EN BANC

G.R. No. 190004 AUGUST 8, 2017

LAND BANK OF THE PHLIPPINES, Petitioner vs EUGENIO DALAUTA, Respondent

MENDOZA, J.:

NATURE OF ACTION: This petition for review on certiorari seeking to review, reverse and set aside
the of the Court of Appeals-Cagayan de Oro in modifying decisions of the Regional Trial Court, Branch
5, Butuan City, sitting as Special Agrarian Court in an action for determination of just compensation.

TOPIC: Prescription under the law

FACTS:

Respondent Dalauta is the owner of an agricultural land in Florida, Butuan City and such land
was placed by the Department of Agrarian Reform under compulsory acquisition of the Comprehensive
Agrarian Reform Program. Petitioner Land Bank of the Philippines offered P192,782.59 as compensation
for the land, but Dalauta rejected such valuation for being too low.

In December 4,1995, the PARAD affirmed the valuation made by LBP.

On February 28, 2000 Dalauta filed a petition for the determination of just compensation with the
RTC sitting as SAC.

The Land Bank of the Philippines argues that the PARAD resolution already attained finality
when Dalauta filed the petition for the determination of just compensation before the RTC sitting as SAC.
The petition was filed beyond the 15 day prescriptive period or specifically more than 5 years after the
issuance of the PARAD Resolution.

ISSUE:

Whether or not respondent’s petition was filed beyond the prescriptive period or more than 5
years after the issuance of the PARAD Resolution?

RULINGS:

While RA. No 6657 itself does not provide for the period within which a landowner can file for
the determination of just compensation before the SAC, it cannot be imprescriptible because the parties
cannot be placed in limbo indefinitely. The Civil Code settles such conundrum. Considering that the
payment of just compensation is an obligation created by law, is should only be ten years from the time
the landowner received the notice coverage. The Constitution itself provides for the payment of just
compensation in the eminent domain cases. Under Article 1144, such actions must be brought within ten
years from the time the right of action accrues. Article 1144 reads: The following actions must be brought
within ten years from the time the right of action accrues; (1) upon written contract (2) Upon an
obligation created by law (3) Upon the judgment.
 Nevertheless, any interruption or delay caused by the government like proceedings in the DAR
should toll the running of the prescriptive period. The statute of limitations has been devised to operate
against those who slept on their rights, but not against those desirous to act but cannot to do for causes
beyond their control.

In this case, Dalauta received the Notice of Coverage on February 7, 1994. He then filed a
petition for determination of just compensation on February 28, 2000. Clearly, the filing date was well
within the ten year prescriptive period under Article 1141.

FIRST DIVISION

G.R. No. 211845, AUGUST 9, 2017

PEN DEVELOPMENT CORPORATION AND LAS BRISAS RESORT

CORPORATION, Petitioners, v. MARTINEZ LEYBA, INC, Respondent.

DEL CASTILLO, J.

NATURE OF THE ACTION: Respondent, Martinez filed a Complaint for Quieting of Title,
Cancellation of Title and Recovery of Ownership with Damages against Las Brisas before the Regional
Trial Court of Antipolo City.

TOPIC: Prescription

FACTS:

In 1968, Respondent Martinez whose lands were adjacent to that of petitioner Las Brisas noticed
that the construction of the latter seemed to encroach on its land. Upon verification by the surveyors,
respondent was informed that the fence of Las Brisas overlaps its property.

Respondent filed a complaint for Quieting of Title, Cancellation of Title and Recovery of
Ownership with Damages against Las Brisas. It argued that Las Brisas constructed a riprapping on a
northern portion of Lot 29, a building straddling Lot 30 and 31 and are now constructing a new building
on Lot 31 which acts constitute an encroachment on lands covered by respondent titles.

In its Answer, Las Brisas demied that it encroached on Respondent’s land and that it constructed
the Las Brisas Resort Complex. It countered that it brought the land from the Republic Bank and took
possession thereof in good faith and it was actually Martinez that was encroaching upon its land. It also
argued that respondent may be held accountable for laches in filing only after the lapse of thirty years.

ISSUE:

Whether or not CA seriously erred in failing to rule that respondents incurred laches in enforcing
its putative rights?

RULINGS:
 The CA correctly held that as the owners of the subject property, respondents has the
imprescriptible right to recover possession thereof from any person illegally occupying its lands. Even if
petitioners have been occupying these lands for a significant period of time, respondent had registered
and lawful owner has the right to demand the return thereof at any time.

Jurisprudence consistently holds that “prescription and laches cannot apply to registered land and
covered by the Torrens system because under the Property Registration Decree, no title to registered land
in derogation to that of the registered owner shall be acquired by prescription or adverse possession.

SECOND DIVISION

G.R. No. 226345, August 2, 2017

PIONEER INSURANCE AND SURETY CORPORATION, Petitioner, v. PHOENIX APL CO. PTE
LTD, Respondent.

MENDOZA, J.

NATURE OF ACTION: This is an appeal by certiorari from the decision of the Court of Appeals dated
December in affirming the judgment of the Court of First Instance of Manila (Branch VI) which latter
court declared plaintiff Oliva Yap, herein respondent, entitled to recover from defendant Pioneer
Insurance & Surety Corporation, herein petitioner, the full amount of the damage inquired in Policy No.
4219, which is P25,000.00, plus 12% of said sum from the date of filing of the complaint until full
payment, in addition to the sum of P6,000.00 for attorney's fees, and costs.

TOPIC: Prescription

FACTS:

The Shipper, Chillies Export House Limited, turned over to respondent APL Co. Pte Ltd 250 bags
of chili pepper for transport from the port of Chennai, India to Manila. BSFIL Technologies as consignee,
insured the cargo with petitioner Pioneer Insurance and Surety Corporation.
 When the shipment arrived at the port of Manila, BSFIL upon receipt thereof, discovered that the
76 bags were wet and heavily infested with molds. The shipment was declared unfit for human
consumption and was eventually declared as a total loss.

As a result, BSFIL made a formal claim against APL and Pioneer Insurance. Pioneer Insurance
paid BFIL. Having been subrogated to all the rights and cause of action of BSFIL, Pioneer Insurance
sought payment from APL, but the latter refused. This prompted Pioneer Insurance to file a complaint for
sum of money against APL.

RTC stated that under the Carriage of Goods by Sea, lack of written notice shall prejudice the
right of the shipper to bring the suit within one year after the delivery of the goods and stated that the
shorter prescriptive period set the Bill of Lading could not apply because it is contrary to the provisions of
the COGSA.

The CA reversed the decisions of the trial courts and ruled that the present action was barred by
prescription.

ISSUE:

Whether or not Petitioners claim against the respondent is already barred by prescription?

RULINGS:

The present case involves lost or managed cargo. It has long been settled that in the case of loss
or damage cargoes, the one year prescriptive period under the COGSA applies. It is this juncture where
the parties are at odds, with the Pioneer Insurance claiming that the one year prescriptive period under the
COGSA governs; whereas the APL insists that the nine-month prescriptive period under the Bill of
Lading applies.

A reading of the Bill of Lading between the parties reveals that the nine-month period is not
applicable in all actions or claims. As an exception, the nine-month period is applicable when there is a
different period provided by a law for a particular claim or action – unlike in the Philippine American
where the Bill of Lading became operative because there was a compulsory law applicable which
provides for a different prescriptive period. Hence, strictly applying the terms of the Bill of Lading, the
one year prescriptive period under the COGSA should govern because the present case involves loss of
goods or cargo. In finding so, the Court does not construe the Bill of Lading any further but merely
applies its terms according to its plan and literal meaning.
 FIRST DIVISION

G.R. No. 198799 March 20, 2017

BANK OF THE PHILIPPINE ISLANDS, Petitioner versus AMADO M. MENDOZA and MARIA
MARCOS VDA. DE MENDOZA, Respondents

PERLAS-BERNABE, J.:

NATURE OF ACTION: This is a Complaint for Sum of Money with Application for Writ of
Attachment filed by petitioner BPI against respondents before the RTC.

TOPIC: Solutio Indebiti

FACTS:

BPI filed a complaint against respondents before the RTC.

BPI alleged respondents opened a foreign currency savings account at BPI-Gapan Branch and
deposited therein the total amount of US$l6,264.00and placed the amount of US$2,000.00 in a time
deposit account. After the lapse of the thirty (30) day clearing period, respondents withdrew the amount
of US$16,244.00 from the US savings account, leaving only US$20.00 for bank charges. However, on
June 26, 1997, BPI received a notice from its correspondent bank, Bankers Trust Company New York,
that the subject check was dishonored due to "amount altered".

This prompted BPI to inform respondents of such dishonor and to demand reimbursement. BPI
then claimed respondents allowed BPI to apply the proceeds of their time deposit account in the amount
of US$2,015.00 to their outstanding obligation, upon the exhaustion of the said time deposit account,
Amado gave BPI a promissory note containing his promise to pay BPI-Gapan Branch the amount of
₱l,000.00 monthly and when respondents failed to fulfill their obligation despite repeated demands, BPI
was constrained to give a final demand letter to respondents.

For their part, while respondents admitted the withdrawals and exchanged the same with BPI at
the rate of ₱26.l59 per dollar, they did not receive the amount of ₱582,140.00 from the proceeds.
Respondents then maintained that Amado only affixed his signature in the letter in order to acknowledge
its receipt, but not to give his consent to the application of the proceeds of their time deposit account to
their purported obligations to BPI. According to Amado, he would have been willing to pay BPI, if only
the latter presented proper and authenticated proof of the dishonor of the subject check. However, since
the bank failed to do so, Amado argued that BPI had no cause of action against him and his mother, Maria

ISSUE:

Whether or not respondent has an obligation to return the money paid by BPI over the subject
check?

RULINGS:
 To recount, respondents were ordered by the RTC to pay BPI the amount of ₱369,600.51
representing the peso equivalent of the amounts withdrawn by respondents less the amounts already
recovered by BPI, plus legal interest of twelve percent (12%) per annum reckoned from the time the
money was withdrawn, thus, implying that such amount was a loan or a forbearance of money. However,
records reveal that BPI's payment of the proceeds of the subject check was due to a mistaken notion that
such check was cleared, when in fact, it was dishonored due to an alteration in the amount indicated
therein. Such payment on the part of BPI to respondents was clearly made by mistake, giving rise to the
quasi-contractual obligation of solutio indebiti under Article 215446 in relation to Article 216347 of the
Civil Code. Not being a loan or forbearance of money, an interest of six percent (6%) per annum should
be imposed on the amount to be refunded and on the damages and attorney's fees awarded, if any,
computed from the time of demand until its satisfaction. Consequently, respondents must return to BPI
the aforesaid amount, with legal interest at the rate of six percent (6%) per annum from the date of
extrajudicial demand - or on June 27, 1997, the date when BPI informed respondents of the dishonor of
the subject check and demanded the return of its proceeds - until fully paid.
 THIRD DIVISION

G.R. No. 185597, August 2, 2017

JOHN E.R REYES AND MERWIN JOSEPH REYES, Petitioners, v. ORICO DOCTOLERO,
ROMEO AVILA, GRANDEUR SECURITY AND SERVICES CORPORATION AND MAKATI
CINEMA SQUARE, Respondents.

JARDELEZA, J.

NATURE OF ACTION: This is a complaint for damages against respondents Doctolero and Avila and
their employer Grandeur, charging the latter with negligence in the selection and supervision of its
employees. They likewise impleaded MCS on the ground that it was negligent in getting Grandeur's
services. In their complaint, petitioners prayed that respondents be ordered, jointly and severally, to pay
them actual, moral, and exemplary damages, attorney's fees and litigation costs.

TOPIC: Sources of Civil Obligations – Quasi Delict

FACTS:

Petitioners filed with the RTC of Makati a complaint for damages against respondents Doctolero
and Avila and their employer Grandeur, charging the latter with negligence in the selection and
supervision of its employees. They likewise impleaded MCS on the ground that it is negligent in getting
Grandeur’s services. In their complaint, petitioners prayed that respondents be ordered, jointly and
severally, to pay them actual, moral and exemplary damages, attorney’s fees and litigation costs.

Grandeur asserted that it exercised the required diligence in the selection and supervision of its
employees. It is likewise averred that the shooting incident was caused by the unlawful aggression of
petitioners who took advantage of their martial arts skills.

On the other hand, MCS contends that it cannot be held liable for damages simply because of its
ownership of the premises where the shooting incident occurred. It argued that the injuries sustained by
the petitioners were caused by the acts of respondents Doctolero and Avila, for whom respondent Gradeur
should be solely responsible

RTC rendered judgment against respondents Doctolero and Avila, finding them responsible for
the injuries sustained by the petitioners while then complaint against the MCS was dismissed. It also held
Grandeur solidarily liable with respondents Doctolero and Avila because the former unable to prove that
it exercised the diligence of a good father of a family in the supervision of its employees because it failed
to prove strict implementation of its rules, regulations, guidelines, issuance and instructions and to
monitor consistent compliance by respondents.

Later, RTC by filing of Motion for reconsideration by Grandeur, it find that it was able to show
that it observed a diligence of a good father of family.

ISSUE:

Whether or not Grandeur and MCS may be held vicariously liable for the damages caused by
respondents Doctolero and Avila to petitioners John and Mervin Reyes?
RULINGS:

We cannot agree. MCS is not liable to petitioners. As a general rule, one is only responsible for
his own act or omission. This general rule is laid down in Article 2176 of the Civil Code.

The law, however, provides for exceptions when it makes certain person liable for the act or
omission of another. One exception is an employer who is made vicariously liable for the tort committed
by his employee under the paragraph 5 of Article 2180. Here, although the employer is not the actual
tortfeasor, the law makes him vicariously liable on the basis of the civil law principle of pater familias for
failure to exercise due care and vigilance over the acts of one’s subordinated to prevent damage to
another.

It must be stressed, however, that the above is applicable only there is an employer-employee
relationship. This employee-employer relationship cannot be presumed but must sufficiently proven by
the plaintiff. The plaintiff must show that the employee was acting within the scope of his assigned task
when the tort complained of was committed. It is only then that the defendant, as employer, may find it
necessary to interpose the defense of due diligence in the selection and supervision of employees.

We find no employer-employee relationship between the MCS and respondent guards. The
guards were merely assigned by Grandeur to secure MCS premises pursuant to their Contract of Guard
Services. Thus, MCS cannot be held vicariously liable for damages caused by the guards act or omissions.

Neither it can be said that the principal-agency relationship existed between MCS and Grandeur.
 FIRST DIVISION

G.R. No. 206468 AUGUST 2, 2017

JUDITH D. DARINES AND JOYCE D. DARINES, Petitioners, vs. EDUARDO QUINONES AND
ROLANDO QUITAN, Respondents.

DEL CASTILLO, J.

NATURE OF ACTION: This is a petition for Review on Certiorari assailing to reverse the decision of
RTC for breach of contract of carriage and damages.

TOPIC: Sources of Civil Obligation – Quasi - Delict

FACTS:

Petitioner was driving a bus going to Benguet along Kennon Road but the bus crashed into a
truck. As a result, both the vehicles were damaged; two passengers of the bus dies; and the other
passengers, including the petitioners were injured.

Petitioners argued that Quitan and respondent Eduardo Quinones, the operator of Amianan Bus
Line breached their contract of carriage as they failed to bring them safely to their destination. They also
contended that Quitan’s reckless and negligent driving caused the collision.

During the trial, Judith testified that Quitan was driving at a very fast pace resulting in a collision
with the truck parked at the shoulder at the shoulder of the road. Consequently, the bone holding her right
eye was fracture and had to be operated. She claimed that, as a result of incident, she failed to report for
work for two months.
ISSUE:

Whether or not the carrier was guilty of fraud and bad faith even if death does not result and that
neither of these circumstances were present in the case at bar?

RULING:

To stress, this case is one for breach of contract of carriage (culpa contractual) where it is
necessary to show the existence of the contract between the parties and the failure of the common carrier
to transport its passenger safely to his or her destination. An action for breach of contract differs from
quasi delicts as the latter emanate from the negligence of the tort feasor including such instance where a
person is injured in a vehicular accident by the party other than the carrier where he is a passenger.

The principle that, in an action for breach of contract of carriage, moral damages may be awarded
only in case (1) accident results in the death of a passenger or (2) the carrier is guilty of fraud or bad faith
is pursuant to Article 1764, in relation to Article 2206 (3) of the Civil Code and Article 2220 thereof.

The aforesaid concepts of fraud or bad faith and negligence are basic as they are distinctly
differentiated by law. Specifically, fraud of bad faith connotes deliberate or wanton wrong doing, or such
deliberate disregard of contractual obligations while the negligence amounts to sheer carelessness.

FIRST DIVISION

G.R. No. 189218 March 22, 2017

OUR LADY OF LOURDES HOSPITAL, Petitioner vs SPOUSES ROMEO AND REGINA

CAPANZANA, Respondents

SERENO, CJ.:

NATURE OF ACTION: Respondent spouses Capanzana filed a complaint for damages against
petitioner hospital, along with co-defendants.

TOPIC: Sources of Civil Obligation – Quasi-Delict

FACTS:
 Respondent Regina Capanzana (Regina), a 40-year-old nurse and clinical instructor
pregnant with her third child, was scheduled for her third caesarean section. The attending physicians
were Dr. Miriam Ramos and Dr. Milagros Santos.

However after ceasarian operation, Regina complained of a headache, a chilly sensation,

restlessness, and shortness of breath. She asked for oxygen and later became cyanotic. After undergoing
an x-ray, she was found to be suffering from pulmonary edema. She was eventually transferred to the
Intensive Care Unit, where she was hooked to a mechanical ventilator. The impression then was that she
was showing signs of amniotic fluid embolism.

On 2 January 1998, when her condition still showed no improvement, Regina was transferred to
the Cardinal Santos Hospital. The doctors thereat found that she was suffering from rheumatic heart
disease mitral stenosis with mild pulmonary hypertension, which contributed to the onset of fluid in her
lung tissue. This development resulted in cardiopulmonary arrest and, subsequently, brain damage.
Regina lost the use of her speech, eyesight, hearing and limbs. She was discharged, still in a vegetative
state.

Respondent spouses Capanzana filed a complaint for damages against petitioner hospital, along
with co-defendants: Dr. Miriam Ramos, an obstetrician/gynecologist; Dr. Milagros Joyce Santos, an
anesthesiologist; and Jane Does, the nurses on duty stationed on the second floor of petitioner hospital.

Respondents imputed negligence to Ors. Ramos and Santos for the latter's failure to detect the
heart disease of Regina, resulting in failure not only to refer her to a cardiologist for cardiac clearance, but
also to provide the appropriate medical management before, during, and after the operation. They further
stated that the nurses were negligent for not having promptly given oxygen, and that the hospital was
equally negligent for not making available and accessible the oxygen unit on that same hospital floor at
the time.

Meanwhile, defendant Dr. Ramos claimed that in all of the consultations and prenatal
check-ups of Regina in the latter's three pregnancies, she never complained nor informed the doctor of
any symptom or sign of a heart problem. Before the last C-section of Regina, Dr. Ramos examined her
and found no abnormal cardiac sound, murmur or sign of rheumatic heart ailment. The doctor further
claimed that since the operation was an emergency, she had no time or chance to have Regina undergo
any cardiac examination and secure a cardiac clearance. Moreover, Dr. Ramos claimed that the cardio-
pulmonary arrest took place 14 hours after the operation, long after she had performed the operation. On
the other hand, defendant Dr. Santos claimed that she was the anesthesiologist in Regina's first and
second childbirths via C-section. The doctor further stated that prior to the third emergency C-section, she
conducted a pre-operative evaluation, and Regina showed no sign or symptom of any heart problem or
abnormality in the latter's cardiovascular, respiratory, or central nervous systems. She then administered
the anesthesia to Regina. She also stated that Regina's condition before, during, and after the operation
was stable.

On 11 May 2005, and pending the resolution of the case before the trial court, Regina died and
was substituted by her heirs represented by Romeo Capanzana.

ISSUE:
 Whether or not petitioners are negligent in the performance of their duties?

RULINGS:

Thus, a failure to act may be the proximate cause if it plays a substantial part in bringing about an
injury. Note also that the omission to perform a duty may also constitute the proximate cause of an injury,
but only where the omission would have prevented the injury. The Court also emphasizes that the injury
need only be a reasonably probable consequence of the failure to act. In other words, there is no need for
absolute certainty that the injury is a consequence of the omission.

Applying the above definition to the facts in the present case, the omission of the nurses - their
failure to check on Regina and to refer her to the resident doctor and, thereafter, to immediately provide
oxygen - was clearly the proximate cause that led to the brain damage suffered by the patient. As the trial
court and the CA both held, had the nurses promptly responded, oxygen would have been immediately
administered to her and the risk of brain damage lessened, if not avoided.

For the negligence of its nurses, petitioner is thus liable under Article 2180 in relation to Article
2176 of the Civil Code. Under Article 2180, an employer like petitioner hospital may be held liable for
the negligence of its employees based on its responsibility under a relationship of patria potestas. The
liability of the employer under this provision is "direct and immediate; it is not conditioned upon a prior
recourse against the negligent employee or a prior showing of the insolvency of that employee." The
employer may only be relieved of responsibility upon a showing that it exercised the diligence of a good
father of a family in the selection and supervision of its employees. The rule is that once negligence of the
employee is shown, the burden is on the employer to overcome the presumption of negligence on the
latter's part by proving observance of the required diligence.

In the instant case, there is no dispute that petitioner was the employer of the nurses who have
been found to be negligent in the performance of their duties. This fact has never been in issue. Hence,
petitioner had the burden of showing that it exercised the diligence of a good father of a family not only in
the selection of the negligent nurses, but also in their supervision.

In the present case, there is no proof of actual supervision of the employees' work or actual
implementation and monitoring of consistent compliance with the rules. The testimony of petitioner's
Assistant Nursing Service Director, Lourdes H. Nicolas is belied by the actual records of petitioner. These
show that Nurses David and Padolina had been observed to be latecomers and absentees; yet they were
never sanctioned by those supposedly supervising them. While the question of diligent supervision
depends on the circumstances of employment, we find that by the very nature of a hospital, the proper
supervision of the attendance of its nurses, who are its frontline health professionals, is crucial
considering that patients' conditions can change drastically in a matter of minutes. Petitioner's Employee
Handbook recognized exactly this as it decreed the proper procedure in availing of unavoidable absences
and the commensurate penalties of verbal reprimand, written warning, suspension from work, and
dismissal in instances of unexcused absence or tardiness. Petitioner's failure to sanction the tardiness of
the defendant nurses shows an utter lack of actual implementation and monitoring of compliance with the
rules and ultimately of supervision over its nurses.
 More important, on that fatal night, it was not shown who were the actual nurses on duty and who
was supervising these nurses. Although Lourdes H. Nicolas explained in her testimony that two nurses are
assigned at the nurses' station for each shift and that they are supervised by the head nurses or the charge
nurses, the documents of petitioner show conflicting accounts of what happened on the fateful days of 26
and 27 of December 1997.

SECOND DIVISION

G.R. No. 193068, February 01, 2017

DEVELOPMENT BANK OF THE PHILIPPINES, Petitioner, v. STA. INES MELALE FOREST

PRODUCTS CORPORATION, et al Respondents.

LEONEN, J.

NATURE OF ACTION: This is a complaint with Application for the Issuance of a Temporary
Restraining Order or Writ of Preliminary Injunction.

TOPIC: Obligation with a Period

FACTS:

Due to financial difficulties, Galleon and its stockholders Sta. Ines, Cuenca Investment,
Universal Holdings, Cuenca, and Tinio, executed a Deed of Undertaking and obligated themselves to
guarantee DBP's potential liabilities. To secure DBP's guarantee, Galleon undertook to secure a first
mortgage on its five new vessels and two second-hand vessels. However, despite the loans extended to it,
financial condition did not improve.

In Letter of Instructions No. 115518 addressed to the NDC, DBP, and the Maritime Industry
Authority directing a rehabilitation plan for Galleon Shipping Corporation where NDC shall acquire
100% of the shareholdings of Galleon Shipping Corporation from its present owners payable after five
years with no interest cost.

Pursuant to Letter of Instructions No. 1155, Galleon's stockholders, represented by Cuenca, and
NDC, through its then Chairman of the Board of Directors, Roberto V. Ongpin (Ongpin) entered into a
Memorandum of Agreement, where NDC and Galleon undertook to prepare and sign a share purchase
agreement covering 100% of Galleon's equity. The purchase price was to be paid after five years from the
execution of the share purchase agreement. The share purchase agreement also provided for the release of
Sta. Ines, Cuenca, Tinio and Construction Development Corporation of the Philippines from the personal
counter-guarantees they issued in DBP's favor under the Deed of Undertaking.
 Acting as Galleon's guarantor, DBP paid off Galleon's debts to its foreign bank creditor and
pursuant to the Deed of Undertaking, Galleon executed a mortgage contract over seven of its vessels in
favor of DBP.

NDC took over Galleon's operations "even prior to the signing of a share purchase agreement."
However, despite NDC's takeover, the share purchase agreement was never formally executed.

Barely seven months from the issuance of Letter of Instructions No. 1155, President Marcos
issued Letter of Instructions No. 1195,29 that NDC has assumed management of Galleon's operations
because Galleon was unable to pay from its cash flows the resulting debt service burden.

On April 22, 1985, respondents Sta. Ines, Cuenca, Tinio, Cuenca Investment and Universal
Holdings filed a Complaint with Application for the Issuance of a Temporary Restraining Order or Writ
of Preliminary Injunction. Sta. Ines, Cuenca, Tinio, Cuenca Investment, and Universal Holdings claimed
that "DBP can no longer go after them for any deficiency judgment since NDC had been subrogated in
their place as borrowers hence the Deed of Undertaking between Sta. Ines, Cuenca Investment, Universal
Holdings, Cuenca, and Tinio and DBP had been extinguished and novated.

The Regional Trial Court also that Sta. Ines, Cuenca, Tinio, Cuenca Investment, and Universal
Holdings' liability to DBP under the Deed of Undertaking had been extinguished due to novation, with
NDC replacing them and PNCC as debtors.

As regards NDC's argument that Sta. Ines, Cuenca, Tinio, Cuenca Investment, and Universal
Holdings had no basis to compel it to pay Galleon's shares of stocks because no share purchase agreement
was executed, the Regional Trial Court held that the NDC was in estoppel since it prevented the execution
of the share purchase agreement and had admitted to being Galleon's owner

The Court of Appeals upheld the Regional Trial Court's findings that the Memorandum of
Agreement between NDC and Cuenca (representing Sta. Ines, Cuenca, Tinio, Cuenca Investment, and
Universal Holdings) was a perfected contract, which bound the parties.

The Court of Appeals likewise affirmed the Regional Trial Court's ruling that novation took place
when NDC agreed to be substituted in place of Sta. Ines, Cuenca, Tinio, Cuenca Investment, and
Universal Holdings in the counter-guarantees they issued in favor of DBP.

The Court of Appeals ruled that DBP was privy to the Memorandum of Agreement between NDC
and Sta. Ines, Cuenca, Tinio, Cuenca Investment, and Universal Holdings, since Ongpin was concurrently
Governor of DBP and chairman of the NDC Board at the time the Memorandum of Agreement was
signed.

ISSUES:

Whether or not the Memorandum of Agreement obligates NDC to purchase Galleon's shares of
stocks and pay the advances made by respondents in Galleon's favor?

Whether the Memorandum of Agreement novated the Deed of Undertaking executed between
DBP and respondents?
RULINGS:

We uphold the Court of Appeals' finding that the failure to execute the share purchase agreement
was brought about by NDC's delay in reviewing the financial accounts submitted by Galleon's
stockholders. The Memorandum of Agreement was executed on August 10, 1981, giving the parties no
more than sixty days or up to October 9, 1981, to prepare and sign the share purchase agreement.
However, it was only on April 26, 1982, or more than eight months after the Memorandum of Agreement
was signed, did NDC's General Director submit his recommendation on Galleon's outstanding account.
Even then, there was no clear intention to execute a share purchase agreement as compliance with the
Memorandum of Agreement. Article 1186 of the Civil Code is categorical that a "condition shall be
deemed fulfilled when the obligor voluntarily prevents its fulfillment." Considering NDC's delay, the
execution of the share purchase agreement should be considered fulfilled with NDC as the new owner of
100% of Galleon's shares of stocks.

The due execution of the share purchase agreement is further bolstered by Article 1198(4) of the
Civil Code, which states that the debtor loses the right to make use of the period when a condition is
violated, making the obligation immediately demandable:

We see no reason to disturb the findings of fact made by the trial court and the Court of Appeals
considering that the same are duly supported by substantial evidence.

Well-settled is the rule that findings of fact made by a trial court and the Court of Appeals are
accorded the highest degree of respect by this Court, and, absent a clear disregard of the evidence before
it that can otherwise affect the results of the case, those findings should not be ignored

Novation is never presumed. The animus novandi, whether partial or total, "must appear by
express agreement of the parties, or by their acts which are too clear and unequivocal to be mistaken."

There was no such animus novandi in the case at bar between DBP and respondents, thus,
respondents have not been discharged as Galleon's co-guarantors under the Deed of Undertaking and they
remain liable to DBP.

FIRST DIVISION

G.R. No. 188269, April 17, 2017

SUMIFRU (PHILIPPINES) CORPORATION (surviving entity in a merger with Davao Fruits

Corporation and other Companies Petitioner versus BERNABE BAYA, Respondent

PERLAS-BERNABE, J:

NATURE OF THE ACTION: This is a petition for review on certiorari of the Court of Appeals setting
aside the Resolutions of the National Labor Relations Commission in declaring respondent Bernabe Baya
(Baya) to have been illegally/ constructively dismissed by AMS Farming Corporation (AMSFC) and
Davao Fruits Corporation (DFC), with modification deleting the award of backwages, annual vacation
leave pay, sick leave pay, monthly housing subsidy, electric light subsidy, and exemplary damages, and
ordering AMSFC and DFC to pay Baya the amounts of P194,992.82 as separation pay, P8,279.95 as 13th
month pay, P50,000.00 as moral damages, and P25,327.28 as attorney’s fees.

TOPIC: Solidary Liability

FACTS:

AMSFC employed Baya into supervisory rank. As a supervisor, Baya joined the union of AMS
Kapalong Agrarian Reform Beneficiaries Multipurpose Cooperative (AMSKARBEMCO), the basic
agrarian reform organization of the regular employees of AMSFC. Later, Baya was reassigned to a series
of supervisory positions in AMSFC’s sister company, DFC, where he also became a member of the
latter’s supervisory union while at the same time, remaining active at AMSKARBEMCO. Later on and
upon AMSKARBEMCO’s petition before the Department of Agrarian Reform (DAR), some 220 hectares
of AMSFC’s 513-hectare banana plantation were covered by the Comprehensive Agrarian Reform Law.
Eventually, said portion was transferred to AMSFC’s regular employees as Agrarian Reform
Beneficiaries (ARBs), including Baya. Thereafter, the ARBs explored a possible agribusiness venture
agreement with AMSFC, but the talks broke down, prompting the Provincial Agrarian Reform Officer to
terminate negotiations and, consequently, give AMSKARBEMCO freedom to enter into similar
agreement with other parties.

When AMSFC learned that AMSKARBEMCO entered into an export agreement with another
company, it summoned AMSKARBEMCO officers, including Baya, to lash out at them and even
threatened them that the ARBs’ takeover of the lands would not push through. Thus, when Baya return to
AMSFC, he was informed that there were no supervisory positions available; thus, he was assigned to
different rank-and-file positions instead.

Baya’s written request to be restored to a supervisory position was denied, prompting him to file
the instant complaint.

In their defense, AMSFC and DFC maintained that they did not illegally/ constructively dismiss
Baya, considering that his termination from employment was the direct result of the ARBs’ takeover of
AMSFC’s banana plantation through the government’s agrarian reform program.

ISSUE:

Whether or not Sumifru and AMSFC are solidarily liable to Baya for monetary awards by virtue
of merger?

RULINGS:

In this case, it is worthy to stress that both AMSFC and DFC are guilty of acts constitutive of
constructive dismissal performed against Baya. As such, they should be deemed as solidarily liable for the
monetary awards in favor of Baya. Meanwhile, Sumifru, as the surviving entity in its merger with DFC,
must be held answerable for the latter’s liabilities, including its solidary liability with AMSFC arising
herein. Verily, jurisprudence states that “in the merger of two existing corporations, one of the
corporations survives and continues the business, while the other is dissolved and all its rights, properties
and liabilities are acquired by the surviving corporation,” as in this case.

FIRST DIVISION

G.R. No. 206390, January 30, 2017

JACK C. VALENCLA, Petitioner, v. CLASSIQUE VINYL PRODUCTS CORPORATION,

JOHNNY CHANG (OWNER) AND/OR CANTINGAS MANPOWER SERVICES, Respondent.

DEL CASTILLO, J.

NATURE OF THE ACTION: Petitioner filed with the Labor Arbiter a Complaint for Underpayment of
Salary and Overtime Pay; Non-Payment of Holiday Pay, Service Incentive Leave Pay, 13th Month Pay;
Regularization; Moral and Exemplary Damages; and, Attorney's Fees against respondents Classique
Vinyl Products Corporation (Classique Vinyl) and its owner Johnny Chang (Chang) and/or respondent
Cantingas Manpower Services (CMS) for illegal dismissal.

TOPIC: Solidary Liability

FACTS:

On March 24, 2010, Valencia filed with the Labor Arbiter a Complaint for illegal dismissal
against respondents Classique Vinyl Products Corporation (Classique Vinyl) and its owner Johnny Chang
and respondent Catingas Manpower Services.

Valencia alleged that by operation of law, he had already attained the status of a regular employee
of his true employer, Classique Vinyl, since according to him, Civ1S is a mere labor only contractor.
Classique Vinyl, for its part asserted that there was no employer-employee relationship between it
and Valencia, hence, it could not have illegally dismissed the latter nor can it be held liable for Valencia's
monetary claims. Even assuming that Valencia is entitled to monetary benefits, Classique Vinyl averred
that it cannot be made to pay the same since it is an establishment regularly employing less than 10
workers. As such, it is exempted from paying the prescribed wage orders in its area and other benefits
under the Labor Code. At any rate, Classique Vinyl insisted that Valencia's true employer was CMS, the
latter being an independent contractor as shown by the fact that it was duly incorporated and registered
not only with the Securities and Exchange Commission but also with the Department of Labor and
Employment; and, that it has substantial capital or investment in connection with the work performed and
the services rendered by its employees to clients.
 CMS, on the other hand, denied any employer-employee relationship between it and Valencia. It
contended that after it deployed Valencia to Classique Vinyl, it was already the latter which exercised full
control and supervision over him. Also, Valencia's wages were paid by Classique Vinyl only that it was
CMS which physically handed the same to Valencia.

ISSUE:

Whether or not Cantingas Manpower Services (CMS) is solidary liable for illegal dismissal with
Classique Vinyl, an independent contractor?

RULING:

Clearly, therefore, no error can be attributed on the part of the labor tribunals and the CA in ruling
out the existence of employer-employee relationship between Valencia and Classique Vinyl.

Further, the Court finds untenable Valencia's argument that neither Classique Vinyl nor CMS was
able to present proof that the latter is a legitimate independent contractor and therefore unable to rebut the
presumption that a contractor is presumed to be a labor-only contractor. "Generally, the presumption is
that the contractor is a labor-only [contractor] unless such contractor overcomes the burden of proving
that it has the substantial capital, investment, tools and the like. Here, to prove that CMS was a legitimate
contractor, Classique Vinyl presented the former's Certificate of Registration with the Department of
Trade and Industry and, License as private recruitment and placement agency from the Department of
Labor and Employment. Indeed, these documents are not conclusive evidence of the status of CMS as a
contractor. However, such fact of registration of CMS prevented the legal presumption of it being a mere
labor-only contractor from arising. In any event, it must be stressed that "in labor-only contracting, the
statute creates an employer-employee relationship for a comprehensive purpose: to prevent a
circumvention of labor laws. The contractor is considered merely an agent of the principal employer and
the latter is responsible to the employees of the labor-only contractor as if such employees had been
directly employed by the principal employer.

The principal employer therefore becomes solidarity liable with the labor-only contractor for all
the rightful claims of the employees." The facts of this case, however, failed to establish that there is any
circumvention of labor laws as to call for the creation by the statute of an employer-employee relationship
between Classique Vinyl and Valencia. In fact, even as against CMS, Valencia's money claims has been
debunked by the labor tribunals and the CA. Again, the Court is not inclined to disturb the same.

In view of the above disquisition, the Court finds no necessity to dwell on the issue of whether
Valencia was illegally dismissed by Classique Vinyl and whether the latter is liable for Valencia's money
claims.
 SECOND DIVISION

G.R. No. 212038, February 08, 2017

SPOUSES JESUS FERNANDO AND ELIZABETH S. FERNANDO, Petitioners, v. NORTHWEST

AIRLINES, INC., Respondent.

G.R. No. 212043

NORTHWEST AIRLINES, INC., Petitioner, v. SPOUSES JESUS FERNANDO AND ELIZABETH

S. FERNANDO, Respondent.

PERALTA, J.
NATURE OF ACTION: This is a consolidated petitions for review on certiorari assailing the Decision
of the Court of Appeals which affirmed the Decision of the Regional Trial Court (RTC), finding
Northwest Airlines, Inc. (Northwest) liable for breach of contract of carriage.

TOPIC: Breach of Obligation

FACTS:

The spouses Jesus and Elizabeth S. Fernando are frequent flyers of Northwest Airlines, Inc. and
are holders of Elite Platinum World Perks Card, the highest category given to frequent flyers of the
carrier.

The Fernandos initiated the filing of the instant case which arose from two (2) separate incidents:
first, when Jesus Fernando arrived at Los Angeles (LA) Airport on December 20, 2001; second, when the
Fernandos were to depart from the LA Airport on January 29, 2002.

Jesus Fernando alleged in their petition, due to personal misconduct, gross negligence and the
rude and abusive attitude of Northwest employees Linda Puntawongdaycha who had not taken time to
verify the validity of the ticket in the computer, she would have not given the wrong information to the
Immigration Officer because the August 2001 return ticket remained unused and valid for a period of one
(1) year, or until August 2002. The wrong information given by Linda Puntawongdaycha aroused doubts
and suspicions on Jesus Fernando's travel plans.

As to the second incident, the Fernandos belied the accusation of Northwest that they did not
present any tickets. They presented their electronic tickets which were attached to their boarding passes.
If they had no tickets, the personnel at the check-in counter would have not issued them their boarding
passes and baggage claim stubs. That's why they could not understand why the coupon-type ticket was
still demanded by Northwest.

On the other hand, Northwest stated in its petition that Linda Puntawongdaycha tried her best to
help Jesus Fernando get through the US Immigration. Notwithstanding that Linda Puntawongdaycha was
not able to find any relevant information on Jesus Fernando's return ticket, she still went an extra mile by
printing the PNR of Jesus Fernando and handling the same personally to the Immigration Officer. It
pointed out that the Immigration Officer "noticed in the ticket that it was dated sometime August 20 or
21, 2001, although it was already December 2001.

As to the incident with Linda Tang, Northwest explained that she was only following Northwest
standard boarding procedures when she asked the Fernandos for their tickets even if they had boarding
passes. The dates indicated on the tickets did not match the booking. Elizabeth Fernando was using an
electronic ticket dated August 21, 2001, while the electronic ticket of Jesus Fernando was dated January
26, 2002. According to Northwest, even if the Fernandos had electronic tickets, the same did not discount
the fact that, on the face of the tickets, they were for travel on past dates. Also, the electronic tickets did
not contain the ticket number or any information regarding the reservation. Hence, the alleged negligence
of the Fernandos resulted in the confusion in the procedure in boarding the plane and the eventual failure
to take their flight.

ISSUE:
 Whether or not Northwest had breached the contract of carriage?

RULING:

We find merit in the petition of the Spouses Jesus and Elizabeth Fernando.

The Fernandos' cause of action against Northwest stemmed from a breach of contract of carriage.

Undoubtedly, a contract of carriage existed between Northwest and the Fernandos. They
voluntarily and freely gave their consent to an agreement whose object was the transportation of the
Fernandos from LA to Manila, and whose cause or consideration was the fare paid by the Fernandos to
Northwest.

When Northwest confirmed the reservations of the Fernandos, it bound itself to transport the
Fernandos on their flight on 29 January 2002. We note that the witness of Northwest admitted on cross-
examination that based on the documents submitted by the Fernandos, they were confirmed passengers on
the January 29, 2002 flight.

In an action based on a breach of contract of carriage, the aggrieved party does not have to prove
that the common carrier was at fault or was negligent. All that he has to prove is the existence of the
contract and the fact of its non-performance by the carrier. As the aggrieved party, the Fernandos only
had to prove the existence of the contract and the fact of its non-performance by Northwest, as carrier, in
order to be awarded compensatory and actual damages.

Therefore, having proven the existence of a contract of carriage between Northwest and the
Fernandos, and the fact of non-performance by Northwest of its obligation as a common carrier, it is clear
that Northwest breached its contract of carriage with the Fernandos. Thus, Northwest opened itself to
claims for compensatory, actual, moral and exemplary damages, attorney's fees and costs of suit.

We, thus, sustain the findings of the CA and the RTC that Northwest committed a breach of
contract "in failing to provide the spouses with the proper assistance to avoid any inconvenience" and that
the actuations of Northwest in both subject incidents "fall short of the utmost diligence of a very cautious
person expected of it". Both ruled that considering that the Fernandos are not just ordinary passengers but,
in fact, frequent flyers of Northwest, the latter should have been more courteous and accommodating to
their needs so that the delay and inconveniences they suffered could have been avoided. Northwest was
remiss in its duty to provide the proper and adequate assistance to them.

Nonetheless, we are not in accord with the common finding of the CA and the RTC when both
ruled out bad faith on the part of Northwest. While we agree that the discrepancy between the date of
actual travel and the date appearing on the tickets of the Fernandos called for some verification, however,
the Northwest personnel failed to exercise the utmost diligence in assisting the Fernandos. The actuations
of Northwest personnel in both subject incidents are constitutive of bad faith.

Time and again, we have declared that a contract of carriage, in this case, air transport, is
primarily intended to serve the traveling public and thus, imbued with public interest. The law governing
common carriers consequently imposes an exacting standard of conduct. A contract to transport
passengers is quite different in kind and degree from any other contractual relation because of the relation
which an air-carrier sustains with the public. Its business is mainly with the travelling public. It invites
people to avail of the comforts and advantages it offers. The contract of air carriage, therefore, generates a
relation attended with a public duty. Neglect or malfeasance of the carrier's employees, naturally, could
give ground for an action for damages.

THIRD DIVISION

G.R. No. 188027 AUGUST 9, 2017

SWIRE REALTY DEVELOPEMNT CORPORATION., Petitioner vs.

SPECIALTY CONTRACTS GENERAL AND CONSTRUCTION SERVICES, INC AND JOSE
JAVELLANA, Respondents

REYES, JR J.:

NATURE OF THE ACTION: This is a Complaint for Sum of Money and Damages filed by Swire
Realty Development Corporation (petitioner) against Specialty Contracts General and Construction
Services, Inc., represented by its President and General Manager Jose Javellana, Jr. (the respondents)

Topic: Obligation; Obligation with Penal Clause

FACTS:

Swire Realty Development Corporation filed complaint for Sum of Money and Damages against
Specialty Contracts General and Construction Services, Inc. The complaint alleges breach of the
Agreement to undertake Waterproofing Works entered between them. By virtue of the Agreement,
respondent undertook to perform waterproofing works on the petitioner’s condominium project known as
Garden View Tower for P2,000,000.00 over a period of 100 calendar days from the execution of the
Agreement or until April 6, 1997. The amount agreed upon is to be paid to the respondents as follows:
20% as down payment, and the balance of 80% payable through monthly progress billings based on
accomplished work, subject to a 10% withholding tax. The Agreement likewise provided that the parties
are liable for penalty in case of delay in the performance of their respective obligations and that the
retention fee shall be released to respondents within 90 days from the turnover and acceptance by the
petitioner of the completed work.

ISSUE:

Whether or not the waterproofing of the swimming pool constitutes additional work for which the
respondents much be compensated?

RULINGS:

With respect to the penalty, the CA and the RTC both recognized that under the attendant
circumstances, the petitioner is entitled to damages on account of the respondent’s delay in the
performance of their obligation. The amount of penalty is governed by Article V of the Agreement.
 Pursuant to settled jurisprudence and Article 1229 in relation to Article 2227 of the New Civil
Code, the Court deems it proper to reduce the penalty involved.

The respondent obligated under the Agreement to complete the waterproofing works on April 6,
1997 but failed. The remaining work to be done have to be performed by Esicor, who accomplished the
same on April 5, 1998. In the light of these, the respondents are then liable for delay for the period of 365
days, which corresponds to the amount of P3,650,000.00 as penalty under Agreement. Without doubt,
taking into consideration that the respondents have completed 90% of the project and the absence of any
showing of bad faith on their part, as well as the fact that the waterproofing works have already been
completed at the respondents expense, the amount of P3,650,000.00 as penalty is exorbitant under the
premises. Therefore, the Court reduces the same and imposes the amount of P200,000.00 as liquidated
damages, by way of penalty.

SECOND DIVISION

G.R. No. 219345 January 30, 2017

SECURITY BANK CORPORATION, Petitioner vs. GREAT WALL COMMERCIAL PRESS

COMPANY, INC., ALFREDO BURIEL ATIENZA, FREDINO CHENG ATIENZA and SPS.
FREDERICK CHENG ATIENZA and MONICA CU ATIENZA, Respondents
Mendoza, J.:
NATURE OF THE ACTION: This is a complaint for the sum of Money with Application for Issuance
of a Writ of Preliminary Attachment against respondents.

TOPIC: Fraud

FACTS:

Petitioner Security Bank filed a Complaint for Sum of Money against respondents Great Wall
Commercial Press Company, Inc. (Great Wall) and its sureties, Alfredo Buriel Atienza, Fredino Cheng
Atienza, and Spouses Frederick Cheng Atienza and Monica Cu Atienza (respondents), before the RTC.
The complaint sought to recover from respondents their unpaid obligations under a credit facility covered
by several trust receipts and surety agreements, as well as interests, attorney's fees and costs. Security
Bank argued that in spite of the lapse of the maturity date of the obligations from December 11, 2012 to
May 7, 2013, respondents failed to pay their obligations. The total principal amount sought was
₱10,000,000.00. RTC granted the application for a writ of preliminary attachment of Security Bank,
which then posted a bond in the amount of ₱10,000,000.00.

RTC denied respondents' motion to lift, explaining that the Credit Agreement and the Continuing
Suretyship Agreement contained provisions on representations and warranties; that the said
representations and warranties were the very reasons why Security Bank decided to extend the loan; that
respondents executed various trust receipt agreements but did not pay or return the goods covered by the
trust receipts in violation thereof; that they failed to explain why the goods subject of the trust receipts
were not returned and the proceeds of sale thereof remitted; and that it was clear that respondents
committed fraud in the performance of the obligation.

However, CA lifted the writ of preliminary attachment. The appellate court explained that the
allegations of Security Bank were insufficient to warrant the provisional remedy of preliminary
attachment. It held that fraud must be present at the time of contracting the obligation, not thereafter, and
that the rules on the issuance of a writ of attachment must be construed strictly against the applicant. It
disposed the case in this wise:

ISSUE:

Whether or not respondents employed fraud in the performance of their obligation to petitioner?

RULING:

The Court finds merit in the petition.

While fraud cannot be presumed, it need not be proved by direct evidence and can well be
inferred from attendant circumstances. Fraud by its nature is not a thing susceptible of ocular observation
or readily demonstrable physically; it must of necessity be proved in many cases by inferences from
circumstances shown to have been involved in the transaction in question.

After a judicious study of the records, the Court finds that Security Bank was able to substantiate
its factual allegation of fraud, particularly, the violation of the trust receipt agreements, to warrant the
issuance of the writ of preliminary attachment.

While the Court agrees that mere violations of the warranties and representations contained in the
credit agreement and the continuing suretyship agreement do not constitute fraud under Section 1(d) of
Rule 57 of the Rules of Court, the same cannot be said with respect to the violation of the trust receipts
agreements.

The Court is of the view that Security Bank's allegations of violation of the trust receipts in its
complaint was specific and sufficient to assert fraud on the part of respondents. These allegations were
duly substantiated by the attachments thereto and the testimony of Security Bank's witness.

The CA stated in the assailed decision that under Section 1 (d) of Rule 57, fraud must only be
present at the time of contracting the obligation, and not thereafter. Hence, the CA did not consider the
allegation of fraud - that respondents offered a repayment proposal but questionably failed to attend the
meeting with Security Bank regarding the said proposal - because these acts were done after contracting
the obligation.

In this regard, the CA erred.

Previously, Section 1 (d), Rule 57 of the 1964 Rules of Court provided that a writ of preliminary
attachment may be issued "[i]n an action against a party who has been guilty of a fraud in contracting the
debt or incurring the obligation upon which the action is brought xxx" Thus, the fraud that justified the
issuance of a writ of preliminary attachment then was only fraud committed in contracting an obligation
(dolo casuante). 28 When the 1997 Rules of Civil Procedure was issued by the Court, Section l(d) of Rule
57 conspicuously included the phrase "in the performance thereof." Hence, the fraud committed in the
performance of the obligation (dolo incidente) was included as a ground for the issuance of a writ of
preliminary attachment.

This significant change in Section 1 (d) of Rule 57 was recognized recently in Republic v. Mega
Pacific eSolutions, Inc. The Court stated therein that "[a]n amendment to the Rules of Court added the
phrase "in the performance thereof' to include within the scope of the grounds for issuance of a writ of
preliminary attachment those instances relating to fraud in the performance of the obligation."

Accordingly, the alleged fraud committed by respondents in the performance of their obligation
should have been considered by the CA. Security Bank detailed in its complaint that respondents,
knowing fully well that they were in default, submitted a Repayment Proposal. Then, they requested for a
meeting with the bank to discuss their proposal. For unknown reasons, they did not meet the
representatives of the Security Bank.

Respondents even attached to its Motion to Lift Writ of Preliminary Attachment Ad Cautelam the
correspondence they had with Security Bank, which revealed that they did not meet the representatives of
the latter despite providing a specific date to discuss the proposed repayment scheme. Respondents
merely offered lame excuses to justify their absence in the arranged meeting and, ultimately, they failed to
clarify the non-compliance with their commitments. Such acts bared that respondents were not sincere in
paying their obligation despite their maturity, substantiating the allegations of fraud in the performance
thereof.

These circumstances of the fraud committed by respondents in the performance of their

obligation undoubtedly support the issuance of a writ of preliminary attachment in favor of Security
Bank.

DIVISION

GR No. 212690, Feb 20, 2017

SPS. ROMEO PAJARES AND IDA T. PAJARES v. REMARKABLE LAUNDRY

DEL CASTILLO, J.:

NATURE OF ACTION: This is a Complaint denominated as “Breach of Contract and Damages” filed
by respondent against spouses Romeo and Ida Pajares (petitioners).

TOPIC: Remedies for Breach of Contract: Article 1170

FACTS:

On September 3, 2012, Remarkable Laundry and Dry Cleaning filed a Complaint denominated as
"Breach of Contract and Damages" against spouses Romeo and Ida Pajares. Respondent alleged that it
entered into a Remarkable Dealer Outlet Contract with petitioners whereby the latter, acting as a dealer
outlet, shall accept and receive items or materials for laundry which are then picked up and processed by
the former in its main plant or laundry outlet; that petitioners violated Article IV (Standard Required
Quota & Penalties) of said contract, which required them to produce at least 200 kilos of laundry items
each week, when, on April 30, 2012, they ceased dealer outlet operations on account of lack of personnel;
that respondent made written demands upon petitioners for the payment of penalties imposed and
provided for in the contract, but the latter failed to pay; and, that petitioners' violation constitutes breach
of contract.

ISSUE:

Whether or not respondent's Complaint which, although denominated as one for breach of
contract, is essentially one for simple payment of damages?

RULINGS:

To Our mind, petitioners' responsibility under the above penal clause involves the payment of
liquidated damages because under Article 2226 of the Civil Code the amount the parties stipulated to pay
in case of breach are liquidated damages. "It is attached to an obligation in order to ensure performance
and has a double function:(1) to provide for liquidated damages, and (2) to strengthen the coercive force
of the obligation by the threat of greater responsibility in the event of breach."

Concomitantly, what respondent primarily seeks in its Complaint is to recover aforesaid

liquidated damages (which it termed as "incidental and consequential damages") premised on the alleged
breach of contract committed by the petitioners when they unilaterally ceased business operations. Breach
of contract may also be the cause of action in a complaint for damages filed pursuant to Article 1170 of
the Civil Code. It provides:

Art. 1170. 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. (Emphasis supplied)

In Pacmac, Inc. v. Intermediate Appellate Court, this Court held that the party who unilaterally
terminated the exclusive distributorship contract without any legal justification can be held liable for
damages by reason of the breach committed pursuant to Article 1170.

In sum, after juxtaposing Article IV of the Remarkable Dealer Outlet Contract vis-à-vis the
prayer sought in respondent's Complaint, this Court is convinced that said Complaint is one for damages.
True, breach of contract may give rise to a complaint for specific performance or rescission of contract. In
which case, the subject matter is incapable of pecuniary estimation and, therefore, jurisdiction is lodged
with the RTC. However, breach of contract may also be the cause of action in a complaint for damages.
Thus, it is not correct to immediately conclude, as the CA erroneously did, that since the cause of action is
breach of contract, the case would only either be specific performance or rescission of contract because it
may happen, as in this case, that the complaint is one for damages.
 FIRST DIVISION

G.R. No. 215290 January 11, 2017

HEIRS OF PABLO FELICIANO, JR., namely: LOURDES FELICIANO TUDLA, GLORIA

FELICIANO CAUDAL, GABRIELA FELICIANO BAUTISTA, ANGELA FELICIANO LUCAS,
DONNA CELESTE FELICIANO-GATMAITAN, CYNTHIA CELESTE FELICIANO, and
HECTOR REUBEN FELICIANO, represented by its assignee, VICTORIA ALDA REYES
ESPIRITU,, Petitioners, vs.
LAND BANK OF THE PHILIPPINES, Respondent.

PERLAS-BERNABE, J.:

NATURE OF ACTION: This is petition for review on certiorari assailing the Amended Decision of the
Court of Appeals in directing respondent the Land Bank of the Philippines (LBP) to pay petitioner,
Victoria Aida Reyes Espiritu (Espiritu) the amount of P1,892,471.01, representing the interest due on the
balance of the revalued just compensation which accrued from July 1, 2009 until December 13, 2011,
with interest at the rate of 6% per annum (p.a.) from the finality of the Decision until full payment.

TOPIC: Delay

FACTS:

Petitioners heirs of Pablo Feliciano, Jr. are co-owners of a 300 hectare (ha.) parcel of agricultural
land situated at F. Simeon, Ragay, Camarines Sur. Due to Presidential Decree 27.5 said portion of land
was classified as un-irrigated Riceland. The Certificates of Land Transfer were distributed to the 84
tenant-beneficiaries in 1973 who were issued Emancipation Patents in 1989. The claim folder covering
the subject land was received by the LBP from the Department of Agrarian Reform (DAR). The DAR
valued the subject land at ₱1,301,498.09, inclusive of interests, but the Feliciano heirs rejected the said
valuation, prompting the LBP to deposit the said amount in the latter's name and the said amount was
released to them.

After the summary administrative proceedings for the determination of just compensation, the
Office of the Provincial Agrarian Reform Adjudicator of Camarines Sur, rendered a fixing the value of
the subject land at ₱4,64l ,080.465 or an average of ₱34,302.375/ha.
 On November 22, 2001, the LBP filed a petition for the determination of just compensation
before the Regional Trial Court of Naga City which was initially dismissed, but eventually reinstated.

In the interim, the Feliciano heirs assigned their rights over the just compensation claims to
Espiritu.

Meanwhile, RTC directed the LBP to revalue the subject land. In compliance therewith, the LBP
revalued the land at ₱7,725,904.05. Espiritu accepted the said amount but insisted on petitioners'
entitlement to twelve percent (12%) interest p.a. on the revalued amount on the ground of unreasonable
delay in the payment thereof.

In RTC’s decision, it ruled (a) fixed the just compensation for the subject land at ₱7,725,904.05;
and (b) directed the LBP (i) to pay Espiritu the said amount, less amounts already paid to and received by
the Feliciano heirs, and (ii) to pay 12% interest p.a. on the unpaid balance of the just compensation. It
observed that the subject land, which was expropriated pursuant to PD 27, fell under the coverage of
DAR that provided for the payment of 6% annual interest for any delay in the payment of just
compensation. Since DAR AO 06-2008 was effective only until December 31, 2009, the RTC imposed
12% interest p.a. on the unpaid just compensation22 from January 1, 2010 until full payment.

Both parties moved for reconsideration, which were denied in an Order dated November 24,
2011, modifying the reckoning of the 12% interest p.a. from the finality of the Decision until its
satisfaction.

Aggrieved, the Feliciano heirs, represented by Espiritu (collectively, petitioners), elevated the
matter before the CA.

ISSUE:

Whether or not the Court has power to grant of legal interest in expropriation cases where there
is delay in the payment?

RULINGS:

Interest may be awarded as may be warranted by the circumstances of the case and based on
prevailing jurisprudence. In previous cases, the Court has allowed the grant of legal interest in
expropriation cases where there is delay in the payment since the just compensation due to the landowners
was deemed to be an effective forbearance on the part of the State. Legal interest on the unpaid balance
shall be pegged at the rate of 12% p.a. from the time of taking in 1989 when Emancipation Patents were
issued, until June 30, 2013 only. Thereafter, or beginning July 1, 2013, until fully paid, the just
compensation due the landowners shall earn interest at the new legal rate of 6% p.a. 50 in line with the
amendment introduced by Bangko Sentral ng Pilipinas-Monetary BoardCircular No. 799,51 Series of
2013.
 Supreme Court, Baguio City

THIRD DIVISION

G.R. No. 211287 April 17, 2017

LAND BANK OF THE PHILIPPINE, Petitioner versus WEST BAY COLLEGES, INC., PBR
MANAGEMENT AND DEVELOPMENT CORPORATION and BCP TRADING CO., INC
Respondents

REYES, J:
NATURE OF ACTION: West Bay filed an Urgent Motion with the RTC praying for the issuance of an
order directing Land Bank to reimburse to it of the insurance proceeds.

TOPIC: Extinguishment of Obligation; Payment

FACTS:

West Bay applied for an interim financing with Land Bank for the construction of a school
building, which was approved in the amount of P125 Million. On December 22, 1997, PBR availed of a
P100-Million Term Loan from Land Bank for the construction of condominium buildings. It executed a
Real and Chattel Mortgage over its training vessel to secure the loan of PBR with Land Bank. The vessel
was insured with First Lepanto Taisho Insurance Corporation in the amount of P26 Million, representing
the mortgagee Land Bank’s insurable interest in the vessel.

However, mortgaged vessel sank during the typhoon Seniang. By agreement of the parties,
insurance proceeds in the amount of P21,980,000.00 net of shared expenses were released to Land Bank
on account of PBR’s loan.

To resolve its financial difficulties, West Bay proposed a restructuring of its debts with Land
Bank. It was provided therein that Land Bank will reimburse West Bay with the insurance proceeds that it
had previously received and executed their respective Restructuring Agreements with Land Bank.

Meanwhile, Respondents filed a petition for corporate rehabilitation with a prayer for suspension
of payments and was approved. Later it amended it’s rehabilitation plan transferring the application of the
insurance proceeds from West Bay to PBR and BCP’s obligations.

While the rehabilitation proceedings were pending, Land Bank filed a motion to be substituted by
Philippine Distressed Asset Asia Pacific (PDAAP), a special purpose vehicle and which was granted.

In November 2011, the respondents filed an Amended Rehabilitation Plan, indicating that
PDAAP did not agree to the application of P21,980,000.00 insurance proceeds to the outstanding
obligations of PBR.

West Bay filed an Urgent Motion directing Land Bank to reimburse to it the amount of
P21,980,000.00 representing the insurance proceeds. It alleged that although the RTC approved the
rehabilitation plans authorizing the application of the insurance proceeds to the obligations of West Bay,
it was never implemented.

Land Bank averred that it was prompted to apply the insurance proceeds to West Bay’s and
PBR’s outstanding loans due to West Bay’s failure to comply with the terms and conditions of the
Restructuring Agreement dated May 10, 2002, as well as the filing of the petition for corporate
rehabilitation. Further, Land Bank claimed that it sold all its rights, credits and receivables relative to the
West Bay and PBR accounts to PDAAP, net of the insurance proceeds.

ISSUE:
 Whether or not the obligation of Land Bank to reimburse the amount of insurance proceeds
constitute a forbearance of money?

RULINGS:

The Court finds that there is no reversible error on the part of the CA in ordering the
reimbursement of P21,980,000.00 which is the amount of the insurance proceeds previously received by
Land Bank.

The Court is inclined to uphold this finding - for if Land Bank had in fact deducted the amount of
the insurance proceeds from the loan obligations of either West Bay or PBR and BCP, this information
would have reflected on the rehabilitation plans of the CGC. In other words, if the insurance proceeds
were indeed applied to West Bay’s and PBR’s account in January and June 2002 as Land Bank espoused,
then P21,980,000.00 should have been subtracted from the obligations of the said companies. Verily,
Land Bank negated its own claim when it failed to present evidence of reduction in the outstanding
balances of the respondents, whether singly or collectively.

Since the obligation of Land Bank to reimburse the amount of insurance proceeds does not
constitute a forbearance of money, the interest rate of six percent (6%) is applicable. The pronouncement
of the Court in Sunga-Chan, et al. v. CA, et al. on this matter is enlightening: For transactions involving
payment of indemnities in the concept of damages arising from default in the performance of obligations
in general and/or for money judgment not involving a loan or forbearance of money, goods, or credit, the
governing provision is Article 2209 of the Civil Code prescribing a yearly six percent (6%) interest.

As to the reckoning period for the commencement of the running of the legal interest, it shall be
subject to the condition “that the courts are vested with discretion, depending on the equities of each case,
on the award of interest.” Applying the guidelines in Nacar, another six percent (6%) interest shall be
imposed from the finality of this Resolution until its satisfaction as the interim period, is considered to be,
by then, equivalent to a forbearance of credit.
 THIRD DIVISION

G.R. No. 187543, February 08, 2017

WERR CORPORATION INTERNATIONAL, Petitioner, v. HIGHLANDS PRIME,

INC., Respondent.

JARDELEZA, J.:

NATURE OF THE ACTION: Petitioner, Werr filed a Complaint for arbitration against HPI before the
CIAC for recovery of the sum of money representing the balance of its retention money.

TOPIC: Obligations – Payment

FACTS:

Highlands Prime, Inc. (HPI) and Werr Corporation International (Werr) are domestic
corporations engaged in property development and construction, respectively. For the construction of 54
residential units contained in three clusters of five-storey condominium structures, known as "The
Horizon-Westridge Project," in Tagaytay Midlands Complex, Talisay, Batangas, the project owner, HPI,
issued a Notice of Award/Notice to Proceed to its chosen contractor, Werr. Thereafter, the parties
executed a General Building Agreement.

Under the Agreement, Werr had the obligation to complete the project within 210 calendar days
from receipt of the Notice of Award/Notice to Proceed on July 22, 2005, or until February 19, 2006.9 For
the completion of the project, HPI undertook to pay Werr a lump sum contract price inclusive of
applicable taxes, supply and transportation of materials, and labor. One of the provisions under the
agreement that HPI has the right to liquidated damages in the event of delay in the construction of the
project equivalent to 1/10 of 1% of the contract price for every day of delay.

However, the project was not completed on the last extension given. Thus, HPI terminated its
contract with Werr. The latter demanded from HPI payment of the balance of the contract price. Werr
filed a Complaint for arbitration against HPI before the CIAC to recover the balance representing of its
retention money.

In its Answer, HPI countered that it does not owe Werr because the balance of the retention
money answered for the payments made to suppliers and for the additional costs and expenses incurred
after termination of the contract.
ISSUE:

Whether or not the payments made to suppliers and contractors after the termination of the
contract are chargeable against the retention money?

RULINGS:

In this case, the issues of whether HPI was able to prove that payments made to suppliers and to
third party contractors are prior incurred obligations that should be charged against the retention money,
and whether HPI incurred expenses above the retention money that warrants actual damages, are issues of
facts beyond the review of the Court under Rule 45.

Moreover, even if we consider such factual issues, we are bound by the findings of fact of the
CIAC especially when affirmed by the CA. Factual findings by a quasi-judicial body like the CIAC,
which has acquired expertise because its jurisdiction is confined to specific matters, are accorded not only
with respect but even finality if they are supported by substantial evidence. We recognize that certain
cases require the expertise, specialized skills, and knowledge of the proper administrative bodies because
technical matters or intricate questions of facts are involved.

Thus, we affirm the CIAC and CA's findings that direct payments charged by HPI in 2007 and
2008 were for materials supplied after the termination of the project and did not correspond to the list of
suppliers submitted; that the waterproofing works done by Dubbel Philippines in the amount of
P629,702.24 were for works done after the termination of the contract that were for the account of the
new contractor; and that the rectification works performed after the termination of the contract worth
P3,040,000.00 were not proven to have been paid, that it was for rectification works only, and that prior
notice of such defective works as required under the Agreement was not proven. Accordingly, we affirm
that the balance of the retention money is P10,955,899.79.

Deemed incorporated into every contract are the general provisions on obligations and
interpretation of contracts found in the Civil Code. The Civil Code provides:

Art. 1234. If the obligation has been substantially performed in good faith, the obligor may recover as
though there had been a strict and complete fulfillment, less damages suffered by the obligee.

Art. 1376. The usage or custom of the place shall be borne in mind in the interpretation of the ambiguities
of a contract, and shall fill the omission of stipulations which are ordinarily established.

In this case, clause 41.5 of the Agreement is undoubtedly a valid stipulation. However, while
clause 41.5 requires payment of liquidated damages if there is delay, it is silent as to the period until when
liquidated damages shall run. The Agreement does not state that liquidated damages is due until
termination of the project; neither does it completely reject that it is only due until substantial completion
of the project. This omission in the Agreement may be supplemented by the provisions of the Civil Code,
industry practice, and the CIAP Document No. 102. Hence, the industry practice that substantial
compliance excuses the contractor from payment of liquidated damages applies to the Agreement.
 SECOND DIVISION

G.R. No. 205578 March 1, 2017

GEORGIA OSMEÑA-JALANDONI, Petitioner vs CARMEN A. ENCOMIENDA, Respondent

PERALTA, J.:

NATURE OF ACTION: This is an appeal from the Decision of the Court of Appeals, Cebu City (CA) in
setting aside the Decision of the Cebu Regional Trial Court dismissing respondent Carmen Encomienda's
claim for sum of money.

TOPIC: Obligation – Extinguishment of Obligations: Article 1236

FACTS:

Encomienda, while purchasing a condominium unit met Georgia Osmeña-Jalandoni, a real estate
broker in Cebu.
 Thereafter, Jalandoni called Encomienda to ask if she could borrow money for several purposes
and promise to pay the same.

When Jalandoni came back to Cebu, she never informed Encomienda. Encomienda then later
gave Jalandoni six (6) weeks to settle her debts. Despite several demands, no payment was made.
Jalandoni insisted that the amounts given were not in the form of loans. When they had to appear before
the Barangay for conciliation, no settlement was reached. But a member of the Lupong Tagapamayapa of
Barangay Kasambagan, Laureano Rogero, attested that Jalandoni admitted having borrowed money from
Encomienda and that she was willing to return it. Jalandoni said she would talk to her lawyer first, but she
never came back. Hence, Encomienda filed a complaint.

For her defense, Jalandoni claimed that there was never a discussion or even just an allusion
about a loan. On January 9, 2006, the RTC of Cebu City dismissed Encomienda's complaint.

ISSUE:

Whether or not Encomienda is entitled to be reimbursed for the amounts she defrayed for
Jalandoni?

RULINGS:

It must be stressed, however, that the trial court merely found that no documentary evidence was
offered showing Jalandoni's authorization or undertaking to pay the expenses. But the second paragraph
of Article 1236 of the Civil Code provides:

Whoever pays for another may demand from the debtor what he has paid, except that if he paid without
the knowledge or against the will of the debtor, he can recover only insofar as the payment has been
beneficial to the debtor.

Clearly, Jalandoni greatly benefited from the purportedly unauthorized payments. Thus, even if
she asseverates that Encomienda's payment of her household bills was without her knowledge or against
her will, she cannot deny the fact that the same still inured to her benefit and Encomienda must therefore
be consequently reimbursed for it. Also, when Jalandoni learned about the payments, she did nothing to
express her objection to or repudiation of the same, within a reasonable time. Even when she claimed that
she was prepared with her own money, she still accepted the financial assistance and actually made use of
it. While she asserts to have been upset because of Encomienda's supposedly intrusive actions, she failed
to protest and, in fact, repeatedly accepted money from her and further allowed her to pay her driver,
security guard, househelp, and bills for her cellular phone, cable television, pager, gasoline, food, and
other utilities. She cannot, therefore, deny the benefits she reaped from said acts now that the time for
restitution has come. The debtor who knows that another has paid his obligation for him and who does not
repudiate it at any time, must corollarily pay the amount advanced by such third person.

Truly, Jalandoni herself admitted that she received the aforementioned amounts from
Encomienda and is merely using her lack of authorization over the payments as her defence. In fact,
Lupong Tagapamayapa member Rogero, a disinterested third party, confirmed this, saying that during the
barangay conciliation, Jalandoni indeed admitted having borrowed money from Encomienda and that she
would return it. Jalandoni, however, reneged on said promise.

The principle of unjust enrichment finds application in this case. Unjust enrichment exists when a
person unfairly retains a benefit to the loss of another, or when a person retains money or property of
another against the fundamental principles of justice, equity, and good conscience. There is unjust
enrichment under Article 22 of the Civil Code when (1) a person is unjustly benefited, and (2) such
benefit is derived at the expense of or with damages to another. The principle of unjust enrichment
essentially contemplates payment when there is no duty to pay, and the person who receives the payment
has no right to receive it. The CA is then correct when it ruled that allowing Jalandoni to keep the
amounts received from Encomienda will certainly cause an unjust enrichment on Jalandoni' s part and to
Encomienda's damage and prejudice.
 FIRST DIVISION

G.R. No. 206037 March 13, 2017

PHILIPPINE NATIONAL BANK, Petitioner vs LILIBETH S. CHAN, Respondent

DEL CASTILLO, J.:

NATURE OF ACTION: This is a complaint for Unlawful detainer for failure to pay monthly rental.

TOPIC: Consignation

FACTS:

Respondent Lilibeth S. Chan leased here commercial building to petitioner Philippine National
Bank (PNB) for a period of five years. When the lease expired, PNB continued to occupy the property on
a month-to-month basis and vacated the premises on March 23, 2006.

Meanwhile, respondent obtained a ₱l,500,000.00 loan from PNB which was secured by a Real
Estate Mortgage constituted over the leased property. In addition, respondent executed a Deed of
Assignment over the rental payments in favor of PNB.

The amount of the respondent's loan was subsequently increased. Consequently, PNB and the
respondent executed an "Amendment to the Real Estate Mortgage by Substitution of Collateral", where
the mortgage over the leased property was released and substituted by a mortgage over a parcel of land
located in Paco, Manila.

Upon failure of PNB to pay its monthly rental, respondent filed a complaint for Unlawful
Detainer. In PNB’s defense, it claimed that it applied the rental proceeds from October 2004 to January
15, 2005 as payment for respondent's outstanding loan which became due and demandable in October
2004. As for the monthly rentals from January 16, 2005 to February 2006, PNB explained that it received
a demand letter11 from a certain Lamberto Chua (Chua) who claimed to be the new owner of the leased
property and requested that the rentals be paid directly to him, reckoned from January 15, 2005 until PNB
decides to vacate the premises or a new lease contract with Chua is executed. PNB thus deposited the
rentals in a separate non-drawing savings account for the benefit of the rightful party.

The MeTC held a hearing on April 25, 2006 where the parties agreed to apply the rental proceeds
from October 2004 to January 15, 2005 to the respondent's outstanding loan.13 PNB, too, consigned the
amount of ₱l,348,643.92, representing ti1ie rentals due from January 16, 2005 to February 2006, with the
court on May 31, 2006.

ISSUE:
Whether or not PNB properly consigned the disputed rental payments in the amount of ₱l,348,643.92
with the Office of the Clerk of Court of the MeTC of Manila?

Whether or not PNB incurred delay in the payment of rentals to the respondent, making it liable to pay
legal interest to the latter?

RULING:

In the present case, the records show that: first, PNB had the obligation to pay respondent a
monthly rental of ₱l16,788.44, amounting to ₱l,348,643.92, from January 16, 2005 to March 23, 2006;47
second, PNB had the option to pay the monthly rentals to respondent or to apply the same as payment for
respondent's loan with the bank, but PNB did neither;48 third, PNB instead opened a non-drawing savings
account at its Paco Branch under Account No. 202- 565327-3, where it deposited the subject monthly
rentals, due to the claim of Chua of the same right to collect the rent;49 and fourth, PNB consigned the
amount of Pl,348,643.92 with the Office of the Clerk of Court of the MeTC of Manila on May 31,
2006.50

Note that PNB's deposit of the subject monthly rentals in a non-drawing savings account is not
the consignation contemplated by law, precisely because it does not place the same at the disposal of the
court. Consignation is necessarily judicial; it is not allowed in venues other than the courts.52
Consequently, PNB's obligation to pay rent for the period of January 16, 2005 up to March 23, 2006
remained subsisting, as the deposit of the rentals cannot be considered to have the effect of payment.

It is important to point out that PNB's obligation to pay the subject monthly rentals had already
fallen due and demandable before PNB consigned the rental proceeds with the MeTC on May 31, 2006.
Although it is true that consignment has a retroactive effect, such payment is deemed to have been made
only at the time of the deposit of the thing in court or when it was placed at the disposal of the judicial
authority. Based on these premises, PNB's payment of the monthly rentals can only be considered to have
been made not earlier than May 31, 2006.

Given its belated consignment of the rental proceeds in court, PNB clearly defaulted in the
payment of monthly rentals to the respondent for the period January 16, 2005 up to March 23, 2006, when
it finally vacated the leased property, As such, it is liable to pay interest in accordance with Article 2209
of the Civil Code.
 FIRST DIVISION

G.R. No. 224022 JUNE 28, 2017

TEODORICO A. ZARAGOZA, Petitioner versus ILOILO SANTOS TRUCKERS, INC Respondent

PERLAS-BERNABE AND CAGUIOA, JJ

NATURE OF THE ACTION: This is a an action for unlawful detainer against respondent before the
Municipal Trial Court in Cities, Iloilo City.

TOPIC: Consignation

FACTS:

Petitioner Teodorico A. Zaragoza bought a parcel of land located from his parents, Florentino
and Erlinda Zaragoza and had the same registered under his name. Petitioner claimed that unknown to
him, his father leased portion land to respondent Iloilo Santos Truckers, Inc. This notwithstanding,
petitioner allowed the lease to subsist and respondent had been diligent in paying its monthly rent.
 Petitioner claimed that when Florentino died, respondent stopped paying rent. On the other hand,
respondent maintained that it was willing to pay rent, but was uncertain as to whom payment should be
made as it received separate demands from Florentine’s heirs, including petitioner. Thus, respondent filed
an interpleader case before the Regional Trial Court of Iloilo City, Branch 24 (RTC-Br. 24). After due
proceedings, RTC-Br. 24 issued dismissing the action for interpleader, but at the same time, stating that
respondent may avail of the remedy of consignation and that respondent may consign the rental amounts
with it in order to do away with unnecessary expenses and delay. Pursuant thereto, respondent send
informing petitioner that it had consigned the aggregate amount of P521,396.8917 before RTC-Br. 24.

This notwithstanding, petitioner averred that granting without conceding the propriety of
consignation, the same did not extinguish the latter’s obligation to pay rent because the amount consigned
was insufficient to cover the unpaid rentals plus interests. In its defense, respondent maintained, inter alia,
that its consignation of rental amounts with RTC-Br. 24 constituted compliance with the provisions of the
lease contract concerning the monthly rental payments.

The MTCC opined that respondent’s consignation with RTC-Br. 24 is void, and thus, did not
serve to release respondent from paying its obligation to pay rentals. As there was no valid consignation,
respondent was held liable to pay unpaid rentals and that petitioner was justified in terminating the lease
contract.

CA found that respondent was actually ready and willing to comply with its obligation to pay
rent, but was in a quandary as to whom it should remit its payment. Hence, it showed good faith by
consigning its rental payments to RTC-Br. 24, which was properly made and was acknowledged by
petitioner by withdrawing the consigned amounts in court. There being no violation of the lease contract,
petitioner could not validly eject respondent from the subject land.

Undaunted, petitioner moved for reconsideration.

ISSUE:

Whether or not petitioner could not eject respondent from the subject land as the latter fully
complied with its obligation to pay monthly rent thru consignation?

RULING:
 To recapitulate, in its letter dated May 24, 2011, petitioner demanded payment for, among others,
monthly rentals for the period of February 2007 to May 2011. In response thereto, respondent claimed
that it had already complied with its obligation to pay monthly rentals via consignation with RTC-Br. 24,
as evidenced by the Manifestation and Notice dated May 30, 2011 it filed before said court. However, a
closer reading of such letter-reply and Manifestation and Notice reveals that the amount consigned with
RTC-Br. 24 represents monthly rentals only for the period of February 2007 to March 2011, which is two
(2) whole months short of what was being demanded by petitioner. In fact, petitioner pointed out such
fact in his letter dated June 9, 2011 to respondent, but the latter still refused to make any additional
payments, by either making further consignations with RTC-Br. 24 or directly paying petitioner.

From the foregoing, it appears that even assuming arguendo that respondent’s consignation of its
monthly rentals with RTC-Br. 24 was made in accordance with law, it still failed to comply with its
obligation under the lease contract to pay monthly rentals. It is apparent that at the time petitioner filed
the unlawful detainer suit on June 21, 2011, respondent was not updated in its monthly rental payments,
as there is no evidence of such payment for the months of April, May, and even June 2011. Irrefragably,
said omission constitutes a violation of the lease contract on the part of respondent.

Considering that all the requisites of a suit for unlawful detainer have been complied with,
petitioner is justified in ejecting respondent from the subject land. Thus, the rulings of the RTC-Br. 23
and the CA must be reversed and set aside, and accordingly, the MTCC ruling must be reinstated.
However, in light of prevailing jurisprudence, the rental arrearages due to petitioner shall earn legal
interest of twelve percent (12%) per annum, computed from first demand on May 24, 2011 to June 30,
2013, and six percent (6%) per annum from July 1, 2013 until fully paid. The other amounts awarded by
the MTCC, i.e., P20,000.00 as attorney’s fees, P50,000.00 as litigation expenses, and the costs of suit)
shall likewise earn legal interest of six percent (6%) per annum from finality of the Decision until fully
paid.
 DIVISION

G.R. No. 190702, February 27, 2017

JAIME T. GAISANO, Petitioner, v. DEVELOPMENT INSURANCE AND SURETY

CORPORATION, Respondent.

JARDELEZA, J.

NATURE OF THE ACTION: This is a petition for review on certiorari1 seeking to nullify the Court of
Appeals' in reversing Regional Trial Court granting petitioner on claiming the proceeds of the
comprehensive commercial vehicle policy issued by Development Insurance and Surety Corporation.

TOPIC: Extinguishment of Obligation : Loss of the thing Due

FACTS:

Petitioner's company, Noah's Ark Merchandising immediately processed the payments and issued
a Far East Bank check payable to Trans-Pacific when the latter issued statement. However, nobody from
Trans-Pacific picked up the check because its president and general manager, Rolando Herradura, was
celebrating his birthday. Trans-Pacific informed Noah's Ark that its messenger would get the check the
next day.

While under the official custody of Noah's Ark marketing manager Achilles Pacquing (Pacquing)
as a service company vehicle, the vehicle was stolen in the vicinity of SM Megamall at Ortigas,
Mandaluyong City. Pacquing reported the loss to the Philippine National Police Traffic Management
Command. The said vehicle cannot be retrieved.

Oblivious of the incident, Trans-Pacific picked up the check the next day, September 28. It issued
an official receipt numbered 124713 dated September 28, 1996, acknowledging the receipt of P55,620.60
for the premium and other charges over the vehicle. The check issued to Trans--Pacific for P140,893.50
was deposited with Metrobank for encashment on October 1, 1996.

After investigation, respondent denied petitioner's claim on the ground that there was no
insurance contract. This prompt petitioner to file a complaint for collection of sum of money and damages
with the RTC where it sought to collect the insurance proceeds from respondent. In its Answer,
respondent asserted that the non-payment of the premium rendered the policy ineffective. The premium
was received by the respondent only on October 2, 1996, and there was no known loss covered by the
policy to which the payment could be applied.

RTC ruled in favor of petitioner. Respondent filed motion for reconsideration. CA granted
respondent's appeal. The CA upheld respondent's position that an insurance contract becomes valid and
binding only after the premium is paid pursuant to Section 77 of the Insurance Code (Presidential Decree
No. 612, as amended by Republic Act No. 10607). It found that the premium was not yet paid at the time
of the loss on September 27, but only a day after or on September 28, 1996, when the check was picked
up by Trans-Pacific.

Hence petitioner filed this petition. He argues that there was a valid and binding insurance
contract between him and respondent. He submits that it comes within the exceptions to the rule in
Section 77 of the Insurance Code that no contract of insurance becomes binding unless and until the
premium thereof has been paid. The prohibitive tenor of Section 77 does not apply because the parties
stipulated for the payment of premiums. The parties intended the contract of insurance to be immediately
effective upon issuance, despite non-payment of the premium, because respondent trusted petitioner. He
adds that respondent waived its right to a pre-payment in full of the terms of the policy, and is in estoppel.

ISSUE:

Whether or not parties intended the contract of insurance to be immediately effective upon
issuance, despite non-payment of the premium and placed the respondent in estoppel?

RULING:

We deny the petition.

Insurance is a contract whereby one undertakes for a consideration to indemnify another against
loss, damage or liability arising from an unknown or contingent event. Just like any other contract, it
requires a cause or consideration. The consideration is the premium, which must be paid at the time and in
the way and manner specified in the policy. If not so paid, the policy will lapse and be forfeited by its
own terms.

The law, however, limits the parties' autonomy as to when payment of premium may be
made for the contract to take effect. The general rule in insurance laws is that unless the premium is
paid, the insurance policy is not valid and binding. Section 77 of the Insurance Code, applicable at the
time of the issuance of the policy, provides:

Sec. 77. An insurer is entitled to payment of the premium as soon as the thing insured is exposed to the
peril insured against. Notwithstanding any agreement to the contrary, no policy or contract of insurance
issued by an insurance company is valid and binding unless and until the premium thereof has been paid,
except in the case of a life or an industrial life policy whenever the grace

Here, there is no dispute that the check was delivered to and was accepted by respondent's agent,
Trans-Pacific, only on September 28, 1996. No payment of premium had thus been made at the time of
the loss of the vehicle on September 27, 1996. While petitioner claims that Trans-Pacific was informed
that the check was ready for pick-up on September 27, 1996, the notice of the availability of the check, by
itself, does not produce the effect of payment of the premium. Trans-Pacific could not be considered in
delay in accepting the check because when it informed petitioner that it will only be able to pick-up the
check the next day, petitioner did not protest to this, but instead allowed Trans-Pacific to do so. Thus, at
the time of loss, there was no payment of premium yet to make the insurance policy effective.

Petitioner argues that his case falls under the fourth and fifth exceptions because the parties
intended the contract of insurance to be immediately effective upon issuance, despite non-payment of the
premium. This waiver to a pre-payment in full of the premium places respondent in estoppel.

We do not agree with petitioner.

 We cannot sustain petitioner's claim that the parties agreed that the insurance contract is
immediately effective upon issuance despite non- payment of the premiums. Even if there is a waiver of
pre-payment of premiums, that in itself does not become an exception to Section 77, unless the insured
clearly gave a credit term or extension. This is the clear import of the fourth exception in the UCPB
General Insurance Co., Inc. To rule otherwise would render nugatory the requirement in Section 77 that
"[n]otwithstanding any agreement to the contrary, no policy or contract of insurance issued by an
insurance company is valid and binding unless and until the premium thereof has been paid.

The policy states that the insured's application for the insurance is subject to the payment of the
premium. There is no waiver of pre-payment, in full or in installment, of the premiums under the policy.
Consequently, respondent cannot be placed in estoppel.

Thus, we find that petitioner is not entitled to the insurance proceeds because no insurance policy
became effective for lack of premium payment.

The consequence of this declaration is that petitioner is entitled to a return of the premium paid
for the vehicle in the amount of P55,620.60 under the principle of unjust enrichment. There is unjust
enrichment when a person unjustly retains a benefit to the loss of another, or when a person retains money
or property of another against the fundamental principles of justice, equity and good conscience.58
Petitioner cannot claim the full amount of P140,893.50, which includes the payment of premiums for the
two other vehicles. These two policies are not affected by our ruling on the policy subject of this case
because they were issued as separate and independent contracts of insurance. We, however, find that the
award shall earn legal interest of 6% from the time of extrajudicial demand on July 7, 1997.60

SECOND DIVISION

G.R. No. 219509, January 18, 2017

ILOILO JAR CORPORATION, Petitioner, v. COMGLASCO CORPORATION/AGUILA

GLASS, Respondent.

MENDOZA, J.:

NATURE OF ACTION: This is an action for breach of contract and damages filed by petitioner against
respondent.

TOPIC: Contracts: Extinguishment of Contractual Obligations: Loss of the thing Due: Article 1267

FACTS:

Petitioner Iloilo Jar Corporation (Iloilo Jar), as lessor, and respondent Comglasco
Corporation/Aguila Glass as lessee, entered into a lease contract over a portion of a warehouse building,
Iloilo City. The term of the lease was for a period of three (3) years. A pre-termination of the lease was
requested by Comgalsco but was rejected by Iloilo Jar on the ground that said pre-termination was not
stipulated. Despite the denial of the request for pre-termination, Comglasco still removed all its stock,
merchandise and equipment from the leased premises and no longer tender payment.
 Iloilo Jar filed a civil action for breach of contract and damages before the RTC. Comglasco
raised in his affirmative defense arguing that by virtue of Article 1267 of the Civil Code it was released
from its obligation from the lease contract. It explained that the consideration thereof had become so
difficult due to the global and regional economic crisis that had plagued the economy. Likewise,
Comglasco admitted that it had removed its stocks and merchandise but it did not refuse to pay the rentals
because the lease contract was already deemed terminated. Further, it averred that though it received the
demand letters, it did not amount to a refusal to pay the rent because the lease contract had been pre-
terminated in the first place.

Iloilo Jar filed its Motion for Judgment on the Pleadings arguing that Comglasco admitted all the
material allegations in the complaint. It insisted that Comglasco's answer failed to tender an issue because
its affirmative defense was unavailing. The RTC granted the Motion for Judgment on the pleadings.
Comglasco moved for reconsideration

ISSUE:

Whether or not obligor Comglasco is released from payment of its contractual obligation due to
economic crisis as contemplated under Article 1267?

RULINGS:

Considering that Comglasco's obligation of paying rent is not an obligation to do, it could not
rightfully invoke Article 1267 of the Civil Code. Even so, its position is still without merit as financial
struggles due to an economic crisis is not enough reason for the courts to grant reprieve from contractual
obligations.

In COMGLASCO Corporation/Aguila Glass v. Santos Car Check Center Corporation, the Court
ruled that the economic crisis which may have caused therein petitioner's financial problems is not an
absolute exceptional change of circumstances that equity demands assistance for the debtor. It is
noteworthy that Comglasco was also the petitioner in the above-mentioned case, where it also involved
Article 1267 to pre-terminate the lease contract.

Thus, the RTC was correct in ordering Comglasco to pay the unpaid rentals because the
affirmative defense raised by it was insufficient to free it from its obligations under the lease contract. In
addition, Iloilo Jar is entitled to attorney's fees because it incurred expenses to protect its interest. The trial
court, however, erred in awarding exemplary damages and litigation expenses.

Exemplary damages may be recovered in contractual obligations if the defendant acted in wanton
or fraudulent, reckless, oppressive or malevolent manner. As discussed, Comglasco defaulted in its
obligation to pay the rentals by reason of its erroneous belief that the lease contract was pre-terminated
because of the economic crisis. The same, however, does not prove that Comglasco acted in wanton or
fraudulent, reckless, oppressive or malevolent manner. On the other hand, attorney's fees may be
recovered in case the plaintiff was compelled to incur expenses to protect his interest because of the
defendant's acts or omissions.
 Further, the interest rate should be modified pursuant to recent jurisprudence. The monetary
awards shall be subject to 12% interest per annum until June 30, 2013 and 6% per annum from July 1,
2013 until fully satisfied.
 FIRST DIVISION

G.R. No. 202454 April 25, 2017

CALIFORNIA MANUFACTURING COMPANY, INC., Petitioner, vs. ADVANCED

TECHNOLOGY SYSTEM, INC., Respondent.

SERENO, J.:

NATURE OF THE ACTION: This is a Petition for Review on Certiorari assailing the Decision of the
Court of Appeals which denied the appeal filed by California Manufacturing Company, Inc. (CMCI) from
the Decision of Regional Trial Court (RTC) of Pasig City Complaint for Sum of Money filed by
Advanced Technology Systems, Inc. (ATSI) against the former.

Nature of the case: Obligations: Legal Compensation Article 1279

FACTS:

CMCI leased from ATSI a Prodopak machine. The parties agreed to a monthly rental of ₱98,000
exclusive of tax. Upon receipt of an open purchase order on 6 August 2001, ATSI delivered the machine
to CMCI's plant.

However, ATSI filed a Complaint for Sum of Money against CMCI to collect unpaid rentals for
the months of June, July, August, and September 2003. ATSI alleged that CMCI was consistently paying
the rents until June 2003 when the latter defaulted on its obligation without just cause. ATSI also claimed
that CMCI ignored all the billing statements and its demand letter.

On the other hand, CMCI moved for the dismissal of the complaint on the ground of
extinguishment of obligation through legal compensation.

CMCI alleged PPPC agreed to transfer the processing of CMCI's product line from its factory in
Meycauayan to Malolos, Bulacan. Upon the request of PPPC, through its Executive Vice President
Felicisima Celones, CMCI advanced ₱4 million as mobilization fund. PPPC President and Chief
Executive Officer Francis Celones allegedly committed to pay the amount in 12 equal installments
deductible from PPPC's monthly invoice Felicisima proposed to set off PPPC's obligation to pay the
mobilization fund with the rentals for the Prodopak machine.

CMCI argued that the proposal was binding on both PPPC and A TSI because Felicisima was an
officer and a majority stockholder of the two corporations. Moreover, in a letter dated September 2003,
13 she allegedly represented to the new management of CMCI that she was authorized to request the
offsetting of PPPC's obligation with ATSI's receivable from CMCI.

CMCl argued that legal compensation had set in and that ATSI was even liable for the balance of
PPPC's unpaid obligation after deducting the rentals for the Prodopak machine.

The trial court ruled that legal compensation did not apply because PPPC had a separate legal
personality from its individual stockholders, the Spouses Celones, and ATSI.
 On appeal by CMCI, the CA affirmed the trial court's ruling that legal compensation had not set
in because the element of mutuality of parties was lacking.

ISSUE:

Whether or not petitioner can legally invoked legal compensation?

RULINGS:

Article 1279 of the Civil Code provides:

ARTICLE 1279. 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.

The law, therefore, requires that the debts be liquidated and demandable. Liquidated debts are
those whose exact amounts have already been determined.

CMCI has not presented any credible proof, or even just an exact computation, of the supposed
debt of PPPC. It claims that the mobilization fund that it had advanced to PPPC was in the amount of ₱4
million. Yet, Felicisima's proposal to conduct offsetting in her letter dated 30 July 2001 pertained to a
₱3.2 million debt of PPPC to CMCI. Meanwhile, in its Answer to ATSI's complaint, CMCI sought to set
off its unpaid rentals against the alleged ₱10 million debt of PPPC. The uncertainty in the supposed debt
of PPPC to CMCI negates the latter's invocation of legal compensation as justification for its non-
payment of the rentals for the subject Prodopak machine.
 THIRD DIVISION

G.R. No. 191174 June 7, 2017

PARADIGM DEVELOPMENT CORPORATION OF THE PHILIPPINES , Petitioner versus

BANK OF THE PHILIPPINE ISLANDS, Respondent

REYES, J:
NATURE OF THE ACTION: This a foreclosure proceeding initiated by FEBTC against the mortgaged
properties of PDCP before the Regional Trial Court (RTC) of Quezon City. A Petition for Review on
assailing the Decision of the Court of Appeals granting respondent Bank of the Philippine Islands’ (BPI)
appeal and accordingly dismissed the complaint filed by petitioner Paradigm Development Corporation of
the Philippines (PDCP).

TOPIC: Extinguishment of Obligations: Novation

FACTS:

Sengkon Trading (Sengkon), a sole proprietorship owned by Anita Go, obtained a loan from Far
East Bank and Trust Company (FEBTC) under a credit facility denominated as Omnibus Line On April
19, 1996, FEBTC again granted Sengkon another credit facility, denominated as Credit Line, in the
amount of P60 Million as contained in the “Agreement for Credit Line.” Two real estate mortgage (REM)
contracts were executed by PDCP President Anthony L. Go (Go) to partially secure Sengkon’s
obligations under this Credit Line.
 Sengkon defaulted in the payment of its loan obligations thus FEBTC demanded payment from
PDCP of alleged Credit Line and Trust Receipt availments. PDCP responded by requesting for
segregation of Sengkon’s obligations under the Credit Line.

Negotiations were then held and PDCP proposed to pay the alleged corresponding obligations
secured by its property, for the release of its properties but FEBTC pressed for a comprehensive
repayment scheme for the entirety of Sengkon’s obligations.

Meanwhile, the negotiations were put on hold because BPI acquired FEBTC and assumed the
rights and obligations of the latter.

Upon failure of the negotiation, FEBTC initiated foreclosure proceedings against the mortgaged
properties of PDCP before the Regional Trial

PDCP filed a Complaint for Annulment of Mortgage, Foreclosure, Certificate of Sale and
Damages against BPI, successor-in-interest of FEBTC, alleging that the REMs and their foreclosure were
null and void.

In asking for the nullity of the REMs and the foreclosure proceeding, PDCP alleged among others
that without the knowledge and consent of PDCP, obligation of SENGKON has been transferred to STI a
juridical personality separate and distinct from SENGKON, a single proprietorship. This substitution of
SENGKON as debtor by STI effectively novated the obligation of PDCP to FEBTC

RTC agreed with PDCP that novation took place in this case, which resulted in discharging the
latter from its obligations as third-party mortgagor. In addition, it also nullified the foreclosure
proceedings because the original copies of the promissory notes (PNs), which were the basis of FEBTC’s
Petition for Extrajudicial Foreclosure of Mortgage, were not

ISSUE:

Whether or not the CA’s decision in rejecting of PDCP’s novation theory based on the absence of
an express release of the old debtor and the substitution in its place of a new debtor is misplaced and
erroneous?

RULINGS:

No novation took place

The Court likewise agrees with the CA that no novation took place in the present case. Novation
is a mode of extinguishing an obligation by changing its objects or principal obligations, by substituting a
new debtor in place of the old one, or by subrogating a third person to the rights of the creditor. Article
1293 of the Civil Code defines novation as “consists in substituting a new debtor in the place of the
original one, [which] may be made even without the knowledge or against the will of the latter, but not
without the consent of the creditor.” However, while the consent of the creditor need not be expressed but
may be inferred from the creditor’s clear and unmistakable acts, to change the person of the debtor, the
former debtor must be expressly released from the obligation, and the third person or new debtor must
assume the former’s place in the contractual relation.

In the present case, PDCP failed to prove by preponderance of evidence that Sengkon was already
expressly released from the obligation and that STI assumed the former’s obligation. Again, as correctly
pointed out by the CA, the Deed of Assumption of Line/ Loan with Mortgage (Deed of Assumption)
which was supposed to embody STI’s assumption of all the obligations of Sengkon under the line,
including but not necessarily limited to the repayment of all the outstanding availments thereon, as well as
all applicable interests and other charges, was not signed by the parties.

Contrary to PDCP’s claim, the CA’s rejection of its claim of novation is not based on the absence
of the mortgagor’s conformity to the Deed of Assumption. The CA’s rejection is based on the fact that the
non-execution of the Deed of Assumption by Sengkon, STI and FEBTC rendered the existence of
novation doubtful because of lack of clear proof that Sengkon is being expressly released from its
obligation; that STI was already assuming Sengkon’s former place in the contractual relation; and that
FEBTC is giving its conformity to this arrangement. While FEBTC indeed approved Sengkon’s request
for the “change in account name” from Sengkon to STI, such mere change in account name alone does
not meet the required degree of certainty to establish novation absent any other circumstance to bolster
said conclusion.

SECOND DIVISION

G.R. No. 223592, August 7, 2017

EQUITABLE INSURANCE CORPORATION, Petitioner, v. TRANSMODAL INTERNATIONAL
INC., Respondent.

PERALTA, J.

NATURE OF ACTION: PDCP filed a Complaint for Annulment of Mortgage, Foreclosure, Certificate
of Sale and Damages with the RTC of Quezon City, against BPI, successor-in-interest of FEBTC,
alleging that the REMs and their foreclosure were null and void.

Nature of the Action: Obligation – Subrogation

FACTS:

Sytengco Enterprise Corporation hired respondent Transmodal International, Inc. to clear the
customs and withdraw, transport and deliver to its warehouse, cargoes consisting of 200 of gum Arabic.
The said cargoes arrived in Manila and were brought to Ocean Links Container Terminal Center, Inc
pending their release by the Bureau of Custom. Respondent Transmodal withdrew the same cargoes and
delivered them to Sytengco’s warehouse. It was noted in the delivery that all the containers were wet.

Sytengco demanded from respondent Transmodal payment as compensation for total loss of
shipment. On that same date, petitioner Equitable Insurance as insurer of the cargoes paid Sytengco’s
claim which the latter signed a subrogation receipt and loss receipt in favor of petitioner Equitable
Insurance. As such, petitioner Equitable Insurance demanded from respondent Transmodal
reimbursement of the payment given to Sytengco.

Thereafter, petitioner Equitable Insurance filed a complaint for damages invoking its right as
subrogee after paying Sytengco’s insurance claim and averred that respondent Transmodal’s fault and
gross negligence were the causes of the damages sustained by Sytengco’s shipment.

ISSUE:

Whether or not petitioner Equitable Insurance merely stepped into the shoes of the insured who
has direct cause of action against respondent Transmodal on the account of the damage sustained by the
subject cargo?

RULINGS:

It is was well established that petitioner has the right to step into the shoes of the insured who has
direct cause of action against herein respondent on account of the damages sustained by the cargoes.
“Subrogation is the substitution of one person in the place of another with reference to lawful claim or
right, so that he who is substituted succeeds to the rights of the other relation to a debt or claim, including
its remedies or securities. The right of subrogation springs from Article 2207 of the Civil Code.

The records further show that petitioner was able to accomplish its obligations under the
insurance policy as it has paid the assured of its insurance claim. The payment by the insurer to the
insured operates as an equitable assignment to the insurer of all the remedies which the insured may have
against the third party whose negligence or wrongful act caused the loss. The right of subrogation is not
dependent upon, nor does it grow out of any privity of contract or upon payment by the insurance
company of the insurance claim. It accrues simply upon the payment by the insurance company of the
insurance claim.

SECOND DIVISION

G.R. No. 212375, January 25, 2017

KABISIG REAL WEALTH DEV., INC. AND FERNANDO C. TIO, Petitioners, v. YOUNG
CORPORATION BUILDERS, Respondent.

DECISION

PERALTA, J.

NATURE OF ACTION: This is an action for Collection of Sum of Money filed by respondent against
Kabisig.

TOPIC: Essential Requisites of CONTRACTS/Obligatory Force

FACTS:

Kabisig Real Wealth Dev., Inc. (Kabisig), through Ferdinand Tio (Tio), contracted the services of
Young Builders Corporation (Young Builders) to supply labor, tools, equipment, and materials for the
renovation of its building in Cebu City. Young Builders then finished the work in September 2001 and
billed Kabisig for P4,123,320.95. However, despite numerous demands, Kabisig failed to pay. It
contended that no written contract was ever entered into between the parties and it was never informed of
the estimated cost of the renovation. Thus, Young Builders filed an action for Collection of Sum of
Money against Kabisig.

On July 31, 2008, the RTC of Cebu City rendered a Decision finding for Young Builders, to pay
plaintiff P4,123,320.95 representing the value of services rendered and materials used in the renovation of
the building of defendant Kabisig Real Wealth Dev., Inc. into a restaurant of defendant Ferdinand Tio, by
way of actual damages, plus 12% per annum from September 11, 2001 until it is fully paid.

Therefore, Kabisig elevated the case to the CA but the appellate court affirmed the RTC
Decision, with modification, deleting the award for actual damages. As modified, the defendants Kabisig
Real Wealth Dev., Inc. and Ferdinand Tio are ordered to jointly pay the plaintiff Young Builders
Corporation Two Million Four Hundred Thousand (P2,400,000.00) Pesos as TEMPERATE DAMAGES
for the value of services, rendered and materials used in the renovation of defendants-appellants building.
In addition, the total amount adjudged shall earn interest at the rate of 12% per annum from September
11, 2001, until it is fully paid.

ISSUE:
 Whether or not the contract entered into between Kabisig and Young Builders is enforceable
without being reduced into writing and is therefore liable to pay damages?

RULINGS:

Under the Civil Code, a contract is a meeting of minds, with respect to the other, to give
something or to render some service

Accordingly, for a contract to be valid, it must have the following essential elements: (1) consent
of the contracting parties; (2) object certain, which is the subject matter of the contract; and (3) cause of
the obligation which is established. Consent must exist, otherwise, the contract is non-existent. Consent is
manifested by the meeting of the offer and the acceptance of the thing and the cause, which are to
constitute the contract. By law, a contract of sale, is perfected at the moment there is a meeting of the
minds upon the thing that is the object of the contract and upon the price. Indeed, it is a consensual
contract which is perfected by mere consent.6

Through the testimonies of both Young Builders' and Kabisig's witnesses, Tio commissioned the
company of his friend, Nelson Yu, to supply labor, tools, equipment, and materials for the renovation of
Kabisig's building into a restaurant. While Tio argues that the renovation was actually for the benefit of
his partners, Fernando Congmon, Gold En Burst Foods Co., and Sunburst Fried Chicken, Inc., and
therefore, they should be the ones who must shoulder the cost of the renovation, said persons were never
impleaded in the instant case. Moreover, all the documents pertaining to the project, such as official
receipts of payment for the building permit application, are under the names of Kabisig and Tio.

Further, Kabisig's claim as to the absence of a written contract between it and Young Builders
simply does not hold water. It is settled that once perfected, a contract is generally binding in whatever
form, whether written or oral, it may have been entered into, provided the aforementioned essential
requisites for its validity are present. Article 1356 of the Civil Code provides:

Art. 1356. Contracts shall be obligatory in whatever form they may have been entered into, provided all
the essential requisites for their validity are present.

There is nothing in the law that requires a written contract for the agreement in question to be
valid and enforceable. Also, the Court notes that neither Kabisig nor Tio had objected to the renovation
work, until it was already time to settle the bill.

For an injured party to recover actual damages, however, he is required to prove the actual
amount of loss with reasonable degree of certainty premised upon competent proof and on the best
evidence available. The burden of proof is on the party who would be defeated if no evidence would be
presented on either side. Indeed, to recover actual damages, the amount of loss must not only be capable
of proof but must actually be proven with a reasonable degree of certainty, premised upon competent
proof or best evidence obtainable of its actual amount. Here, the evidence reveals that Young Builders
failed to submit any competent proof of the specific amount of actual damages being claimed. The
documents submitted by Young Builders either do not bear the name of Kabisig or Tio, their conformity,
or signature, or do not indicate in any way that the amount reflected on its face actually refers to the
renovation project.

Notwithstanding the absence of sufficient proof, Young Builders still deserves to be recompensed
for actually completing the work. In the absence of competent proof on the amount of actual damages, the
courts allow the party to receive temperate damages. Temperate or moderate damages, which are more
than nominal but less than compensatory 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.

To determine the compensation due and to avoid unjust enrichment from resulting out of a
fulfilled contract, the principle of quantum meruit may be used. Under this principle, a contractor is
allowed to recover the reasonable value of the services rendered despite the lack of a written contract. The
measure of recovery under the principle should relate to the reasonable value of the services performed.
The principle prevents undue enrichment based on the equitable postulate that it is unjust for a person to
retain any benefit without paying for it. Being predicated on equity, said principle should only be applied
if no express contract was entered into, and no specific statutory provision was applicable.

The principle of quantum meruit justifies the payment of the reasonable value of the services
rendered and should apply in the absence of an express agreement on the fees. It is notable that the issue
revolves around the parties' inability to agree on the fees that Young Builders should receive. Considering
the absence of an agreement, and in view of the completion of the renovation, the Court has to apply the
principle of quantum meruit in determining how much is due to Young Builders. Under the established
circumstances, the total amount of P2,400,000.00 which the CA awarded is deemed to be a reasonable
compensation under the principle of quantum meruit since the renovation of Kabisig's building had
already been completed in 2001.

Finally, the rate of interest should be modified. When the obligation is breached, and it consists in
the payment of a sum of money, as in this case, the interest due should be that which may have been
stipulated in writing. In the absence of stipulation, the rate of interest shall be 12%, later reduced to
6%,13per annum to be computed from default, i.e., from judicial or extrajudicial demand, subject to the
provisions of Article 116914 of the Civil Code. Here, the records would show that Young Builders made
the demand on September 11, 2001. Also, the rate of legal interest for a judgment awarding a sum of
money shall be 6% per annum from the time such judgment becomes final and executory until its
satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.

SECOND DIVISION

G.R. No. 225402, September 4, 2017

ENCARNCION CONSTRUCTION & INDUSTRIAL CORPORATION, Petitioner, v. PHOENIX

READY MIX CONCRETE DEVELOPMENT & CONSTRUCTION, INC., Respondent.

PERLAS-BERNABE, J.

NATURE OF ACTION: This is a petition for review on certiorari assailing the Decision of the Court of
Appeals which affirmed the Decision of the Regional Trial Court of Imus, Cavite, granting the complaint
for sum of money filed by respondent Phoenix Ready Mix Concrete Development and Construction, Inc.
(Phoenix) against petitioner Encarnacion Construction & Industrial Corporation (ECIC), and dismissing
the latter's counterclaim for damages.

TOPIC: Contract – Consensually - Contract of Adhesion

FACTS:
 Phoenix entered into 2 separate Contract of Proposals and Agreement with ECIC for the delivery
of various quantities of ready-mix concrete. The Agreement was made in connection of the VNHS
Marulas Building. ECIC received the ready mix concrete delivery in due course. However, despite written
demands from Phoenix ECIC refused to pay. Hence, Phoenix filed with RTC the complaint for the sum of
money against ECIC. In its Answer, ECIC claimed that it opted to suspend payment since Phoenix
delivered substandard ready mix concrete such that the City Engineer’s Office of Valenzuela required the
demolition and reconstruction of the VHNS building 3rd floor.

ISSUE:

Whether or not the contract agreed upon by ECIC and Phoenix is void for being contract of
adhesion?

RULINGS:

In the present petition, ECIC maintains that it is entitled to its counterclaim because the
Agreement is signed with Phoenix, particularly paragraph 15 thereof, is void for being a contract of
adhesion; and the ready mix concrete Phoenix delivered for the 3rd floor slab of the VNHS building was
substandard causing it to incur additional expenses to reconstruct the building’s 3rd floor.

A contract of adhesion is one wherein is one party imposes a ready- made form of contract on the
other. It is a contract whereby almost all of its provisions are drafted by one party, with the participation
of the other party being limited to affixing his or her signature or adhesion to the contract. However,
contracts of adhesion are not invalid per se as they are binding as ordinary contracts. While the Court has
occasionally struck down contracts of adhesion as void, it is so when the weaker party has been imposed
upon the dealing with the dominant bargaining party and reduced to the alternative of taking it or leaving
it, completely deprived of the opportunity to bargain on equal footing. Thus, the validity or enforceability
of the impugned contracts will have to be determined by the peculiar circumstances obtained in each and
the situation of the parties concerned.

In this case, there is no proof that ECIC was disadvantaged or utterly inexperienced in dealing
with the Phoenix. There were likewise no allegations and proof that its representative Ramon Encarnacion
was uneducated, or under duress or force when he signed the businessman who signed Agreement with
full knowledge of its import. Case laws states that the natural presumption is that one does not sign a
document without first informing himself of its contents and consequences. This presumption has not
been debunked.

Further, the Court finds that the terms and conditions of the parties Agreement are plain, clear,
and unambiguous and thus could not have caused any confusion.

Based on these terms, it is apparent that any claim that ECIC may have had as regards the quality
or strength of the delivered ready mix concrete should have been made at the time of delivery. However,
it failed to make a claim on the quality of the delivered concrete at the stipulated time, and thus, said
claim is deemed to have been waived.
 FIRST DIVISION

G.R. No. 210209, August 9, 2017

CATHAY LAND, INC AND CATHAY METAL CORPORATION, Petitioners, v. AYALA LAND,
INC., AVIDA LAND CORPORATION AND LAGUNA TECHNOPARK, INC., Respondents.

DEL CASTILLO, J.

NATURE OF THE ACTION: Respondent, Ayala Group filed a Motion for Execution with Application
for Issuance of a Temporary Restraining Order (TRO) and Writ of Injunction before the RTC.

Topic: Contract – a judgment based on compromise agreement shall be executed/implemented

based strictly on the terms agreed upon the parties.

FACTS:

Cathay Group filed a Complaint for easement of right of way against respondents against
respondents Ayala Land, Inc, Avida Land Corporation and Laguna Technopark. The complaint alleged
that the Ayala Group unjustifiably denied passage to Cathay Group’s personnel, vehicles and heavy
equipment through its properties by putting up checkpoints and constructions gates which caused the
development of the latter’s South Forbes Golf City project to be interrupted and delayed.

However, before trial could ensue, the parties executed a Compromise Agreement where they
mutually agreed to amicably settle all their claims as well as other claims and causes of action that they
have against each other in relation to the complaint.

It was also expressly stated in the Compromise Agreement that in the event of breach on the part
of the Cathay Group of any of its undertakings, the Ayala Group has the right to withdraw or suspend the
grant of easement of right of way from the Cathay Group.

In 2005, the Cathay Group commenced the development of its South Forbes Golf City project.
Subsequently, however, the Ayala Group noted that Cathay Group’s marketing materials for the project
showed plans to develop a thirty-hectare cyber park which will house, among others, call centers offices
and to construct high rise buildings. Upon failure of the Cathay Group to give heed to the demands of
Ayala Group, it file a Motion for Execution with issuance of TRO and writ of Injunction. The Ayala
alleged that the Cathay Group disregarded its undertaking not to construct high rise buildings or structure
which are at least 15 meters high or beyond the building height limit of three storeys, as provided under
the Compromise Agreement.

ISSUE:
 Whether or not the term “high rise building as used in the Compromise Agreement should not be
interpreted to imply a height limit of the tree storeys as such definition in the Fire Code” was not
contemplated by the parties when they entered into the Compromise Agreement?

RULINGS:

It is settled that once a compromise agreement is approved by a final order of the court, it
transcends its identity as a mere contract binding only upon the parties thereto, as it becomes a judgment
that is subject to execution in accordance duty to implement and enforce it. To be clear, it is the decision
on a compromise agreement that is considered as a judgment on the merits, not the order pertaining to its
execution.

Nevertheless, in implementing a compromise agreement, the court cannot modify, impose terms
different from the terms of the agreement or set aside the compromise and reciprocal concession made in
good faith by the parties without gravely abusing their discretion.

The Ayala has no right under the Compromise Agreement, to seek injunctive relief from the
courts in case the Cathay Group commits an act contrary to its undertakings in the agreement. To
emphasize, under the Compromise Agreement, the Ayala Group has no right to seek to enjoin the Cathay
Group from the proceeding with the development of its Court Forbes Golf City project of from
constructing high rise building as it did in its Motion for Execution. To be sure, the Ayala Group’s right
under the Compromise Agreement that is enforceable through a writ of execution is only the suspension
of withdrawal of the grant of easement of right of way.
 G.R. No. 225562, March 08, 2017

WILLIAM C. LOUH, JR. AND IRENE L. LOUH, Petitioners, v. BANK OF THE PHILIPPINE
ISLANDS, Respondent.

REYES, J.

NATURE OF THE ACTION: This is a complaint for Collection of a Sum of a Money filed by
respondent BPI against petitioner.

TOPIC: Contract: AUTONOMY OF CONTRACT

FACTS:

Bank of the Philippine Islands (BPI), issued a credit card in William's name, with Irene as the
extension card holder. Pursuant to the terms and conditions of the cards' issuance, 3.5% finance charge
and 6% late payment charge shall be imposed monthly upon unpaid credit availments.

The Spouses Louh made purchases from the use of the credit cards and paid regularly based on
the amounts indicated in the Statement of Accounts (SOAs). However, they were remiss in their
obligations and their account was unsettled prompting BPI to send written demand letters. Thereafter, BPI
filed a complaint for collection of a sum of Money.

RTC rendered a Decision, the fallo of which ordered the Spouses Louh to solidarily pay BPI.
However, the RTC found the 3.5% finance and 6% late payment monthly charges imposed by BPI as
iniquitous and unconscionable. Hence, both charges were reduced to 1% monthly. Anent the award of
attorney's fees equivalent to 25% of the amount due, the RTC

ISSUE:

Whether or not the court may reduce the charges imposed by BPI?

RULINGS:

In the case at bench, BPI imposed a cumulative annual interest of 114%, plus 25% of the amount
due as attorney's fees. Inevitably, the RTC and the CA aptly reduced the charges imposed by BPI upon
the Spouses Louh. Note that incorporated in the amount of P533,836.27 demanded by BPI as the Spouses
Louh's obligation as of August 7, 2010 were the higher rates of finance and late payment charges, which
the courts a quo had properly directed to be reduced.

This is not the first time that this Court has considered the interest rate of 36% per annum as
excessive and unconscionable. We held in Chua vs. Timan that the stipulated interest rates of 7% and 5%
per month imposed on respondents' loans must be equitably reduced to 1% per month or 12% per annum.
Since the stipulation on the interest rate is void, it is as if there was no express contract thereon. Hence,
courts may reduce the interest rate as reason and equity demand.

The same is true with respect to the penalty charge. Pertinently, Article 1229 of the Civil Code states:

Art. 1229. The judge shall equitably reduce the penalty when the principal obligation has been partly or
irregularly complied with by the debtor. Even if there has been no perfom1ance, the penalty may also be
reduced by the courts if it is iniquitous or unconscionable.

THIRD DIVISION

G.R. No. 211504 March 8, 2017

FEDERAL BUILDERS, INC., Petitioner vs POWER FACTORS, INC., Respondent

BERSAMIN, J.:
NATURE OF THE ACTION: Respondent, Power Factors filed a request for arbitration in the CIAC
invoking the arbitration clause of the Contract of Service

TOPIC: Contracts: Obligatory Force - contracts shall be obligatory in whatever form they may have
been entered into, provided that all the essential requisites for their validity are present

FACTS:

Federal a general contractor of the Bullion Mall under a construction agreement with Bullion
Investment and Development Corporation (BIDC engaged respondent Power Factors Inc. (Power) as its
subcontractor for the electric works at the Bullion Mall and the Precinct Building for ₱l8,000,000.00.

Power sent a demand letter to Federal claiming the unpaid amount for work done by Power for
the Bullion Mall and the Precinct Building.

Federal, represented by new counsel (Domingo, Dizon, Leonardo and Rodillas Law Office),
moved to dismiss the case on the ground that CIAC had no jurisdiction over the case inasmuch as the
Contract of Service between Federal and Power had been a mere draft that was never finalized or signed
by the parties. Federal contended that in the absence of the agreement for arbitration, the CIAC had no
jurisdiction to hear and decide the case.

ISSUE:

Whether or not there was no mutual consent and no meeting of the minds between it and Power
as to the operation and binding effect of the arbitration clause because they had rejected the draft service
contract?

RULINGS:

Pursuant to Article 135618 and Article 135719 of the Civil Code, contracts shall be obligatory in
whatever form they may have been entered into, provided that all the essential requisites for their validity
are present. Indeed, there was a contract between Federal and Power even if the Contract of Service
was unsigned. Such contract was obligatory and binding between them by virtue of all the essential
elements for a valid contract being present.

It clearly appears that the works promised to be done by Power were already executed albeit still
incomplete; that Federal paid Power ₱l ,000,000.00 representing the originally proposed downpayment,
and the latter accepted the payment; and that the subject of their dispute concerned only the amounts still
due to Power. The records further show that Federal admitted having drafted the Contract of Services
containing the following clause on submission to arbitration.

With the parties having no issues on the provisions or parts of the Contract of Service other than
that pertaining to the downpayment that Federal was supposed to pay, Federal could not validly insist on
the lack of a contract in order to defeat the jurisdiction of the CIAC. As earlier pointed out, the CIAC
Revised Rules specifically allows any written mode of communication to show the parties' intent or
agreement to submit to arbitration their present or future disputes arising from or connected with their
contract.
 SECOND DIVISION

G.R. No. 175949, January 30, 2017

UNITED ALLOY PHILIPPINES CORPORATION, SPOUSES DAVID C. CHUA AND LUTEN

CHUA, Petitioners, v. UNITED COCONUT PLANTERS BANK, Respondent.

PERALTA, J.:

NATURE OF ACTION: Petitioner, UNIALLOY filed against Respondent, UCPB a complaint for
Annulment and/or Reformation of Contract with Damages, with Prayer for a Writ of Preliminary
Injunction or Temporary Restraining Order.

TOPIC: force of law between the contracting parties and should be complied with in good faith.

FACTS:
United Alloy Philippines Corporation (UNIALLOY) applied for and was granted a credit
accommodation by herein respondent United Coconut Planters Bank (UCPB) in the amount of
PhP50,000,000.00, as evidenced by a Credit Agreement. Part of UNIALLOY's obligation under the
Credit Agreement was secured by a Surety Agreement executed by UNIALLOY Chairman, Jakob Van
Der Sluis (Van Der Sluis), UNIALLOY President, David Chua and his spouse, Luten Chua (Spouses
Chua), and one Yang Kim Eng (Yang). Six (6) Promissory Notes, were later executed by UNIALLOY in
UCPB's favor.

In addition, as part of the consideration for the credit accommodation, UNIALLOY and UCPB
also entered into a "lease-purchase" contract wherein the former assured the latter that it will purchase
several real properties which UCPB co-owns with the Development Bank of the Philippines.

Subsequently, UNIALLOY failed to pay its loan obligations. As a result, UCPB filed against
UNIALLOY, the spouses Chua, Yang and Van Der Sluis an action for Sum of Money with Prayer for
Preliminary. The collection case was filed with the Regional Trial Court of Makati City (RTC of Makati).
Consequently, UCPB also unilaterally rescinded its lease-purchase contract with UNIALLOY.

On the other hand, on even date, UNIALLOY filed against UCPB, UCPB Vice-President Robert
Chua and Van Der Sluis a complaint for Annulment and/or Reformation of Contract with Damages, with
Prayer for a Writ of Preliminary Injunction or Temporary Restraining Order. UNIALLOY prayed, among
others, that three (3) of the six (6) Promissory Notes it executed be annulled or reformed or that it be
released from liability thereon.

The court dismissed UNIALLOY's complaint for annulment of contract. It direct UNIALLOY to
tum over to UCPB the property subject of their lease-purchase agreement.
ISSUE:

Whether or not petitioners are jointly and severally liable with UNIALLOY to pay the latter’s
loan obligations with UCPB?

RULINGS:

The Court rules in the affirmative.

As ruled upon by both the RTC and the CA, UNIALLOY failed to pay its obligations under the
above promissory notes and that herein petitioner Spouses Chua, together with their co-defendants Van
Der Sluis and Yang freely executed a Surety Agreement whereby they bound themselves jointly and
severally with UNIALLOY, to pay the latter's loan obligations with UCPB.

The liability of the SURETIES shall not be limited to the aggregate principal amount of FIFTY
MILLION PESOS (P50,000,000.00), Philippine Currency, or its foreign currency equivalent, but shall
include such interest, fees, penalties and other charges due thereon, as well as any and all renewals,
extensions, restructurings or conversions of the Accommodation or any portion thereof, as may appear in
the books and records of account of the BANK.

As correctly held by both the RTC and the CA, Article 1159 of the Civil Code expressly provides
that "obligations arising from contracts have the force of law between the contracting parties and should
be complied with in good faith." The RTC as well as the CA found nothing which would justify or excuse
petitioners from non-compliance with their obligations under the contract they have entered into. Thus, it
becomes apparent that petitioners are merely attempting to evade or, at least, delay the inevitable
performance of their obligation to pay under the Surety Agreement and the subject promissory notes
which were executed in respondent's favor.

The Court notes, however, that the interest rates imposed on the subject promissory notes were
made subject to review and adjustment at the sole discretion and under the exclusive will of UCPB.
Moreover, aside from the Consolidated Statement of Account attached to the demand letters addressed to
petitioner spouses Chua and their co-defendants, no other competent evidence was shown to prove the
total amount of interest due on the above promissory notes. In fact, based on the attached Consolidated
Statement of Account, UCPB has already imposed a 24% interest rate on the total amount due on
respondents' peso obligation for a short period of six months. Settled is the rule that any contract which
appears to be heavily weighed in favor of one of the parties so as to lead to an unconscionable result is
void. Any stipulation regarding the validity or compliance of the contract which is left solely to the will of
one of the parties, is likewise, invalid.

Moreover, courts have the authority to strike down or to modify provisions in promissory notes
that grant the lenders unrestrained power to increase interest rates, penalties and other charges at the
latter's sole discretion and without giving prior notice to and securing the consent of the borrowers. This
unilateral authority is anathema to the mutuality of contracts and enable lenders to take undue advantage
of borrowers.22 Although the Usury Law has been effectively repealed, courts may still reduce iniquitous
or unconscionable rates charged for the use of money. Furthermore, excessive interests, penalties and
other charges not revealed in disclosure statements issued by banks, even if stipulated in the promissory
notes, cannot be given effect under the Truth in Lending Act.24
 The Court, thus, finds it proper to modify the interest rates imposed on respondents' obligation.

Finally, pursuant to the parties' Credit Agreement as well as the subject Promissory Notes,
respondents are also liable to pay a penalty charge at the rate of 1% per month or 12% per annum.

FIRST DIVISION

G.R. No. 215910, February 06, 2017

MANUEL C. UBAS, SR., Petitioner, v. WILSON CHAN, Respondent.

PERLAS-BERNABE, J.

NATURE OF ACTION: This is a Complaint for Sum of Money with Application for Writ of
Attachment (Complaint) filed by petitioner against respondent Wilson.

Topic: Privity of Contracts

FACTS:

Petitioner alleged that respondent, "doing business under the name and style of UNIMASTER,"
was indebted to him in the amount of P1,500,000.00, representing the price of boulders, sand, gravel, and
other construction materials allegedly purchased by respondent from him for the construction of the
Macagtas Dam in Barangay Macagtas, Catarman, Northern Samar (Macagtas Dam project). He claimed
that respondent is guilty of fraud in incurring obligation because when petitioner presented the subject
checks for encashment the same were dishonored due to a stop payment order. However respondent
argued that there is no contract that existed between them and even described the procedure in the
delivery of aggregates to their project sites, asserting that petitioner was not among their suppliers of
aggregates for the Macagtas Dam project as, in fact, the latter never submitted any bill attaching purchase
orders and delivery receipts for payments as other suppliers did.

ISSUE:

Whether or not there is privity of contract exited between the petitioner and respondent

RULINGS:

Although the checks were under the account name of Unimasters, it should be emphasized that
the manner or mode of payment does not alter the nature of the obligation. The source of obligation, as
claimed by petitioner in this case, stems from his contract with respondent. When they agreed upon the
purchase of the construction materials on credit for the amount of P1,500,000,00, the contract between
them was perfected. Therefore, even if corporate checks were issued for the payment of the obligation,
the fact remains that the juridical tie between the two parties was already established during the contract's
perfection stage and, thus, does not preclude the creditor from proceeding against the debtor during the
contract's consummation stage.

That a privity of contract exists between petitioner and respondent is a conclusion amply
supported by the averments and evidence on record in this case.

First, the Court observes that petitioner was consistent in his account that he directly dealt with
respondent in his personal and not merely his representative capacity.

In fine, the Court holds that the CA erred in dismissing petitioner's complaint against respondent
on the ground of lack of cause of action. Respondent was not able to overcome the presumption of
consideration under Section 24 of the NIL and establish any of his affirmative defenses. On the other
hand, as the holder of the subject checks which are presumed to have been issued for a valuable
consideration, and having established his privity of contract with respondent, petitioner has substantiated
his cause of action by a preponderance of evidence

FIRST DIVISION

G.R. No. 214864. March 22, 2017

PHILIPPINE PORTS AUTHORITY (PPA) VS. NASIPIT INTEGRATED ARRASTRE AND

STEVEDORING SERVICES, INC. (NIASSI);
CAGUIOA, J:

NATURE OF THE ACTION: This assertion finds relevance in this petition for review on certiorari of
the Decision of the Court of Appeals (CA), which nullified and set aside the Resolution of the Regional
Trial Court (RTC), dissolving the writ of preliminary injunction it earlier issued in favor of petitioner
Nasipit Integrated Arrastre and Stevedoring Services, Inc. (NIASSI) against respondent Philippine Ports
Authority (PPA).

TOPIC: Perfected Contract

FACTS:

PPA, through its Pre-qualification, Bids and Awards Committee (PBAC) accepted bids for a 10-
year contract to operate as the sole cargo handler at the port of Nasipit, Agusan del Norte (Nasipit Port).
Subsequently, PBAC issued Resolution No. 005-2000 recommending that the 10-year cargo-handling
contract be awarded to NIASSI as the winning bidder.

The second highest bidder, Concord Arrastre and Stevedoring Corporation (CASCOR) filed a
protest with PPA’s General Manager, Oscar M. Sevilla, alleging that two of NIASSI’s stockholders on
record are legislators who are constitutionally prohibited from having any direct or indirect financial
interest in any contract with the government or any of its agencies during the term of their office.

Notwithstanding the protest, PPA issued a Notice of Award in favor of NIASSI. The Notice of
Award directed NIASSI to signify its concurrence thereto by signing the conforme portion and returning
the same to PPA within 10 days from receipt.

However, instead of formally executing a written contract, NIASSI requested PPA to issue a
Hold-Over Authority (HOA) in its favor, in view of CASCOR’s pending protest. PPA granted NIASSI’s
request and issued a HOA dated August 1, 2001, effective until October 31, 2001, “or until [such time] a
cargo[-]handling contract shall have been awarded, whichever comes first.”

Meanwhile, the Office of the Government Corporate Counsel (OGCC) issued Opinion No. 028,
series of 2002 on February 7, 2002 (OGCC Opinion) which confirmed the authority of PPA to bid out the
cargo-handling contract and affirmed the validity of the award in NIASSI’s favor. Despite this, the HOA
was subsequently extended several times upon NIASSI’s request. While the exact number of extensions
and their particulars cannot be ascertained from the records, the last extension of the HOA appears to
have been issued on October 13, 2004, for a term of six months.

However, barely two months after the last extension of the HOA, PPA, through its Assistant
General Manager for Operations, Benjamin B. Cecilio revoked the extension. In said letter, Cecilio
advised NIASSI that PPA received numerous complaints regarding the poor quality of its services due to
the use of inadequately maintained equipment. Cecilio further relayed that PPA would take over the
cargo-handling services at the Nasipit Port.

ISSUE:

Whether or not the 10-year cargo-handling contract had already been perfected?

RULINGS:
 The CA’s findings in CA-G.R. SP No. 00214 constitute the law of the case between the parties,
and are thus binding herein.

It is therefore Our submission that a perfected contract of cargo handling services existed when
the petitioner won the bidding, given the Notice of Award and conformed to the conditions set forth in the
Notice of Award because the requirements prescribed in the Notice of Award have no bearing on the
perfection of the contract. On the contrary, it amounted to a qualified acceptance of petitioner’s offer, a
clear legal right to continue its operations in the port. Since the respondent is bound by the contract, the
act of taking over the cargo handling service from the petitioner is violative of its right.
 THIRD DIVISION

G.R. No. 182409 March 20, 2017

FELIX PLAZO URBAN POOR SETTLERS COMMUNITY ASSOCIATION, INC., Petitioner vs

ALFREDO LIPAT, SR. and ALFREDO LIPAT, JR., Respondents

REYES, J.:

NATURE OF THE CASE: This is a petition for review on certiorari assailing the Decision of the Court
of Appeals which granted the appeal of Alfredo Lipat, Sr. (Lipat Sr.) and Alfredo Lipat, Jr. (Lipat Jr.)
(respondents) and accordingly dismissed the action for Specific Performance and Damages with Prayer
for Preliminary Injunction filed by Felix Plazo Urban Poor Settlers Community Association, Inc.
(petitioner) for lack of cause of action.

TOPIC: Contracts – Perfection of Contract

FACTS:

Lipat Sr., as represented by Lipat Jr., executed a Contract to Sell (CTS) in favor of the petitioner,
as represented by its President, Manuel Tubao (Tubao ), whereby the former agreed to sell to the latter
two parcels of land in Naga City for a consideration of ₱200.00 per square meter.

As stipulated in the CTS, the petitioner had 90 days to pay in full the purchase price of the subject
properties; otherwise, the CTS shall automatically expire. The period, however, elapsed without payment
of the full consideration by the petitioner.

According to the petitioner, the 90-day period provided in the CTS was subject to the condition
that the subject properties be cleared of all claims from third persons considering that there were pending
litigations involving the same.

Upon the expiry of the 90-day period, and despite the failure to clear the subject properties from
the claims of third persons, the petitioner contributed financial assistance for the expenses of litigation
involving the subject properties with the assurance that the CTS will still be enforced once the cases are
settled.

In the meantime, the petitioner agreed to pay rental fees for their occupation of the subject
properties from 1992 to 1996.
 After the termination of the cases involving the subject properties, however, the respondents
refused to enforce the CTS on the ground that the same had expired and averred that there was no
agreement to extend its term.

Consequently, the petitioner filed a case for Specific Performance and Damages with Prayer for
the Issuance of Preliminary Injunction against the respondents on June 10, 1997 before the Regional Trial
Court (RTC) of Naga City.

For their defense, the respondents alleged that the CTS was not enforced due to the petitioner's
failure to pay the P200.00 per sq m selling price before the expiration of its term. As a result, the
members of the petitioner were required to pay rental fees corresponding to the area they occupy.

ISSUE:

Whether or not petitioner can oblige the respondents to sell the properties covered by the
Contract to sell, the contract being still effective?

RULING:

The parties are bound to the stipulations they mutually agreed upon in the CTS

Indeed, the contract executed by the parties is the law between them. Consequently, from the time
the contract is perfected, all parties privy to it are bound not only to the fulfillment of what has been
expressly stipulated but likewise to all consequences which, according to their nature, may be in keeping
with good faith, usage and law.

Concededly, it is undisputed that the abovementioned contract is in the nature of a CTS. As such,
the obligation of the seller to sell becomes demandable only upon the occurrence of the suspensive
condition. In the present case, as correctly observed by the CA, the suspensive condition is the payment in
full of the purchase price by the petitioner prior to the expiration of the 90-day period stipulated in their
CTS, which the latter failed to do so. The relevant portion of the CA's decision reads: As shown in the
case at bar, the [petitioner] did not pay the full purchase price which is its obligation under the CTS. As
the payment of the full purchase price is a positive suspensive condition the non-fulfillment of which
prevents the perfection of a CTS, it is indubitable that the subject CTS is ineffective and without force
and effect.

In Spouses Garcia, et al. v. Court of Appeals, et al., the Court emphasized that in a CTS, payment
of the full purchase price is a positive suspensive condition, failure of which is not considered a breach of
the same but an occurrence that prevents the obligation of the seller to transfer title from becoming
effective. Here, there is no dispute that the petitioner failed to pay the full purchase price stipulated in the
CTS on the date fixed therein. Thus, the respondents are within their rights to refuse to enforce the same.
 FIRST DIVISION

G.R. No. 202578 SEPTEMBER 27, 2017

HEIRS OF GILBERTO ROLDAN NAMELY: ADELINA ROLDAN, ROLANDO ROLDAN,

GILBERTO ROLDAN JR., MARIO ROLDAN, DANNY ROLDAN, LEONARDO ROLDAN,
ELSA ROLDAN, ERLINDA ROLDAN-CARAOS, THELMA ROLDAN-MASINSIN, GILDA
ROLDAN-DAWAL AND RHODORA ROLDAN-ICAMINA, Petitioners,
vs.
HEIRS OF SILVELA ROLDAN, NAMELY: ANTONIO R. DE GUZMAN, AUGUSTO R. DE
GUZMAN, ALICIA R. VALDORIA-PINEDA AND SALLY R. VALDORIA AND HEIRS OF
LEOPOLDO MAGTULIS, NAMELY: CYNTHIA YORAC-MAGTULIS, LEA JOYCE
MAGTULIS-MALABORBO, DHANCY MAGTULIS, FRANCES DIANE MAGTULIS AND
JULIERTO MAGTULIS-PLACER, Respondents.

SERENO, CJ, J.
TOPIC: Interpretation of Contract

Facts:

After the death of Natalia Magtulis her heirs including Gilberto took possession of the property to
the exclusion of respondents. The latter filed before the RTC a complaint for partition and damages
against petitioners. The latter refused to yield the property on these grounds that respondent heirs of
Silvela had already sold her share to Gilberto and respondent heirs of Leopoldo had no cause of action,
given that he was not a child of Natalia.

The RTC ruled that the heirs of Silvela remained co-owners of the property they had inherited
from Natalia. As regards Leopoldo Magtulis, the trial court concluded that he was a son of Natalia based
on his Certificate of Baptism and Marriage Certificate.

The appellate court refused to conclude that Silvela had sold her shares to Gilberto without any
document evidencing the sales transaction.

Issue:

Whether or not there is perfected contract of sale between co-owners Silvela and Giberto?

Held:

Petitioners argue before us that Silvela had a perfected contract of sale with Gilberto over her
shares of Lot No 4696. That argument is obviously a question of fact as it delves into the truth of whether
she conveyed her rights of her brother.

The assessment of the existence of the sale requires the calibration of the evidence on record and
probative weight thereof. The RTC as affirmed by the CA already performed its function and found that
the heirs of Gilberto had not presented any document had not presented any document or witness to prove
the fact of sale.

The factual determination of courts, when adopted and confirmed by the CA, is final and
conclusive on this Court except of unsupported by the evidence on record. In this case, the exception
does not apply as petitioners merely alleged that Silveda sold, transferred and conveyed her share in the
land in question to Gilberto Roldan for valuable consideration without particularizing the details or
referring to any proof of transaction. Therefore, we sustain the conclusion that she remains con-owner of
Lot No. 4696.

THIRD DIVISION

G.R. Nos. 194027-194028 July 5, 2017

COLORITE MARKETING CORPORATION, Petitioner, vs. KA KUEN CHUA, doing business

under the name and style KA KUEN CHUA ARCHITECTURAL, Respondent.
 REYES, J.:

NATURE OF THE ACTION: These are consolidated petitions for review on certiorari assailing the
Decision of the Court of Appeals which affirmed with modifications the Final Award of the Construction
Industry Arbitration Commission (CIAC)

TOPIC: Interpretation of Contract

FACTS:

Colorite Marketing Corporation (Colorite) and Architect Ka Kuen Tan Chua (Chua), signed a
construction contract whereby the latter undertook to build a four-storey residential/commercial building
for the former on a parcel of land located at St. Paul Road, comer Estrella Avenue, Makati City.

The parties agreed to a full contract price of Thirty-Three Million Pesos (Php 33,000,000.00),
subject, among others, to the following stipulations:

a) the project will commence in seven days from the time KKCA received a notice to proceed
from Colorite, and will be completed within 365 days reckoned from the seventh day after the release of
the down payment;

b) in the event that the project is not completed on time, the amount of Php 10,000.00 for each
calendar day of delay shall be paid by KKCA to Colorite;

c) only a maximum of 20% of slippage, or 73 calendar days of delay, is allowed, and Colorite has
the right to terminate the contract if the delay exceeded the maximum number of days allowed;

and d) Colorite has the right to take over and complete the construction of the project, and all
costs incurred thereby will be deducted from the amount due to KKCA.

To undertake the excavation work, Colorite engaged the services of WE Construction Company
(WCC) and a full-blast excavation work began. However, the excavation resulted in erosion, which
caused damage to the adjacent property owned by the Hontiveros family. This prompted the latter to file a
formal complaint before the City Government of Makati.

In view of this development, a Hold Order was issued by the Building Officials of Makati City
dated January 22, 2004 directing KKCA to stop immediately all its excavation activities in the premises,
and to immediately restore the eroded portion of the adjacent property. The incident resulted in the delay
of the project because the Hontiveros family refused to sign a waiver that was required for the lifting of
the Hold Order unless their property was restored.

After 878 days of delay, Colorite demanded from KKCA to pay damages pursuant to the contract.

ISSUE:

Whether or not respondent is solely in delay in the performance of contractual obligation by

virtue of the stipulation stated therein?
RULINGS:

Article 1370 of the Civil Code in part states that "if the terms of a contract are clear and leave no
doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control."

As worded, paragraph 21 is only concerned with excavation works, and no other. Paragraph 21
provides that all excavation works are within the scope of works of KKCA but it does not oblige KKCA
to directly perform the same as it admits the employment of excavation sub-contractors, albeit for the
account of Colorite.

On the other hand, paragraph 33 explicitly makes soil protection works, and the installation of
adequate dewatering equipment and pumps as KKCA's direct contractual obligation. While soil protection
works and adequate dewatering system have distinct purposes, they are similar since both are continuing
necessities while the foundation and the basement are not yet secured. It was thus logical that both items
were placed under the general contractor's direct responsibilities under paragraph.

While all the foregoing easily points to the conclusion that KKCA is solely to be blamed for the
delay of the project, the Court, however, finds that Colorite is also at fault. From the moment it became
apparent that KKCA paid no heed to Colorite's demand to complete the project, the latter also began
contributing to its delay.

Despite KKCA's firm stance, the project need not actually be delayed for too long. Other than
KKCA's fault, the delay can likewise be avoided. For one, while KKCA is under contractual obligation to
secure the lifting of the Hold Order, there is, however, nothing which prohibits Colorite from doing it.

Under Article V, paragraph (b)96 of the construction contract, Colorite has the right to terminate
the contract and carry out the completion of the project in the event that the delay exceeds the maximum
allowable number of days of delay. However, Colorite opted to continue to bind KKCA in the contract.

While it may be that Colorite is acting within its right, the Court cannot find justification
behind the former's inaction. Colorite asserts that it should be awarded compensatory damages for
unrealized profit amounting to Php 460,189 .00 a month owing to the alleged great demand for leasable
residential/commercial units in the area. However, Colorite's inaction weighs against the sincerity of its
claim. Certainly, it does not appear to be in keeping with good sense that Colorite, on its part, did not act
to secure the lifting of the Hold Order.

Verily, common human experience dictates that under similar circumstances, anybody in the
predicament of Colorite would have opted to exercise its right to terminate the contract the moment it
became apparent that the contractor would not lift a finger to finish the project. Colorite should have
pursued the completion of the project by another contractor to minimize injury upon itself, without
prejudice, however, to the prosecution of its cause of action against KKCA.
 G.R. NO. 194199; MARCH 22, 2017

PROVINCE OF CAMARINES SUR, REPRESENTED BY GOVERNOR LUIS RAYMUND F.

VILLAFUERTE, JR. VS. BODEGA GLASSWARE, REPRESENTED BY ITS OWNER JOSEPH
D. CABRAL;
JARDELEZA, J.:

NATURE OF THE ACTION: This is an action for ejectment filed by the petitioner against respondent
Bodega Glassware (Bodega).

TOPIC: Contract in contravention of the terms: Rescission

FACTS:

Petitioner donated around 600 square meters of this parcel of land to the Camarines Sur Teachers’
Association, Inc. (CASTEA) through a Deed of Donation Inter Vivos (Deed of Donation), through the
Provincial Governor Apolonio G. Maleniza. The Deed of Donation included an automatic revocation
clause.

CASTEA accepted the donation in accordance with the formalities of law and complied with the
conditions stated in the deed. However, on August 15, 1995, CASTEA entered into a Contract of Lease
with Bodega over the donated property. Under the Contract of Lease, CASTEA leased the property to
Bodega for a period of 20 years commencing on September 1, 1995 and ending on September 15, 2015.
Bodega took actual possession of the property on September 1, 1995.

Sometime in July 2005, the Office of the Provincial Legal Officer of the Province of Camarines
Sur wrote Bodega regarding the building it built on the property. The Provincial Legal Officer requested
Bodega to show proof of ownership or any other legal document as legal basis for his possession. Bodega
failed to present any proof. Nevertheless, petitioner left Bodega undisturbed and merely tolerated its
possession of the property.
 As it now intended to use the property for its developmental projects, petitioner demanded that
Bodega vacate the property and surrender its peaceful possession. Bodega refused to comply with the
demand.

Petitioner, through its then Provincial Governor Luis Raymund F. Villafuerte, Jr., revoked its
donation through a Deed of Revocation of Donation. It asserted that CASTEA violated the conditions in
the Deed of Donation when it leased the property to Bodega. Thus, invoking the automatic revocation
clause in the Deed of Donation, petitioner revoked, annulled and declared void the Deed of Donation. It
appears from the record that CASTEA never challenged this revocation.

On March 13, 2008, petitioner filed an action for unlawful detainer against Bodega before the
MTC Naga City. It prayed that Bodega be ordered to vacate the property and surrender to petitioner its
peaceful possession.

The MTC Naga City ruled in favor of the petitioner.

ISSUE:

Whether or not petitioner has the right to rescind the deed of donation upon the violation of the
stipulated terms and conditions?

RULINGS:

We shall rule on the effect of the automatic revocation clause for the purpose of ascertaining who
between petitioner and Bodega has the right to possess the property.

We explained in De Luna that Article 1306 of the Civil Code allows the parties “to establish such
stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to
law, morals, good customs, public order or public policy.” In contracts law, parties may agree to give one
or both of them the right to rescind a contract unilaterally. This is akin to an automatic revocation clause
in an onerous donation. The jurisprudence on automatic rescission in the field of contracts law therefore
applies in an automatic revocation clause.

In this case, the Deed of Donation contains a clear automatic revocation clause.

Accordingly, petitioner takes the position that when CASTEA leased the property to Bodega, it
violated the conditions in the Deed of Donation and as such, the property automatically reverted to it. It
even executed a Deed of Revocation. The records show that CASTEA never contested this revocation.
Hence, applying the ruling in De Luna, Roman Catholic Archbishop of Manila, Dolor and Zamboanga
Barter Traders Kilusang Bayan, Inc., petitioner validly considered the donation revoked and by virtue of
the automatic revocation clause, this revocation was automatic and immediate, without need of judicial
intervention. Thus, the CA clearly erred in its finding that petitioner should have first filed an action for
reconveyance. This contradicts the doctrine stated in the aforementioned cases and renders nugatory the
very essence of an automatic revocation clause.

Thus, as petitioner validly considered the donation revoked and CASTEA never contested it, the
property donated effectively reverted back to it as owner. In demanding the return of the property,
petitioner sources its right of possession on its ownership. Under Article 428 of the Civil Code, the owner
has a right of action against the holder and possessor of the thing in order to recover it.

This right of possession prevails over Bodega’s claim which is anchored on its Contract of Lease
with CASTEA. CASTEA’s act of leasing the property to Bodega, in breach of the conditions stated in the
Deed of Donation, is the very same act which caused the automatic revocation of the donation. Thus, it
had no right, either as an owner or as an authorized administrator of the property to lease it to Bodega.
While a lessor need not be the owner of the property leased, he or she must, at the very least, have the
authority to lease it out. None exists in this case. Bodega finds no basis for its continued possession of the
property.

THIRD DIVISION

G.R. No. 190995 August 9, 2017

BENJAMIN A. KO, EDUARDO A. KO., ALEXANDER A. KO, MA CYTHIA K. AZADA CHUA,

GARY A. KO, ANTHONY A. KO, FELIX A. KO, AND DANTON C. KO, Petitioners vs
VIRGINIA DY ARAMBURO ET AL, Respondents

TIJAM, , J.:
NATURE OF THE CASE: Respondent together with her co-respondent filed a complaint for Recovery
of Ownership with the Declaration of Nullity and or Alternatively Reconveyance and Damages against
Corazon.

Topic: Sale of Conjugal Properties requires consent of the other Spouse

FACTS:

Respondent Virginia together with her co-respondents hereon, filed a complaint for the recovery
of Ownership against Corazon. The complaint alleged that Virginia and her husband Simeon together
with Corazon and her husband acquired the subject properties from the Spouses Eusebio and Epifania
Casual through the Deed of Cession.

On December 14, 1974 Simeon sold and conveyed his entire one half share in the co-owned
properties to Corazon. The latter claimed that she became the sole owner thereof and consequently was
able to transfer the titles of the same to her name. She argued that the subject properties belong to
Simeon’s exclusive property hence, Virginia’s conformity to such sale was not necessary. She also
maintained that the subject properties are not part of Spouses Simeon and Virginia’s conjugal properties.
This, according to her is bolstered by the fact that the subject properties are not included in the case for
dissolution of conjugal partnership and in the separation of properties between Simeon and Virginia.

Virginia insisted only a third person of the subject properties is owned by Simeon and that the
same is conjugally-owned by her and Simeon since it was acquired during their marriage. As such, the
disposition by Simeon of the one half portion of the subject properties in favor of Corazon is not only
void but also fictitious not only because Simeon does not own the said one half portion but because
Virginia’s purported signature in December 14, 1974 Deed of Sale as the vendor’s wife was a forgery as
found by NBI.

ISSUE:

Whether or not the Deed of Absolute Sale is void because Simeon had no right to sell?

RULINGS:

We uphold the courts a quo that the one third portion of the subject properties is indeed part of
Simeon and Virginia’s conjugal properties.

Thus, in this case the subject properties having been acquired during the marriage are still
presumed to belong to Simeon and Virginia’s conjugal properties.

Unfortunately, Corazon or the petitioners for that matters, failed to adduce ample evidence that
would convince this Court of the exclusive character of the properties.

Simeon could not have validly sold the one third share of Augusto’s heirs, as well as the one third
portion of his and Virgina’s conjugal share without the latter’s consent, to Corazon.

As for the one third portion of the subject properties pertaining to Augusto’s heirs, we are one
with the CA in the ruling that the Deed of Absolute Sale is void as the said portion is owned by the
Augusto’s heirs as the above discussed and thus, Simeon had no right to sell the same. It is basic that the
object of the valid sales contract must be owned by the seller. One cannot give what one does not have.

However, as to the one third portion commonly owned by Spouses Simeon and Virginia,
Simeon’s alienation of the same through sale without Virginia’s conformity is merely voidable.
 SECOND DIVISION

G.R. No. 216491, August 23, 2017

THE HEIRS OF PETER DONTON, THROUGH THEIR LEGAL REPRESENTATIVES,

FELIPE G. CAPULONG, Petitioners, v. DUANE STIER AND EMILY MAGGAY, RespondentS.

PERLAS-BERBABE, J.

NATURE OF THE CASE: This complaint for annulment of title and reconveyance of property with
damages originally filed by now-deceased Peter Donton (Donton), the predecessor of herein petitioners
Heirs of Peter Donton (petitioners

TOPIC: Capacity to Buy: Sale of Undivided Share to an Alien being void transaction

FACTS:

Sometime in June 2001, while Donton was in the United States, he discovered that respondents
took possession and control of the subject property as well as the management of his business operating
thereat which was registered under the former’s name. Due to this incident, Donton was forced to return
to the Philippines where he learned that respondents through an alleged fraudulent means were able to
transfer the ownership of the subject property in their names.

Donton filed the instant complaint for annulment of title and reconveyance of the property with
damages against the respondent and the Register of Deed of Quezon City, alleging that the signature on
the Deed of Absolute Sale by virtue of which he purportedly sold the subject property to respondents was
forgery and that Stier is an American citizen and non-respondent alien who is therefore, not allowed by
law to own real property in the Philippines.

CA sustained the RTC in ruling that petitioners failed to substantiate their allegation that Stier is
an American citizen and married and that Maggay had no capacity to purchase real property.

ISSUE:

Whether or not petitioners are entitled to the relief prayed for the annulment of title and
reconveyance of property with damages?
RULINGS:

The Court a quo erred in ruling that Stier’s American citizenship was not established in this case,
effectively rendering the sale of the subject property as to him void ab initio, in light of the clear
proscription under Section 7, Article XII of the Constitution against foreigners acquiring real property.

Thus, lands of the public domain, which include private lands, may be transferred or conveyed
only to individuals or entities qualified to acquire or hold private lands or lands of the public domain.
Aliens, whether individuals or corporations, have been disqualified from acquiring lands of the public
domain as well as private lands.

In the light of the foregoing, even if petitioners failed to prove that Donton’s signature on the
Deed of Absolute Sale was forgery, the sale of the subject property to Stier is in violation of the
Constitution; hence null and void ab initio. A contract that violates the Constitution and the law is null
and void and vest no rights and creates no obligations. It produces no legal effect at all. Furthermore, Stier
is barred from recovering any amount that he paid for the subject property, the action being proscribed by
the Constitution.

Nevertheless, considering that petitioners failed to prove their allegation that Maggay, the other
vendee, had no capacity to purchase the subject property, the sale to her remains valid but only up to the
extent of her undivided one-half share therein. Meanwhile, the other undivided-one half share which
pertained to Steir, shall revert to Donton, the original owner, for being the subject of a transaction void ab
initio. Consequently, the Deed of Absolute Sale issued in respondent’s favor must be annulled only in so
far as Stier is concerned, without prejudice, however, to the rights of any subsequent purchasers for value
of the subject property.
 G.R. No. 193887; March 29, 2017

SPS. DENNIS ORSOLINO AND MELODY ORSOLINO, PETITIONERS VS. VIOLETA

FRANY, RESPONDENT

REYES, J.:

NATURE OF THE ACTION: This petition stemmed from a complaint for ejectment over a house and
lot located at No. 37 Ilang-Ilang Street corner Camias Street, Barangay Capri, Novaliches, Quezon City,
filed by Spouses Noel and Violeta Frany (respondent) (Spouses Frany) against petitioners Spouses Dennis
and Melody Orso lino (Spouses Orsolino ), and all persons claiming rights under them.

TOPIC: Sale of conjugal property

FACTS:

A complaint for ejectment was filed by Respondent Spouses Noel and Violeta Frany against
petitioners Spouses Orsolino and all persons claiming rights under them.

Spouses Frany claimed that Carolina Orsolino (Carolina), the mother of petitioner Dennis,
authorized her other son to sell the subject property as evidenced by a Special Power of Attorney. On the
same date, Sander sold the subject property to Spouses Frany for the sum of P200,000.00, evidenced by a
Deed of Sale. The respondent said that it was agreed upon that Spouses Orsolino, who are the current
occupants of the subject property, shall vacate and peacefully surrender the possession of the same to
Spouses Frany on or before the end of November 2004. However, despite repeated demands to vacate the
subject property, the petitioners failed to do so. The said matter was also brought before the barangay for
conciliation but no settlement was reached.

The Spouses Orsolino also alleged that they were not aware of the sale made in favor of Spouses
Frany and the signature of Carolina appearing in the SPA and Deed of Sale is a forgery;

On September 19, 2007, the MeTC rendered its judgment in favor of Spouses Frany and declared
the sale of the subject property as valid upon finding that there was no forgery.

RTC concluded that both the SPA and Deed of Sale showed patent irregularities and alterations
which render it null and void ab initio.

The CA upheld the validity of the SPA and Deed of Sale which were duly notarized since the
same carry evidentiary weight with respect to their due execution and this presumption was not rebutted
by clear and convincing evidence to the contrary by Spouses Orsolino.

ISSUE:

Whether or not the sale of conjugal property to respondent is void?

RULINGS:

The Court does not agree with the RTC’s finding that the sale was void because the subject
property was conjugal at the time Carolina sold it to the respondent. Article 160 of the Civil Code
provides that all property of the marriage is presumed to belong to the conjugal partnership, unless it be
proved that it pertains exclusively to the husband or to the wife. However, the presumption under said
article applies only when there is proof that the property was acquired during the marriage. Proof of
acquisition during the marriage is an essential condition for the operation of the presumption in favor of
the conjugal partnership.

Here the RTC’s conclusion that the subject property was conjugal was not based on evidence
since Spouses Orsolino failed to present any evidence to establish that Carolina acquired the subject
property during her marriage. Consequently, there is no basis for applying the presumption under Article
160 of the Civil Code to the present case.

The Court has also observed that Spouses Orsolino presented nothing to support their claim of
their right to possess the subject property. There is no dispute with the fact that Spouses Orsolino were
not even the registered owners of the subject property. Spouses Orsolino were not able to prove by
preponderance of evidence that they are now the new owners and the rightful possessors of the subject
property since they have not presented any solid proof to bolster their claim. The sad truth is that they
were merely allowed to stay on the subject property by mere tolerance of Carolina. Thus, their
unsubstantiated arguments are not, by themselves, enough to offset the respondent’s right as the new
owner of the subject property.

Lastly, the other issues raised by Spouses Orsolino, specifically their failure to receive the
demand letter and the lack of prior conciliation proceeding before the barangay, are contradicted by the
evidence on record. As found by the MeTC, the respondent tried to have a copy of the demand letter
personally delivered to Spouses Orsolino on August 5, 2005 but the latter refused to receive the same,
thus, the respondent left a copy of the demand letter in the premises.[32] Similarly, the Certificate to File
Action issued by the Punong Barangay suffices to prove that the case was referred to the barangay for
possible conciliation.
 THIRD DIVISION

G.R. No. 206114 June 19, 2017

DOLORES ALEJO, Petitioner vs. SPOUSES ERNESTO CORTEZ and PRISCILLA SAN
PEDRO, SPOUSES JORGE LEONARDO and JACINTA LEONARDO and THE REGISTER OF
DEEDS OF BULACAN, Respondents

TIJAM, J.:

NATURE OF THE ACTION: This is an action fo ejectment and annulment of sale, reconveyance and
recovery of possession.

TOPIC: Void Sale of one spouse for absence of consent of others

FACTS:

The property belonged to the conjugal property/absolute community of property of the respondent
Spouses Jorge and Jacinta Leonardo (Spouses Leonardo) and upon which their residential house was
built.

Jorge's father, Ricardo, approached his sister, herein petitioner Dolores Alejo, to negotiate the
sale of the subject property. Jacinta executed a Kasunduan with Dolores for the sale of the property for a
purchase price of PhP500,000. The Kasunduan was signed by Jacinta and Ricardo as witness. Jorge,
however, did not sign the agreement.

Jorge wrote a letter to Dolores denying knowledge and consent to the Kasunduan. Jorge further
informed Dolores that Jacinta was retracting her consent to the Kasunduan due to Dolores' failure to
comply with her obligations. Jorge filed cases for ejectment and annulment of sale, reconveyance and
recovery of possession against her.

However, during the pendency of said cases, the subject property was sold by Jorge and Jacinta to
respondents Spouses Ernesto Cortez and Priscilla San Pedro. At the time of said sale, Dolores was in
possession of the subject property.

Consequently, Dolores filed the case a quo for annulment of deed of sale and damages against the
Spouses Cortez and the Spouses Leonardo.

In its Decision, the RTC noted that while the Kasunduan patently lacks the written consent of
Jorge, the latter's acts reveal that he later on acquiesced and accepted the same. In particular, the RTC
observed that Jorge did not seasonably and expressly repudiate the Kasunduan but instead demanded from
Dolores compliance therewith and that he allowed Dolores to take possession of the property. Further, the
RTC noted that the case for annulment of sale, reconveyance and recovery of possession filed by Jorge.
against Dolores had been dismissed and said dismissal attained finality.

CA declared the Kasunduan as void absent Jorge's consent and acceptance. Nevertheless, the CA
found Dolores to be a possessor in good faith who is entitled to reimbursement for the useful
improvements introduced on the land or to the increase in the value thereof, at the option of the Spouses
Leonardo.

ISSUE:

Whether or the parties’ agreement for the sale of a conjugal property is void for lack of written
consent of the husband?

RULINGS:

The sale by one Spouse of Conjugal Real Property is Void Without the Written Consent of the
other Spouse

In the event that one spouse is incapacitated or otherwise unable to participate in the
administration of the conjugal properties, the other spouse may assume sole powers of administration.
These powers do not include disposition or encumbrance without authority of the court or the written
consent of the other spouse. In the absence of such authority or consent, the disposition or encumbrance
shall be void. However, the transaction shall be construed as a continuing offer on the part of the
consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance
by the other spouse or authorization by the court before the offer is withdrawn by either or both offerors.

The law is therefore unequivocal when it states that the disposition of conjugal property of one
spouse sans the written consent of the other is void. Here, it is an established fact that the Kasunduan was
entered into solely by Jacinta and signed by her alone. By plain terms of the law therefore, the Kasunduan
is void.
 DIVISION

GR No. 215820, Mar 20, 2017

DELOS SANTOS v. ALBERTO ABEJON

PERLAS-BERNABE, J.:

NATURE OF THE CASE: This is a Complaint for Cancellation of Title with collection of sum of
money filed by respondents against petitioners before the RTC.

TOPIC: Contract of Option

FACTS:

Erlinda and her late husband Pedro Delos Santos (Pedro) borrowed the amount of P100,000.00
from the former's sister, Teresita, as evidenced by a Promissory Note. As security for the loan, Erlinda
and Pedro mortgaged their property consisting of 43.50 square meters situated at 2986 Gen. Del Pilar
Street, Bangkal, Makati City. After Pedro died, Erlinda ended up being unable to pay the loan, and as
such, agreed to sell the subject land to Teresita for P150,000.00, or for the amount of the loan plus an
additional P50,000.00. A Deed of Sale and a Release of Mortgage was executed and issued in the name of
"Teresita, Abejon, married to Alberto S. Abejon.

Thereafter, respondents constructed a three (3)-storey building over the subject land. Despite the
foregoing, petitioners refused to acknowledge the sale, pointing out that since Pedro died in 1989, his
signature in the Deed of Sale executed in 1992 was definitely forged.

In defense, petitioners denied any participation relative to the spurious Deed of Sale, and instead,
maintained that it was Teresita who fabricated the same and caused its registration before the Register of
Deeds of Makati City. They likewise asserted that Erlinda and Pedro never sold the subject land to
Teresita. Finally, they claimed that the improvements introduced by Teresita on the subject land were all
voluntary on her part.

During the pre-trial proceedings, the parties admitted and/or stipulated that: (a) the subject land
was previously covered by TCT No. 131753 in the name of Erlinda and Pedro, but such title was
cancelled and replaced by TCT No. 180286 in the name of Teresita; (b) the Deed of Sale and Release of
Mortgage executed on July 8, 1992 were forged, and thus, should be cancelled; (c) in view of said
cancellations, TCT No. 180286 should likewise be cancelled and TCT No. 131753 should be reinstated;
(d) from the time when the spurious Deed of Sale was executed until the present, petitioners have been
the actual occupants of the subject land as well as all improvements therein, including the three (3)-storey
building constructed by respondents; and (e) the P100,000.00 loan still subsists and that respondents paid
for the improvements being currently occupied by petitioners, i.e., the three (3)-storey building.

ISSUE:

Whether or not petitioner may appropriate for themselves the improvements made over the
subject land?

RULINGS:

It is settled that "the declaration of nullity of a contract which is void ab initio operates to restore
things to the state and condition in which they were found before the execution thereof." Pursuant to this
rule, since the Deed of Sale involving the subject land stands to be nullified in view of the parties'
stipulation to this effect, it is incumbent upon the parties to return what they have received from said sale.
Accordingly, Erlinda and the rest of petitioners (as Pedro's heirs) are entitled to the return of the subject
land as stipulated during .the pre-trial. To effect the same, the Register of Deeds of Makati City should
cancel TCT No. 180286 issued in the name of Teresita, and thereafter, reinstate TCT No. 131753 in the
name of Pedro and Erlinda and, restore the same to its previous state before its cancellation, i.e., with the
mortgage executed by the parties annotated thereon.

On the other hand, respondents, as Teresita's successors-in-interest, are entitled to the refund of
the additional P50,000.00 consideration she paid for such sale. However, it should be clarified that the
liability for the said amount will not fall on all petitioners, but only on Erlinda, as she was the only one
among the petitioners who was involved in the said sale. Pursuant to Nacar v. Gallery Frames, the amount
of P50,000.00 shall be subjected to legal interest of six percent (6%) per annum from the finality of this
Decision until fully paid.
 Applying the aforesaid rule in this case, under the first option, petitioner may appropriate for
themselves the three (3)-storey building on the subject land after payment of the indemnity provided for
in Articles 546 and 548 of the Civil Code, as applied in existing jurisprudence. Under this option,
respondents would have a right of retention over the three (3)-storey building as well as the subject land
until petitioners complete the reimbursement. Under the second option, petitioners may sell the subject
land to respondents at a price equivalent to the current market value thereof. However, if the value of the
subject land is considerably more than the value of the three (3)-storey building, respondents cannot be
compelled to purchase the subject land. Rather, they can only be obliged to pay petitioners reasonable rent
 FIRST DIVISION

G.R. No. 193156, January 18, 2017

IVQ LANDHOLDINGS, INC, Petitioner, v. REUBEN BARBOSA, Respondent.

LEONARDO-DE CASTRO, J.:

NATURE OF ACTION: Respondent Barbosa filed a Petition for Cancellation and Quieting of Titles
against Petitioner, Jorge Vargas III, Benito Montinola, IVQ, and the Register of Deeds of Quezon City.

TOPIC: Form of Contract of Sale

FACTS:

On June 10, 2004, Barbosa filed a Petition for Cancellation and Quieting of Titles against Jorge
Vargas III, Benito Montinola, IVQ, and the Register of Deeds of Quezon City. He averred that he bought
from Therese Vargas a parcel of land where the latter surrendered to petitioner an owner’s duplicate copy
of her title. According to him, he took possession of the subject property and paid real estate taxes thereon
in the name of Therese Vargas.

However, in 2003, Barbosa learned that Therese Vargas's name was cancelled and replaced with
that of IVQ in the tax declaration of the subject property. He found out that the subject property was
previously registered in the name of Kawilihan Corporation while IVQ supposedly bought the subject
property from Jorge Vargas III who, in turn, acquired it also from Kawilihan Corporation.

Barbosa argued that even without considering the authenticity of Jorge Vargas III's title, Therese
Vargas's title bore an earlier date. Barbosa, thus, prayed for the trial court to issue an order directing the
Office of the Register of Deeds of Quezon City to cancel Jorge Vargas and adjudicating ownership of the
subject property to him.

Jose Vargas III, Benito Montinola, and IVQ (respondents in the court a quo) countered that the
alleged title from where Barbosa's title was allegedly derived from was the one that was fraudulently
acquired and that Barbosa was allegedly part of a syndicate that falsified titles for purposes of "land
grabbing." They argued that it was questionable that an alleged lot owner would wait for 30 years before
filing an action to quiet title. The Register of Deeds of Quezon City neither filed an answer to Barbosa's
petition nor participated in the trial of the case.

Upon inquiry of the trial court judge, the counsel for IVQ clarified that the transfers or
assignment of rights were done at the time that the subject property was mortgaged with PNB. The
property was then redeemed by IVQ on behalf of Jorge Vargas III.

RTC granted Barbosa's petition and ordered the cancellation of IVQ. The trial court noted that
while the original copy of the Deed of Absolute Sale in favor of Barbosa was not presented during trial,
Barbosa presented secondary evidence by submitting to the court a photocopy of said deed and the deed
of sale in favor of his predecessor-in-interest Therese Vargas, as well as his testimony. The RTC ruled
that Barbosa was able to establish the existence and due execution of the deeds of sale in his favor and
that of Therese Vargas.

In contrast, the RTC noted that IVQ was not able to prove its claim of ownership over the subject
property. The deed of sale in favor of IVQ, which was supposedly executed in 1986, was inscribed only
in 2003 on Jorge Vargas was reconstituted back in 1993. The trial court added that while there is no
record of tax declarations and payment of real estate taxes in the name of Jorge Vargas III, Therese
Vargas declared the subject property for taxation purposes in her name and, thereafter, Barbosa paid real
estate taxes thereon in her name. On the other hand, the only tax declaration that IVQ presented was for
the year 2006. The RTC also opined that while Barbosa was not able to sufficiently establish his
possession of the subject property as he failed to put on the witness stand the caretaker he had authorized
to occupy the property, IVQ also did not gain control and possession of the subject property because the
same continued to be in the possession of squatters.

The appellate court held that Barbosa was able to prove his ownership over the subject property,
while IVQ presented a rather flimsy account on the transfer of the subject property to its name.

ISSUE:

Whether or not the Deed of Sale of Petitioner not contained in public instrument constitute a
valid sale?

RULINGS:

Indeed, the alleged defects in the notarization of the Deed of Absolute Sale dated September 11,
1970 between Kawilihan Corporation and Therese Vargas and the Deed of Absolute Sale dated October
4, 1978 between Therese Vargas and Barbosa are by no means trivial.

Article 1358 of the New Civil Code requires that the form of a contract transmitting or extinguishing real
rights over immovable property should be in a public document. x x x

Not having been properly and validly notarized, the deed of sale cannot be considered a public
document. It is an accepted rule, however, that the failure to observe the proper form does not render the
transaction invalid. It has been settled that a sale of real property, though not consigned in a public
instrument or formal writing is, nevertheless, valid and binding among the parties, for the time-honored
rule is that even a verbal contract of sale or real estate produces legal effects between the parties.

Not being considered a public document, the deed is subject to the requirement of proof under
Section 20, Rule 132, which reads:

Section 20. Proof of private document. - Before any private document offered as authentic is received in
evidence its due execution and authenticity must be proved

(a) By anyone who saw the document executed or written; or

(b) By evidence of the genuineness of the signature or handwriting of the maker.

 Any other private document need only be identified as that which it is claimed to be.

Accordingly, the party invoking the validity of the deed of absolute sale had the burden of
proving its authenticity and due execution. x x x.

In the instant case, should the Deeds of Absolute Sale in favor of Therese Vargas and Barbosa,
respectively, be found to be indeed improperly notarized, the trial court would have erred in admitting the
same in evidence without proof of their authenticity and in relying on the presumption regarding the
regularity of their execution. Barbosa would then have the additional burden of proving the authenticity
and due execution of both deeds before he can invoke their validity in establishing his claim of
ownership.

Therefore, IVQ should be allowed to formally offer in evidence the documents it belatedly
submitted to this Court and that Barbosa should equally be given all the opportunity to refute the same or
to submit controverting evidence.

THIRD DIVISION

G.R. No. 185627 March 15, 2017

SPOUSES BERNARDITO AND ARSENIA GAELA (DECEASED), SUBSTITUTED BY HER

HEIRS NAMELY: BERNARDITO GAELA AND JOSELINE E. PAGUIRIGAN, Petitioners versus
SPOUSES TAN TIAN HEANG AND SALLY TAN,, Respondents

REYES, J.:

NATURE OF THE CASE: This petition stemmed from a complaint for ejectment over two parcels of
land both situated in Barrio Rosario, Municipality of Pasig, covered by Transfer Certificates of Title
(TCT) by Spouses Tan Tian Heang and Sally Tan (respondents) against Spouses Bernardito and Arsenia
Gaela (petitioners).

TOPIC: Sale: the title holder is entitled to all the attributes of ownership of the property, including
possession. Thus, the Court must uphold the age-old rule that the person who has a Torrens title over a
land is entitled to its possession

FACTS:

The petitioners claimed that they are the lawful owners of the subject properties. They said that
sometime in 2002, their daughter Bemardita Gaela (Bemardita) took the certificates of title registered in
their names and forged their signatures in the Real Estate Mortgage that Bemardita executed in favor of
Alexander Tam Wong (Wong). Thus, their certificates of title were cancelled and new ones were issued to
Wong, who then sold the subject properties to the respondents. Afterwards, they sought the annulment of
sale of the subject properties and cancellation. They averred that before the transfer of title from Wong to
the respondents, they were able to cause the annotation of a notice of lis pendens on the respondents'
titles.

For their part, the respondents countered that they are the lawful and legal owners of the subject
properties which they acquired in good faith from its former owner Wong.

The MeTC rendered its Decision in favor of the petitioners, dismissing the complaint on the
ground of lack of cause of action. Aggrieved, the respondents filed an appeal before the RTC.

In overturning the MeTC's ruling, the RTC held that the respondents have the better right to
possess the subject properties since they are the registered owners of the same. The respondents' lack of
prior physical possession over the subject properties is of no moment since it is enough that they have a
better right of possession over the petitioners.

ISSUE:

Whether or not petitioner has a better title over the subject property?

RULINGS:

In this case, the evidence showed that as between the parties, it is the respondents who have a
Torrens title to the subject properties. The RTC and the CA relied on the Torrens title in the name of the
respondents to support their finding that the respondents are the owners of the subject properties.

Time and again, the Court had emphasized that when the property is registered under the Torrens
system, the registered owner's title to the property is presumed legal and cannot be collaterally attacked,
especially in a mere action for unlawful detainer, and it does not even matter if the party's title to the
property is questionable.

At any rate, it is fundamental that a certificate of title serves as evidence of an indefeasible and
incontrovertible title to the property in favor of the person whose name appears therein. The title holder is
entitled to all the attributes of ownership of the property, including possession. Thus, the Court must
uphold the age-old rule that the person who has a Torrens title over a land is entitled to its possession.
 THIRD DIVISION

G.R. No. 221071 January 18, 2017

 EDDIE E. DIZON and BRYAN R. DIZON, Petitioners, versus YOLANDA VIDA P. BELTRAN,
Respondent.

REYES, J.

NATURE OF THE ACTION: Respondent, Vida filed before the Municipal Trial Court in Cities
(MTCC) of Davao City an action for unlawful detainer against the petitioners, James and their unnamed
relatives, house helpers and acquaintances residing in the disputed property.

TOPIC: SALES – Formalities of Contract of Sale – Immovable Property

FACTS:

Spouses Dizon entered into a Compromise Agreement with Verona selling the disputed property
in the amount of not less than ₱4,000,000.00, which price shall be increased by ₱100,000.00 for every
succeeding year until the same is finally sold. They would thereafter equally divide the proceeds from the
sale. Meanwhile, Eddie went to abroad for work.

On December 8, 2009, Verona died and Eddie went back to the Philippines. A copy of a Deed of
Absolute Sale was shown to Eddie that disputed property conveyed to herein respondent, Yolanda Vida P.
Beltran (Vida), for ₱1,500,000.00.

Eddie alleged that the Deed was falsified, and his and Verona's signatures thereat were forgeries.

In June of 2010, Vida filed before the Municipal Trial Court in Cities (MTCC) of Davao City an
action for unlawful detainer against the petitioners, James and their unnamed relatives, house helpers and
acquaintances residing in the disputed property. Vida alleged that she is the registered owner of the
disputed property. While the Deed evidencing the conveyance in her favor was executed on December 1,
2009, Eddie pre-signed the same on April 9, 2008 before he left to work abroad.

The petitioners sought the dismissal of Vida's complaint arguing that at the time the Deed was
executed, Verona was already unconscious.

MTCC rendered a Decision directing the petitioners and their co-defendants to turn over to Vida
the possession of the disputed property.

ISSUE:

Whether or not the Deed of Sale enjoys the presumption of due execution, and shall remain valid
unless annulled in a proper proceeding?

RULINGS:

Insofar as a person who fraudulently obtained a property is concerned, the registration of the
property in said person's name would not be sufficient to vest in him or her the title to the property. A
certificate of title merely confirms or' records title already existing and vested. The indefeasibility of the
Torrens title should not be used as a means to perpetrate fraud against the rightful owner of real property.
Good faith must concur with registration because, otherwise, registration would be an exercise in futility.
A Torrens title does not furnish a shield for fraud, notwithstanding the long-standing rule that registration
is a constructive notice of title binding upon the whole world. The legal principle is that if the registration
of the land is fraudulent, the person in whose name the land is registered holds it as a mere trustee.

In the case at bar, when the Deed was executed on December 1, 2009, Eddie claimed that he was
abroad while Verona was already unconscious. Vida did not directly refute these allegations and instead
pointed out that the Deed was pre-signed in April of 2008. The foregoing circumstances reduced the Deed
into the category of a private instrument.

In the instant petition, Vida impliedly admits the irregularity of the Deed's notarization as both of
the vendors were not personally present.1avvphi1 Consequently, clue execution can no longer be
presumed. Besides, the extant circumstances surrounding the controversy constitute preponderant
evidence suggesting that forgery was committed.
 THIRD DIVISION

G.R. No. 196444 February 15, 2017

DASMARIÑAS T. ARCAINA and MAGNANI T. BANTA, Petitioners vs.NOEMI L. INGRAM,

represented by MA. NENETTE L. ARCHINUE, Respondent

JARDELEZA, J.:

NATURE OF THE ACTION: Respondent Archinue, on behalf of Ingram, instituted the recovery case
against petitioners before the MCTC.

TOPIC: Obligation of the Vendor Article 1539:

FACTS:

Arcaina’s attorney-in-fact, Banta, entered into a contract with Ingram for the sale of the property
with the contract price was ₱1,860,000.00, with Ingram making installment payments for the property
from May 5, 2004 to February 10, 2005 totaling ₱1,715,000.00. Banta and Ingram thereafter executed a
Memorandum of Agreement acknowledging the previous payments and that Ingram still had an
obligation to pay the remaining balance in the amount of ₱145,000.00.7 They also separately executed
deeds of absolute sale over the property in Ingram’s favor.

Subsequently, Ingram caused the property to be surveyed and discovered that Lot No. 3230 has
an area of 12,000 sq. m. Upon learning of the actual area of the property, Banta allegedly insisted that the
difference of 5,800 sq. m. remains unsold. This was opposed by Ingram who claims that she owns the
whole lot by virtue of the sale.

Ingram alleged that upon discovery of the actual area of the property, Banta insisted on fencing
the portion which she claimed to be unsold. Ingram prayed that the MCTC declare her owner of the whole
property.
 Petitioners denied that the sale contemplates the entire property and contended that the parties
agreed that only 6,200 sq. m. shall be sold at the rate of ₱300.00 per sq. m. Petitioners averred that since
Ingram failed to show that that she has a right over the unsold portion of the property, the complaint for
recovery of possession should be dismissed.

ISSUE:

Whether or not petitioners have the obligation to deliver the whole area of the subject land
subject of sale?

RULINGS:

In a lump sum contract, a vendor is generally obligated to deliver all the land covered within the
boundaries, regardless of whether the real area should be greater or smaller than that recited in the deed.
However, in case there is conflict between the area actually covered by the boundaries and the estimated
area stated in the contract of sale, he/she shall do so only when the excess or deficiency between the
former and the latter is reasonable.

Applying Del Prado to the case before us, we find that the difference of 5,800 sq. m. is too
substantial to be considered reasonable. We note that only 6,200 sq. m. was agreed upon between
petitioners and Ingram. Declaring Ingram as the owner of the whole 12,000 sq. m. on the premise that this
is the actual area included in the boundaries would be ordering the delivery of almost twice the area stated
in the deeds of sale. Surely, Article 1542 does not contemplate such an unfair situation to befall a vendor-
that he/she would be compelled to deliver double the amount that he/she originally sold without a
corresponding increase in price. In Asiain v. Jalandoni, we explained that a vendee of a land when it is
sold in gross or with the description 'more or less' does not thereby ipso facto take all risk of quantity in
the land. The use of 'more or less' or similar words in designating quantity covers only a reasonable
excess or deficiency." Therefore, we rule that Ingram is entitled only to 6,200 sq. m. of the property. An
area of 5,800 sq. m. more than the area intended to be sold is not a reasonable excess that can be deemed
included in the sale.

Further, at the time of the sale, Ingram and petitioners did not have knowledge of the actual area
of the land within the boundaries of the property. It is undisputed that before the survey, the parties relied
on the tax declaration covering the lot, which merely stated that it measures more or less 6,200 sq. m.
Thus, when petitioners offered the property for sale and when Ingram accepted the offer, the object of
their consent or meeting of the minds is only a 6,200 sq. m. property. The deeds of sale merely put into
writing what was agreed upon by the parties. In this regard, we quote with approval the ruling of the
MCTC:

In this case, the Deed of Absolute Sale (Exhibit "M") dated April 13, 2005 is clear and unequivocal as to
the area sold being up to only 6,200 square meters.1âwphi1 The agreement of the parties were clear and
unambiguous, hence, the inconsistent and impossible testimonies of and the Spouses Ingram. No amount
of extrinsic aids are required and no further extraneous sources are necessary in order to ascertain the
parties' intent, determinable as it is, from the document itself. The court is thus convinced that the deed
expresses truly the parties' intent as against the oral testimonies of Nenette, and the Spouses Ingram.
 The contract of sale is the law between Ingram and petitioners; it must be complied with in good
faith. Petitioners have already performed their obligation by delivering the 6,200 sq. m. property. Since
Ingram has yet to fulfill her end of the bargain, she must pay petitioners the remaining balance of the
contract price amounting to ₱145,000.00.

DIVISION

GR No. 208450, Jun 05, 2017

SPS. ROBERTO ABOITIZ AND MARIA CRISTINA CABARRUS, Petitioners v. SPS. PETER L.
PO AND VICTORIA L. PO, Respondents

LEONEN, J:
NATURE OF THE ACTION: Petitioner Spouses Po filed a complaint to recover the land and to
declare nullity of title with damages against petitioner.

TOPIC: Innocent Purchaser in Good Faith

FACTS:

Mariano executed a Deed of Absolute Sale in favor of his son, Ciriaco Seno a land in Cebu. The
latter sold the two (2) lots to Victoria Po (Victoria). The parties executed a Deed of Absolute Sale.

In 1990, Peter Po discovered that Ciriaco "had executed a quitclaim renouncing his interest over
Lot in favor of petitioner Roberto. The Spouses Po confronted Ciriaco. By way of remedy, Ciriaco and
the Spouses Po executed a Memorandum of Agreement in which Ciriaco agreed to pay Peter the
difference between the amount paid by the Spouses Po as consideration for the entire property and the
value of the land the Spouses Po were left with after the quitclaim.

However, also in 1990, Lot No. 2835 was also sold to Roberto. The Mariano Heirs, including
Ciriaco, executed separate deeds of absolute sale in favor of Roberto. Thereafter, Roberto immediately
developed the lot as part of a subdivision called North Town Homes. Roberto filed an application for
original registration of Lot No. 2835 with the Mandaue City Regional Trial Court. In its Decision the trial
court granted the issuance of Original Certificate in the name of Roberto. The lot was immediately
subdivided with portions sold to Ernesto and Jose.

The Spouses Po filed a complaint to recover the land and to declare nullity of title with damages.

The trial court ruled in favor of the Spouses. The Spouses Aboitiz appealed to the Court of
Appeals. The Court of Appeals, in its Decision, partially affirmed the trial court decision, declaring the
Spouses Po as the rightful owner of the land.

The Court of Appeals discussed the inapplicability of the rules on double sale and the doctrine of
buyer in good faith since the land was not yet registered when it was sold to the Spouses Po. However, it
ruled in favor of the Spouses Po on the premise that registered property may be reconveyed to the
"rightful or legal owner or to the one with a better right if the title was wrongfully or erroneously
registered in another person's name. The Court of Appeals held that the Mariano Heirs were no longer the
owners of the lot at the time they sold it to Roberto in 1990 because Mariano, during his lifetime, already
sold this to Ciriaco in 1973.

ISSUE:

Whether the respondents Jose Maria Moraza, Ernesto Aboitiz, and Isabel Aboitiz are innocent
purchasers in good faith?

RULINGS:

Despite these findings, the Spouses Po cannot recover the property. Respondents Jose, Ernesto
and Isabel are innocent purchasers Ernesto and Isabel are innocent purchasers for value.

An innocent purchaser for value refers to the buyer of the property who pays for its full and fair
price without or before notice of another person's right or interest in it. He or she buys the property
believing that "the seller is the owner and could transfer the title to the property.

The Spouses Po argue that respondents Jose, Ernesto, and Isabel are not innocent purchasers for
value because the tax declaration over the property has the following annotation:

This tax declaration is also declared in the name of Mrs. Victoria Lee Po, married to Peter Po
under tax dec. no. 0634-A so that one may be considered a duplicate to the other. However, if a property
is registered, the buyer of a parcel of land is not obliged to look beyond the transfer certificate of title to
be considered a purchaser in good faith for value.

The real purpose of the Torrens system of registration is to quiet title to land and to put a stop to
any question of legality of the title except claims which have been recorded in the certificate of title at the
time of registration or which may arise subsequent thereto. Every registered owner and every subsequent
purchaser for value in good faith holds the title to the property free from all encumbrances except those
noted in the certificate. Hence, a purchaser is not required to explore further what the Torrens title on its
face indicates in quest for any hidden defect or inchoate right that may subsequently defeat his right
thereto.

Where innocent third persons, relying on the correctness of the certificate of title thus issued,
acquire rights over the property the court cannot disregard such rights and order the total cancellation of
the certificate. The effect of such an outright cancellation would be to impair public confidence in the
certificate of title, for everyone dealing with property registered under the Torrens system would have to
inquire in every instance whether the title has been regularly or irregularly issued. This is contrary to the
evident purpose of the law. Every person dealing with registered land may safely rely on the correctness
of the certificate of title issued therefor and the law will in no way oblige him to go behind the certificate
to determine the condition of the property. Even if a decree in a registration proceeding is infected with
nullity, still an innocent purchaser for value relying on a Torrens title issued in pursuance thereof is
protected.
The protection of innocent purchasers in good faith for value grounds on the social interest
embedded in the legal concept granting indefeasibility of titles. Between the third party and the owner, the
latter would be more familiar with the history and status of the titled property. Consequently, an owner
would incur less costs to discover alleged invalidities relating to the property compared to a third party.
Such costs are, thus, better borne by the owner to mitigate costs for the economy, lessen delays in
transactions, and achieve a less optimal welfare level for the entire society

Thus, respondents were not obliged to look beyond the title before they purchased the property.
They may rely solely on the face of the title.

The only exception to the rule is when the purchaser has actual knowledge of any defect or other
circumstance that would cause "a reasonably cautious man" to inquire into the title of the seller. If there is
anything which arouses suspicion, the vendee is obliged to investigate beyond the face of the title.
Otherwise, the vendee cannot be deemed a purchaser in good faith entitled to protection under the law.

In this case, there is no showing that respondents Jose, Ernesto, and Isabel had any knowledge of
the defect in the title. Considering that the annotation that the Spouses Po are invoking is found in the tax
declaration and not in the title of the property, respondents Jose, Ernesto, and Isabel cannot be deemed
purchasers in bad faith.
 THIRD DIVISION

G.R. No. 205283 June 7, 2017

ABIGAIL L. MENDIOLA, Petitioner vs. VENERANDO P. SANGALANG, Respondent

TIJAM, J.:

NATURE OF THE CASE: Petitioners commenced their complaint for accion publiciana against
respondent for the latter to return the illegally occupied unit and to pay reasonable rental therefor.

TOPIC: Transfer of Ownership

FACTS:

While Honorata was still alive, one-half of the residential house of the subject property was being
used by petitioner and the other half by Vilma's son. The commercial building, on the other hand, was
being leased to third persons. This set-up continued until after Honorata's death.

In 2003, respondent and his siblings discovered that the subject property was already registered in
the names of petitioner and Vilma. Upon verification, they discovered that the title over the property had
been transferred in favor of petitioner and Vilma by virtue of a Deed of Sale purportedly executed by
Honorata in their favor.

It was around this time, or in July 2003, after Vilma's son left the residential house, that
respondent, allegedly without asking permission from the petitioner or Vilma and with the use of force
and violence upon things, broke open the door of the unit and had since detained the same.

Petitioner and Vilma demanded that respondent vacate the unit but the latter refused to do so.
Consequently, they commenced their complaint for accion publiciana against respondent for the latter to
return the illegally occupied unit and to pay reasonable rental therefor.

ISSUE:

Whether or not ownership by virtue of Deed of Sale is transferred to petitioner?

RULINGS:

In this case, it is undisputed that the Deed of Sale, through which ownership over the property
had been purportedly transferred to the petitioner and Vilma, was executed in 1996. However, it is
perfectly obvious that Honorata could not have signed the same as she passed away as early as 1994. If
any, Honorata's signature thereon could only be a product of forgery. This makes the Deed of Sale void
and as such, produces no civil effect; and it does not create, modify, or extinguish a juridical relation.

The Court cannot simply close its eyes against such patent defect on the argument that registered
owners of a property are entitled to its possession.

While it is true that petitioner and Vilma have in their favor a Torrens title over the property, it is
nonetheless equally true that they acquired no right under the void Deed of Sale. Indeed, when the
instrument presented is forged, even if accompanied by the owner's duplicate certificate of title, the
registered owner does not thereby lose his title, and neither does the assignee in the forged deed acquire
any right or title to the property.

SECOND DIVISION

G.R. No. 206343 February 22, 2017

LAND BANK OF THE PHILIPPINES, Petitioner, vs. LORENZO MUSNI, EDUARDO SONZA
and SPOUSES IRENEO AND NENITA SANTOS, Respondents.

LEONEN, J.:

NATURE OF THE ACTION: Respondent Musni claimed that he filed a criminal case against Nenita
and Eduardo for falsification of a public document.

TOPIC: Purchaser for value: Banks must show that they exercised the required due diligence before
claiming to be mortgagees in good faith or innocent purchasers for value.

FACTS:

Respondent Lorenzo Musni (Musni) was the compulsory heir of Jovita Musni (Jovita), who was
the owner of a lot in Comillas, La Paz, Tarlac.

Musni alleged that Nenita Sonza Santos falsified a Deed of Sale, and caused the transfer of title of
the lot in her and her brother Eduardo's names. He claimed that the Spouses Santos and Eduardo
mortgaged the lot to Land Bank as security for their loan. He alleged that he was dispossessed of the lot
when Land Bank foreclosed the property upon Nenita and Eduardo's failure to pay their loan and claimed
that he filed a criminal case against Nenita and Eduardo for falsification of a public document.

Spouses Santos admitted having mortgaged the lot to Land Bank. They also admitted that the
property was foreclosed because they failed to pay their loan with the bank. Moreover, they confirmed
that Nenita was convicted in the falsification case filed by Musni.

In defense, the Spouses Santos alleged that they, together with Eduardo, ran a lending business
under the name "Sonza and Santos Lending Investors." As security for the loan of ₱286,640.82, Musni
and his wife executed a Deed of Sale over the lot in favor of the Spouses Santos. The title of the lot was
then transferred to Nenita and Eduardo. The lot was then mortgaged to Land Bank, and was foreclosed
later.

Land Bank asserted its transaction with the Spouses Santos and Eduardo was legitimate, and that
it verified the authenticity of the title with the Register of Deeds. Further, the bank loan was secured by
another lot owned by the Spouses Santos, and not solely by the lot being claimed by Musni.

Land Bank prayed that it be paid the value of the property and the expenses it incurred, should the
trial court order the reconveyance of the property to Musni.

The trial court found that Land Bank was not an "innocent purchaser for value".

ISSUE:

Whether petitioner is a mortgagee in good faith and an innocent purchaser for value?

RULINGS:

Petitioner is neither a mortgagee in good faith nor an innocent purchaser for value.

A purchaser in good faith is one who buys property without notice that some other person has a
right to or interest in such property and pays its fair price before he has notice of the adverse claims and
interest of another person in the same property.

We quote the following disquisitions of the trial court on the Land Bank's apparent bad faith in the
transaction: "Land Ban however tried to show that the title of the land owned by Jovita Musni was
cancelled by virtue of a decision of the [Department of Agrarian Reform] Adjudication Board, Region III
and in lieu thereofTCT No. 304649 was issued in favor of Nenita Sonza et.al. The date of the decision in
(sic) December 29, 1997 but inscribed only on February 25, 1998. If this were so, why is it that Nenita
Santos was issued TCT No. 304649 on February 8, 1998, before the Decision was inscribed. Defendant
Nenita Santos never mentioned any decision of the [Department of Agrarian Reform Adjudication Board]
awarding the lot to her."

The Court of Appeals also found that petitioner was not an innocent purchaser for value:

Neither can We also consider [Land Bank] as an innocent purchaser for value because the
subject property was foreclosed on May 4, 1999 while the complaint for falsification was filed on March
4, 1999.
 "In the instant case, the Court cannot consider the Land Bank of the Philippines as innocent
purchaser for value. With all its resources, it could have ascertained how Nenita Sonza acquired the land
mortgaged to it and later foreclosed by it. The fact the land (sic) was foreclosed after Criminal Case No.
4066-99 was instituted should have warned it. The questionable ownership of Nenita Sonza for it and its
employees to obtain knowledge of the questionable transfer of the land to Nenita Sonza. Its failure to take
the necessary steps or action shall make the bank liable for damages. The bank shall be responsible for its
and its employer shortcomings."

The rule on "innocent purchasers or mortgagees for value" is applied more strictly when the
purchaser or the mortgagee is a bank. Banks are expected to exercise higher degree of diligence in their
dealings, including those involving lands. Banks may not rely simply on the face of the certificate of title.

Had petitioner exercised the degree of diligence required of banks, it would have ascertained the
ownership of one of the properties mortgaged to it.

Where "the findings of fact of the trial courts are affirmed by the Court of Appeals, the same are
accorded the highest degree of respect and, generally, will not be disturbed on appeal[;] Such findings are
binding and conclusive on this Court." Accordingly, this Court finds no reason to disturb the findings of
the Court of Appeals, which affirmed the findings of the trial court, that petitioner is neither a mortgagee
in good faith nor an innocent purchaser for value.

THIRD DIVISION
 G.R. No. 200285 March 20, 2017

FELIX B. TIU, Petitioner vs SPOUSES JACINTO JANGAS AND PETRONILA MERTOJANGAS,

MARIA G. ORTIZ, MELENCIO ORTIZ, MERLA M. KITANE, PACITO KITANE,
CANDELARIA RUSIANA, RODRIGO RUSIANA, JUANA T. JALANDONI, ADELAIDA P.
RAGAY and TEOFISTO RAGAY, SR., Respondents

REYES, J.:

NATURE OF THE ACTION: This case stemmed from a Complaint for reconveyance of property filed
by Spouses Jacinto and Petronila Merto-Jangas (Spouses Jangas) against Felix Tiu (petitioner) and Rural
Bank of Amlan, Inc. (RBAI).

TOPIC: Purchaser of Good Faith

FACTS:

The subject property was originally owned by Gregorio, and upon his death, the subject property
was transmitted by succession to his heirs, as confirmed by the issuance of TD No. 17560 issued in 1961
where the owner described therein were Gregorio's daughters, Adelaida, Bruna and Isabel. Thereafter, the
Pajulas sisters equally partitioned the subject property among themselves.

Bruna sold to the Spouses Delayco one-third over Lot No. 480-A. The heirs of Spouses , Delayco,
represented by Bridiana, applied for and was granted an FP over the whole Lot No. 480-A as evidenced
by OCT No. FV-29932. Furthermore, Bridiana transferred the title to her name alone and was then issued
TCT No. FT-4925.

In March of 1990, Bridiana sold the subject property to the petitioner. Spouses Felix and Evelyn
Tiu (Spouses Tiu), who also had the subject property declared in their names. Then, in 1991, the Spouses
Tiu mortgaged the subject property with the RBAI

Hence, Spouses Jangas to file a complaint for reconveyance and damages against the petitioner
and RBAI.

The trial court dismissed the petitioner's claim of ownership over the subject property taking note
that the sale and transfer effected by Bruna in favor of the Spouses Delayco was merely her one-third-
share of the subject property.

On August 31, 2010, the CA, in its Decision22 denied the petitioner's appeal and affirmed in toto
the findings of the RTC.

ISSUE:

Whether or not petitioner is a buyer in good faith and entitled to reconveyance of the subject
property?

RULINGS:
 The determination of whether the petitioner is a buyer in good faith is a factual issue, which
generally is outside the province of this Court to determine in a petition for review. Although this rule
admits of exceptions, none of these apply to this case. There is no conflict between the factual findings
and legal conclusions of the RTC and the CA, both of which found the petitioner to be a buyer in bad
faith and not entitled to reconveyance of the subject property.

It is undisputed that the subject property was originally owned by Gregorio, and upon his death,
the subject property was transmitted by succession to his heirs, as confirmed by the issuance of TD No.
17560 issued in 1961 where the owner described therein were Gregorio's daughters, Adelaida, Bruna and
Isabel. Thereafter, the Pajulas sisters equally partitioned the subject property among themselves. Thus,
Bruna is entitled to only one-third of the subject property.

A scrutiny of the records established the fact that the property sold to the Spouses Delayco was
the one-third share only of Bruna over Lot No. 480-A. However, it was clearly ascertained that the heirs
of Spouses , Delayco, represented by Bridiana, applied for and was granted an FP over the whole Lot No.
480-A as evidenced by OCT No. FV-29932. Furthermore, Bridiana transferred the title to her name alone
and was then issued TCT No. FT-4925.

As correctly emphasized by the lower courts, the petitioner's right in the subject property is
limited only to Bruna's share in the co-owned property. When the subject property was sold to the
Spouses Delayco, they merely stepped into the shoes of Bruna and acquired whatever rights and
obligations appertain thereto.

The petitioner mistakenly relied upon the title of Bridiana to conclude that the latter was a
possessor in good faith and with just title who acquired the subject property through a valid deed of sale.
Neither can the petitioner benefit from the contract of sale of the subject property, executed by

Bridiana in his favor, to support his claim of possession in good faith and with just title.

Be that as it may, the rights of the respondents as owners of their respective shares of the subject
property were never alienated from them despite having the whole Lot No. 480-A titled under Bridiana's
name. Neither does the fact that the petitioner had bought the subject property from Bridiana and having a
new title issued in his name displaced the existing ownership of the respondents. Besides, it seems that
the petitioner knew of the fact that there were other occupants of the subject property. In fact, during cross
examination, the petitioner testified that when he visited the subject property for surveying he already saw
two structures that were built thereon, thus, he already knew that someone else besides his seller has
possession over the same.

The Court has repeatedly emphasized that one who purchases real estate with knowledge of a
defect or lack of title in his vendor cannot claim that he has acquired title thereto in good faith as against
the true owner of the land or of an interest therein; and the same rule must be applied to one who has
knowledge of facts which should have put him upon such inquiry and investigation as might be necessary
to acquaint him with the defects in the title of his vendor.27

When a piece of land is in the actual possession of persons other than the seller, the buyer must be
wary and should investigate the rights of those in possession. Without making such inquiry, one cannot
claim that he is a buyer in good faith. As in this case, the failure of buyer to take the ordinary precautions
which a prudent man would have taken under the circumstances, especially in buying a piece of land in
the actual, visible and public possession· of another person, other than the vendor, constitutes gross
negligence amounting to bad faith.
 FIRST DIVISION

G.R. No. 194533 APRIL 19, 2017

PHILIPPINE STEEL COATING CORP, Petitioner, vs. EDUARD QUINONES, Respondent

SERENO, CJ:

NATURE OF THE CASE: This case arose from a Complaint for damages filed by respondent Quiñones
(owner of Amianan Motors) against petitioner PhilSteel.

TOPIC: Express Warranty

FACTS:

Richard Lopez, sales engineer of PhilSteel, offered Quinones their new product: primer-coated,
long span rolled galvanized iron (G.I) sheets. The latter showed interest, but asked Lopez if the primer-
coated sheets were compatible with Guilder acrylic paint process used by Amianan Motors n the finishing
of its assembled buses. Uncertain, Lopez referred the query to his immediate superior, Ferdinand
Agbengco, PhilSteel’s sale manager.

There were assurance of quality by Angbengco to Quinones of their new product as superior to
that of the G.I’s sheet being used by the latter in his business, hence Quinones expressed reservations.
Due to guaranty of Angbengco, Quinones was induced to purchase the product and use it in the
manufacture of bus units.

However, Quinone’s several customers complained about the bus units they bought claiming that
the paint or finish used was breaking and peeling off. It invoked the warranties given by Angbengco.
According to him, the damaged to the vehicles was attributable to the hidden defects of the primer-coated
sheets and /or their incompatibility with the Guilder acrylic paint process used in Amianan Motors,
contrary to the prior evaluation and assurances made by Philsteel. Quinones was forced to repair the
damage.

PhilSteel counters that Quinones himself offered to purchase the subject product directly from the
former without being induced by any of PhilSteel representatives.

RTC found the assurance made by Angbengco constituted an express warranty under Article 156
of the Civil Code.

ISSUE:

Whether or not vague oral statements made by seller on the characteristics of a generic good can
be considered warranties that may be invoked to warrant payment of damages?

Whether general warranties on the suitability of products sold prescribe in 6 months under Article 1571
of the Civil Code?

RULNGS:

We deny the petition. The Court agrees with the CA that this is the case of express warranty
under Article 1546 of the Civil Code. Petitioner argues that the purported warranties by mere “vague oral
statements cannot be invoked to warrant the payment of damages.

An express warranty can be oral when it is positive affirmation of a fact that the buyer relied on.

Petitioner argues that the purported warranties by mere vague oral statements cannot be invoked
to warrant the payment of damages.

A warranty is a statement or representation made by the seller of goods – contemporaneously and

as part of the contract of sale – that has reference to the character, quality or title of the goods; and is
issued to promise or undertake to insure that certain facts are or shall be as the seller represents them. A
warranty is not necessarily written. It may be oral as long as it is not given as a mere opinion or judgment.
Rather, it is a positive affirmation of the fact that the buyers rely upon, and that influences or induces
them to purchase the product.

All in all, these “vague oral statements” were express affirmations not only of the costs that could
be saved if the buyer used PhilSteel’s G.I sheets, but also of the compatibility of thise sheets with the
acrylic painting process customarily used in Amianan Motors. Angbengco did not aimlessly utter those
“vague oral statements” for nothing but with a clear goal of persuading Quinones to buy PhilSteel’s
product.

Taken together, the oral statements of Angbengco created an express warranty. They were
positive affirmations of the facts that thee buyer relied on and that induced him to buy petitioner’s primer-
coated G.I sheets.
 THIRD DIVISION

G.R. No. 416419 OCTOBER 4, 2017

PILIPINAS MAKRO, INC, Petitioner vs. COCO CHARCOAL PHILIPPINES, INC AND LIM
KIM SAN Respondents

MARTINEZ, J.:
NATURE OF THE ACTION: Makro filed separate complaints against Coco Charcoal and Lim to
collect the refund sought.

TOPIC: Rights and Obligations of the Vendor: Implied Warranty

FACTS:

Petitioner Pilipinas Mackro and respondent Coco Charcoal Phils. Inc executed a notarized Deed
of Absolute Sale wherein the latter would sell its parcel of land to the former. Also, petitioner entered into
another notarized Deed of Absolute Sale with respondent Lim Kim San for the sale of the latters land.
Coco Charcoal and Lim’s parcel of land are contiguous and parallel to each other.

However, petitioner discovered that the lot purchased from Coco Charcoal had been encroached
upon by DPWH for its road widening project and construction of drainage canal to develop and expand
the Davao-Cotabato National Highway and 130 square meters of the land bought from Lim had been
encroached upon the same DPWH project.

Petitioner offered a compromise agreement in consideration of a refund of the purchase price

corresponding to the area encroached upon by the road widening project. Failing to recover such, Mackro
filed separate complaints against Coco Charcoal and Lim to collect the refund sought.

While the appellate court agreed that the DPWH project encroached upon the frontal portions of
the properties, it ruled that Mackro was not entitled to a refund. It explained that the warranty expressed
in Section 4(i) of the Deeds of Sale similar to the warranty against eviction set forth under Article 1548 of
the Civil Code. As such, the CA posited that only a buyer in good faith may sue to a breach of warranty
against eviction. It averred that Mackro could not be feign ignorance of the ongoing road widening
project. It also noted that Mackro’s actual knowledge of the encroachment before the execution of the sale
constitutes its recognition that Coco Charcoal and Lim’s warranty against liens, easement, and
encumbrance does not include the respective 131 and 130 square meters affected by the DPWH project,
but covers only the remainder of the property.

ISSUE:

Whether or not CA earned in treating Section 4(i) of the Deed of Sale as akin to an implied
warranty against eviction?

RULINGS:

The CA erred in treating Section4 (i) of the Deeds of Sale as akin to an implied warranty against
eviction. First, the deeds of Sale categorically state that the sellers assure that the properties sold were free
from any encumbrances which may prevent Makro from fully and absolutely possessing the properties in
question. Second, in order for the implied warranty against eviction to be enforceable, the following
requisites must concur: (a) there must be a final judgment (b) the purchaser shall have deprived of the
whole or part of the thing sold (c) said deprivation was by virtue of a prior right to the sale made by the
vendor and (d) the vendor has been summoned and made co-defendant in the suit for eviction at the
instance of the vendee. Evidently, there was no final judgment and no opportunity for the vendors to have
been summoned precisely because no judicial action was instituted.
 Further, even if Section 4(i) of the deeds of sale was to be deemed similar to an implied warranty
against eviction, the CA erred in concluding that Marko acted in bad faith. It is true that the warranty
against eviction cannot be enforced if the buyer knew the risks of danger of eviction and still assumed its
consequences. The CA highlights that Marko was aware of the encroachments even before the sale
because the ongoing road widening project was visible enough to inform the buyer of the diminution of
the land area of the property purchased.
 THIRD DIVISION

G.R. No. 200612, April 05, 2017

RAFAEL C. UY (CABANGBANG STORE), PETITIONER, V. ESTATE OF VIPA FERNANDEZ,

RESPONDENT.

REYES, J.:

NATURE OF THE ACTION: The Estate of Vipa, through Grace Joy, filed a complaint for unlawful
detainer with the Municipal Trial Court in Cities (MTCC) of Iloilo City against Rafael.

TOPIC: Contract of Sale – Sale of the Undivided Share

FACTS:

A contract of lease was executed between Vipa and Rafael Uy (Rafael) over the subject
property and the improvements thereon, pursuant to which, Rafael bound himself to pay Vipa, as
consideration for the lease of the property, the amount of P3,000.00 per month, with a provision
for a 10% increase every year thereafter.
On March 5, 1994, Vipa died leaving no will or testament whatsoever. Grace Joy became
the de facto administrator of the estate of Vipa. After Vipa's death, Levi lived in Aklan.
A complaint for unlawful detainer was filed by the Estate of Vipa against Rafael for
failure to pay the monthly rents.
However, Rafael’s defense is that deposited the amount of P10,000.00 with the Office of
the Clerk of Court of the Regional Trial Court (RTC) of Iloilo City on November 20, 1998 and
that Grace Joy was informed of such consignation since he had no idea on who is entitled to
receive the rent for the subject property.
The RTC explained that the subject property was acquired by Vipa during the subsistence
of her marriage with Levi and, as such, is part of their conjugal properties. That after Vipa's
death, the conjugal partnership was terminated, entitling Levi to one-half of the property. The
RTC then pointed out that Levi sold his share in the subject property to Rafael, as evidenced by a
Deed of Sale. Accordingly, the RTC ruled that Rafael, as co-owner of the subject property,
having bought Levi's one-half share thereof, had the right to possess the same.

ISSUE:
 Whether or not the sale of Levi, co-owner of the subject undivided interest is void?

RULIGNS:

Nevertheless, a co-owner could sell his undivided share; hence, Levi had the right to freely sell
and dispose of his undivided interest. Thus, the sale by Levi of his one-half undivided share in the subject
property was not necessarily void, for his right as a co-owner thereof was effectively transferred, making
the buyer, Rafael, a co-owner of the subject property. It must be stressed that the binding force of a
contract must be recognized as far as it is legally possible to do so (quando res non valet ut ago, valeat
quantum valere potest).

However, Rafael became a co-owner of the subject property only on December 29, 2005 – the
time when Levi sold his one-half undivided share over the subject property to the former. Thus, from
December 29, 2005 Rafael, as a co-owner, has the right to possess the subject property as an incident of
ownership. Otherwise stated, prior to his acquisition of Levi's one-half undivided share, Rafael was a
mere lessee of the subject property and is thus obliged to pay the rent for his possession thereof.

Accordingly, Rafael could no longer be directed to vacate the subject property since he is already
a co-owner thereof. Nevertheless, Rafael is still bound to pay the unpaid rentals from June 1998 until
April 2003 in the amount of P271,150.00. In Nacar v. Gallery Frames, et al.,[58] the Court pointed out
that pursuant to Resolution No. 796 of the Bangko Sentral ng Pilipinas Monetary Board, the interest rate
of loans or forbearance of money, in the absence of stipulation shall be six percent (6%) effective only
from July 1, 2013. Thus, prior to July 1, 2013, the rate of interest on loans or forbearance of money, in the
absence of stipulation, is still 12%. Accordingly, the amount of P271,150.00, representing the unpaid
rentals shall earn interest at the rates of 12% per annum from the date of the last demand on May 3, 2003
until June 30, 2013 and 6% per annum from July 1, 2013 until fully paid
 THIRD DIVISION

G.R. No. 228112 September 13, 2017

SPOUSES ROSALINO R. REYES, JR AND SYLVIA S. REYES, Petitioners, vs. SPOUSES

HERBERT BUN HONG G. CHUNG AND WIENNA T. CHUNG, Respondents.

VELASCO, JR J.

NATURE OF THE ACTION: The respondents lodged a Complaint for Ejectment against the petitioners
before the Metropolitan Trial Court of Quezon City.

TOPIC: Sales – Extinguishment of Contract of Sale – Redemption

FACTS:
 Spouses Reyes obtained from Export and Industry Bank, Inc a loan secured by the Deed of Real
Estate Mortgage. When the petitioner Spouses defaulted in the payment on their loan obligation, the
subject property is extra judicially foreclosed and sold at public auction, with the EIBI as the highest
bidder. After the petitioner’s failure to redeem the subject property within one year redemption period, the
title thereto was consolidated in EIBI’s name. Later, EIBI sold the subject property to LNC Corporation
and the later sold and assigned to respondents spouses Herbert Bun Hong and Wienna Chung. The
respondent lodged a complaint for Ejectment against petitioners. Respondents alleged that they acquired
the absolute right as purchaser and successors in interests of EIBI and LNC and they applied for the
issuance of Writ of Possession as a matter of right.

ISSUE:

Whether or not purchaser in the foreclosure sale may demand possession as a matter of right?

RULINGS:

This Court upholds that the respondents right to writ of possession even though they were not
purchasers in the foreclosure proceedings.

In an extrajudicial foreclosure of real property, the purchaser becomes the absolute owner thereof
if no redemption is made within one year from the registration of the certificate of sale by those
entitled to redeem. Being the absolute owner, he is entitled to all the rights of ownership over a property
recognized in Article 428 of the New Civil Code, not the least of which is possession or jus possidendi.
Possession being an essential right of the owner with which he is able to exercise the other attendant
rights of ownership, after consolidation of title, the purchaser in a foreclosure sale may demand
possession as a matter of right.

However, unlike the original mortgagee-purchaser, the respondents’ right to apply for the
issuance of writ of possession is circumscribed and cannot be made ex-parte; the issuance of a writ of
possession in favor of a subsequent purchaser must be made only after hearing and after determining that
the subject property is still in the possession of the mortgagor.

It was error therefore for RTC branch 226 to issue writ of possession to the respondents ex parte.

Supreme Court, Baguio

THIRD DIVISION
 G.R. No. 212778 April 26, 2017

TEDDY CASTRO AND LAURO SEBASTIAN ... Petitioners versus PABLITO V. MENDOZA, SR.,
on his behalf and as attorney-in-fact of RICARDO C. SANTOS, ARLENE C. MENDOZA,
MARGIE AC DE LEON, NANCY S. REYES, MARITA PAGLINAWAN, NATIVIDAD C.
MUNDA, MARILOU DE GUZMAN RAMOS, LEONCIA PRINCIPIO, CECILIA DINIO, ANGEL
DELA CRUZ, ZENAIDA SANTOS, LOURDES S. LUZ, MARIFE F. CRUZ, ANTONIO H.
SANTOS, CONSTANCIA SANTOS, MARCELINA SP. DAMEG, PLACIDO DE LEON, LILIAN
SANTOS, (collectively organized as Bustos Public Market II Vendors and Stall Owners
Association) and MUNICIPALITY OF BUSTOS, BULACAN, Respondents

JARDELEZA, J:
NATURE OF THE ACTION: Both petitioners and private respondents filed various motions before the
PARAD: (1) petitioners filed a Motion to Cite Defendants in Contempt (both public and private
respondents) and Issue Writ of Demolition, and Motion for Execution of Deed of Conveyance; and (2)
respondents, as actual possessors of the property, filed their Affidavit of Third Party Claim.

TOPIC: Sale: Right of Redemption

FACTS:

Simeon’s compulsory heirs, surviving spouse, Laura, and his children, Rosalina, Natividad,
Melencio, Valentin, Jesus, Tirso, and Luis, all surnamed Santos, executed a deed of extrajudicial partition
with waiver of rights and sale.

Jesus, owner-heir sold his share in the original Santos property to respondent Municipality on
October 27, 1992 for the expansion and construction of the Bustos public market.

As of 1989, the lots surrounding the first public market in respondent Municipality, including the
original Santos property and the portion sold by Jesus, have been classified as a commercial area.

From 1991 to 1994, all phases of the sales transaction between Jesus and respondent Municipality
(negotiation and acquisition) and the subsequent construction and completion of the public market, were
effected without issue or complaint from the petitioners. After the transfer of ownership of the property to
respondent Municipality, the latter had begun constructing public market.

On August 22, 1994, after the inauguration of the public market, petitioners filed their complaint
for Maintenance of Peaceful Possession with prayer for Restraining Order/ Preliminary Injunction; Pre-
emption and Redemption; and Damages before the PARAD Bulacan against respondent Municipality. In
their complaint, petitioners “categorically manifested their serious intent to exercise their rights of pre-
emption and redemption provided for under Sections 11 and 12, Republic Act No. 3884, as amended.” On
August 26, 1994, petitioners deposited the amount of P2,300.00 as redemption price for the property.

On June 28, 1995, the PARAD ruled that: (1) petitioners are the conclusive tenants of the entire
original Santos property, including the property now owned by respondent Municipality; and (2) both
Jesus and respondent Municipality failed to give notice of the sale of the property to the tenants, herein
petitioners.

Issue:

Whether or not petitioners have validly exercised their right of redemption?

Held:

We now examine the redemption made by petitioners.

Under Section 12 of the RA 3844, the right of redemption is validly exercised upon compliance
with the following requirements: (a) the redemptioner must be an agricultural lessee or share tenant; (b)
the land must have been sold by the owner to a third party without prior written notice of the sale given to
the lessee or lessees and the DAR; (c) only the area cultivated by the agricultural lessee may be redeemed;
and (d) the right of redemption must be exercised within 180 days from written notice of the sale by the
vendee.

Jurisprudence instructs that tender or consignation is an indispensable requirement to the proper

exercise of the right of redemption by the agricultural lessee. An offer to redeem is validly effected
through: (a) a formal tender with consignation, or (b) a complaint filed in court coupled with consignation
of the redemption price within the prescribed period. In making a repurchase, it is not sufficient that a
person offering to redeem merely manifests his desire to repurchase. This statement of intention must be
accompanied by an actual and simultaneous tender of payment of the full amount of the repurchase price,
i.e., the consideration of the sale, otherwise the offer to redeem will be held ineffectual.

Applying the foregoing, we find that petitioners did not validly exercise their right of redemption.

In this case, it is undisputed that petitioners are bona fide tenants of the original Santos property.
A portion of that land was sold by an owner-heir, Jesus, to a third party, respondent Municipality, without
any written notice of the sale to petitioners and the DAR. Albeit petitioners’ right of redemption had long
been sustained and upheld, it fell upon them to comply with the requirements for a valid and effective
exercise of such right. Otherwise stated, the filing of the complaint should have been coupled with the
consignation of the redemption price to show their willingness and ability to pay within the prescribed
period.

In this regard, we agree with the CA’s ruling that petitioners belatedly tendered payment and
effected consignation of the redemption price of P1.2 million. The discrepancy between the amounts of
P2,300.00 and P1.2 Million clearly calls to question petitioners’ willingness and ability to pay.

Considering that petitioners failed to consign the full redemption price of P1.2 Million when they
filed the complaint before the PARAD in August 22, 1994, there was no valid exercise of the right to
redeem the property. It bears stressing that the right of redemption under Section 12 of RA 3844, as
amended, is an essential mandate of the agrarian reform legislation to implement the State’s policy of
owner-cultivatorship and to achieve a dignified, self-reliant existence for small fanners. Such laudable
and commendable policy, however, is never intended to unduly transgress the corresponding rights of
purchasers of land. Consequently, petitioners cannot redeem the property and gain its ownership.
 SECOND DIVISION

G.R. No. 224225 AUGUST 14, 2017

NORMA I. BARING, Petitioner vs ELENA LOAN AND CREDIT COMPANY, INC, Respondent

PERALTA, J.:

NATURE OF THE ACTION: Elena Loan filed a Petition for Foreclosure under Act No. 3135, as
amended, before the Office of the Clerk of Court and Ex-Officio Sheriff of Las Piñas City.

TOPIC: Redemption

FACTS:

Petiioner Norma Baring and Spouses Virgilio and Bernardo obtained a series of loans and other
credit accommodations in the initial amount of three thousand from petitioner –appellee Elena Loan and
Credit Company, Inc a suly organized investor. As security of the said loan, Baring executed a Deed of
Real Estate Mortgage over the parcel of land with the improvement. In the Real Estate Mortgage, the
parties agreed that Elena Loan as the mortgagee may foreclose the mortgage extrajudicially.

Subsequently, the debtors failed to pay their obligations under the promissory notes despite
repeated demands. Consequently, Elena Loan filed a Petition for Foreclosure. On December 4, 2009
Elena Loan filed an Ex-Parte petition for the Issuance of a Writ of Possession.

ISSUE:

Whether or not petitioner becomes an absolute owner of the subject property upon failure of the
respondent to exercise redemption?

RULINGS:
 In this case, respondent foreclosed the subject property after the petitioner and her co-debtors
failed to pay their obligation under the promissory notes despite repeated demands. Upon the compliance
with the legal requirements, a public auction was held where respondent emerged as the highest bidder.
As petitioner did not exercise her right of redemption over the foreclosed property, the title to the property
was consolidated in the name of respondent. Consequently, as the new registered owner of the subject
property, respondent is entitled to exercise all the attributes of ownership.

It is well settled that the purchaser in an extrajudicial foreclosure of real becomes the absolute
owner of the property if no redemption is made within one year from the registration of the certificate of
sale by those entitled to redeem. A torrens title recognizes the owner whose name appears in the
certificate as entitled to all the rights of ownership under the civil law.

Since respondent is the absolute and registered owner of the subject property and entitled to the
possession thereof, the CA correctly ruled that it was the RTC ministerial duty to issue the writ of
possession prayed for by the respondent.

SECOND DIVISION

G.R. No. 194152 JUN 05, 2017

MAKILITO B. MAHINAY, Petitioner versus DURA TIRE & RUBBER INDUSTRIES, INC,
Respondent

PRESENT: CARPIO, J, CHAIRPERSON; PERALTA; MENDOZA;* LEONEN AND

MARTIRES,** JJ

NAURE OF THE ACTION: Petitioner filed a Complaint for specific performance and annulment of
auction sale before the Regional Trial Court of Cebu City.

TOPIC: Redemption

FACTS:
 On June 5, 1992, A&A Swiss sold a parcel of land to Mahinay with acknowledgment that the
property had been previously mortgaged by A&A Swiss to Dura Tire, holding himself liable for any
claims that Dura Tire may have against Move Overland. Under the mortgage agreement, Dura Tire was
given the express authority to extrajudicially foreclose the property should Move Overland fail to pay its
credit purchases. Due to failure to pay its credit purchases, Tire applied for extrajudicial foreclosure of the
property. Despite the protest, Sheriff Romeo Laurel (Sheriff Laurel) proceeded with the sale and
issued a Certificate of Sale in favor of Dura Tire, the highest bidder at the sale.

Mahinay filed a Complaint for specific performance and annulment of auction sale before the
Regional Trial Court of Cebu City.

The Court of Appeals held that Mahinay had no right to question the foreclosure of the property.
Mahinay, as “substitute mortgagor,” was fully aware that the property he purchased from A&A Swiss was
previously mortgaged to Dura Tire to answer for Move Overland’s obligation. Considering that Move
Overland failed to pay for its credit purchases, Dura Tire had every right to foreclose the property.

ISSUE:

Whether or not the one (1)-year period of redemption was tolled when Mahinay filed his
Complaint for annulment of foreclosure sale?

RULINGS:

Contrary to Mahinay’s claim, his right to redeem the mortgaged property did not arise from the
Court of Appeals’ “judicial declaration” that he was a “substitute mortgagor” of A&A Swiss. By force of
law, specifically, Section 6 of Act No. 3135, Mahinay’s right to redeem arose when the mortgaged
property was extrajudicially foreclosed and sold at public auction. There is no dispute that Mahinay had a
lien on the property subsequent to the mortgage. Consequently, he had the right to buy it back from the
purchaser at the sale, Dura Tire in this case, “from and at any time within the term of one year from and
after the date of the sale.”

The “date of the sale” referred to in Section 6 is the date the certificate of sale is registered with
the Register of Deeds. This is because the sale of registered land does not ‘“take effect as a conveyance,
or bind the land’ until it is registered.”

The right of redemption being statutory,61 the mortgagor may compel the purchaser to sell back
the property within the one (l)-year period under Act No. 3135. If the purchaser refuses to sell back the
property, the mortgagor may tender payment to the Sheriff who conducted the foreclosure sale. Here,
Mahinay should have tendered payment to Sheriff Laurel instead of insisting on directly paying Move
Overland’s unpaid credit purchases to Dura Tire.
 DIVISION

GR No. 200349, Mar 06, 2017

FE B. YABUT Petitioner v. ROMEO ALCANTARA Respondent

DECISION

PERALTA, J.:

NARURE OF THE ACTION: Respondent Alcantara filed action for reconveyance insisting that he
was the true and lawful owner and possessor of subject parcels of land.

TOPIC: In fraud of creditor respondent

FACTS:

Romeo Alcantara filed a Complaint for Reconveyance alleging that he was the true and lawful
owner and possessor of parcels of agricultural- residential land located in Balangasan, Pagadian City,

For petitioners' part, on the other hand, they contend that Ballesteros applied for a Sales
Application (SA 10279) covering a total land area of 46.2930 hectares. Barbara Andoy filed a Sales
Application (SA 10960) over a portion of the same land area applied for by Ballesteros. The Assistant
Director of Lands issued a decision finding that Andoy entered a portion of the land in dispute with the
knowledge that the premises had already been applied for by Ballesteros.

Thereafter, Andoy's heirs entered and laid out their claims on portions of SA 10279 Because of
this, Ballesteros was forced to file a case or forcible entry against the Jamisola siblings before the local
Municipal Justice of Peace.

During Ballesteros's absence or specifically on August 20, 1946, Andoy's son, Faustino Andoy
Jamisola, sold a part of the subject property to Pantaleon Suazola.

When Ballesteros returned to Pagadian in 1949 after his retirement as Provincial Philippine
Constabulary Commander of Pampanga, he learned about the sale of the six (6) hectares between
Faustino and Suazola..

On September 3, 1952, however, Suazola filed Free Patent Application over what he identified as
Lot No. 4111, which turned out to be the whole 11.5 hectares of Lot No. 6509.

Thus, Ballesteros filed a Letter Protest to the Director of Lands against Suazola's FPA No. V8352
which Director of Lands ruled that the rejection of Andoy's sales application in 1930 and the consequent
recognition of better rights in favor of Ballesteros were as much binding upon the Jamisola siblings as it
had been upon their mother. The Jamisola siblings then appealed to the Secretary of the Department of
Agriculture and Natural Resources (DANR). The DANR Secretary excluded the lots being claimed by the
Jamisola siblings from SA 10279, in line with the government's land for the landless policy.

Sometime in May 1958, Andrada's son-in-law, Felipe Fetalvero, caused the survey of Lot No.
6509. In said survey, the portion sold to Andrada. As a result, the Director of Lands issued an Order of
Execution on July 6, 1966 directed to the District Land Officer to order the Jamisolas, their relatives,
representatives, tenants, or anybody acting in their behalf to vacate the premises and place Ballesteros in
peaceful and exclusive possession of the same. Thereafter, the DANR Land Investigator submitted a
report stating that the Jamisolas or any of their relatives was not actually living within the premises.

As a result of the favorable ruling, Ballesteros filed a cadastral answer for the judicial
confirmation of his title in the cadastral proceedings His title to the subject prope11ies was confirmed in
said proceedings and eventually, a decree was made registering such title under the Torrens System as
Original Certificate of

On August 5, 1969, Ballesteros sold Lot Nos. 6509-B, 6509-C, and 6509-D to his daughter,
Yabut. On September 16, 1969, Alcantara filed a petition for review with the CFI praying that the
issuance of the decree of title over the subject lots in favor of Ballesteros and the Yabuts be set aside since
he was the true and lawful owner and possessor of said parcels of land and that they were totally devoid
of any lawful claim over the subject lots.

Respondent Alcantara claimed that to be the owner and possessor of the parcels of agricultural
residential land located in Batangas which he bought to it from Pantaleon Suazola, who in turn had been
continuously and openly in occupation and possession of said property in the concept of an owner for
more than 39 years before said respondent acquired the same. Ballesteros then purportedly employed
fraud to have the contested property registered in his name. Six months later, Ballesteros sold the lots to
his daughter, Yabut

ISSUE:

Whether or not defendants conspired with Tiburcio Ballesteros to defraud plaintiff?

RULINGS:

An action for reconveyance is a legal and equitable remedy that seeks to transfer or reconvey
property, wrongfully registered in another person's name, to its rightful owner: To warrant reconveyance
of the land, the plaintiff must allege and prove, among others, ownership of the land in dispute and the
defendant's erroneous, fraudulent or wrongful registration of the property.[18] The following requisites
must concur: (1) the action must be brought in the name of a person claiming ownership or dominical
right over the land registered in the name of the defendant; (2) the registration of the land in the name of
the defendant was procured through fraud or other illegal means; (3) the property has not yet passed to an
innocent purchaser for value; and (4) the action is filed after the certificate of title had already become
final and incontrovertible but within four years from the discovery of the fraud, or not later than ten (10)
years in the case of an implied trust.
 Respondents failed to show that the registration of the land in the name of Ballesteros was
procured through fraud or any other illegal means. A careful perusal of the assailed decisions of the RTC
and the CA would reveal that no actual and definite finding of fraud on the part of Ballesteros was ever
made. The RTC merely held that Alcantara was able to he is the true and lawful owner of Lots 6509-C
and D and petitioners could not be regarded as innocent purchasers for value and in good faith. In fact, it
even made the pronouncement as to respondent’s failure to prove the existence of fraud, thus; thus, in this
case, however, it was not shown that the defendants conspired with Tiburcio Ballesteros to defraud
plaintiff. As fraud is criminal in nature, it must be proved by clear preponderance of evidence. The
inadequacy of the contract and the relationship of the vendor Ballesteros to the vendee Fe Yabut are not
by themselves proof of fraud.

SECOND DIVISION

G.R. No. 188057 July 12, 2017

HILLTOP MARKET FISH VENDORS' ASSOCIATION, INC., Petitioner vs.HON. BRAULIO

YARANON, City Mayor, Baguio City, HON. GALO WEYGAN, City Councilor and Chairman
Anti-Vice Coordinating Task Force, and the CITY GOVERNMENT OF BAGUIO, Respondents

CARPIO, J.:

NATURE OF THE ACTION: Petitioner, Hilltop filed a Complaint with Very Urgent Application for
Temporary Restraining Order and Writ of Preliminary Injunction praying that the court issue an
injunction against the implementation of AO No. 30 and order the concerned office to issue the
Certificate to make the contract of lease effective.

TOPIC: Contract of Lease : Perfection

FACTS:

Petitioner Hilltop Market Fish Vendors' Association, Inc. (Hilltop), entered into a Contract of
Lease over a lot owned by the City of Baguio. The contract provided that the period of lease is 25 years,
renewable for the same period at the option of both parties, and the annual lease rental is ₱25,000, with
the first payment commencing upon the issuance by the City Engineer's Office of the Certificate of full
occupancy of the building to be constructed by Hilltop on the lot. Before the Certificate is issued, the City
of Baguio can continue collecting market fees from the vendors who are allowed to occupy any portion of
the building. At the termination of the lease period, the City of Baguio will own the building without
payment or reimbursement for Hilltop's costs.

Sometime in 1975, Hilltop constructed the building, thereafter known as the Rillera building, on
the lot. Even though the City Engineer's Office did not issue a Certificate, Hilltop's members occupied the
Rillera building and conducted business in it.

On 16 October 1980, the City Council of Baguio, through its then Mayor Ernesto Bueno, rescind
the contract of lease with Hilltop, for its continued failure to comply with its obligation to complete the
Rillera building.

On 28 February 2005, respondent then Mayor Braulio Yaranon issued Administrative Order No.
030 S. 2005 ordering the City Building and Architects Office (CBAO) and Public Order and Safety
Division to immediately close the Rillera building to have it cleaned, sanitized and enclosed; to prevent
illegal activities in it; and for its completion and preparation for commercial use.

Hilltop filed with the RTC a Complaint with Very Urgent Application for Temporary Restraining
Order and Writ of Preliminary Injunction praying that the court issue an injunction against the
implementation of AO No. 30 and order the concerned office to issue the Certificate to make the contract
of lease effective.

In their Answer Yaranon and respondent Galo Weygan alleged that the Certificate was not issued
to Hilltop because the Rillera building was not completed, and there were no provisions for electrical and
plumbing systems or facilities for conduct of regular business. In any case, they argued that the issuance
of the Certificate shall only signal the start of payment of annual lease rental and not the effectivity of the
contract. They further alleged that even without the Certificate, Hilltop's members occupied the building
and conducted business in it; hence, Hilltop already waived the condition.

ISSUE:

Whether or not there is a perfected contract of lease between Hilltop and City of Baguio?

RULINGS:

In a contract of lease, the cause or essential purpose is the use and enjoyment of the thing. The
thing or subject matter of the contract in this case was clearly identified and agreed upon as the lot where
the building would be constructed by Hilltop. The consideration were the annual lease rental and the
ownership of the building upon the termination of the lease period. Considering that Hilltop and the City
of Baguio agreed upon the essential elements of the contract, the contract of lease had been perfected.

From the moment that the contract is perfected, the parties are bound to fulfill what they have
expressly stipulated. Thus, the City of Baguio gave the use and enjoyment of its lot to Hilltop. Both the
RTC and the CA found that upon the execution of the contract on 22 June 1974, Hilltop took possession
of the lot and constructed the Rillera building on it. Thereafter, Hilltop's members occupied the Rillera
building and conducted business in it up to the present. The findings of fact of the RTC and the CA are
final and conclusive and cannot be reviewed on appeal by this Court.

Since Hilltop exercised its right as lessee based on the contract of lease and the law, it has no
basis in claiming that the contract of lease did not commence.

SECOND DIVISION
 G.R. No. 211175, January 18, 2017

ATTY. REYES G. GEROMO, FLORENCIO BUENTIPO, JR., ERNALDO YAMBOT AND

LYDIA BUSTAMANTE, Petitioners, v. LA PAZ HOUSING AND DEVELOPMENT
CORPORATION AND GOVERNMENT SERVICE INSURANCE SYSTEM, Respondents.

MENDOZA, J.:

NATURE OF THE ACTION: This is action for damages filed by the petitioners before the Housing and
Land Regulatory Board (HLURB) against La Paz Housing and Development Corporation (La Paz) and
the Government Service Insurance System (GSIS), on the ground of breach of warranty against hidden
defects.

TOPIC: Implied Warranty against Hidden Defect

FACTS:

Petitioners Atty. Reyes G. Geromo (Geromo), Florencio Buentipo, Jr. (Buentipo), Ernaldo
Yambot (Yambot), and Lydia Bustamante (Bustamante) acquired individual housing units of Adelina 1-A
Subdivision (Adelina) in San Pedro, Laguna from La Paz, through GSIS financing, as evidenced by their
deeds of conditional sale.
Geromo, Bustamante and Yambot started occupying their respective residential dwellings.
Buentipo, on the other hand, opted to demolish the turned-over unit and build a new structure thereon.
After more than two (2) years of occupation, cracks started to appear on the floor and walls of their
houses. The petitioners, through the President of the Adelina 1-A Homeowners Association, requested La
Paz, being the owner/developer, to take remedial action. They collectively decided to construct a
riprap/retaining wall along the old creek believing that water could be seeping underneath the soil and
weakening the foundation of their houses. Although La Paz was of the view that it was not required to
build a retaining wall, it decided to give the petitioners P3,000.00 each for expenses incurred in the
construction of the said riprap/retaining wall. The petitioners claimed that despite the retaining wall, the
condition of their housing units worsened as the years passed. When they asked La Paz to shoulder the
repairs, it denied their request, explaining that the structural defects could have been caused by the 1990
earthquake and the renovations/improvements introduced to the units that overloaded the foundation of
the original structures.
In 1998, the petitioners decided to leave their housing units in Adelina.5
In May 2002, upon the request of the petitioners, the Municipal Engineer of San Pedro and the
Mines and Geosciences Bureau (MGB) of the Department of Environment and Natural Resources
(DENR) conducted an ocular inspection of the subject properties. They found that there was "differential
settlement of the area where the affected units were constructed."
On the basis thereof, Geromo filed a complaint for breach of contract with damages against La
Paz and GSIS before the HLURB. Buentipo, Yambot and Bustamante filed a similar complaint against
La Paz and GSIS. They all asserted that La Paz was liable for implied warranty against hidden defects and
that it was negligent in building their houses on unstable land. Later on, the said complaints were
consolidated.
HLURB Arbiter found La Paz liable for the structural damage on the petitioners' housing units,
explaining that the damage was caused by its failure to properly fill and compact the soil on which the
houses were built and to maintain a three (3) meter easement from the edge of the creek as required by
law. As to GSIS, the HLURB ruled that there was no cogent reason to find it liable for the structural
defects as it merely facilitated the financing of the affected units.

In its September 12, 2005 Decision,13 the HLURB Board of Commissioners set aside the
Arbiter's decision, explaining that there was no concrete evidence presented to prove that the houses of
the petitioners were indeed damaged by the failure of La Paz to comply with the building standards or
easement requirements.

ISSUE:

Whether or not La Paz should be held liable for the structural defects on its implied warranty
against hidden defects?

RULING:

Here, the petitioners observed big cracks on the walls and floors of their dwellings within two
years from the time they purchased the units. The damage in their respective houses was substantial and
serious. They reported the condition of their houses to La Paz, but the latter did not present a concrete
plan of action to remedy their predicament. They also brought up the issue of water seeping through their
houses during heavy rainfall, but again La Paz failed to properly address their concerns. The structural
cracks and water seepage were evident indications that the soil underneath the said structures could be
unstable. Verily, the condition of the soil would not be in the checklist that a potential buyer would
normally inquire about from the developer considering that it is the latter's prime obligation to ensure
suitability and stability of the ground.

Furthermore, on June 11, 2002, HLURB Director Belen G. Ceniza, after confirming the cracks on
the walls and floors of their houses, requested MGB-DENR and the Office of the Municipal Mayor to
conduct a geological/geohazard assessment and thorough investigation on the entire Adelina subdivision.

Based on the said findings, the Court is of the considered view that the petitioners were justified
in abandoning their dwellings as they were living therein under unsafe conditions. With the houses
uncared for, it was no surprise that, by the time the case was filed in 2004, they were in a worse condition.

La Paz remained unconcerned even after receiving incident reports of structural issues from
homeowners and despite constant follow-ups from them for many years. In fact, the petitioners took it
upon themselves to build a riprap/retaining wall due to La Paz's indifference.
 One of the purposes of P.D. No. 957, also known as The Subdivision and Condominium Buyers'
Protective Decree, is to discourage and prevent unscrupulous owners, developers, agents, and sellers from
reneging on their obligations and representations to the detriment of innocent purchasers.26

Considering the nature of the damage sustained by the structures, even without the findings of the
local governmental agency and the MGB-DENR, La Paz is still liable under the doctrine of res ipsa
loquitur. In the case of D.M. Consunji, Inc. v. CA, the Court expounded on this doctrine in this wise:

In this case, the subdivision plan/layout was prepared and approved by La Paz. The actual
excavation, filling and levelling of the subdivision grounds were exclusively done under its supervision
and control. There being no contributory fault on the part of the petitioner, there can be no other
conclusion except that it was the fault of La Paz for not properly compacting the soil, which used to be an
old creek.

It should have taken adequate measures to ensure the structural stability of the land before they
started building the houses thereon. The uneven street pavements and visible cracks on the houses were
readily apparent yet La Paz did not undertake any corrective or rehabilitative work.

La Paz's argument that the damage could have been sustained because of the 1990 earthquake or
through the various enhancements undertaken by the petitioners on their respective structures was not
substantiated. Records undeniably show that the petitioners had raised their concerns as early as 1988 -
before the earthquake occurred in 1990.

THIRD DIVISION

G.R. No. 188467 March 29, 2017

RENATO MA. R. PERALTA, Petitioner vs JOSE ROY RAVAL, Respondent JOSE ROY B.
RAVAL, Petitioner, vs. RENATO MA. R. PERALTA, Respondent.

REYES, J.:

NATURE OF THE CASE: This is a complaint for annulment of lease contract, docketed as Civil Case
No. 9121-16, against Peralta, who allegedly breached in his obligations under the contract of lease.

TOPIC: Termination of Lease – Expiration of Period

FACTS:

Spouses Arzaga, as lessors, entered into a Contract of Lease with Peralta, as lessee, over the
subject lots and the improvements thereon.

Spouses Arzaga and Peralta agreed on a lease term of 40 years, for monthly rentals. Sometime in
May 1988, Flaviano Arzaga, Jr. being an adopted son and heir of the Spouses Arzaga, filed with the RTC
of Laoag City a complaint for anullment of lease contract, against Peralta, who allegedly breached in his
obligations under the contract of lease.
 Raval came into the picture after Flaviano Jr. assigned to him via a Deed of Assignment dated
July 28, 1995 all his interests, rights and participation in the subject properties. Peralta refused to
recognize the validity of the assignment to Raval, prompting him to still deposit his rental payments for
the account of Flaviano Jr.

Beginning August 1995, Raval demanded from Peralta compliance with the lease contract's terms
and conditions.

After several more demands and another barangay conciliation, Raval eventually filed in 1998 the
subject complaint for rescission of lease.

Peralta opposed the complaint and sought its dismissal, as he insisted that Raval was not his
lessor, and thus was not a real party-in-interest to the case. He also contended that Raval did not have the
right, power and authority to seek the rescission of the contract of lease that was executed 24 years prior
to the filing of the complaint.

ISSUE:

Whether or not a four year prescriptive period applies to rescissible contract?

RULINGS:

Considering that the subject contract of lease provided for a 40-year term and was executed in
1974, the agreement had already terminated in 2014.

There are various provisions under the NCC that apply to rescissions of contracts. Among these
are Article 1191on the power to rescind in reciprocal obligations, Article 1380 on contracts validly agreed
upon by parties to be rescissible, Article 1381 on rescissible contracts under the law, Article 1389 on
prescription of actions for rescission, and Article 1592 on rescission in sale of immovable property.

It must be emphasized though that specifically on the matter of rescission of lease agreements,
Article 1659 of the NCC applies as a rule. It reads:

Article 1659. If the lessor or the lessee should not comply with the obligations set forth in Articles 1654
and 1657, the aggrieved party may ask for the rescission of the contract and indemnification for damages,
or only the latter, allowing the contract to remain in force.

Article 1654 referred to in Article 1659 pertains to the obligations of a lessor in a lease
agreement. Article 1657, on the other hand, enumerates the obligations of a lessee, as it provides:

Article 1657. The lessee is obliged:

(1) to pay the price of the lease according to the terms stipulated;

(2) To use the thing leased as a diligent father of a family, devoting it to the use stipulated; and in the
absence of stipulation, to that which may be inferred from the nature of the thing leased, according to the
custom of the place;

(3) To pay expenses for the deed of lease.

 Given the rules that exclusively apply to leases, the other provisions of the NCC that deal with the
issue of rescission may not be applicable to contracts of lease. To illustrate, Peralta's reference to Article
1389, when he argued that Raval's action had already prescribed for having been filed more than four
years. after the execution of the lease contract in 1974, is misplaced. For the same reason, Peralta erred in
arguing that Raval's action should only be deemed a subsidiary remedy, such that it could not have been
validly instituted if there were other legal means for reparation. Article 1389 applies to rescissions in
Articles 1380 and 1381, which are distinct from rescissions of lease under Article 1659.

The limits on the application of Article 1389 was explained by the Court in Unlad Resources
Development Corporation, et al. v. Dragon, et al.58 The nature of an action filed under Article 1389, as
well as the prescriptive period of four years that is provided under the provision, do not apply to all
rescissible contracts but are limited to specific cases, particularly

Article 1389 specifically refers to rescissible contracts as, clearly, this provision is under the chapter
entitled "Rescissible Contracts."

In a previous case, this Court has held that Article 1389: applies to rescissible contracts, as
enumerated and defined in Articles 1380 and 1381. We must stress however, that the "rescission" in
Article 13 81 is not akin to the te1111 "rescission" in Article 1191 and Article 1592. In Articles 1191 and
1592, the rescission is a principal action which seeks the resolution or cancellation of the contract while in
Article 1381, the action is a subsidiary one limited to cases of rescission for lesion as enumerated in said
article.

The prescriptive period applicable to resc1ss1on under Articles 1191 and 1592, is found in
Article 1144, which provides that the action upon a written contract should be brought within ten years
from the time the right of action accrues.

The same prescriptive period of 10 years, counted from the time that the right of action accrues,
applies in the case at bar. Raval's cause of action did not refer to Article 1389, yet one that was based on a
written contract. Thus, contrary to Peralta' s insistent claim, the action for rescission had not yet
prescribed at the time of its filing in 1998. Raval's cause of action accrued not on the date of the lease
agreement's execution in 1974, but from the time that there was a violation and default by Peralta in his
obligations under the lease agreement.

On this matter, Raval's complaint specified the violations that were allegedly committed by
Peralta as a lessee, Specifically, rescission was sought because of Peralta's alleged refusal to render an
accounting of unpaid monthly rentals, to vacate the second storey of the house, to remove the
improvements constructed on the areas not covered by the lease, to operate and provide a water system
and to refund the taxes paid by Flaviano Jr. These violations happened either immediately prior to Raval's
repeated extrajudicial demands that began in August 1995; or after Peralta's refusal to heed to the
demands. There was no indication that the violations dated back from the first few years of the lease
agreement's effectivity in the 1970s. Clearly, the filing of the action for rescission in 1998 was within the
10-year prescriptive period that applies to the suit.

THIRD DIVISION
 G.R. No. 188448, January 11, 2017

RODOLFO LAYGO AND WILLIE LAYGO, Petitioners, v. MUNICIPAL MAYOR OF SOLANO,

NUEVA VIZCAYA, Respondent.

JARDELEZA, J.:

NATURE OF THE CASE: Bandrang filed a Petition for Mandamus against Respondent before the
Regional Trial Court of Bayombong, Nueva Vizcaya alleging that despite already being aware of the
violations of the lease contracts of petitioners with the Municipality, Mayor Dickson still refused to
enforce the provisions of the lease contracts against subleasing.

TOPIC: Implied New Lease

FACTS:

In July 2005, Aniza Bandrang sent two letter-complaints to then Municipal Mayor Santiago O.
Dickson and the Sangguniang Bayan of Solano, Nueva Vizcaya, informing them of the illegal sublease
she entered into with petitioners Rodolfo Laygo and Willie Laygo over Public Market Stalls No. 77-A,
77-B, 78-A, and 78-B, which petitioners leased from the Municipal Government. Bandrang claimed that
petitioners told her to vacate the stalls, which they subsequently subleased to another.

Bandrang demand letter was endorsed to Mayor Dickson for appropriate action but was not taken
heed. As per Mayor response, the right of petitioners to keep their stalls was under the Build-Operate-
Transfer (BOT) scheme.

Thereafter, Bandrang wrote another letter to the Sangguniang, praying and recommending to
Mayor Dickson, by way of a resolution, the cancellation of the lease contract between the Municipality
and petitioners for violating the provision on subleasing. She suggested that after which, the stalls can be
bidded upon anew and leased to the successful bidder. The Sangguniang once again referred the letter of
Bandrang, together with a copy of Resolution No. 183-2004, to Mayor Dickson for appropriate action.
The Sangguniang opined that they no longer need to make any recommendation to Mayor Dickson
because Resolution No. 183-2004 already empowered and authorized him to cancel the lease contracts
pursuant to its pertinent provisions.

Bandrang filed mandamus against the Mayor alleging that despite already being aware of the
violations of the lease contracts of petitioners with the Municipality, Mayor Dickson still refused to
enforce the provisions of the lease contracts against subleasing. Bandrang concluded that Mayor
Dickson's inaction can only be construed as an unlawful neglect in the performance and enforcement of
his public duty as the Chief Executive of Solano, Nueva Vizcaya. Thus, she sought an order directing
Mayor Dickson to immediately cancel the lease between the Municipal Government and petitioners over
Public Market Stall Nos. 77-A, 77-B, 78-A, and 78-B, and to lease the vacated stalls to interested persons.

In his Answer with Special and Affirmative Defenses, Mayor Dickson claimed that under the
principle of pari delicto, Bandrang had no right to seek remedy with the court as she was guilty herself in
leasing the market stalls. Mayor Dickson insisted that he acted in accordance with law by referring the
matter to the Sangguniang for appropriate action. According also to him, there was a directive to all stall
owners in the public market of Solano, Nueva Vizcaya to build their own stalls after a fire gutted the
public market.

On the other hand, petitioners denied that they were the lessees of Stalls 77 A and B and 78 A and
B. They clarified that Clarita Laygo (Clarita), their mother, was the lessee of the stalls by virtue of a BOT
scheme of the Municipality. At the time they entered into a contract of lease with Bandrang, it was agreed
that the contract was subject to the consent of the other heirs of Clarita. The consent, however, was never
given; hence, there was no subleasing to speak of. Even on the assumption that there was, petitioners
maintained that the prohibition on subleasing would not apply because the contract between the
Municipality and Clarita was one under a BOT scheme. Resolution No. 183-2004 only covered stall
holders who violated their lease contracts with the Municipal Government. Since their contract with the
Municipal Government was not a lease contract but a BOT agreement, Resolution No. 183-2004 would
neither apply to them, nor be enforced against them. Further, even granting arguendo that the prohibition
would apply, petitioners claimed that there was no more ground for the revocation of the lease because
the subleasing claimed by Bandrang had ended and the subsequent receipt by the Municipality of
payments ratified the contract with petitioners.

ISSUE:

Whether or not there exist a contract of lease between Municipal Government of Solano an
petitioners?

RULINGS:

We grant the petition.

There is preponderant evidence that the contract between petitioners and the Municipal
Government is one of lease.

The type of contract existing between petitioners and the Municipal Government is disputed. The
Municipal Government asserts that it is one of lease, while petitioners insist that it is a BOT agreement.
Both parties, however, failed to present the contracts which they purport to have. It is likewise uncertain
whether the contract would fall under the coverage of the Statute of Frauds and would, thus, be only
proven through written evidence. In spite of these, we find that the Municipal Government was able to
prove its claim, through secondary evidence, that its contract with petitioners was one of lease.

We have no reason to doubt the certifications of the former mayor of Solano, Mayor Galima, and
the Municipal Planning and Development Office (MPDO)37 which show that the contract of the
Municipal Government with petitioners' mother, Clarita, was converted into a BOT agreement for a
time in 1992 due to the fire that razed the public market. These certifications were presented and
offered in evidence by petitioners themselves. They prove that Clarita was allowed to construct her stalls
that were destroyed using her own funds, and with the payment of the lease rentals being suspended until
she recovers the cost she spent on the construction. The construction was, in fact, supervised by the
MPDO for a period of three months. The stalls were eventually constructed completely and awarded to
Clarita. She thereafter re-occupied the stalls under a lease contract with the Municipal Government. In
fact, in his Notice dated August 21, 2007, the Municipal Treasurer of Solano reminded petitioners of their
delinquent stall rentals from May 2006 to July 2007.38 As correctly posited by the Municipal
Government, if the stalls were under a BOT scheme, the Municipal Treasurer could not have assessed
petitioners of any delinquency.

Also, petitioners themselves raised, for the sake of argument, that even if the contract may be
conceded as one of lease, the municipality is nonetheless estopped from canceling the lease contract
because it subsequently accepted payment of rentals until the time of the filing of the case.

In the same vein, the Sangguniang Bayan Resolution No. 183-2004, which quoted Items No. 9
and 11 of the lease contract on the absolute prohibition against subleasing and the possible termination of
the contract in view of back rentals or any violation of the stipulations in the contract, is presumed to have
been regularly issued. It deserves weight and our respect, absent a showing of grave abuse of discretion
on the part of the members of the Sangguniang.

SECOND DIVISION

G.R. No. 205657 March 29, 2017

INTERNATIONAL EXCHANGE BANK NOW UNION BANK OF THE

PHILIPPINES, Petitioner vs SPOUSES JEROME AND QUINNIE BRIONES, AND JOHN DOE,
Respondents

LEONEN, J.:

NATURE OF THE ACTION: iBank filed a complaint for replevin and/or sum of money against the
Spouses Briones and a person named John Doe. The Complaint alleged that the Spouses Briones
defaulted in paying the monthly amortizations of the mortgaged vehicle.

TOPI: Definition: Upon accepting an agency, the agent becomes bound to carry out the agency and
shall be held liable for the damages, which the principal may incur due to the agent's non-performance.

FACTS:

Spouses Jerome and Quinnie Briones took out a loan from iBank to purchase a BMW Z4
Roadster. The Spouses Briones executed a promissory note with chattel mortgage that required them to
take out an insurance policy on the vehicle. The promissory note also gave iBank, as the Spouses Briones'
attomey-infact, irrevocable authority to file an insurance claim in case of loss or damage to the vehicle.
The insurance proceeds were to be made payable to iBank.

However, the mortgaged BMW Z4 Roadster was camapped by three (3) armed men in front of
Metrobank Banlat Branch in Tandang Sora, Quezon City. The Spouses Briones declared the loss to
iBank, which instructed them to continue paying the next three (3) monthly installments "as a sign of
good faith," a directive they complied with. After the Spouses Briones finished paying the three (3)-
month installment, iBank sent them a letter demanding full payment of the lost vehicle. Spouses Briones
submitted a notice of claim with their insurance company, which denied the claim due to the delayed
reporting of the lost vehicle.

iBank filed a complaint for replevin and/or sum of money against the Spouses Briones and a
person named John Doe. The Complaint alleged that the Spouses Briones defaulted in paying the monthly
amortizations of the mortgaged vehicle.

The Regional Trial Court20 dismissed iBank's complaint. It ruled that as the duly constituted
attorney-in- fact of the Spouses Briones, iBank had the obligation to facilitate the filing of the notice of
claim and then to pursue the release of the insurance proceeds.

The Court of Appeals stated that as the Spouses Briones' agent, iBank was bound by its
acceptance to carry out the agency.

ISSUES:

Whether or not agency relationship existed between the parties?

Whether or not the agency relationship was revoked or terminated?

RULINGS:

The Petition is devoid of merit.

In a contract of agency, "a person binds himself to render some service or to do something in
representation or on behalf of another, with the consent or authority of the latter." Furthermore, Article
1884 of the Civil Code provides that "the agent is bound by his acceptance to carry out the agency, and is
liable for the damages which, through his non-performance, the principal may suffer."

All the elements of agency exist in this case. Under the promissory note with chattel mortgage,
Spouses Briones appointed iBank as their attorney-in-fact, authorizing it to file a claim with the insurance
company if the mortgaged vehicle was lost or damaged. Petitioner was also authorized to collect the
insurance proceeds as the beneficiary of the insurance policy.

Article 1370 of the Civil Code is categorical that when "the terms of a contract are clear and leave
no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control."

The determination of agency is ultimately factual in nature and this Court sees no reason to
reverse the findings of the Regional Trial Court and the Court of Appeals. They both found the existence
of an agency relationship between the Spouses Briones and iBank, based on the clear wording of Sections
6 and 22 of the promissory note with chattel mortgage, which petitioner prepared and respondents signed.

Petitioner asserts that the Spouses Briones effectively revoked the agency granted under the
promissory note when they filed a claim with the insurance company.
 Petitioner is mistaken. Revocation as a form of extinguishing an agency under Article 192453 of
the Civil Code only applies in cases of incompatibility, such as when the principal disregards or bypasses
the agent in order to deal with a third person in a way that excludes the agent. In the case at bar, the
mortgaged vehicle was camapped on November 5, 2003 and the Spouses Briones immediately informed
petitioner about the loss.55 The Spouses Briones continued paying the monthly installment for the next
three (3) months following the vehicle's loss to show their good faith.

However, on March 26, 2004, petitioner demanded full payment from Spouses Briones for the
lost vehicle.57 The Spouses Briones were thus constrained to file a claim for loss with the insurance
company on April 30, 2004, precisely because petitioner failed to do so despite being their agent and
being authorized to file a claim under the insurance policy.58 Not surprisingly, the insurance company
declined the claim for belated filing.

The Spouses Briones' claim for loss cannot be seen as an implied revocation of the agency or
their way of excluding petitioner. They did not disregard or bypass petitioner when they made an
insurance claim; rather, they had no choice but to personally do it because of their agent's negligence.
This is not the implied termination or revocation of an agency provided for under Article 1924 of the
Civil Code.

While a contract of agency is generally revocable at will as it is primarily based on trust and
confidence, 59 Article 1927 of the Civil Code provides the instances when an agency becomes
irrevocable:

Article 1927. An agency cannot be revoked if a bilateral contract depends upon it, or if it is the means of
fulfilling an obligation already contracted, or if a partner is appointed manager of a partnership in the
contract of partnership and his removal from the management is unjustifiable.

In the promissory note with chattel mortgage, the Spouses Briones authorized petitioner to claim,
collect, and apply· the insurance proceeds towards the full satisfaction of their loan if the mortgaged
vehicle were lost or damaged. Clearly, a bilateral contract existed between the parties, making the agency
irrevocable. Petitioner was also aware of the bilateral contract; thus, it included the designation of an
irrevocable agency in the promissory note with chattel mortgage that it prepared for the Spouses Briones
to sign.

DIVISION

GR No. 205998, Apr 24, 2017

WILLIAM ANGHIAN SIY v. ALVIN TOMLIN

 DEL CASTILLO, J.:
NATURE OF THE ACTION: Petitioner William Anghian Siy filed before the Regional Trial Court of
Quezon City (RTC) a Complaint for Recovery of Possession with Prayer for Replevin against Frankie
Domanog Ong (Ong), Chris Centeno (Centeno), John Co Chua (Chua), and herein respondent Alvin
Tomlin.

TOPIC: Agency: Implied Agency

Facts:

Petitioner alleged that he is the owner of a 2007 model Range Rover which he purchased from
Alberto Lopez III. The former entrusted the said vehicle to Ong, a businessman who owned a second-
hand car sales showroom after the latter claimed that he had a prospective buyer therefor. Ong failed to
remit the proceeds of the purported sale nor return the vehicle. Petitioner later found out that the vehicle
had been transferred to Chua. He then filed a complaint before the Quezon City Police District's Anti-
Carnapping.

Upon learning of the complaint, Ong met with petitioner to arrange the return of the vehicle but
the former failed to return the vehicle. Later, petitioner learned that the vehicle was being transferred to
respondent and that the vehicle was later impounded and taken into custody by the PNP-Highway Patrol
Group (HPG).

Respondent argued that he is the true owner of the subject vehicle as he was able to register the
transfer in his favor and obtain a certificate of registration in his name.

Issue:

Whether or not respondent become an agent of petitioner in the sale of the latter’s vehicle?

Held:

From petitioner's own account, he constituted and appointed Ong as his agent to sell the vehicle,
surrendering to the latter the vehicle, all documents of title pertaining thereto, and a deed of sale signed in
blank, with full understanding that Ong would offer and sell the same to his clients or to the public. In
return, Ong accepted the agency by his receipt of the vehicle, the blank deed of sale, and documents of
title, and when he gave bond in the form of two guarantee checks worth P4.95 million. AH these gave
Ong the authority to act for and in behalf of petitioner. Under the Civil Code on agency,

Art. 1869. Agency may be express, or implied from the acts of the principal, from his silence or
Jack of action, or his failure to repudiate the agency, knowing that another person is acting on his behalf
without authority.

Agency may be oral, unless the law requires a specific form.

Art. 1870. Acceptance by the agent may also be express, or implied from his acts which carry out
the agency, or from his silence or inaction according to the circumstances. (Emphasis and underscoring
supplied)
"The basis of agency is representation and the same may be constituted expressly or impliedly. In an
implied agency the principal can be bound by the acts of the implied agent." The same is true with an oral
agency.

Acting for and in petitioner's behalf by virtue of the implied or oral agency, Ong was thus able to
sell the vehicle to Chua, but he failed to remit the proceeds thereof to petitioner; his guarantee checks
bounced as well. This entitled petitioner to sue for estafa through abuse of confidence. This is exactly
what petitioner did: on May 18, 2011, he filed a complaint for estafa and carnapping against Ong before
the Quezon City Prosecutor's Office.

Since Ong was able to sell the subject vehicle to Chua, petitioner thus ceased to be the owner
thereof. Nor is he entitled to the possession of the vehicle; together with his ownership, petitioner lost his
right of possession over the vehicle.
 SECOND DIVISION

G.R. No. 206008 June 7, 2017

DELFIN DOMINGO DADIS, Petitioner vs. SPOUSES MAGTANGGOL DE GUZMAN and NORA
Q. DE GUZMAN, and THE REGISTER OF DEEDS OF TALAVERA, NUEV A ECIJA,
Respondent

PERALTA, J.:

NATURE OF THE ACTION: Petitioner Delfin Domingo Dadis (Delfin) filed a ComplainT for
reconveyance and damages against respondents Spouses Magtanggol De Guzman (Magtanggol) and Nora
Q. De Guzman (Nora) and the Register of Deeds (RD) of Talavera, Nueva Ecija. Delfin.

TOPIC: Form of Special Power of Attorney

FACTS:

Petitioner Delfin Domingo Dadis filed a Complaint for reconveyance and damages against
respondents Spouses Magtanggol De Guzman and Nora Q. De Guzman and the Register of Deeds of
Talavera, Nueva Ecija.

Delfin alleged that her daughter, Marissa P. Dadis entered into a contract of real estate mortgage
over the subject property in favor of Magtanggol to secure a loan obligation. The Spouses De Guzman
made it appear that Marissa was authorized by the Spouses Dadis by virtue of a Special Power of
Attorney which was forged document because it was never issued by him or Corazon as the signatures
contained therein are not theirs, especially so since he was in the United States of America (USA) at the
time.

The Spouses De Guzman countered that Delfin has no cause of action against them as they have
no knowledge that Delfin was not in the Philippines at the time of the execution of the SPA, which, as a
duly-notarized document, was presumed to have been done regularly. Delfin defaulted in paying the
obligation despite several repeated demand thus, they were constrained to cause the registration of the
REM with the RD and give him enough time and opportunity to reacquire the property, it was only after
three years from the time the obligation became due that they pursued and effected the foreclosure of the
property; considering that he still failed to pay the obligation, the property was foreclosed on August 21,
2001, with them as the highest bidder; as the property was not redeemed, the title thereto was
consolidated in their names and TCT No. N-26572 was issued in their favor; they were in good faith from
the time the property was mortgaged until it was foreclosed and they were able to help Delfin's family,
who was financially distressed at the time.

The RTC and the CA agreed that the subject SPA had been forged. Such fact is not even
contested before Us by the parties.

ISSUE:

Whether or not Magtanggol is a mortgagee in good faith when he entered into the loan
transaction secured by a mortgage?

RULINGS:

Magtanggol is not a mortgagee in good faith.

The doctrine of mortgagee in good faith presupposes that the mortgagor, who is not the rightful
owner of the property, has already succeeded in obtaining a Torrens title over the property in his or her
name and that, after obtaining the said title, he or she succeeds in mortgaging the property to another who
relies on what appears on the said title. In this case, Marissa is undoubtedly not the registered owner of
the subject lot; and the certificate of title was in the name of her parents at the time of the mortgage
transaction. She merely acted as the attorney-in-fact of Corazon and Delfin by virtue of the falsified SPA.
The protection accorded by law to mortgagees in good faith cannot be extended to mortgagees of
properties that are not yet registered with the RD or registered but not under the mortgagor's name.

Here, Magtanggol maintained that he did not bother to inquire from Corazon and Marissa the
whereabouts of Delfin because, at the time the mortgage transaction was held, the SPA presented was
well-prepared, duly signed, and notarized and that it was them who actually handed it together with their
companions, Imelda Reyes and Roger Sumawang, and that Corazon did not tell him the whereabouts of
her husband, who, unknown to him, was in the USA at the time.

We rule that, based on his own disclosures during the trial, Magtanggol could not be considered
as a mortgagee in good faith because he had actual notice of facts that should have put him on deeper
inquiry into Marissa's capacity to sell. He could not feign ignorance of Delfin's absence or whereabouts.
The subject SPA was not yet existing at the time he first met Corazon and Marissa. It was him who
required it from them. He testified that sometime in 1996, Corazon, together with her three daughters,
went to their house to talk to him regarding the subject property that was mortgaged in favor of Greenline
Lending Corporation, a financial institution based in Cabanatuan. Because he allegedly pitied Corazon,
who was sickly at the time and in order to help in her medication, he agreed to their offer to mortgage the
same property to him after he redeemed it from Greenline. It was he who informed Corazon that she
could not mortgage by herself alone and advised her to prepare an SPA to be used in their transaction.
With these admissions, it is but logical to infer that the only reason why he required the execution of the
subject SPA was that he already knew, as a matter of fact, after inquiring into or being told of, the
absence or whereabouts of Delfin. Despite this actual knowledge at the time the mortgage transaction was
entered into, he did not question the due execution of the SP A and the resulting authority conferred upon
Marissa; therefore, he is not a mortgagee in good faith.
 He clearly failed to observe the required degree of caution in ascertaining the genuineness of the
SPA and the supposed authority of Marissa. He should not have simply relied on the face of the document
submitted by Corazon and Marissa. When the person applying for the loan is other than the registered
owner of the real property being mortgaged, it should have already raised a red flag and should have
induced the mortgagee to make inquiries into and confirm the authority of the mortgagor.

The falsity of the SPA could not be cured even if Magtanggol later on informed Delfin of the
mortgage transaction and of the proceedings leading to the property's foreclosure, consolidation of title,
and issuance of a new title.

As the forged SP A and REM are void ab initio, the foreclosure proceedings conducted on the
strength thereof suffer from the same infirmity. Being not a mortgagee in good faith and an innocent
purchaser for value at the auction sale, Magtanggol is not entitled to the protection of any right with
respect to the subject property. Since it was not shown that the property has been transferred to a third
person who is an innocent purchaser for value (because no intervention or third-party claim was
interposed during the pendency of this case), it is but proper that the ownership over the contested lot
should be retained by Delfin.

THIRD DIVISION

G.R. No. 192602, January 18, 2017

SPOUSES MAY S. VILLALUZ AND JOHNNY VILLALUZ, JR., Petitioners, v. LAND BANK OF
THE PHILIPPINES AND THE REGISTER OF DEEDS FOR DAVAO CITY, Respondents.

JARDELEZA, J.:
NATURE OF THE ACTION: The Spouses Villaluz filed a complaint with the Regional Trial Court
(RTC) of Davao City seeking the annulment of the foreclosure sale. The sole question presented before
the RTC was whether Agbisit could have validly delegated her authority as attorney-in-fact to Milflores
Cooperative.

TOPIC: Obligation of the Agent

FACTS:

Paula Agbisit (Agbisit), mother of petitioner May S. Villaluz (May), requested the latter to
provide her with collateral for a loan for the expansion of her backyard cut flowers business. May
convinced her husband, Johnny Villaluz (collectively, the Spouses Villaluz), to allow Agbisit to use their
land, located in Calinan, Davao City as collateral.

The Spouses Villaluz executed a Special Power of Attorney in favor of Agbisit authorizing her
to, among others, negotiate for the sale, mortgage, or other forms of disposition a parcel of land and "sign
in our behalf all documents relating to the sale, loan or mortgage, or other disposition of the
aforementioned property.

Agbisit executed her own Special Power of Attorney, appointing Milflores Cooperative as
attorney-in-fact in obtaining a loan from and executing a real mortgage in favor of Land Bank of the
Philippines (Land Bank).

Unfortunately, Milflores Cooperative was unable to pay its obligations to Land Bank. Thus, Land
Bank filed a petition for extra-judicial foreclosure sale with the Office of the Clerk of Court of Davao
City. Spouses Villaluz learned that an auction sale covering their land had been set for October 2, 2003.
Land Bank won the auction sale as the sole bidder.

The Spouses Villaluz filed a complaint with the Regional Trial Court (RTC) of Davao City
seeking the annulment of the foreclosure sale. The sole question presented before the RTC was whether
Agbisit could have validly delegated her authority as attorney-in-fact to Milflores Cooperative. Citing
Article 1892 of the Civil Code, the RTC held that the delegation was valid since the Special Power of
Attorney executed by the Spouses Villaluz had no specific prohibition against Agbisit appointing a
substitute.

On appeal, the CA affirmed the RTC Decision. It similarly Article 1892 to be squarely applicable.

ISSUES:

Whether or not the mortgage contract executed by the substitute is valid and binding upon the
principal?

Whether or not the assignment constitute dation in payment that will extinguish obligations?

RULINGS:

Although the law presumes that the agent is authorized to appoint a substitute, it also imposes an
obligation upon the agent to exercise this power conscientiously. To protect the principal, Article 1892
allocates responsibility to the agent for the acts of the substitute when the agent was not expressly
authorized by the principal to appoint a substitute; and, if so authorized but a specific person is not
designated, the agent appoints a substitute who is notoriously incompetent or insolvent. In these instances,
the principal has a right of action against both the agent and the substitute if the latter commits acts
prejudicial to the principal.

In the present case, the Special Power of Attorney executed by the Spouses Villaluz contains no
restrictive language indicative of an intention to prohibit Agbisit from appointing a substitute or sub-
agent. Thus, we agree with the findings of the CA and the RTC that Agbisit's appointment of Milflores
Cooperative was valid.

The Spouses Villaluz claim that the Special Power of Attorney they issued was mooted by the
execution of the Deed of Assignment of the Produce/Inventory by Milflores Cooperative in favor of Land
Bank. Their theory is that the additional security on the same loan extinguished the agency because the
Deed of Assignment "served as payment of the loan of the [Milflores] Cooperative."

The assignment was for the express purpose of "securing the payment of the Line/Loan, interest
and charges thereon."31 Nowhere in the deed can it be reasonably deduced that the collaterals assigned by
Milflores Cooperative were intended to substitute the payment of sum of money under the loan. It was an
accessory obligation to secure the principal loan obligation.

The assignment, being intended to be a mere security rather than a satisfaction of indebtedness, is
not a dation in payment under Article 124532 and did not extinguish the loan obligation. "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." As
stated in the second condition of the Deed of Assignment, the "Assignment shall in no way release the
ASSIGNOR from liability to pay the Line/Loan and other obligations, except only up to the extent of any
amount actually collected and paid to ASSIGNEE by virtue of or under this Assignment." Clearly, the
assignment was not intended to substitute the payment of sums of money. It is the delivery of cash
proceeds, not the execution of the Deed of Assignment, that is considered as payment. Absent any proof
of delivery of such proceeds to Land Bank, the Spouses Villaluz's claim of payment is without basis.

Neither could the assignment have constituted payment by cession under Article 125536 for the
plain and simple reason that there was only one creditor, Land Bank. Article 1255 contemplates the
existence of two or more creditors and involves the assignment of all the debtor's property.

The Spouses Villaluz understandably feel shorthanded because their property was foreclosed by
reason of another person's inability to pay. However, they were not coerced to grant a special power of
attorney in favor of Agbisit. Nor were they prohibited from prescribing conditions on how such power
may be exercised. Absent such express limitations, the law recognizes Land Bank's right to rely on the
terms of the power of attorney as written. "Courts cannot follow one every step of his life and extricate
him from bad bargains, protect him from unwise investments, relieve him from one-sided contracts, or
annul the effects of [unwise] acts. The remedy afforded by the Civil Code to the Spouses Villaluz is to
proceed against the agent and the substitute in accordance with Articles 1892 and 1893.
 SECOND DIVISION

G.R. No. 214406, February 06, 2017

BP OIL AND CHEMICALS INTERNATIONAL PHILIPPINES, INC., Petitioner, v. TOTAL

DISTRIBUTION & LOGISTIC SYSTEMS, INC., Respondent.

PERALTA, J.:

NATURE OF THE CASE: This a complaint for collection filed by petitioner against the defendant.

TOPIC: Obligation of the Principal

FACTS:

The defendant entered into an Agency Agreement (the Agreement) with BP Singapore whereby it
was given the right to act as the exclusive agent of the latter for the sales and distribution of its industrial
lubricants in the Philippines. The agency was for a period of five years from 1997 to 2002. In return, the
defendant was supposed to meet the target sales volume set by BP Singapore for each year of the
Agreement. As agreed in the Supplemental Agreement they executed on January 6, 1998, the defendant
was supposed to deposit the proceeds of the sales it made to a depositary account that the defendant will
open for the purpose.

When the defendant did not meet its target sales volume for the first year of the Agreement, the
plaintiff informed the defendant that it was going to appoint other distributors to sell the BP's industrial
lubricant products in the Philippines. The defendant did not object to the plan of the plaintiff but asked for
P10,000,000.00 as compensation for the expenses. The plaintiff did not agree to the demand made by the
defendant.

The defendant further alleged that it did not fail to meet the sales target for Year I. It alleged that
delays ensues on the part of the plaintiff, making the stipulated sales target no longer applicable. It
pointed that the appointment of new distributor would violated the Agency Agreement. The plaintiffs
took steps to take over the distribution of BP Products in the Philippines and to appoint new agents for
this purpose. Even before the termination of the Agreement, the plaintiff cut off the supply of BP products
to the defendant, and even tried to sell directly to the defendant's customers, without the defendant's
knowledge.

ISSUE:

Whether or not the petitioner has the right to collect from the defendant with legal interest?

RULINGS:

A modification, however, must be made as to the rate of interest applied by the RTC. The RTC
ordered the respondent to pay the amount adjudged "with legal interest computed at 6% per annum from
July 19, 2001 up to the finality of the decision and at 12% per annum from finality of the decision up to
the date of payment." Now, the interest imposed should be 12% per annum from July 19, 2001 until June
30, 2013 and 6% per annum from July 1, 2013 until full satisfaction per decision of this Court.

In summary, the interest rates applicable to loans and forbearance of money, in the absence of an
express contract as to such rate of interest, for the period of 1940 to present are as follows:

Law, Rule and Regulations, BSP Issuances

Date of Effectivity

Interest Rate

Act No. 2655

May 1, 1916

6%

CB Circular No. 416

July 29, 1974

12%

CB Circular No. 905

December 22, 1982

12%

CB Circular No. 799

July 1, 2013

6%

It is important to note, however, that interest shall be compounded at the time judicial demand is
made pursuant to Article 2212 of the Civil Code of the Philippines, and sustained in Eastern Shipping
Lines v. Court of Appeals, then later on in Nacar v. Gallery Frames, save for the reduction of interest rate
to 6% for loans or forbearance of money, thus:

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 6% 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.

THIRD DIVISION

G.R. No. 178467, April 26, 2017

SPS. CRISTINO & EDNA CARBONELL, PETITIONERS, VS. METROPOLITAN BANK AND
TRUST COMPANY, RESPONDENT.

BERSAMIN, J.:

NATURE OF THE ACTION: The petitioners initiated against the respondent an action for damages,
alleging that they had experienced emotional shock, mental anguish, public ridicule, humiliation, insults
and embarrassment during their trip to Thailand because of the respondent's release to them of five
US$100 bills that later on turned out to be counterfeit.

TOPIC: Standard of Care

FACTS:

While Petitioner is in Bangkok, they had exchanged five US$100 bills into Baht, but only four of
the US$100 bills had been accepted by the foreign exchange dealer because the fifth one was "no good.
They alleged that they experienced emotional shock, mental anguish, public ridicule, humiliation, insults
and embarrassment during their trip to Thailand because of the respondent's release to them of five
US$100 bills that later on turned out to be counterfeit

Upon their return to the Philippines, they had confronted the manager of the respondent's Pateros
branch on the fake dollar bills, but the latter had insisted that the dollar bills she had released to them
were genuine inasmuch as the bills had come from the head office; that in order to put the issue to rest,
the counsel of the petitioners had submitted the subject US$100 bills to the Bangko Sentral ng Pilipinas
(BSP) for examination.

The petitioners then sent a written notice to the respondent, attaching the BSP certification and
informing the latter that they were giving it five days within which to comply with their demand, or face
court action. In response, respondent could not absolutely guarantee the genuineness of each and every
foreign currency note that passed through its system; that it had also been a victim like them; and that it
had exercised the diligence required in dealing with foreign currency notes and in the selection and
supervision of its employees and offered to reinstate US$500 in their dollar account, and, in addition, to
underwrite a round-trip all-expense-paid trip to Hong Kong.

ISSUE:

Whether or not the respondent’s failure to exercise the degree of diligence required in handling
the affairs of its clients showed that it was liable not just for simple negligence but for misrepresentation
and bad faith amounting to fraud?

RULINGS:

The relationship existing between the petitioners and the respondent that resulted from a contract
of loan was that of a creditor-debtor. Even if the law imposed a high standard on the latter as a bank by
virtue of the fiduciary nature of its banking business, bad faith or gross negligence amounting to bad faith
was absent. Hence, there simply was no legal basis for holding the respondent liable for moral and
exemplary damages. In breach of contract, moral damages may be awarded only where the defendant
acted fraudulently or in bad faith.

That was not true herein because the respondent was not shown to have acted fraudulently or in
bad faith. This is pursuant to Article 222o of the Civil Code, to wit:
Article 2220. Willful injury to property may be a legal ground for awarding moral damages if the court
should find that, under the circumstances, such damages are justly due. The same rule applies to
breaches of contract where defendant acted fraudulently or in bad faith.

With the respondent having established that the characteristics of the subject dollar notes had
made it difficult even for the BSP itself as the country's own currency note expert to identify the
counterfeiting with ease despite adhering to all the properly laid out standard operating procedure and
precautions in the handling of US dollar bills, holding it liable for damages in favor of the petitioners
would be highly unwarranted in the absence of proof of bad faith, malice or fraud on its part. That it
formally apologized to them and even offered to reinstate the USD$500.00 in their account as well as to
give them the all-expense-paid round trip ticket to Hong Kong as means to assuage their inconvenience
did not necessarily mean it was liable.

In civil cases, an offer of compromise is not an admission of liability, and is admissible as

evidence against the offeror.

Even without taking into consideration the news clippings to the effect that the US Secret Service
and Central Intelligence Agency had themselves been deceived by the 1990 series of the US dollar notes
infamously known as the "supernotes," the record had enough to show in that regard, not the least of
which was the testimony of Ms. Malabrigo as BSP's Senior Currency Analyst about the highly deceptive
nature of the subject US dollar notes and the possibility for them to pass undetected.
 SECOND DIVISION

G.R. No. 206468 SEPTEMBER 6, 2017

ALICIA M.L. COSETENG AND DILIMAN PREPATORY SCHOOL Petitioners, vs. LETICIA P.
PEREZ, Respondents.

REYES, JR, J.

NATURE OF THE ACTION: Respondent filed a complaint for payment of separation benefits with the
Labor Arbiter

TOPIC: Proof of Negligence

FACTS:

Respondent Perez was hired by petitioners as elementary teacher. Respondent was suspended
from work after the school investigating committee adjudged her behavior as highly irregular and liable
for negligence in the performance of her duties. When she was directed to report to work for her
assignment, she correspondingly served out her suspension. Without reporting back to work, Respondent
tendered her resignation to Coseteng, assistant principal via facsimile. Upon her resignation, respondent
received all amounts due her under the Private Education Retirement Annuity, a program wherein
teachers and employers contribute to a fund for the availment of the teacher on their retirement.

Thereafter, nothing more was heard from Perez until she filed a Complaint for payment of
separation benefits. Petitioners argued that Perez was constructively dismissed from employment as her
resignation was free and voluntary and that they did not separation pay to Limochin but merely financial
assistance. Petitioners prayed for the dismissal of Perez’s complaint and by way of counterclaim, prayed
for the issuance of an order mandating Perez to pay them moral damages, exemplary damages and
attorney’s fees.

ISSUE:

Whether or not there is proof of the existence of the factual basis of the damages and causal
relation to the defendants’ act?

RULINGS:
 Petitioners prayer for moral damages on account of the complaint filed by Perez, the Court denies
the same for the reason that moral damages are not automatically granted; “there must still be proof of the
existence of the factual basis of the damage and its causal relation to the defendant’s acts.

With respect to exemplary damages, Article 2229 of the Civil Code states that the “exemplary or
coercive damages are imposed, by way of the example or correction for the public good, in addition to the
moral, temperate, liquidated or compensatory damages”. Since the Court has adjudged the petitioners as
not entitled to moral damages, their plea for provision.

On the subject of attorney’s fees, the Court holds that while the petitioners were compelled to
engage the services of counsel and incurred litigation expenses to defend their interests, it appears that
Perez was not impelled by malice and bad faith in filing her complaint. She truly, albeit erroneously
believed that she can avail of the separation benefits even if she resigned from her work. Article 2208 of
the Civil Code states that attorney’s fees may be recovered when the defendant’s act or omission has
compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest.

FIRST DIVISION

G.R. No. 206468 AUGUST 2, 2017

JUDITH D. DARINES AND JOYCE D. DARINES, Petitioners, vs. EDUARDO QUINONES AND
ROLANDO QUITAN, Respondents.

DEL CASTILLO, J.

NATURE OF THE ACTION: This is a petition for Review on Certiorari assailing to reverse the
decision of RTC for breach of contract of carriage and damages.

TOPIC: Presumption of Negligence

FACTS:

Petitioner Judith D. Darines alleged in her complaint the Amianan Bus Line they were riding with
her daughter crushed into a truck which was parked on the shoulder of Kennon Road. As a result, bother
vehicles were damaged and petitioners were injured. She argued that the driver Quitan and Eduardo
Qinones, the operator of the said bus breached their contract of carriage as they failed to bring them safely
to their destination.

In defense, Quinones and Quitan countered that the proximate cause of the incident was the
negligence of the truck driver who parked the truck at the roadside right after the curve without having
installed any early warning device. They also claimed that Quinones observed due diligence in the
selection and supervision of his employees as he conducted seminars on road safely measures and
Quintan attended such seminars including those required by the government on traffic safely. They
likewise averred that Quintan was a licensed professional driver who in his 12 years as public utility
driver, had not figured in any incident like the one at hand.

To support petitioner claim for moral damages, she testified that she suffered sleepness nights
since she worried about the result and possible effect of her operation.

RTC awarded moral damages grounded on Judith’s testimony regarding her pain and suffering.

CA deleted the award of moral damages because petitioners failed to prove that respondents acted
fraudulently or in bad faith as shown by the fact that respondents paid petitioners’ medical and
hospitalization expenses. It held that no moral damages was awarded then there is no basis to grant
exemplary damages.

ISSUE:

Whether or not respondents acted in fraud or in bad faith in performing their duties arising from
their contract of carriage, they are then not liable for moral damages?

RULINGS:

The principle that, in action for breach of contract of carriage, moral damages may be awarded
only in the case (1) an accident results in the death of a passenger; or (2) the carrier is guilty of fraud or
bad faith is pursuant to Article 1764 in relation to Article 2206(3) of the Civil Code and Article 2220
thereof.

The aforesaid concept of fraud or bad faith and negligence are basic as they distinctly
differentiated by law. Specifically, fraud or bad faith connotes “deliberate or wanton wrong doing”

Here, petitioners impute negligence on the part of respondents when, as paying passengers, they
sustained injuries when the bus owned and operated by respondent Quinones, and driven by respondent
Quitan, collided with another vehicle. Petitioners propounded on the negligence of respondents, but did
not discuss or impute fraud or bad faith, or such gross negligence which would amount to bad faith,
against respondents. There being neither allegation nor proof that respondents acted in fraud or in bad
faith in performing their duties arising from their contract of carriage, they are then not liable for moral
damages.

Clearly, unless it is fully established that negligence in action for breach of contract is so gross as
to amount to malice, then the claim of moral damages is without merit.
 SECOND DIVISION

G.R. No. 217777 AUGUST 16, 2017

PRISCILLA Z. ORBE, Petitioner vs LEONORA O. MIARAL,, Respondent

CARPIO,.:

NATURE OF THE ACTION: Petitioner filed a complaint for estafa against respondent and Anne
Kristine before the Office of the City Prosecutor (OCP) of Quezon City.

TOPIC: Contract of Partnership

FACTS:

Respondent agreed to engage in the garment exportation business with her sister, herein
petitioner. They executed a partnership agreement where they agreed to contribute two hundred fifty
thousand pesos each to Toppy Co. Inc and Miral Enterprises and to equally divide the profits they may
earn.

Petitioner initially invested the partnership and for the payment of salaries of the workers at the
factory. On one of the trip of respondent, she convinced the petitioner to pay the place ticket and promise
to pay once they arrive in the United States.

Respondent issued 3 checks drawn in a bank in the United States as payment. However, one of
the checks was dishonored for having been drawn against insufficient funds. Petitioner likewise
discovered that there was no exportation of garments to the United States or any other transactions in the
United States that took place.

Petitioner filed for estafa against the respondent and Anne Kristine for failure to return the
money.

ISSUE:

Whether or not respondent as partner is liable estafa?

RULINGS:

In this case, the OCCP erred gravely when it based its conclusion on the Clarin case. Liwanag
applies to the partnership agreement executed between petitioner and respondent. Petitioner’s initial
contributions of P183,999.00 and P20,000.00 were all for specific purposes; for the buying and selling of
garments and for the salaries of the factory workers, respectively. When respondent failed to account for
these amounts or to return these amounts to petitioner upon demand, there is probable cause to hold that
respondent misappropriated the amounts and had not used them for their intended purposes. The
Information for estafa should thus proceed.

In Liwanag, this Court held that thus, assuming contract of partnership was indeed entered into by
and between the parties, we have ruled that when money or property had been received by the partner for
the specific purpose and he later misappropriated it, such partner is guilty of estafa.

SECOND DIVISION

G.R. No. 202088; March 8, 2017

Manuel L. Bautista, et al. Petitioners Vs. Margarito L. Bautista, Respondent

PERALTA, J.:

NATURE OF THE ACTION: Petitioners instituted a Complaint for Partition and Accounting with
Prayer for Temporary Restraining Order and/or Writ of Preliminary Injunction before the RTC of San
Pablo City, Branch 32, over several properties against herein respondent Margarito, the Spouses Marconi
de Villa and Florencia Bautista, and the Spouses Senen Cabrera and Ester Bautista.

TOPIC: Implied Trust - Resulting Trust

Facts:

The Bautista siblings – Margarito, Manuel L. Bautista, Carmelita Bautista Sahagun , Aniano L.
Bautista , Florencia Bautista de Villa and Ester Bautista Cabrera – established a lending business
through a common fund from the proceeds of the sale of a parcel of coconut land they inherited from their
mother Consorcia Lantin Bautista. Margarito, Florencia, and Ester managed the business with Reginald
Sahagun, Carmelita’s son, as credit investigator. Senen Cabrera, Ester’s husband, prepared the documents
for mortgage and reported the status of the lending business to the Bautista siblings. Through the said
lending business, the siblings acquired several real properties in San Pablo City.

Amelia V. Mendoza obtained a loan from Florencia, and secured the same with a real estate
mortgage a parcel of land she owned situated at Barangay Sta. Monica, San Pablo City.

Amelia allegedly sold the subject property to Margarito through a Kasulatan ng Bilihang
Tuluyan. Florencia filed a Petition for the Issuance of a Second Owner’s Duplicate and alleged that she
was the mortgagee of the subject property, and that she could not locate, despite diligent search, the
owner’s duplicate title in her possession, which she misplaced sometime in September 2002. Florencia
also executed a Special Power of Attorney in favor of Margarito to represent her in the proceedings.

Petitioners tried to oppose the issuance, RTC granted the petition was later issued in the name of
Margarito. On January 12, 2004, petitioners registered an Adverse Claim over the Sta. Monica property.

Failing to settle their differences, petitioners subsequently instituted a Complaint for Partition and
Accounting with Prayer for Temporary Restraining Order and/or Writ of Preliminary Injunction over
several properties against herein respondent Margarito, the Spouses Marconi de Villa and Florencia
Bautista, and the Spouses Senen Cabrera and Ester Bautista. Petitioners averred that Margarito and the
others refused to heed their oral and written demands for the partition of the properties they co--owned,
which included the Sta. Monica property.

For his part, Margarito asseverated that he exclusively owns the property in controversy since he
used his personal funds in purchasing the land.

On February 16, 2009, the RTC ruled in favor of the petitioners and declared, among other things,
that the Sta. Monica property was commonly owned by the siblings.

Issue:

Whether or not there is an implied resulting trust existed among the parties?

Held:

As for the TCT No. T-59882 in the name of Margarito, like in the case at bar, although a
certificate of title is the best proof of ownership of a piece of land, the mere issuance of the same in the
name of any person does not foreclose the possibility that the real property may be under co-ownership
with persons not named in the certificate or that the registrant may only be a trustee or that other parties
may have acquired interest subsequent to the issuance of the certificate of title. The principle that a trustee
who puts a certificate of registration in his name cannot repudiate the trust by relying on the registration is
one of the well-known limitations upon a title.

There is an implied trust when a 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. This is
sometimes referred to as a purchase money resulting trust, the elements of which are: (a) an actual
payment of money, property or services, or an equivalent, constituting valuable consideration; and (b)
such consideration must be furnished by the alleged beneficiary of a resulting trust.

A trust, which derives its strength from the confidence one reposes on another especially between
families, does not lose that character simply because of what appears in a legal document. From the
foregoing, this Court finds that an implied resulting trust existed among the parties. The pieces of
evidence presented demonstrate their intention to acquire the Sta. Monica property in the course of their
business, just like the other properties that were also the subjects of the partition case and the compromise
agreement they entered into. Although the Sta. Monica property was titled under the name of Margarito,
the surrounding circumstances as to its acquisition speak of the intent that the equitable or beneficial
ownership of the property should belong to the Bautista siblings.
 DIVISION

GR No. 215999, Aug 16, 2017

SPS. FELIX A. CHUA AND CARMEN L. CHUA v. UNITED COCONUT PLANTERS BANK

DECISION

NATURE OF THE ACTION: Petitioners filed their complaint against UCPB, Revere, Jose Go, and the
Register of Deeds of Lucena City in the RTC in Lucena City in Declaring as legal and binding the Deeds
of Trust and holding the properties held in trust for plaintiff by defendants REVERE and GO.

FACTS:
 Petitioner Spouses Felix and Carmen Chua, for themselves and representing their co-petitioners,
entered into a Joint Venture Agreement (JVA) with Gotesco Properties, Inc. (Gotesco) which was
represented by respondent Jose Go, for the development of their 44-hectare property situated in Ilayang
Dupay, Lucena City into a mixed use, residential and commercial subdivision. However, prior to then
execution of the JVA, petitioners and Jose Go had separate outstanding loan obligations with UCPB.

Pursuant to the JVA, several deeds of absolute sale were executed over petitioners' 12 parcels of
land situated in Lucena City in favor of Revere. Jose Go, and petitioners, represented by Felix Chua,
executed another deed of trust covering 20 parcels of land distinct from the 12 parcels of land already
covered by the first deed of trust. The Spouses Chua executed a real estate mortgage (REM) in favor of
UCPB involving several parcels of land registered in the names of petitioners to secure the loans obtained
in their personal capacities and in their capacities as corporate officers and stockholders of the Lucena
Grand Central Terminal, Inc.

Petitioners entered into a Memorandum of Agreement (MOA) with UCPB to consolidate the
obligations of the Spouses Chua and LGCTI. Under its terms, this REM covered the payment of all loans,
overdrafts, credit lines and other credit facilities or accommodations obtained or hereinafter obtained by
the mortgagors, LGCTI, Spouses Chua and Jose Go.

On even date, Jose Go, acting in behalf of Revere, and UCPB executed another REM (Revere
REM) involving the properties held in trust by Revere for petitioners. The execution of the Revere REM
was unknown to petitioners. Enforcing petitioners' REM as well as the Revere REM, UCPB foreclosed
the mortgages, and the properties were sold. On February 14, 2003, UCPB and LGCTI executed a deed of
assignment of liabilities.

On November 11, 2003, Spouses Chua wrote UCPB to request an accounting of Jose Go's
liabilities that had been mistakenly secured by the mortgage of petitioners' properties, as well as to obtain
a list of all the properties subject of their REM as well as of the Revere REM for re-appraisal by an
independent appraiser. The Spouses Chua further requested that the proceeds of the foreclosure sale of the
properties be applied only to petitioners' obligation of P204,597,177.04; and that the rest of the properties
or any excess of their obligations should be returned to them. However, UCPB did not heed petitioners'
requests.

Thus, on February 3, 2004, petitioners filed their complaint against UCPB, Revere, Jose Go, and
the Register of Deeds of Lucena City in the RTC in Lucena City.

ISSUE:

Whether or petitioner had transferred the ownership of all the properties by execution of Deed of
Trust?

RULINGS:
 The Deeds of Trust expressly provided that: “The TRUSTEE hereby acknowledges and obliges
itself not to dispose of, sell, transfer, convey, lease or mortgage the said twelve parcels of land without the
written consent of the TRUSTORS first obtained”. By entering into the Revere REM, therefore, Revere
openly breached its undertakings under the Deeds of trust in contravention of the express prohibition
therein against the disposition or mortgage of the properties. It is also worth mentioning that the records
are bereft of any allegation that Revere had obtained the approval of petitioners or that the latter had
acquiesced to the mortgage of the properties in favor of UCPB. Absent the proof showing that petitioners
had transferred the ownership of some or all of the properties covered by the deeds of trust in favor or
Revere or Jose Go, the deeds of trust remained as the controlling documents as to the parcels of land
therein covered.

Additionally, UCPB could not now feign ignorance of the deeds of trust. As the RTC aptly
pointed out, UCPB's own Vice President expressly mentioned in writing that UCPB would secure from
Jose Go the titles necessary for the execution of the mortgages. As such, UCPB's actual knowledge of the
deeds of trust became undeniable. In addition, UCPB, being a banking institution whose business was
imbued with public interest, was expected to exercise much greater care and due diligence in its dealings
with the public. Any failure on its part to exercise such degree of caution and diligence would invariably
stigmatize its dealings with bad faith. It should be customary and prudent for UCPB, therefore, to adopt
certain standard operating procedures to ascertain and verify the genuineness of the titles to determine the
real ownership of real properties involved in its dealings, particularly in scrutinizing and approving loan
applications. By approving the loan application of Revere obviously without making prior verification of
the mortgaged properties' real owners, UCPB became a mortgagee in bad faith.