prompted to file the herein
complaint for the reconveyance of the land.

ISSUE:

Whether or not the Deeds of Sale and Mortgage are valid.

RULING:

Clearly, the Deeds of Sale were executed merely to facilitate the use of the property as
collateral to secure a loan from a bank. Being merely a subterfuge, these agreements could not
have been the source of any consideration for the supposed sales. Indeed, the execution of the
two documents on the same day sustains the position of petitioners that the Contracts of Sale
were absolutely simulated, and that they received no consideration therefor.

The failure of Sulit to take possession of the property purportedly sold to her was a clear
badge of simulation that rendered the whole transaction void and without force and effect,
pursuant to Article 1409of the Civil Code. The fact that she was able to secure a Certificate of
Title to the subject property in her name did not vest her with ownership over it. A simulated
deed of sale has no legal effect; consequently any transfer certificate of title (TCT) issued in
consequence thereof should be cancelled. A simulated contract is not a recognized mode of
acquiring ownership.

Page 504 of 745


MANSUETO CUATON, petitioner,
vs. REBECCA SALUD and COURT OF APPEALS (Special Fourteenth Division),
G.R. No. 15838 January 27, 2004

FACTS:

Respondent Rebecca Salud, joined by her husband Rolando Salud, instituted a suit for
foreclosure of real estate mortgage with damages against petitioner Mansueto Cuaton and his
mother, Conchita Cuaton. The trial court rendered a decision declaring the mortgage constituted
on October 31, 1991 as void, because it was executed by Mansueto Cuaton in favor of Rebecca
Salud without expressly stating that he was merely acting as a representative of Conchita Cuaton,
in whose name the mortgaged lot was titled.
The Court of Appeals rendered the assailed decision affirming the judgment of the trial court.

ISSUE:

Whether the 8% and 10% monthly interest rates imposed on the one-million-peso loan obligation
of petitioner to respondent Rebecca Salud are valid.

RULING:

Stipulations authorizing iniquitous or unconscionable interests are contrary to morals


(contra bonos mores), if not against the law. Under Article 1409 of the Civil Code, these
contracts are inexistent and void from the beginning. They cannot be ratified nor the right to set
up their illegality as a defense be waived.

Moreover, the contention regarding the excessive interest rates cannot be considered as
an issue presented for the first time on appeal. The records show that petitioner raised the
validity of the 10% monthly interest in his answer filed with the trial court. To deprive him of his
right to assail the imposition of excessive interests would be to sacrifice justice to technicality.
Furthermore, an appellate court is clothed with ample authority to review rulings even if they are
not assigned as errors. This is especially so if the court finds that their consideration is necessary
in arriving at a just decision of the case before it. We have consistently held that an unassigned
error closely related to an error properly assigned, or upon which a determination of the question
raised by the error properly assigned is dependent, will be considered by the appellate court
notwithstanding the failure to assign it as an error. Since respondents pointed out the matter of
interest in their Appellants Brief before the Court of Appeals, the fairness of the imposition
thereof was opened to further evaluation. The Court therefore is empowered to review the same.

Page 505 of 745


INFOTECH vs. COMELEC
January 13, 2004

FACTS:

Before us is a Petition4 under Rule 65 of the Rules of Court, seeking (1) to declare null and void
Resolution No. 6074 of the Commission on Elections (Comelec), which awarded "Phase II of the
Modernization Project of the Commission to Mega Pacific Consortium (MPC);" (2) to enjoin the
implementation of any further contract that may have been entered into by Comelec "either with
Mega Pacific Consortium and/or Mega Pacific eSolutions, Inc. (MPEI);" and (3) to compel
Comelec to conduct a re-bidding of the project.
Congress passed Republic Act 8046,5 which authorized Comelec to conduct a nationwide
demonstration of a computerized election system and allowed the poll body to pilot-test the
system in the March 1996 elections in the Autonomous Region in Muslim Mindanao (ARMM).
On December 22, 1997, Congress enacted Republic Act 84366 authorizing Comelec to use an
automated election system (AES) for the process of voting, counting votes and
canvassing/consolidating the results of the national and local elections. It also mandated the poll
body to acquire automated counting machines (ACMs), computer equipment, devices and
materials; and to adopt new electoral forms and printing materials.

ISSUE:

Whether the Commission on Elections, the agency vested with the exclusive
constitutional mandate to oversee elections, gravely abused its discretion when, in the exercise of
its administrative functions, it awarded to MPC the contract for the second phase of the
comprehensive Automated Election System.

RULING:

In the case of a consortium or joint venture desirous of participating in the bidding, it


goes without saying that the Eligibility Envelope would necessarily have to include a copy of the
joint venture agreement, the consortium agreement or memorandum of agreement -- or a
business plan or some other instrument of similar import -- establishing the due existence,
composition and scope of such aggrupation. Otherwise, how would Comelec know who it was
dealing with, and whether these parties are qualified and capable of delivering the products and
services being offered for bidding.

In the instant case, no such instrument was submitted to Comelec during the bidding
process. This fact can be conclusively ascertained by scrutinizing the two-inch thick "Eligibility
Requirements" file submitted by Comelec last October 9, 2003, in partial compliance with this
Court?s instructions given during the Oral Argument. This file purports to replicate the eligibility
documents originally submitted to Comelec by MPEI allegedly on behalf of MPC, in connection
with the bidding conducted in March 2003. Included in the file are the incorporation papers and
financial statements of the members of the supposed consortium and certain certificates, licenses
and permits issued to them.
However, there is no sign whatsoever of any joint venture agreement, consortium agreement,
memorandum of agreement, or business plan executed among the members of the purported
consortium.
Comelec had no basis at all for determining that the alleged consortium really existed and was
eligible and qualified, that the arrangements among the members were satisfactory and sufficient
to ensure delivery on the Contract and to protect the government interest.
Hence, had the proponent MPEI been evaluated based solely on its own experience, financial and
operational track record or lack thereof, it would surely not have qualified and would have been
immediately considered ineligible to bid, as respondents readily admit.
At any rate, it is clear that Comelec gravely abused its discretion in arbitrarily failing to observe
its own rules, policies and guidelines with respect to the bidding process, thereby negating a fair,
honest and competitive bidding.

Page 506 of 745


TEDDY G. PABUGAIS v. DAVE P. SAHIJWANI
G.R. No. 156846 February 23, 2004
423 SCRA 596

FACTS:

Pursuant to an Agreement And Undertaking on December 3, 1993, petitioner Teddy G.


Pabugais, in consideration of the amount of P15,487,500.00, agreed to sell to respondent Dave P.
Sahijwani a lot containing 1,239 square meters located at Jacaranda Street, North Forbes Park,
Makati, Metro Manila. Respondent paid petitioner the amount of P600,000.00 as
option/reservation fee and the balance of P14,887,500.00 to be paid within 60 days from the
execution of the contract, simultaneous with delivery of the owners duplicate Transfer
Certificate of Title in respondents name the Deed of Absolute Sale; the Certificate of Non-Tax
Delinquency on real estate taxes and Clearance on Payment of Association Dues. The parties
further agreed that failure on the part of respondent to pay the balance of the purchase price
entitles petitioner to forfeit the P600,000.00 option/reservation fee; while non-delivery by the
latter of the necessary documents obliges him to return to respondent the said option/reservation
fee with interest at 18% per annum.

Petitioner failed to deliver the required documents. In compliance with their agreement,
he returned to respondent the latters P600,000.00 option/reservation fee by way of Far East
Bank & Trust Company Check, which was, however, dishonored.

Petitioner claimed that he twice tendered to respondent, through his counsel, the amount
of P672,900.00 (representing the P600,000.00 option/reservation fee plus 18% interest per
annum computed from December 3, 1993 to August 3, 1994) in the form of Far East Bank &
Trust Company Managers Check No. 088498, dated August 3, 1994, but said counsel refused to
accept the same. On August 11, 1994, petitioner wrote a letter to respondent saying that he is
consigning the amount tendered with the Regional Trial Court of Makati City. On August 15,
1994, petitioner filed a complaint for consignation.

Respondents counsel, on the other hand, admitted that his office received petitioners
letter dated August 5, 1994, but claimed that no check was appended thereto. He averred that
there was no valid tender of payment because no check was tendered and the computation of the
amount to be tendered was insufficient, because petitioner verbally promised to pay 3% monthly
interest and 25% attorneys fees as penalty for default, in addition to the interest of 18% per
annum on the P600,000.00 option/reservation fee.

On November 29, 1996, the trial court rendered a decision declaring the consignation
invalid for failure to prove that petitioner tendered payment to respondent and that the latter
refused to receive the same. Petitioner appealed the decision to the Court of Appeals.
Petitioners motion to withdraw the amount consigned was denied by the Court of Appeals and
the decision of the trial court was affirmed.

On a motion for reconsideration, the Court of Appeals declared the consignation as valid in an
Amended Decision dated January 16, 2003. It held that the validity of the consignation had the
effect of extinguishing petitioners obligation to return the option/reservation fee to respondent.
Hence, petitioner can no longer withdraw the same.

Unfazed, petitioner filed the instant petition for review contending that he can withdraw the
amount deposited with the trial court as a matter of right because at the time he moved for the
withdrawal thereof, the Court of Appeals has yet to rule on the consignations validity and the
respondent had not yet accepted the same.

Page 507 of 745


ISSUE:

Whether or not assigning the amount of P672, 900.00 to Atty. De Guzman is prohibited.

RULING:

The amount consigned with the trial court can no longer be withdrawn by petitioner
because respondents prayer in his answer that the amount consigned be awarded to him is
equivalent to an acceptance of the consignation, which has the effect of extinguishing
petitioners obligation.

Moreover, petitioner failed to manifest his intention to comply with the Agreement And
Undertaking by delivering the necessary documents and the lot subject of the sale to respondent
in exchange for the amount deposited. Withdrawal of the money consigned would enrich
petitioner and unjustly prejudice respondent.

The withdrawal of the amount deposited in order to pay attorneys fees to petitioners
counsel, Atty. De Guzman, Jr., violates Article 1491 of the Civil Code which forbids lawyers
from acquiring by assignment, property and rights which are the object of any litigation in which
they may take part by virtue of their profession. Furthermore, Rule 10 of the Canons of
Professional Ethics provides that the lawyer should not purchase any interest in the subject
matter of the litigation which he is conducting. The assailed transaction falls within the
prohibition because the Deed assigning the amount of P672,900.00 to Atty. De Guzman, Jr., as
part of his attorneys fees was executed during the pendency of this case with the Court of
Appeals. In his Motion to Intervene, Atty. De Guzman, Jr., not only asserted ownership over
said amount, but likewise prayed that the same be released to him. That petitioner knowingly
and voluntarily assigned the subject amount to his counsel did not remove their agreement within
the ambit of the prohibitory provisions. To grant the withdrawal would be to sanction a void
contract.

The instant petition for review was DENIED.

Page 508 of 745


LIGUEZ VS. COURT OF APPEALS
102 PHIL 577

FACTS:

Petitioner filed a complaint for the recovery of parcel of land against the widow and heirs
of Salvador Lopez. Petitioner averred that he is the owner of the aforementioned parcel of land
pursuant to a Deed of Donation executed in her favor by the late owner, Salvador Lopez. The
defense interposed that the donation was null and void for having illicit cause or consideration
which was the petitioners entering into a marital relations with Salvador, a married man, and
that the property had been adjudicated to the appellees as heirs of Salvador Lopez by the Court
of First Instance.

Meanwhile, the Court of Appeals found that the Deed of Donation was prepared by a
Justice of Peace and was ratified and signed when petitioner Liquez was still a minor, 16 years of
age. It was the ascertainment of the Court of Appeals that the donated land belonged to the
conjugal partnership of Salvador and his wife and that the Deed of Donation was never recorded.
Hence, the Court of Appeals held that the Deed of Donation was inoperative and null and void
because the donation was tainted with illegal cause or consideration.

ISSUE:

Whether or not the Deed of Donation is void for having illicit cause or consideration.

RULING:

NO. Under Article 1279 of the Civil Code of 1989, which was the governing law during
the execution of the Deed of Donation, the liberality of the donor is deemed cover only in those
contracts that are pure beneficence. In these contracts, the idea of self interest is totally absent in
the part of the transferee. Here, the facts as found demonstrated that in making the donation,
Salvador Lopez was not moved exclusively by the desire to benefit the petitioner but also to
secure her cohabiting with him. Petitioner seeks to differentiate between the liberality of Lopez
as cause and his desire as a motive. However, motive may be regarded as cause when it
predetermined the purpose of the contract. The Court of Appeals rejected the claim of petitioner
on the ground on the rule on pari delicto embodied in Article 1912 of the Civil Code. However,
this rule cannot be applied in the case because it cannot be said that both parties had equal guilt
where petitioner was a mere minor when the donation was made and that it was not shown that
she was fully aware of the terms of the said donation.

Page 509 of 745


PHILIPPINE BANKING CORPORATION V. LUI SHE,
21 SCRA 52

FACTS:

Justina who inherited parcels of land in Manila executed a contract of lease in favor of
Wong, covering a portion already leased to him and another portion of the property. The lease
was for 50 years, although the lessee was give the right to withdraw at anytime from the
agreement with a stipulated monthly rental.

She executed another contract giving Wong the option to buy the leased premises for
P120,000 payable within 10 years at monthly installment of P1,000. The option was conditioned
on his obtaining Philippine citizenship, which was then pending. His application for
naturalization was withdrawn when it was discovered that he was a resident of Rizal.

She executed two other contracts one extending the term to 99 years and the term fixing
the term of the option of 50 years. In the two wills, she bade her legatees to respect the contract
she had entered into with Wong, but it appears to have a change of heart in a codicil. Claiming
that the various contracts were made because of her machinations and inducements practiced by
him, she now directed her executor to secure the annulment of the contracts.

The complaint alleged that Wong obtained the contracts through fraud. Wong denied
having taken advantage of her trust in order to secure the execution of the contracts on question.
He insisted that the various contracts were freely and voluntarily entered into by the parties.

The lower court declared all the contracts null and void with the exception of the first,
which is the contract of lease.

ISSUE:

Whether or not the contracts entered into by the parties are void.

RULING:

The contract is void. The Court held the lease and the rest of the contracts were obtained
with the consent of Justina freely given and voluntarily, hence the claim that the consent was
vitiated due to fraud or machination is bereft of merit. However the contacts are not necessarily
valid because the Constitution provides that aliens are not allowed to own lands in the
Philippines. The illicit purpose then becomes the illegal causa, rendering the contracts void.

It does not follow from what has been said that because the parties are in pari delicto they
will be left where they are, without relief. For one thing, the original parties who were guilty of
violation of fundamental charter have died and have since substituted by their administrators to
whom it would e unjust to impute their guilt. For another thing, Article 1416 of the Civil Code
provides an exception to the pari de licto, that when the agreement is not illegal per se but is
merely prohibited, and the prohibition of the law is designed for the protection of the plaintiff, he
may recover what he has paid or delivered.

Page 510 of 745


VIGILAR v. AQUINO
G.R. No. 180388 ;January 18, 2011

FACTS:

On 19 June 1992, petitioner Angelito M. Twao, then Officer-in-Charge (OIC)-District


Engineer of the Department of Public Works and Highways (DPWH) 2nd Engineering District
of Pampanga sent an Invitation to Bid to respondent Arnulfo D. Aquino, the owner of A.D.
Aquino Construction and Supplies. The bidding was for the construction of a dike by bulldozing
a part of the Porac River at Barangay Ascomo-Pulungmasle, Guagua, Pampanga.Subsequently,
on 7 July 1992, the project was awarded to respondent, and a "Contract of Agreement" was
thereafter executed between him and concerned petitioners for the amount of PhP1,873,790.69,
to cover the project cost.

By 9 July 1992, the project was duly completed by respondent, who was then issued a
Certificate of Project Completion dated 16 July 1992. Respondent Aquino, however, claimed
that PhP1,262,696.20 was still due him, but petitioners refused to pay the amount. He thus filed a
Complaint for the collection of sum of money with damages before the Regional Trial Court of
Guagua, Pampanga.

Petitioners avers that the complaint was a suit against the state; that respondent failed to
exhaust administrative remedies; and that the "Contract of Agreement" covering the project was
void for violating Presidential Decree No. 1445, absent the proper appropriation and the
Certificate of Availability of Funds.

On 28 November 2003, the lower court ruled in favor of respondent. On appeal, the CA
reversed and set aside the decision of the lower court ,disposing that the "CONTRACT
AGREEMENT" entered into between the plaintiff-appellees construction company, which he
represented, and the government, through the Department of Public Works and Highway
(DPWH) Pampanga 2nd Engineering District, is declared null and void ab initio.

ISSUE:

Whether or not the contract agreement is valid, thus making respondent liable.

HELD:

YES. Specifically, C.V. Canchela & Associates is similar to the case at bar, in that the
contracts involved in both cases failed to comply with the relevant provisions of Presidential
Decree No. 1445 and the Revised Administrative Code of 1987. Nevertheless, "the illegality of
the subject Agreements proceeds, it bears emphasis, from an express declaration or prohibition
by law, not from any intrinsic illegality. As such, the Agreements are not illegal per se, and the
party claiming there under may recover what had been paid or delivered. The government project
involved in this case, the construction of a dike, was completed way back on 9 July 1992. For
almost two decades, the public and the government benefitted from the work done by
respondent.

Petitioners cannot escape the obligation to compensate respondent for services rendered
and work done by invoking the states immunity from suit. This Court has long established that
the doctrine of governmental immunity from suit cannot serve as an instrument for perpetrating
an injustice to a citizen. Justice and equity sternly demand that the State's cloak of invincibility
against suit be shred in this particular instance, and that petitioners-contractors be duly
compensated on the basis of quantum meruit for construction done on the public works
housing project.

Page 511 of 745


EPG Construction vs Vigilar
GR No. 131544. March 16, 2001

FACTS:

In 1983, the Ministry of Human Settlement entered into a Memorandum of Agreement


(MOA) with the Ministry of Public Works and Highways, where the latter undertook to develop
a housing project by the ministry and on the site construct thereon 145 housing units.

By virtue of the MOA, the Ministry of Public Works and Highways forged individual
contracts with herein petitioners EPG Construction Co., Ciper Electrical and Engineering, Septa
Construction Co., Phil. Plumbing Co., Home Construction Inc., World Builders Inc., Glass
World Inc., Performance Builders Development Co. and De Leon Araneta Construction Co., for
the construction of the housing units. Under the contracts, the scope of construction and funding
therefor covered only around 2/3 of each housing unit. After complying with the terms of said
contracts, and by reason of the verbal request and assurance of then DPWH Undersecretary Aber
Canlas that additional funds would be available and forthcoming, petitioners agreed to undertake
and perform additional constructions for the completion of the housing units, despite the
absence of appropriations and written contracts to cover subsequent expenses for the additional
constructions.

Petitioners received payment for what was originally stipulated. However, petitioners
demanded payment for the unpaid balance of P5,918,315.63 constituting payment for the
additional constructions which petitioners argued formed an implied contract. They claimed that
payment should be based on the principle of quantum meruit. DPWH Secretary Gregorio Vigilar
denied the subject money claims prompting herein petitioners to file before the Regional Trial
Court of Quezon City, Branch 226, a Petition for Mandamus praying for payment.

ISSUE:
Are petitioners entitled to payment?

RULING:
Although the Court agreed with respondents postulation that the implied contracts,
which covered the additional constructions, are void, in view of violation of applicable laws,
auditing rules and lack of legal requirements, it nonetheless find the instant petition laden with
merit and uphold, in the interest of substantial justice, petitioners-contractors right to be
compensated for the "additional constructions" on the public works housing project, applying the
principle of quantum meruit.

To begin with, petitioners-contractors assented and agreed to undertake additional


constructions for the completion of the housing units, believing in good faith and in the interest
of the government and, in effect, the public in general, that appropriations to cover the additional
constructions and completion of the public works housing project would be available and
forthcoming. On this particular score, the records reveal that the verbal request and assurance of
then DPWH Undersecretary Canlas led petitioners-contractors to undertake the completion of the
government housing project, despite the absence of covering appropriations, written contracts,
and certification of availability of funds, as mandated by law and pertinent auditing rules and
issuances. To put it differently, the implied contracts, declared void in this case, covered only
the completion and final phase of construction of the housing units, which structures,
concededly, were already existing, albeit not yet finished in their entirety at the time the implied
contracts were entered into between the government and the contractors.

Page 512 of 745


GOCHAN VS YOUNG
GR No. 131889. March 12, 2001

FACTS:

Felix Gochan Sr.s daughter, Alice, mother of [herein respondents], inherited 50 shares of
stock in Gochan Realty from the former. Alice died in 1955, leaving the 50 shares to her
husband, John Young, Sr. When their all their children reached the age of majority, John, Sr.
requested Gochan Realty to partition the shares of his late wife by issuing the shares of stock to
[herein respondents] and cancelling it in his name. Respondent corporation refused. On 1990,
John, Sr. died, leaving the shares to the [respondents].
On February 8, 1994, [respondents] Cecilia Gochan Uy and Miguel Uy filed a complaint
with the SEC for issuance of shares of stock to he rightful owners, nullification of shares of
stock, reconveyance of property impressed with rust, accounting, removal of officers and
directors and damages against petitioners. Petitioners then assert that respondents were not the
real parties in interest and had no capacity to sue, and respondents causes of action had already
been barred by the Statute of limitations.

ISSUE:

Do respondents have legal standing to push through with their complaint?

RULING:

On November 21, 1979, respondents Felix Gochan & Sons Realty Corporation did not
have unrestricted earnings in its books to cover the purchase price of the 208 shares of stock it
was then buying from complainant Cecilia Gochan Uy, thereby rendering said purchase null and
void ab initio for being violative of the trust fund doctrine and contrary to law, morals, good
customs, public order, and public policy.
Thus, Cecilia remains a stockholder of the corporation in view of the nullity of the
Contract of Sale. Necessarily, petitioners contention that the action has prescribed cannot be
sustained. Prescription cannot be invoked as a ground if the contract is alleged to be void ab
initio. It is axiomatic that the action or defense for the declaration of nullity of a contract does
not prescribe.
In Section 2 of Rule 87, while permitting an executor or administrator to represent or to
bring suits on behalf of the deceased, do not prohibit the heirs from representing the deceased.
The heirs can thusly represent Young in the present case.
Given the circumstances, the claim of petitioners was then dismissed and the case
remanded to the RTC for trial.

Page 513 of 745


FRANCISCO VS HERRERA
GR No. 139982. November 21, 2002

FACTS:

Eligio Herrera, Sr., father of the respondent, was the owner of two parcels of land. At
two incidents on 1991, petitioner bought the two parcels of land for Php1,000,000.00 and
PhP750,000.00. Contending that the purchase price was inadequate, the children of Eligio, Sr.,
namely, Josefina Cavettany, Eligio Herrera, Jr., and respondent Pastor Herrera tried to negotiate
for an increase of the purchase price. When petitioner refused respondents then filed a complaint
for annulment of sale on the ground that at the time of sale, Eligio Sr., was already afflicted with
senile dementia, characterized by deteriorating mental and physical condition including loss of
memory. Both the RTC and CA decided in favor of respondent.

ISSUE:

Is the disputed contract void and therefore unenforceable?

RULING:

In the present case, it was established that the vendor Eligio, Sr., entered into an
agreement with petitioner, but that the formers capacity to consent was vitiated by senile
dementia. Hence, the assailed contracts are not void or inexistent per se; rather, these are
contracts that are valid and binding unless annulled through a proper action filed in court
seasonably.
An annullable contract may be rendered perfectly valid by ratification which can be
express or implied. Implied ratification may take the form of accepting and retaining the benefit
of a contract. This is what happened in this case. Respondent negotiated for the increase of the
purchase price while receiving the installment payments.
One cannot negotiate for an increase in the price in one breath and in the same breath
contend that the contract of sale is void.

Page 514 of 745


MENDEZONA VS. OZAMIZ
GR No. 39752 February 6, 2002

FACTS:

Respondents (Montalvan and Ozamiz) were granted by the court with the guardianship of
properties over the person of Carmen Ozamiz. As guardians, they filed the inventories and
accounts of Carmen Ozamizs properties, cash, shares of stocks, vehicles and fixed assets,
including a property known as the Lahug property. The sad property is the same property
covered by the Deed of Absolute Sale executed by Carmen Ozamiz in favor of the petitioners
(Mendezona).
Respondents opposed the petitioners claim of ownership of the Lahug property and
alleged that the titles issued were defective and illegal. Further, they alleged that at the time of
the sale Carmen was already ailing and not in full possession of her mental faculties, she was
then incapacitated to enter into a contract.

ISSUE:

Whether the property in question was sold to the petitioners.

RULING:

It is significant to note that the Deed of Absolute Sale dated April 28, 1989 is a notarized
document duly acknowledge before a notary public. As such, it has in its favor the presumption
of regularity, and it carries the evidentiary weight conferred upon it with respect to its due
execution.
It has been held that a person is not incapacitated to contract merely because of advanced
years or by reason of physical infirmities. The respondents utterly failed to show adequate proof
hat at the time of the sale Carmen lost her control of mental facilities. They want to impugn one
document, the Lahug property, however, there are nine other important documents that were
signed by Carmen either before or after April 28, 1989.
Thus, the said property in question was duly proven to be sold by Carmen Ozamiz to the
petitioners Mendezona.

Page 515 of 745


MANZANILLA VS. CA
GR No. L-75342 March 15, 1990

FACTS:

Spouses Manzanilla sold on installment an undivided one-half portion of their residential


house and lot. At the time of the sale, the said property was mortgaged to the Government
Service Insurance System (GSIS), which fact was known to the vendees, spouses Magdaleno and
Justina Campo. The Campo spouses took possession of the premises upon payment of the first
installment. Some payments were made to petitioners while some were made directly to GSIS.
The GSIS filed its application to foreclose the mortgage on the property for failure of the
Manzanilla spouses to pay their monthly amortizations. The property was sold at public auction
where GSIS was the highest bidder. Two months before the expiration of the
period to redeem, the Manzanilla spouses executed a Deed of Absolute Sale of the undivided one
half portion of their property in favor of the Campo spouses. Upon the expiration of the period to
redeem without the Manzanilla spouses exercising their right of redemption, title to the property
was consolidated in favor of the GSIS and a new title issued in its name. The
Manzanilla spouses succeeded in re-acquiring the property from the GSIS. An Absolute Deed of
Sale was executed by GSIS in favor of the Manzanilla spouses and a new certificate of title was
issued to them.
The Manzanilla spouses mortgaged the property to the Bian Rural Bank. Petitioner Ines
Carpio purchased the property from the Manzanilla spouses and agreed to assume the mortgage
in favor of Bian Rural Bank.
Private respondent Justina Campo registered her adverse claim over the said portion of
land with the Register of Deeds of Quezon City. On the other hand, petitioner Ines Carpio filed
an ejectment case against private respondent Justina. Private respondent Justina Campo filed a
case for quieting of title against the Manzanilla spouses and Ines Carpio praying for the issuance
to her of a certificate of title over the undivided one-half portion of the property in question.

ISSUE:

Whether petitioners Manzanillas are under any legal duty to reconvey the undivided one-
half portion of the property to private respondent Justina Campo.

RULING:

In view of the failure of either the Manzanilla spouses or the Campo spouses to redeem
the property from GSIS, title to the property was consolidated in the name of GSIS. The new title
cancelled the old title in the name of the Manzanilla spouses. GSIS at this point had a clean title
free from any lien in favor of any person including that of the Campo spouses.
Art. 1456. If property is acquired through mistake or fraud, the
person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of
the person from whom the property comes. There was no mistake or fraud on the part of
petitioners when the subject property was re-acquired from the GSIS. The fact that they
previously sold one-half portion thereof has no more significance in this re-acquisition. Private
respondent's right over the one-half portion was obliterated when absolute ownership and title
passed on to the GSIS after the foreclosure sale. The property as held by GSIS had a clean title.
The property that was passed on to petitioners retained that quality of title. As regards the rights
of private respondent Ines Carpio, she is a buyer in good faith and for value. There was no
showing that at the time of the sale to her of the subject property, she knew of any lien on the
property except the mortgage in favor of the Bian Rural Bank. No other lien was annotated on
the certificate of title. She is also not required by law to go beyond what appears on the face of
the title. When there is nothing on the certificate of title to indicate any cloud or vice in the
ownership of the property or any encumbrances thereon, the purchaser is not to explore further
than what the Torrens Title upon its face indicates in quest for any hidden defect or inchoate
right thereof. Thus Quieting of title is dismissed.

Page 516 of 745


RURAL BANK OF PARAQUE VS REMOLADO
GR No. L-62051. March 18, 1985

FACTS:

This case is about the repurchase of mortgage property after the period of redemption and
had expired. Isidra Remolado, 64, a widow, and resident of Makati, Rizal, owned a lot with an
area of 308 square meters, with a bungalow thereon, which was leased to Beatriz Cabagnot. On
April 17, 1971 she mortgaged it again to petitioner. She eventually secured loans totalling
P18,000 (Exh. At D). the loans become overdue. The bank foreclosed the mortagage on July 21,
1972 and bought the property at the foreclosure sale for P22,192.70. The one-year period of
redemption was to expire on August 21, 1973.
On August 9, 1973 or 14 days before the expiration of the one-year redemption period,
the bank gave her a statement showing that she should pay P25,491.96 for the redemption of the
property on August 23. No redemption was made on that date. On September 3, 1973 the bank
consolidated its ownership over the property. Remolado's title was cancelled. Remolado was
offered a period until October 31, 1973 from which she could repurchase the lot. She only
exercised that option on November 5. Remolado then filed an action for reconveyance which the
lower courts granted her.

ISSUE:

Is Remolado entitled to reconveyance?

RULING:

There was no binding agreement for its repurchase. Even on the assumption that the bank
should be bound by its commitment to allow repurchase on or before October 31, 1973, still
Remolado had no cause of action because she did not repurchase the property on that date.
Justice is done according to law. As a rule, equity follows the law. There may be a moral
obligation, often regarded as an equitable consideration (meaning compassion), but if there is no
enforceable legal duty, the action must fail although the disadvantaged party deserves
commiseration or sympathy.
In the instant case, the bank acted within its legal rights when it refused to give Remolado
any extension to repurchase after October 31, 1973. It had given her about two years to liquidate
her obligation. She failed to do so. The decision of the CA affirming the decision of the RTC was
reversed.

Page 517 of 745


COJUANGCO V. REPUBLIC
GR No. 166859, April 12, 2011

FACTS:

Jacobo Ringor and his wife Gavina sired two children, Juan and and Catalina. Catalina pre-
deceased her father, thereby leaving Juan as the lone heir of 3 lots owned by Jacobo. Juan
married Gavina and sired 7 children with her. One of the children was Jose (the father and
predecessors-in-interest of herein petitioners). Jacobo applied for the registration of his lands
under the Torrens system. He filed three land registration cases alone, with his son Juan, or his
grandson Jose, applying jointly with him. Subsequently, in a Compraventa dated November 3,
1928, Jacobo allegedly sold and transferred to Jose his one-half undivided interest in Parcel 1
covered by OCT No. 25885. Jacobo's thumbmark appeared on the Compraventa.
During trial, witnesses attested that even after the decisions in the three land registration
cases and the Compraventas, Jacobo remained in possession of the lands and continued
administering them as he did prior to their registration. According to witness Julio Monsis,
Jacobo did not partition the lands since the latter said that he still needed them. When Jacobo
died on June 7, 1935, the lands under the three land registration applications, including those
which petitioners sought to partition in their counterclaim before the trial court, remained
undivided. Jose continued to function as administrator over said land and promised to divide it
equally/ When he died sometime on 1971, Respondents demanded from Jose's children, herein
petitioners, the partition and delivery of their share in the estate left by Jacobo and under Jose's
administration. The petitioners refused and attempts at amicable settlement failed. On March 27,
1973, respondents filed a Complaint for partition and reconveyance

ISSUE:

Is the exercise by Juan and Jose in the form of trust?

RULING:

Express trusts, sometimes referred to as direct trusts, are intentionally created by the
direct and positive acts of the settlor or the trustor by some writing, deed, or will, or oral
declaration. Contrary to the claim of petitioners, oral testimony is allowed to prove that a trust
exists. It is not error for the court to rely on parol evidence, - - i.e., the oral testimonies of
witnesses Emeteria Ringor, Julio Monsis and Teofilo Abalos - - which the appellate court also
relied on to arrive at the conclusion that an express trust exists.
Contrary to the claim of petitioners, oral testimony is allowed to prove that a trust exists.
It is not error for the court to rely on parol evidence, - - i.e., the oral testimonies of witnesses
Emeteria Ringor, Julio Monsis and Teofilo Abalos - - which the appellate court also relied on to
arrive at the conclusion that an express trust exists.
A trustee who obtains a Torrens title over a property held in trust for him by another
cannot repudiate the trust by relying on the registration. A Torrens Certificate of Title in Jose's
name did not vest ownership of the land upon him. The Torrens system does not create or vest
title. It only confirms and records title already existing and vested. The SC upheld the decision of
the lower courts in favoring the respondents claims.

Page 518 of 745


RINGOR VS RINGOR
GR No. 147863. August 13, 2004

FACTS:

Jacobo Ringor and his wife Gavina sired two children, Juan and and Catalina. Catalina
pre-deceased her father, thereby leaving Juan as the lone heir of 3 lots owned by Jacobo. Juan
married Gavina and sired 7 children with her. One of the children was Jose (the father and
predecessors-in-interest of herein petitioners). Jacobo applied for the registration of his lands
under the Torrens system. He filed three land registration cases alone, with his son Juan, or his
grandson Jose, applying jointly with him. Subsequently, in a Compraventa dated November 3,
1928, Jacobo allegedly sold and transferred to Jose his one-half undivided interest in Parcel 1
covered by OCT No. 25885. Jacobo's thumbmark appeared on the Compraventa.
During trial, witnesses attested that even after the decisions in the three land registration
cases and the Compraventas, Jacobo remained in possession of the lands and continued
administering them as he did prior to their registration. According to witness Julio Monsis,
Jacobo did not partition the lands since the latter said that he still needed them. When Jacobo
died on June 7, 1935, the lands under the three land registration applications, including those
which petitioners sought to partition in their counterclaim before the trial court, remained
undivided. Jose continued to function as administrator over said land and promised to divide it
equally/ When he died sometime on 1971, Respondents demanded from Jose's children, herein
petitioners, the partition and delivery of their share in the estate left by Jacobo and under Jose's
administration. The petitioners refused and attempts at amicable settlement failed. On March 27,
1973, respondents filed a Complaint for partition and reconveyance

ISSUE:

Is the exercise by Juan and Jose in the form of trust?

RULING:

Express trusts, sometimes referred to as direct trusts, are intentionally created by the
direct and positive acts of the settlor or the trustor by some writing, deed, or will, or oral
declaration. Contrary to the claim of petitioners, oral testimony is allowed to prove that a trust
exists. It is not error for the court to rely on parol evidence, - - i.e., the oral testimonies of
witnesses Emeteria Ringor, Julio Monsis and Teofilo Abalos - - which the appellate court also
relied on to arrive at the conclusion that an express trust exists.
Contrary to the claim of petitioners, oral testimony is allowed to prove that a trust exists.
It is not error for the court to rely on parol evidence, - - i.e., the oral testimonies of witnesses
Emeteria Ringor, Julio Monsis and Teofilo Abalos - - which the appellate court also relied on to
arrive at the conclusion that an express trust exists.
A trustee who obtains a Torrens title over a property held in trust for him by another
cannot repudiate the trust by relying on the registration. A Torrens Certificate of Title in Jose's
name did not vest ownership of the land upon him. The Torrens system does not create or vest
title. It only confirms and records title already existing and vested. The SC upheld the decision of
the lower courts in favoring the respondents claims.

Page 519 of 745


SALVADOR VS. CA
313 PHIL 369(1995)

Facts:

On November 9, 1991, at around 11:00 oclock in the evening, along the MacArthur
Highway in Valenzuela, Metro Manila, the Suzuki Supercarry Mini-van driven by private
respondent Sameul King Sagaral III collided with a passenger bus onwed and operated by
petitioner Five Star Bus Co. and driven by co-petitioner Ignacio Torres.
Private respondent Sagaral filed a civil action for damges against petitioner.
To simplify the proceedings due to the various motions filed by petitioners, Judge
Bautista cancelled the 8 August 1996 hearing and reset it to 20 August 1996. He also set for
hearing petitioners motion for reconsideration on 20 August 1996.
The hearing set for 20 August 1996 was cancelled and the trial court on that day issued
instead its order denying petitioners motion for reconsideration of its order dated 16 July 1996
which considered the case submitted for resolution. They applead to CA but the same was
dismissed.

Issue:

Whether or not appellate court erred in affirming the order of the trial court.

Held:

A review of the records shows that the trial court had scheduled a total six hearing dates
for the prosecution of evidence. From those repeated resetting, it can be gleaned that the delay in
the proceedings was largely, if not mainly, due to petitioners. Thus there could be no grave abuse
of discretion when the trial court finally ordered petitioners right to present evidence as waived
to put an end to their footdragging. Indeed, it is never too often to say that justice delayed is
justice denied.

Page 520 of 745


SPOUSES RICARDO AND MILAGROS HUANG, petitioners,
vs. COURT OF APPELAS, JUDGE, PEDRO N. LAGGUI, Presiding Judge, RTC, Makati,
Br. 60, and SPOUSES DOLORES AND ANICETO SANDOVAL,
G.R. No. 108525 September 13, 1994

FACTS:
Respondent Dolores Sandoval purchased Lot 21 and registered it in her name Dasmarias
Village, Makati. She also purchased the adjacent lot, Lot 20, but heading the advice of Milagros,
the deed of sale was placed in the name of Ricardo and Registered in his name under TCT No.
204783. Thereafter, Dolores constructed a residential house onLot 21. Ricardo also requested her
permission to construct a small residential house on Lot 20 to which she agreed inasmuch as she
was then the one paying for apartment rentals of the Huang spouses. She also allowed Ricardo to
mortgage Lot 20 to the Social Security System to secure the payment of his loan of P19,200.00
to be spent in putting up the house. However, she actualy financed the construction of the house,
the swimming pool and the fence thereon on the understanding that the Huang spouses would
merely hold title in trust for her beneficial interest.
To protect her rights and interests as the lawful owner of Lot 20 and its improvements,
Dolores requested the Huangs to execute in her favor a deed of absolute sale with assumption of
mortgage over the property. The letter obliged.
The Huang spouses leased the house to Deltron-Sprague Electronics Corporation for its
various executives as official quarters without first securing the permission of Dolores. Dolores
tolerated the lease of the property as she did not need it at that time. But, after sometime, the
lessees started prohibiting the Sandoval family from using the swimming pool and the Huangs
then began challenging the Sandovals' ownership of the property.
Ricardo and Milagros Huang filed a complaint against the spouses Dolores and Aniceto
Sandoval seeking the nullity of the deed of sale with assumption of mortgage and/or quieting of
title to Lot 20. They alleged that the Sandovals made them sign blank papers which turned out to
be a deed of sale with assumption of mortgage over Lot 20.

ISSUE:

Whether or not the Court of Appeals erred in stating that there was an implied trust
between them and Dolores is not supported by evidence. The exhaustive decision of the trial
court based as it is on a painstaking review of the entire records deserves our affirmance. Indeed,
we find no reason to disturb the factual conclusions therein.

HELD:

Trust is a fiduciary relationship with respect to property which involves the existence of
equitable duties imposed upon the holder of the title to the property to deal with it for the benefit
of another. A person who establishes a trust is called the trustor; one in whom confidence is
reposed as regards property for the benefit of another person is known as the trustee; and the
person for whose benefit the trust has been created is referred to as the beneficiary or cestui que
trust.
In the present case, Dolores provided the money for the purchase of Lot 20 but the
corresponding deed of sale and transfer certificate of title were placed in the name of Ricardo
Huang because she was advised that the subdivision owner prohibited the acquisition of two (2)
lots by a single individual. Guided by the foregoing definitions, we are in conformity with the
common finding of the trial court and respondent court that a resulting trust was created. Ricardo
became the trustee of Lot 20 and its improvements for the benefit of Dolores as owner. The
pertinent law is Art. 1448 of the New Civil Code which provides that there is an implied trust
when property is sold and the legal estate is granted to one party but the price is paid by another
for the purpose of having the beneficial interest for the property. A resulting trust arises because
of the presumption that he who pays for a thing intends a beneficial interest therein for himself.
Wherefor the petition is denied.

Page 521 of 745


VDA. DE ESCONDE VS. COURT OF APPEALS
G.R. No. 103635. February 1, 1996

FACTS:

Petitioner Catalina Vda. De Esconde received two transfer of certificates of land from the
partition of the estate of the brother of her deceased husband. The partition was made in 1947,
thus, due to the minority of her children of the petitioner except Constancia, she divided the land,
where the second title containing CTC 1700 (547 SQ.M) was given exclusively to Pedro
Esconde while the first lot containing CTC 1208 (20, 285 SQ.M) was given to the co petitioners
Benjamin, Elenita, and Constancia.
However, when lot 1700 was given to Pedro Esconde, his brother Benjamin, has
introduced improvements on a portion of the said lot owned by Pedro but the latter has
constructed fences over the property. Benjamin noticed that the lot was named only to his brother
Pedro but the former believed that all of them as children of Catalina have the share to the lot.
The action for reconveyance of the land was made on June 29, 1987 more than 30 years after the
partition.

ISSUE:

Whether the reconveyance of the land has already prescribed.

RULING:

Yes. The action over immovable properties prescribes in thirty (30) years if the property
was held by trust in bad faith. Thus, in this case, the action prescribed in 1977, thirty (30) years
after the partition. The action was already because there was a document of partition stating the
transfer of the certificate of title to Pedro Esconde, in which, the property was not given in trust
to Pedro but as the exclusive owner of the lot. However, he shall indemnify his brother Benjamin
for the improvement the latter has introduced to the land.

Page 522 of 745


ANCOG VS. COURT OF APPEALS
G.R. No.112260. June 30, 1997

FACTS:

Petitioners Jovita Yap- Ancog and Gregorio Yap, Jr. sought for the invalidation of the
extrajudicial settlement made by their mother for the land the petitioner Jovita was residing. Her
mother set the land as a security for a loan. This action was made when their mother planned to
sell the property which was still a part of the conjugal property of their parents.
However, Rosario Diez, their mother, contended that petitioners have waived their rights
over the lot because petitioner Jovita accepted the fact that she was renting the lot in favor of her
mother. However, Gregorio Yap, Jr. was still minor when the extrajudicial settlement was made.

ISSUE:

Whether petitioners are entitled to the subject lot.

RULING:

With respect to petitioner Jovita Yap Ancog, she is not entitled to the lot because she
already waived her right of possession over the property when she rented the lot and thus,
secured the lot for a loan to the Development Bank of the Philippines. Furthermore, she can not
alleged that the settlement was void because she was a graduate of law and she knew the proper
procedure for the ownership of the lot.
However, Gregorio Yap, Jr. was not affected by laches and prescription of claiming his
rights over the partition of the lot because he was a minor during the creation of the extrajudicial
settlement.

Page 523 of 745


RODOLFO MORALES, represented by his heirs, and PRISCILA MORALES vs. COURT
OF APPEALS, RANULFO ORTIZ, JR., and ERLINDA ORTIZ
G.R. No. 117228 1997 Jun 1

FACTS:

The Plaintiffs are the absolute and exclusive owners of the premises in question having
purchased the same from Celso Avelino, evidenced by a Deed of Absolute Sale. They later
caused the transfer of its tax declaration in the name of the female plaintiff and paid the realty
taxes thereon.

Celso Avelino (Plaintiffs' predecessor in interest) purchased the land in question


consisting of two adjoining parcels while he was still a bachelor and the City Fiscal of Calbayog
City from Alejandra Mendiola and Celita Bartolome, through a 'Escritura de Venta'. After the
purchase, he caused the transfer of the tax declarations of the two parcels in his name as well as
consolidated into one the two tax declarations in his name. With the knowledge of the Intervenor
and the defendant, Celso Avelino caused the survey of the premises in question, in his name, by
the Bureau of Lands. He also built his residential house therein.

When the two-storey residential house was finished, he took his parents, Rosendo
Avelino and Juana Ricaforte, and his sister, Aurea, who took care of the couple, to live there
until their deaths. He also declared this residential house in his tax declaration to the premises in
question and paid the corresponding realty taxes, keeping intact the receipts which he comes to
get or Aurea would go to Cebu to give it to him.

After being the City Fiscal of Calbayog, his sister, Aurea, took care of the premises in
question. While he was already in Cebu, the defendant, without the knowledge and consent of
the former, constructed a small beauty shop in the premises in question.

Inasmuch as the Plaintiffs are the purchasers of the other real properties of Celso
Avelino, one of which is at Acedillo street, after they were offered by Celso Avelino to buy the
premises in question, they examined the premises in question and talked with the defendant
about that fact, the latter encouraged them to purchase the premises in question rather than the
property going to somebody else they do not know and that he will vacate the premises as soon
as his uncle will notify him to do so. Thus, they paid the purchase price was executed in their
favor. However, despite due notice from his uncle to vacate the premises in question, the
defendant refused to vacate or demolish the beauty shop unless he is reimbursed P35,000.00 for
it although it was valued at less than P5,000.00. So, the Plaintiffs demanded, orally and in
writing to vacate the premises. The defendant refused.

ISSUES:

1. Whether or not Celso Avelino purchase the land in question as a mere trustee for his
parents and siblings, and is the property he acquired a trust property

2. Whether petitioners discharged their burden to prove the existence of an implied trust.

RULING:

A trust is the legal relationship between one person having an equitable ownership in
property and another person owning the legal title to such property, the equitable ownership of
the former entitling him to the performance of certain duties and the exercise of certain powers
by the latter.

Trusts are either express or implied. Express trusts are created by the intention of the
trustor or of the parties, while implied trusts come into being by operation of law, either through

Page 524 of 745


implication of an intention to create a trust as a matter of law or through the imposition of the
trust irrespective of, and even contrary to, any such intention.

In turn, implied trusts are either resulting or constructive trusts. Resulting trusts are based
on the equitable doctrine that valuable consideration and not legal title determines the equitable
title or interest and are presumed always to have been contemplated by the parties. They arise
from the nature or circumstances of the consideration involved in a transaction whereby one
person thereby becomes invested with legal title but is obligated in equity to hold his legal title
for the benefit of another. On the other hand, constructive trusts are created by the construction
of equity in order to satisfy the demands of justice and prevent unjust enrichment. They arise
contrary to intention against one who, by fraud, duress or abuse of confidence, obtains or holds
the legal right to property which he ought not, in equity and good conscience, to hold.

Based on Art. 1448 of the New Civil Code, 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. However, if the person to whom the title is conveyed is a child, legitimate or
illegitimate, of the one paying the price of the sale, no trust is implied by law, it being disputably
presumed that there is a gift in favor of the child.

There are recognized exceptions to the establishment of an implied resulting trust. The
first is stated in the last part of Article 1448 itself. Another exception is that in which an actual
contrary intention is proved. Also where the purchase is made in violation of an existing statute
and in evasion of its express provision, no trust can result in favor of the party who is guilty of
the fraud.

As a rule, the burden of proving the existence of a trust is on the party asserting its
existence, and such proof must be clear and satisfactorily show the existence of the trust and its
elements. While implied trusts may be proved by oral evidence, the evidence must be
trustworthy and received by the courts with extreme caution, and should not be made to rest on
loose, equivocal or indefinite declarations. Trustworthy evidence is required because oral
evidence can easily be fabricated.

In the case, petitioners' theory is that Rosendo Avelino owned the money for the purchase
of the property and he requested Celso, his son, to buy the property allegedly in trust for the
former. The fact remains, however, that title to the property was conveyed to Celso.
Accordingly, the situation is governed by or falls within the exception under the third sentence of
Article 1448. The preponderance of evidence, as found by the trial court and affirmed by the
Court of Appeals, established positive acts of Celso Avelino indicating, without doubt, that he
considered the property he purchased from the Mendiolas as his exclusive property. He had its
tax declaration transferred in his name, caused the property surveyed for him by the Bureau of
Lands, and faithfully paid the realty taxes. Finally, he sold the property to private respondents.

2. The petitioners did not discharged their burden to prove the existence of an implied
trust. Priscila's justification for her and her sisters' failure to assert co-ownership of the property
based on the theory of implied trust is not tenable. Celso Avelino did not have actual possession
of the property because he "was away from Calbayog continuously for more than 30 years until
he died on October 31, 1987, and the the tax declarations of the property were in Celso's name
and the latter paid the realty taxes thereon, there existed no valid and cogent reason why Priscila
and her sisters did not do anything to have their respective shares in the property conveyed to
them after the death of Rosendo Avelino in 1980. Neither is there any evidence that during his
lifetime, Rosendo demanded from Celso that the latter convey the land to the former, which
Rosendo could have done after Juana's death on 31 May 1965. The omission was mute and
eloquent proof of Rosendo's recognition that Celso was the real buyer of the property in 1948
and the absolute and exclusive owner thereof.

Page 525 of 745


TALA REALTY SERVICES CORPORATION vs. BANCO FILIPINO SAVINGS AND
MORTGAGE BANK
G.R. No. 137533. November 22, 2002

FACTS:

Petitioner Tala Realty Services Corporation alleges that it is the absolute owner of nine
parcels of land and their improvements by virtue of separate Deeds of Absolute Sale executed
between Tala and the respondent Banco Filipino Savings and Mortgage Bank on August 25,
1981. The Bulacan property is the subject matter of the case. Thereafter, Tala and the Bank
entered into separate lease contracts over the nine properties. The contracts had the same form
and terms, except for the description of the property and the amount of the monthly rentals. The
contracts provided for twenty-year lease periods renewable for another twenty years at the option
of the Bank. The monthly rental for the Bulacan property was P9,800.00.
Later that same day, the parties revised the nine lease contracts. The terms of the lease were
shortened to eleven years renewable for a period of nine years at the option of the lessee under
terms and conditions mutually agreeable to both parties, but the monthly rental for the Bulacan
property remained P9,800.00.
Almost eleven years after the execution of the nine lease contracts, Talas director,
Elizabeth H. Palma, wrote to the Bank reminding the latter that the contracts were about to
expire on August 31, 1992, and that the Bank had earlier signified its interest to renew the lease
contracts. Meantime, Tala would lease the properties to the Bank on a month-to-month basis
until the agreement was finalized. On January 20, 1993, the Bank requested Tala to send its
representative to the Banks office to negotiate the renewal of the lease. Talas director,
Elizabeth Palma, negotiated the renewal and submitted a proposal for increased rental. Tala
reiterated the increased rental which was agreed upon in the previous negotiation. Thus, the new
monthly rental rate for the Bulacan property was P31,800.00.
However, for several months from the time of negotiation, the Bank failed to take action
on Talas proposed terms for the renewal of the lease contract. Tala also informed the Bank that
since it had been ten months since the expiration of the lease contracts in August 1992 and the
Bank had not taken any definite action to renew the contracts despite being furnished copies of
the same in December 1992, Tala declared itself free to lease, dispose, sell and/or in any way
alienate the bank branch sites subject of the lease agreement. However, the Bank clarified that it
is the one which had the option to renew the lease and that it had communicated to Tala it was
exercising its option to do so.
From the time the lease contract over the Bulacan property expired in August 1992 until
March 1994, the Bank continued to occupy the subject Bulacan property. It paid Tala monthly
rentals at the old rate of P9,800.00 from September 1, 1992 until March 1994, but refused to pay
the P22,000.00 difference between the old monthly rate and the new rate of P31,800.00.
Beginning April 1994 until the filing of the, the Bank did not pay any rent at all. Nor did it pay
the goodwill money and deposit Tala required for the renewal of the lease.
On April 14, 1994, Tala wrote to the Bank demanding payment of the latters outstanding
obligations over the Bulacan property, consisting of unpaid rental adjustment, deposit, and
goodwill money. It also informed the Bank that at the end of the month, the month-to-month
lease would no longer be renewed, thus, it should vacate the premises by that time, otherwise,
petitioner would resort to legal action. Still, the Bank refused to pay its outstanding obligations,
prompting Talas lawyer to demand the latter to vacate the premises and to pay its outstanding
obligation within five days from receipt of the letter, otherwise a legal action would be filed
against it. The Bank still did not comply with Talas demands, the latter filed complaints for
ejectment and/or unlawful detainer.
The Banks liquidator, on he other hand asserts that the amended 11-year lease contracts of
August 25, 1981 provided for the payment of security deposits and not advance rentals so that
said payment could not be used to cover unpaid rentals during the period that the Bank was
closed and under receivership and liquidation. According to Talas lawyer, the only time that
said security deposits may be applied to unpaid rents is when the rentals for the last year of the
lease contracts were not paid, but the lease contracts were still due to expire in 1992. The Bank,

Page 526 of 745


therefore, could not apply the security deposits to the payment of rentals and thus had to pay its
accrued rentals.
The MTC ruled in favor of the Bank. Based from the evidences, defendant has a better
right of possession over the subject property on the basis of a Contract of Lease. It cannot be said
that the defendant failed to comply with the terms and conditions of the said Contract of Lease
because payment was made to the plaintiff on December 18, 1981 P487,500.00 as advance
rentals, to be applied to the rentals due from the eleventh through the twentieth years of the lease
or from 1992 through the year 2001. Thus, the RTC dismissed petitioners appeal of the decision
of the MTC for lack of merit. On appeal to the Court of Appeals, the decision of the RTC of
Malolos was affirmed.

ISSUE:

Whether or not the implied trust created under the obligation was valid.

RULING:

Talas right to lease the property to the Bank proceeds from its (Talas) claim of ownership
of the property based on a contract of sale executed between it and the Bank on August 25, 1981.
The Bank, however, disputes Talas ownership in fee simple as stated in its 20-year lease
contract with Tala as it (the Bank) alleges that there is an implied trust relationship between the
Bank as trustor and beneficiary and Tala as trustee. Pursuant to this implied trust, the Bank in
April 1994 demanded Tala to perform its obligation as trustee and return the disputed property to
the Bank as trustor and beneficiary. The Bank is of the view, therefore, that since it had already
sought enforcement of the implied trust and reconveyance of the subject property, the Bank had
the right to its possession and Tala did not have a right to eject it from the property.
The Bank alleged that the sale and twenty-year lease of the disputed property were part of a
larger implied trust warehousing agreement. Concomitant with the Courts factual finding that
the 20-year contract governs the relations between the parties, the court finds the Banks
allegation of circumstances surrounding its execution worthy of credence; the Bank and Tala
entered into contracts of sale and lease back of the disputed property and created an implied trust
warehousing agreement for the reconveyance of the property. However, the implied trust is
inexistent and void for being contrary to law.
The Bank claims to be both the trustor and beneficiary while Tala is the trustee. It alleges
the existence of an implied trust between it and Tala, relies on Articles 1448 and 1453 of the
New Civil Code. However, an implied trust could not have been formed between the Bank and
Tala as the Court has held that where the purchase is made in violation of an existing statute and
in evasion of its express provision, no trust can result in favor of the party who is guilty of the
fraud.
The Bank cannot use the defense of nor seek enforcement of its alleged implied trust with
Tala since its purpose was contrary to law. As admitted by the Bank, it warehoused its branch
site holdings to Tala to enable it to pursue its expansion program and purchase new branch sites
including its main branch in Makati, and at the same time avoid the real property holdings limit
under Sections 25(a) and 34 of the General Banking Act which it had already reached. The Bank
stated in its Memorandum that the (n)ew branch sites which the Respondent (Bank) will be
disqualified from buying, by reason of the aforecited limitations under existing banking laws and
regulations, will be acquired for it by the Petitioner (Tala) which will forthwith lease them to the
Respondent (Bank). The Bank also admitted that the agreement that the branch sites will be
returned to the bank anytime at its pleasure at the same transfer price was differently stated in
the lease contracts as a first preference to buy because the Bank was apprehensive that the
agreement to return property, if spelled out as-is in the documents, might provide basis for the
Central Bank to question the sale and simultaneous lease back of the branch sites as simulated
and accordingly, derail the expansion program of the Respondent.
Clearly, the Bank was well aware of the limitations on its real estate holdings under the
General Banking Act and that its warehousing agreement with Tala was a scheme to
circumvent the limitation. Thus, the Bank opted not to put the agreement in writing and call a
spade a spade, but instead phrased its right to reconveyance of the subject property at any time as

Page 527 of 745


a first preference to buy at the same transfer price. This arrangement which the Bank claims
to be an implied trust is contrary to law. Thus, while the sale and lease of the subject property
genuine and binding upon the parties, the implied trust cannot be enforced even assuming the
parties intended to create it. The Bank cannot thus demand reconveyance of the property based
on its alleged implied trust relationship with Tala.
WHEREFORE, the petition is dismissed.

Page 528 of 745


THE HEIRS OF PEDRO MEDINA, represented by MARGARITA MEDINA vs. THE
HON. COURT OF APPEALS, RESTITUTA ZURBITO VDA. DE MEDINA and ANDRES
NAVARRO, JR.
G.R. No. L-26107 1981 November 27

FACTS:

On March 6, 1957, petitioners filed the complaint in the trial court seeking to recover
from respondents a parcel of land situated in the sitio of Oac, municipality of Milagros, province
of Masbate, containing an area of 321.1156 hectares and praying that respondents be ordered to
deliver to them possession and ownership thereof with accounting, damages and costs and
litigation expenses.

Complaint alleged that petitioner Margarita Medina as plaintiff inherited with her sister
Ana Medina the said parcel of land from their father Pedro Medina. Upon their father's death, she
and her sister Ana Medina being then minors were placed under the care and custody of the
spouses Sotero Medina and Restituta Zurbito, as guardians of their persons and property.

The land in dispute was placed under the management of Sotero Medina as administrator
thereof, and upon Sotero's death, under the management of his widow, Restituta Zurbito.
Complainant later discovered that the land in question was surreptitiously declared for taxation
purposes in the name of Andres Navarro, Jr., grandson of Restituta Zurbito, however,
respondents as defendants had without color of title denied petitioners' ownership and instead
had claimed ownership thereof since the year 1948 and exercised acts of possession and
ownership thereon to the exclusion of petitioners.

Petitioners demanded the respondents to vacate the premises and deliver possession and
ownership thereof, but the latter failed and refused to do so. On the other hand, respondent
Andres Navarro, Jr. had excavated soil from the land in question and sold the same to the
Provincial Government of Masbate without the knowledge and consent of petitioners and
appropriated the proceeds thereof to his personal benefit to the damage and prejudice of the
plaintiff. Respondent Restituta Zurbito Vda. de Medina never rendered an accounting of the
income of the property in question in spite of their repeated demands and instead appropriated all
the income therefrom to her personal use and benefit. However, the other party states otherwise.

In its decision, the court declared petitioner Margarita Medina with her co-heirs as the
lawful owners of the land in question and ordered respondents to deliver unto them the "titulo
real No. 349581" and to restore to them the actual possession thereof; and also ordered them to
pay them certain amounts representing the produce of the land. Upon appeal, respondent Court
of Appeals reversed the trial court's decision sustaining respondents' defenses of prescription of
action and acquisitive prescription, ordered the dismissal of the complaint.

ISSUES:

1. Whether or not petitioners' action for recovery thereof has been barred by prescription.
2. Whether or not an express trust over the property in litigation has been constituted by
petitioners' father Pedro Medina, upon his brother Sotero and Sotero's wife Restituta Zurbito for
the benefit of his children, petitioner Margarita Medina and her deceased sister Ana Medina and
the latter's heirs.

RULING:

1. Petitioners' cause of action had prescribed upon the lapse of the ten-year period of
acquisitive prescription provided by the then applicable statute for unregistered lands such as the
land herein involved.

Page 529 of 745


As found by the Court of Appeals, the land was sold to Sotero Medina on June 29, 1924
from which date Sotero and his wife took open, public, continuous and adverse possession of the
land in the concept of owner. In 1957 when the present action was filed, thirty-three years, much
more than the 10-year statutory period for acquisitive prescription, had already elapsed.

The appellate court further held that petitioners' action to recover was likewise time-
barred, pointing out that "the ten-year period under the statute of limitation within which
plaintiffs could file an action for recovery of real property commenced to run in 1933 when
plaintiff Margarita Medina was informed that the land in dispute belonged to her father Pedro
Medina, for in that year she could have brought an action for reconveyance. The period of
prescription commences to run from the day the action may be brought (Article 1150, Civil Code
of the Philippines), and in an action based on fraud, as is the basis of the present action, the
period of prescription begins from the discovery of the fraud the reasons a party might have had
for not immediately taking judicial action is immaterial and does not stop the running of the
period.

2. A property held in trust cannot be acquired by prescription. Section 38 of Act 190


provides that the law of prescription does not apply `in the case of continuing and subsisting
trust.' However,if the prescriptibility of an action for reconveyance is based on constructive trust,
prescription may supervene in an implied trust.

Therefore, the appellate court correctly held that the facts and evidence of record do not
support petitioners' claim of the creation of an express trust and imprescriptibility of their claim.
Although no particular words are required for the creation of an express trust, a clear intention to
create a trust must be shown, and the proof of fiduciary relationship must be clear and
convincing.

In the case, if an express trust had been constituted upon the occupancy of the property
by respondents in favor of the petitioners, prescription of action would not lie, the basis of the
rule being that the possession of the trustee is not adverse to the beneficiary. But if there were
merely a constructive or implied trust, the action to recover may be barred by prescription of
action or by acquisitive prescription by virtue of respondents' continuous and adverse possession
of the property in the concept of owner-buyer for thirty-three years.

Express trusts are those intentionally created by the direct and positive act of the trustor,
by some writing, deed or will, or oral declaration. The creation of an express trust must be
manifested with reasonable certainty and cannot be inferred from loose and vague declarations or
from ambiguous circumstances susceptible of other interpretations. Nowhere in the record is
there any evidence, and the plaintiffs do not even raise the pretention, that the original owner of
the property Pedro Medina, father of plaintiff Margarita Medina, appointed, designated or
constituted Sotero Medina (the husband of defendant Restituta Zurbito Medina) as the trustee of
the land in dispute. Thus, it is concluded that there was realy no express trust.

The circumstances presented by the respondents do not make out the creation of an
express trust. Respondents' possession of the Spanish title issued in the late Pedro Medina's name
may just be the consequence of the sale of the land by Narciso (to whom it had been adjudicated
in the partition) to the spouses Sotero Medina and Restituta Zurbito on June 29, 1924 and is by
no means an evidence of an express trust created for the benefit of petitioners. Spanish titles are
defeasible, and although evidences of ownership may be lost through prescription. Neither is the
deed of partition (which apparently excluded Pedro Medina) entered into earlier any indication
of an express creation of a trust. In fact, the documents are adverse to petitioners' cause, and are
evidences of transfer of ownership of the land from one owner/owners to another or others and
they in fact negate the creation or existence of an express trust.

Neither does the testimony of Sotero's widow, Restituta Zurbito, to the effect that her
husband and then later she herself "administered" the land support petitioners' claim of an

Page 530 of 745


express trust. There is no showing that the term "administration" as used by said respondent in
her testimony is by reason of an appointment as such on behalf of another owner or beneficiary,
such as to support the existence of an express trust. On the contrary, it appears clear from the
context of her testimony that her use of the term "administer" was in the concept of an owner-
buyer "administering" and managing his/her property.

Thus, the appealed decision is affirmed.

Page 531 of 745


FILIPINAS PORT SERVICES vs. GO
G.R. No. 161886, March 16, 2007

FACTS:

The case is actually an intra-corporate dispute involving Filport, a domestic corporation


engaged in stevedoring services with principal office in Davao City. It was initially instituted
with the Securities and Exchange Commission (SEC) where the case hibernated and remained
unresolved for several years until it was overtaken by the enactment into law, on 19 July 2000, of
Republic Act (R.A.) No. 8799, otherwise known as the Securities Regulation Code. From the
SEC and consistent with R.A. No. 8799, the case was transferred to the RTC of Manila, Branch
14, sitting as a corporate court. Subsequently, upon respondents motion, the case eventually
landed at the RTC of Davao City where it was docketed as Civil Case No. 28,552-2001. RTC-
Davao City, Branch 10, ruled in favor of the petitioners prompting respondents to go to the CA
in CA-G.R. CV No. 73827.

In the same petition, docketed as SEC Case No. 06-93-4491, Cruz alleged that despite
demands made upon the respondent members of the board of directors to desist from creating the
positions in question and to account for the amounts incurred in creating the same, the demands
were unheeded. Cruz thus prayed that the respondent members of the board of directors be made
to pay Filport, jointly and severally, the sums of money variedly representing the damages
incurred as a result of the creation of the offices/positions complained of and the aggregate
amount of the questioned increased salaries.

In the same Answer, respondents further averred that Cruz and his co-petitioner
Minterbro, while admittedly stockholders of Filport, have no authority nor standing to bring the
so-called derivative suit for and in behalf of the corporation; that respondent Mary Jean D. Co
has already ceased to be a corporate director and so with Fortunato V. de Castro, one of those
holding an assailed position; and that no demand to cease and desist from further committing the
acts complained of was made upon the board. By way of affirmative defenses, respondents
asserted that (1) the petition is not duly verified by petitioner Filport which is the real party-in-
interest; (2) Filport, as represented by Cruz and Minterbro, failed to exhaust remedies for redress
within the corporation before bringing the suit; and (3) the petition does not show that the
stockholders bringing the suit are joined as nominal parties. In support of their counterclaim,
respondents averred that Cruz filed the alleged derivative suit in bad faith and purely for
harassment purposes on account of his non-reelection to the board in the 1991 general
stockholders meeting.

ISSUE:

Whether the CA erred in holding that Filports Board of Directors acted within its powers
in creating the executive committee and the positions of AVPs for Corporate Planning,
Operations, Finance and Administration, and those of the Special Assistants to the President and
the Board Chairman, each with corresponding remuneration, and in increasing the salaries of the
positions of Board Chairman, Vice-President, Treasurer and Assistant General Manager

HELD:

In the present case, the boards creation of the positions of Assistant Vice Presidents for
Corporate Planning, Operations, Finance and Administration, and those of the Special Assistants
to the President and the Board Chairman, was in accordance with the regular business operations
of Filport as it is authorized to do so by the corporations by-laws, pursuant to the Corporation
Code.

The election of officers of a corporation is provided for under Section 25 of the Code
which reads:

Page 532 of 745


Sec. 25. Corporate officers, quorum. Immediately after their election, the directors of a
corporation must formally organize by the election of a president, who shall be a director, a
treasurer who may or may not be a director, a secretary who shall be a resident and citizen of the
Philippines and such other officers as may be provided for in the by-laws.

As a matter of fact, it was during the term of appellee Cruz, as president and director, that
the executive committee was created. What is more, it was appellee himself who moved for the
creation of the positions of assistant vice presidents for operations, for finance, and for
administration. He should not be heard to complain thereafter for similar corporate acts.

The increase in the salaries of the board chairman, president, treasurer, and assistant
general manager are indeed reasonable enough in view of the responsibilities assigned to them,
and the special knowledge required, to be able to effectively discharge their respective functions
and duties.

By claiming that Filport suffered damages because the directors appointed to the assailed
positions are not doing anything to deserve their compensation, petitioners are saddled with the
burden of proving that salaries were actually paid. Since the trial court, in effect, found that the
petitioners successfully proved payment of the salaries when it directed the reimbursements of
the same, respondents necessarily have to raise the issue on appeal. And the CA rightly resolved
the issue when it found that no evidence of actual payment of the salaries in question was
actually adduced.

Page 533 of 745


MENDIZABEL vs. APAO
G.R. No. 143185, February 20, 2006

FACTS:

On 21 March 1955, Fernando Apao (Fernando) purchased from spouses Alejandro and
Teofila Magbanua (vendors) a parcel of land with an area of 61,616 square meters (property)
situated in Malangas, Zamboanga del Sur. Fernando bought the property for P400. The vendors
executed a deed of sale which stated inter alia that they could purchase back the property within
six months for P400, failing which, the sale would become absolute. The vendors failed to
repurchase the property. Fernando thus took possession of the same.

On 1 April 1958, Fernando had the property surveyed by Engr. Ernesto Nuval together
with the piece of land adjacent to it, which he had previously purchased from one Leopoldo
Carloto. The Bureau of Lands approved the survey on 2 July 1959 resulting in the issuance of
Survey Plan Psu-173083 covering both lots. Upon receipt of the approved survey plan,
Fernando immediately filed an application with the Bureau of Lands for a free patent over the
entirety of Psu-173083. His application was docketed as F.P.A. No. 18-1481.

After the survey of Fernandos land, the Survey Party of the Bureau of Lands surveyed the
same area. This latter survey resulted in a subdivision of the land into two separate and distinct
lots identified as Lot Nos. 407 and 1080. Fernando learned that Ignacio Mendizabel (Ignacio)
had filed prior to the Bureau of Lands survey a homestead application over Lot No. 1080.
Fernando became the claimant-protestant in Ignacios application, docketed as H.A. No. 18-8905
(E-18-8521).

On 11 May 1962, the Bureau of Lands Regional Office in Zamboanga City rendered a
decision awarding Lot No. 1080 to Ignacio.

ISSUE:

Whether there is implied trust exists in this case

HELD:

The act of petitioners in misrepresenting that they were in actual possession and
occupation of the property, obtaining patents and original certificates of title in their names]
created an implied trust in favor of the actual possessors of the property. The Civil Code
provides:

ART. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by
force of law, considered a trustee of an implied trust for the benefit of the person from whom the
property comes.

In other words, if the registration of the land is fraudulent, the person in whose name the
land is registered holds it as a mere trustee, and the real owner is entitled to file an action for
reconveyance of the property.

Petitioners would nonetheless insist that respondents failed to present any proof of
fiduciary relation between them and respondents and breach of such trust by petitioners. A
deeper analysis of Article 1456 reveals that it is not a trust in the technical sense for in a typical
trust, confidence is reposed in one person who is named a trustee for the benefit of another who
is called the cestui que trust, respecting property which is held by the trustee for the benefit of
the cestui que trust. A constructive trust, unlike an express trust, does not emanate from, or
generate a fiduciary relation. While in an express trust, a beneficiary and a trustee are linked by
confidential or fiduciary relations, in a constructive trust, there is neither a promise nor any

Page 534 of 745


fiduciary relation to speak of and the so-called trustee neither accepts any trust nor intends
holding the property for the beneficiary. Implied trusts are those which, without being expressed,
are deducible from the nature of the transaction as matters of intent or which are super induced
on the transaction by operation of law as matters of equity, independently of the particular
intention of the parties. In turn, implied trusts are either resulting or constructive trusts.
Constructive trusts are created by the construction of equity in order to satisfy the demands of
justice and prevent unjust enrichment. They arise contrary to intention against one who, by
fraud, duress or abuse of confidence, obtains or holds the legal right to property which he ought
not, in equity and good conscience, to hold.

The records show that respondents bought the property from spouses Alejandro and
Teofila Magbanua on 21 March 1955 as evidenced by a deed of sale. Fernando testified that he
was in actual, open, peaceful, and continuous possession of the property at the time he filed his
application for a free patent and was then enjoying its fruits. These facts were corroborated by
the testimonies of Braanula and Lizardo, residents of Barangay Mabini, Malangas, Zamboanga
del Sur. Petitioners, however, assert that the deed of sale, although Annex A of respondents
complaint, should not be given weight for it was not offered in evidence.

Petitioners assertion has no merit. All documents attached to a complaint, the due
execution and genuineness of which are not denied under oath by the defendant, must be
considered as part of the complaint without need of introducing evidence. In petitioners answer,
there was no denial under oath of the due execution and genuineness of the deed of sale. Thus,
the deed of sale is not only incorporated into respondents complaint, it is also deemed admitted
by petitioners. This has the effect of relieving respondents from the duty of expressly presenting
such document as evidence. The court, for the proper resolution of the case, may and should
consider without the introduction of evidence the facts admitted by the parties

Page 535 of 745


VDA. DE GUALBERTO vs. GO
G.R. No. 139843, July 21, 2005

FACTS:

Petitioners are the heirs of the late Generoso Gualberto, former registered owner of a
parcel of land situated at Redor Street, Barangay Redor, Siniloan, Laguna under Transfer
Certificate of Title (TCT) No. 9203, containing an area of 169.59 square meters, more or less,
and declared for taxation purposes under Tax Declaration No. 4869.

Sometime in 1965, the subject parcel of land was sold by Generoso Gualberto and his
wife, herein petitioner Consuelo Natividad Vda. De Gulaberto (Consuelo, for brevity), to
respondents father Go S. Kiang for P9, 000.00, as evidenced by a deed entitled Kasulatan ng
Bilihang Tuluyan dated January 15, 1965 (Kasulatan, for brevity), which deed appears to
have been duly notarized by then Municipal Judge Pascual L. Serrano of the Municipal Court of
Siniloan, Laguna and recorded in his registry as Doc. No. 9, Page No. 12, Book No.12, Series of
1965. On April 1, 1973, petitioner Consuelo executed an Affidavit attesting to the fact that the
aforementioned parcel of land had truly been sold by her and her husband Generoso to the
spouses Go S. Kiang and Rosa Javier Go, as borne by the said Kasulatan. Evidently, the
affidavit was executed for purposes of securing a new tax declaration in the name of the spouses
Go.

In December, 1973, in a case for Unlawful Detainer filed by a certain Demetria Garcia
against herein petitioners, the latter alleged that therein plaintiff Garcia is not a real party in
interest and therefore has no legal capacity and cause of action to sue the defendants; that the real
parties in interest of the parcel of commercial land and the residential apartment in question are
Generoso Gualberto and Go S. Kiang respectively as shown by TCT No. 9203 issued by the
Register of Deeds of Laguna. In a Forcible Entry case filed by respondents against petitioners
before the Municipal Circuit Trial Court of Siniloan-Famy, Siniloan, Laguna docketed as Civil
Case No. 336, a decision was rendered in favor of respondents, which decision was affirmed in
toto by the RTC of Siniloan, Laguna. When elevated to the Court of Appeals, that same decision
was affirmed by the latter court, saying that the Court finds that the judgment of the court a quo
affirming the previous judgment of the municipal court is supported by sufficient and
satisfactory evidence and there is no reason for the Court to hold otherwise.

ISSUE:

Whether an action for reconveyance of property based on nullity of title prescribes

HELD:

Petitioners insist that their action for reconveyance is imprescriptible.


An action for reconveyance of real property based on implied or constructive trust is not
barred by the aforementioned 10-year prescriptive period only if the plaintiff is in actual,
continuous and peaceful possession of the property involved. Generally, an action for
reconveyance based on an implied or constructive trust, such as the instant case, prescribes in 10
years from the date of issuance of decree of registration. However, this rule does not apply when
the plaintiff is in actual possession of the land. Thus, it has been held:

An action for reconveyance of a parcel of land based on implied or constructive trust


prescribes in ten years, the point of reference being the date of registration of the deed or the date
of the issuance of the certificate of title over the property, but this rule applies only when the
plaintiff or the person enforcing the trust is not in possession of the property, since if a person
claiming to be the owner thereof is in actual possession of the property, as the defendants are in
the instant case, the right to seek reconveyance, which in effect seeks to quiet title to the
property, does not prescribe. The reason for this is that one who is in actual possession of a piece
of land claiming to be the owner thereof may wait until his possession is disturbed or his title is

Page 536 of 745


attacked before taking steps to vindicate his right, the reason for the rule being, that his
undisturbed possession gives him a continuing right to seek the aid of a court of equity to
ascertain and determine the nature of the adverse claim of a third party and its effect on his own
title, which right can be claimed only by one who is in possession.

Here, it was never established that petitioners remained in actual possession of the
property after their fathers sale thereof to Go S. Kiang in 1965 and up to the filing of their
complaint in this case on August 10, 1995. On the contrary, the trial courts factual conclusion is
that respondents had actual possession of the subject property ever since. The action for
reconveyance in the instant case is, therefore, not in the nature of an action for quieting of title,
and is not imprescriptible.

Page 537 of 745


HEIRS OF YAP V CA
G.R.No. 133047 August 17, 1999

FACTS:

Ramon Yap purchased a parcel of land situated at 123 Batanes Street, Galas, Quezon
City, covered by Transfer Certificate of Title No. 82001/T-414, from the spouses Carlos and
Josefina Nery. The lot was thereupon registered in the name of Ramon Yap under Transfer
Certificate of Title No. 102132; forthwith, he also declared the property in his name for tax
purposes and paid the real estate taxes due thereon from 1966 to 1992. In 1967, Ramon Yap
constructed a two storey 3-door apartment building for the use of the Yap family. One-fifth (1/5)
of the cost of the construction was defrayed by Ramon Yap while the rest was shouldered by
Chua Mia, the mother of Lorenzo, Benjamin and Ramon. Upon its completion, the improvement
was declared for real estate tax purposes in the name of Lorenzo Yap in deference to the wishes
of the old woman.

The controversy started when herein petitioners, by a letter of 08 June 1992, advised
respondents of the formers claim of ownership over the property and demanded that respondents
execute the proper deed necessary to transfer the title to them. At about the same time,
petitioners filed a case for ejectment against one of the bonafide tenants of the property.

ISSUE:

Whether or not there was implied trust in the instant case?

RULING:

The court found there was none. The Court of Appeals, sustaining the court a quo, has
found the evidence submitted by petitioners to be utterly wanting, consisting mainly of the self-
serving testimony of Sally Yap. She herself admitted that the business establishment of her
husband Lorenzo was razed by fire in 1964 that would somehow place to doubt the claim that he
indeed had the means to purchase the subject land about two years later from the Nery spouses.
Upon the other hand, Ramon Yap was by then an accountant with apparent means to buy the
property himself. At all events, findings of fact by the Court of Appeals, particularly when
consistent with those made by the trial court, should deserve utmost regard when not devoid of
evidentiary support. No cogent reason had been shown by petitioners for the Court to now hold
otherwise.

One basic distinction between an implied trust and an express trust is that while the
former may be established by parol evidence, the latter cannot. Even then, in order to establish
an implied trust in real property by parol evidence, the proof should be as fully convincing as if
the acts giving rise to the trust obligation are proven by an authentic document. An implied trust,
in fine, cannot be established upon vague and inconclusive proof.

Page 538 of 745


HEIRS OF KIONOSALA V DACUT
G.R.No. 147379 February 27, 2002

FACTS:

On 19 December 1995 private respondents filed a complaint for declaration of nullity of


titles, reconveyance and damages against petitioners. This complaint involved 2 parcels of land
known as Lot No. 1017 and Lot No. 1015 with areas of 117,744 square meters and 69,974 square
meters respectively, located in Pongol, Libona, Bukidnon. On 7 September 1990 Lot No. 1017
was granted a free patent to petitioners Heirs of Ambrocio Kionisala under Free Patent No.
603393, and on 13 November 1991 Lot 1015 was bestowed upon Isabel Kionisala, one of the
impleaded heirs of Ambrocio Kionisala under Free Patent No. 101311-91-904. Thereafter, on 19
November 1990 Lot 1017 was registered under the Torrens system and was issued Original
Certificate of Title No. P-19819 in petitioners name, while on 5 December 1991 Lot No. 1015
was registered in the name of Isabel Kionisala under Original Certificate of Title No. P-20229.

In support of their causes of action for declaration of nullity of titles and reconveyance,
private respondents claimed absolute ownership of Lot 1015 and 1017 even prior to the issuance
of the corresponding free patents and certificates of title.

ISSUE:

Whether or not the action for reconveyance based on an implied trust of the lots has
prescribed?

RULING:

The action for reconveyance based on implied trust prescribes only after ten (10) years
from 1990 and 1991 when the free patents and the certificates of title over Lot 1017 and Lot
1015, respectively, were registered. Obviously the action had not prescribed when private
respondents filed their complaint against petitioners on 19 December 1995. At any rate, the
action for reconveyance in the case at bar is also significantly deemed to be an action to quiet
title for purposes of determining the prescriptive period on account of private respondents
allegations of actual possession of the disputed lots. In such a case, the cause of action is truly
imprescriptible.

Page 539 of 745


RAMOS V. RAMOS
G.R. No. L-19872 December 3, 1974

FACTS:

The spouses Martin Ramos and Candida Tanate died on October 4, 1906 and October 26,
1888, respectively. On December 10, 1906 a special proceeding was instituted in the Court of
First Instance of Negros Occidental for the settlement of the intestate estate of the said spouses.
Rafael O. Ramos, a brother of Martin, was appointed administrator. The estate was administered
for more than six years. A project of partition dated April 25, 1913 was submitted. It was signed
by the three legitimate children, Jose, Agustin and Granada; by the two natural children,
Atanacia and Timoteo, and by Timoteo Zayco in representation of the other five natural children
who were minors. It was sworn to before the justice of the peace. Plaintiffs, however, did not
know of any proceedings. They never received any sum of money in cash the alleged
insignificant sum of P1,785.35 each from said alleged guardian as their supposed share in the
estate of their father under any alleged project of partition.

ISSUE:

Whether or not a trustee can acquire by prescription the ownership of property entrusted
to him?

RULING:

There is a rule that a trustee cannot acquire by prescription the ownership of property
entrusted to him, or that an action to compel a trustee to convey property registered in his name
in trust for the benefit of the cestui qui trust does not prescribed or that the defense of
prescription cannot be set up in an action to recover property held by a person in trust for the
benefit of anothe, or that property held in trust can be recovered by the beneficiary regardless of
the lapse of time.

That rule applies squarely to express trusts. The basis of the rule is that the possession of
a trustee is not adverse. Not being adverse, he does not acquire by prescription the property held
in trust. Thus, section 38 of Act 190 provides that the law of prescription does not apply in the
case of a continuing and subsisting trust.

Page 540 of 745


THE INTESTATE ESTATE OF TY vs. COURT OF APPEALS
G.R. No. 112872. APRIL 19, 2001

FACTS:

Petitioner Sylvia S. Ty was married to Alexander T. Ty. Alexander died of leukemia on


May 19, 1988 and was survived by his wife, petitioner Sylvia, and only child, Krizia Katrina. In
the settlement of his estate, petitioner was appointed administratrix of her late husbands intestate
estate. On November 4, 1992, petitioner filed a motion for leave to sell or mortgage estate
property in order to generate funds for the payment of deficiency estate taxes in the sum of
P4,714,560.00. Private respondent, the father of the deceased filed two complaints for the
recovery of said property. He prayed for the recovery of the pieces of property that were placed
in the name of deceased Alexander by private respondent, the same property being sought to be
sold out, mortgaged, or disposed of by petitioner. Private respondent claimed in both cases that
even if said property were placed in the name of deceased Alexander, they were acquired
through private respondents money, without any cause or consideration from deceased
Alexander.

ISSUE:

Is the petitioner correct in her contention that there was an express trust between the
deceased and private respondent?

RULING:

Petitioner is in error when she contends that an express trust was created by private
respondent when he transferred the property to his son. Express trust is those that are created by
the direct and positive acts of the parties, by some writing or deed or will or by words evidencing
an intention to create a trust. On the other hand, implied trusts are those which, without being
expressed, are deducible from the nature of the transaction by operation of law as matters of
equity, independently of the particular intention of the parties. Thus, if the intention to establish
a trust is clear, the trust is express; if the intent to establish a trust is to be taken from
circumstances or other matters indicative of such intent, then the trust is implied.
In the cases at hand, private respondent contends that the pieces of property were
transferred in the name of the deceased Alexander for the purpose of taking care of the property
for him and his siblings. Such transfer having been effected without cause of consideration, a
resulting trust was created. A resulting trust arises in favor of one who pays the purchase money
of an estate and places the title in the name of another, because of the presumption that he who
pays for a thing intends a beneficial interest therein for himself. The trust is said to result in law
from the acts of the parties. Such a trust is implied in fact. Petitioners assertion that private
respondents action is barred by the statute of limitations is erroneous. The statue of limitations
cannot apply in this case. Resulting trusts generally do not prescribe except when the trustee
repudiates the trust.

Page 541 of 745


VDA. DE RETUERTO vs. BARZ
G.R. No. 148180. DECEMBER 19, 2001

FACTS:

When Spouses Esteban Perez and Lorenza Sanchez died intestate, their rights over the
property were inherited by their daughter, Juana Perez, married to Numeriano Barz, who then
declared the properly, for taxation purposes, under her name but with an area of only 13,160
square meters, more or less. On April 16, 1929, Juana Perez, widow Barz, executed a deed
confirming her execution of a "Deed of Absolute Sale," in favor of Panfilo Retuerto, married to
Catalina Ceniza, over a portion of the "Hacienda de Mandaue. However, on April 26, 1935,
Panfilo Retuerto purchased the aforementioned parcel of land, this time, from the Archbishop of
Cebu. In the meantime, the San Carlos Seminary in Cebu filed a Petition with the Regional Trial
Court for the issuance of titles over several parcels of land in "Hacienda de Mandaue," including
Lot No. 896-A, earlier purchased by Panfilo Retuerto from Juana Perez and from the Archbishop
of Cebu. No such Decree was issued as directed by the Court because the Second World War
ensued in the Pacific. However, Panfilo Retuerto failed to secure the appropriate decree after the
war.

ISSUE:

Who has a right of ownership over the subject lot?

RULING:

Constructive trusts are created in equity to prevent unjust enrichment, arising against one
who, by fraud, duress or abuse of confidence, obtains or holds the legal right to property which
he ought not, in equity and good conscience, to hold. Petitioners failed to substantiate their
allegation that their predecessor-in-interest had acquired any legal right to the property subject of
the present controversy. Nor had they adduced any evidence to show that the certificate of title of
Pedro Barz was obtained through fraud.

Even assuming arguendo that Pedro Barz acquired title to the property through mistake or
fraud, petitioners are nonetheless barred from filing their claim of ownership. An action for
reconveyance based on an implied or constructive trust prescribes within ten years from the time
of its creation or upon the alleged fraudulent registration of the property. Since registration of
real property is considered a constructive notice to all persons, then the ten-year prescriptive
period is reckoned from the time of such registering, filing or entering. Thus, petitioners should
have filed an action for reconveyance within ten years from the issuance of OCT No. 521 in
November 16, 1968. This, they failed to do so. In the 1966 decision of the Land Registration
Court in LRC No. 529, it was found that Pedro Barz, private respondents' predecessor-in-interest,
was the lawful owner of the subject property as he and his predecessors-in-interest had been in
peaceful, continuous and open possession thereof in the concept of owner since 1915.

Page 542 of 745


CHIA LIONG TAN v. COURT OF APPEALS
G.R. No. 106251, November 11, 1993

FACTS:

Petitioner claims to be the registered owner of the motor vehicle, Elf van which was
purchased by his brother Tan Ban Yong, the private respondent. The petitioner principally relies
on the fact that the vehicle is registered in his name. He testified that the said vehicle was
purchased, that he sent his brother to pay for it and the receipt of payment was placed in
petitioners name because it was his money that was used to pay for the vehicle, that he allowed
his brother to use it and that his brother refused to return the same. RTC, as affirmed by the CA
ruled that ownership belongs to the private respondent as the testimonies of Tan Pit Sin, the one
whom he borrowed money fro for the sad purchase and the employee of the Isuzu motors were
given weight.

ISSUE:

Whether or not the petitioner has ownership of the property n question

RULING:

A certificate of registration of a motor vehicle in ones name indeed creates a strong


presumption of ownership. The person in whose favor it, has been issued is virtually the owner
thereof unless proved otherwise. Such presumption is rebuttable by competent proof. It was
undeniable that an implied trust was created when the certificate of registration of the vehicle
was placed in the petitioners name although the price thereof was paid by private respondent. A
trust, which drives its strength from the confidence one reposes on another especially between
brothers, does not lose that character simply because of what appears is a legal document.
Petition is denied.

Page 543 of 745


EILIA OLACO V. CO CHO CHIT
G.R. No. 58010, March 31, 1993

FACTS:

On May 17, 1060, private respondent-spouses Valentin Co Cho Chit and O Lay Kia
learned fro the newspaper that O laco sold the Oroquieta property to the Roman Catholic
archbishop for P230,000. Rspondent-spouses sued petitioners to recover the purchase price,
asserting that petitioner knes that they were the real vendees and that the legal title thereto was
merely placed in her name. They contend that O laco breached the trust when she sold the land.
While petitioners assert that she merely left the certificate of title covering the property with
private respondent for safekeeping.

ISSUE:

Whether a resulting trust between the parties in the acquisition of the property has
prescribed

RULING:

It has been established that a resulting trust between the parties occurred. Although the
property was bought by the respondent-spouses, the legal title was placed n the name of O laco.
The transfer of the Torrens title in her name was only in consonance with the deed of sale n her
favor. The second requisite is absent., hence prescription did not begin to run until the sale of the
subject property which was clearly an act of repudiation.

But immediately after O laco sold the property which is a disavowal of the resulting
trust, respondent-spouses instituted the present suit for breach of trust. Correspondingly, laches
cannot lie against them.

Costs against petitioners.

Page 544 of 745


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