OCAMPO III. VS.

PEOPLE
G.R Nos. 156547-51. February 4, !!"
FAC#S:
The Department of Budget and Management released the amount of Php 100
Million for the support of the local government unit of the province of Tarlac. However,
petitioner campo, governor of Tarlac, loaned out more than P !"." million in which he
contracted with #ing$od Tarlac %oundation, &nc.. thus, it was the su'(ect of )! criminal
charges against the petitioner.
The *andigan'a+an convicted the petitioner of the crime of malversation of
pu'lic funds. However, the petitioner contended that the loan was private in character
since it was a loan contracted with the Taralc %oundation.
ISS$E:
,hether the amount loaned out was private in nature.
R$LING:
-es, the loan was private in nature 'ecause .rt. 1/!0 of the 1ew 2ivil 2ode
provides that 3a person who receives a loan of mone+ or an+ other fungi'le thing
ac4uires the ownership thereof, and is 'ound to pa+ the creditor an e4ual amount of the
same $ind and 4ualit+.5
The fact that the petitioner67overnor contracted the loan, the pu'lic fund
changed its nature to private character, thus it is not malversation which is the su'(ect
of this case, instead it must 'e a simple collection of mone+ suit against the petitioner in
case of non pa+ment . therefore, the petitioner is ac4uitted for the crime of
malversation.
Page | 1
LE$NG %EN VS. O& %RIEN
GR No. 1'6!. A(r)* 6, 1+1"
FAC#S:
&n 1/18, 9 Brien filed a collection suit against #eung Ben for the lost of the latter
in gam'lings, games and 'an$ing percentage games. The amount to 'e collected was P
1!,000.00. The respondent then filed the case for the fear that the petitioner might
escape his o'ligation '+ going a'road and thus the respondent attached the propert+ of
the petitioner in pa+ment of the winnings of 9 Brien.
ISS$E:
,hether there was a statutor+ o'ligation to pa+ the winnings in gam'ling.
R$LING:
1o. .lthough there can 'e a voluntar+ pa+ment of mone+ for the loser to the
winner, necessaril+ that in civil actions, it is not an o'ligator+ act to pa+ the winnings in
a gam'ling 'ecause the act '+ nature is prohi'ited '+ law and '+ moral.
Thus, in this case, the dut+ of the defendant to refund the mone+ which he won
from the plaintiff at gaming is a dut+ imposed '+ statute. &t therefore arises 3e: lege.5
%urthermore, it is a dut+ to return a certain sum which had passed from the plaintiff to
the defendant. B+ all the criteria which the common law supplies, this is a dut+ in the
nature of de't and is properl+ classified into as an implied contract. &t is well6settled
that mone+ lost in gam'ling or lotter+, if recovera'le at all, can 'e recovered '+ the
loser. Thus #eung Ben can recover the propert+ attached '+ the respondent.
Page | 2
PELA,O VS. LA$RON
GR No. 4!"+. -u.e 1 1+!+
FAC#S:
The wife of the petitioner was to deliver a child, however, when the time of
deliver+ came, the parents 6 in6 law of the wife called the ph+sician since her hus'and
was not present. Thus the hus'and refused to pa+ the service fee of the ph+sician since
the wife died during the deliver+ of the child. The defense of the hus'and was that he
was not the one who called the aid of a ph+sician ,thus his parents shall 'e lia'le for the
services rendered '+ the ph+sician.
ISS$E:
,ho should pa+ the doctor;
R$LING:
&t is the hus'and who should pa+ the service of the doctor 'ecause even he was
not the one who called the doctor, it is his dut+ to give mutual support to his wife and
support includes medical assistance. This o'ligation to give is imposed '+ law.
Page | 3
ASI CORPORA#ION VS. EVANGELIS#A
G.R No. 15"!"6. February 14, !!"
FAC#S:
Private respondent <vangelista contracted Petitioner .*= 2orporation for the
incu'ation and hatching of eggs and '+ products owned '+ <vangelista *pouses. The
contract includes the scheduled pa+ments of the service of .*= 2orporation that the
amount of installment shall 'e paid after the deliver+ of the chic$s. However, the .*=
2orporation detained the chic$s 'ecause <vangelista *pouses failed to pa+ the
installment on time.
ISS$E:
,as the detention of the alleged chic$s valid and recogni>ed under the law;
R$LING:
1o, 'ecause .*= 2orporation must give due to the <vangelista *pouses in pa+ing
the installment, thus, it must not dela+ the deliver+ of the chic$s. Thus, under the law,
the+ are o'liged to pa+ damages with each other for the 'reach of the o'ligation.
Therefore, in a contract of service, each part+ must 'e in good faith in the
performance of their o'ligation, thus when the petitioner had detained the hatched eggs
of the respondents spouses, it is an implication of putting pre(udice to the 'usiness of
the spouses due to the dela+ of pa+ing installment to the petitioner.
Page | 4
RAMAS VS. /$IAMCO
G.R No. 146'. 0e1e2ber 6, !!6
FAC#S:
?uiamco has amica'l+ settled with Davalan, 7a'utero and 7eneroso for the
crime of ro''er+ and that in return, the three had surrendered to ?uiamco a motorc+cle
with its registration. However, .tt+. @amas has sold to 7a'utero the motorc+cle in
installment 'ut when the latter did not a'le to pa+ the installment, Davalon continued
the pa+ment 'ut when he 'ecame insolvent, he said that the motorc+cle was ta$en '+
?uiamco9s men. However, after several +ears, the petitioner @amas together with
policemen too$ the motorc+cle without the respondent9s permit and shouted that the
respondent ?uiamco is a thief of motorc+cle. @espondent then filed an action for
damages against petitioner alleging that petitioner is lia'le for unlawful ta$ing of the
motorc+cle and utterance of a defamator+ remar$ and filing a 'aseless complaint. .lso,
petitioners claim that the+ should not 'e held lia'le for petitioner9s e:ercise of its right
as seller6mortgagee to recover the mortgaged motorc+cle preliminar+ to the
enforcement of its right to foreclose on the mortgage in case of default.
ISS$E:
,hether the act of the petitioner is correct.
R$LING:
1o. The petitioner 'eing a law+er must $now the legal procedure for the recover+
of possession of the alleged mortgaged propert+ in which said procedure must 'e
conducted through (udicial action. %urthermore, the petitioner acted in malice and
intent to cause damage to the respondent when even without pro'a'le cause, he still
instituted an act against the law on mortgage.
Page | 5
3O#EL NI44O MANILA VS. RO%ER#O RE,ES
G.R No. 1545+. February ", !!5
FAC#S:
@espondent @e+es also $nown as .ma+ Bisa+a was having a coffee 'rea$ at the
lo''+ of Hotel 1i$$o Manila 7arden when his friend Mrs. %ilart invited him to attend
the natal part+ of the owner of the hotel, thus respondent @e+es acceded to his friend
'ut when the+ are going to ta$e food in the 'uffet ta'le , part+ organi>er, @u'+ #im
confronted the respondent since allegedl+ the latter was not invited and that the part+
was for limited guests. The respondent was so em'arrassed especiall+ when he was
driven awa+ '+ policemen. The trial court ruled in favor of #im however, the .ppellate
2ourt favored the respondent.
ISS$E:
,hether .ma+ Bisa+a Aprivate respondentB is entitled to pa+ment of damages.
R$LING:
1o. The respondent can not recover damages from the organi>er of the part+
since the organi>er acted in pursuance of the ordered of the cele'rant that the part+ was
for limited guests and thus, the latter approached the respondent to leave the area. The
act of the respondent is considered as a self6 inflicted in(ur+ when he, 'eing a gate
crasher has voluntar+ went to a part+ in which he is not invited. Therefore, the act of
@u'+ #im is (ustified and reasona'le.
Page | 6
S#. MAR,&S ACA0EM, VS. CARPI#ANOS
G.R. No. 14''6'. February 6, !!
FAC#S:
The Petitioner .cadem+ was conducting a visitation campaign in 1//! for the
encouragement of prospective enrollees to enroll at *t. Mar+9s .cadem+ of Dipolog 2it+.
The victim *herwin 2arpitanos was one of the high school students who was present in
the campaign . thus, *herwin and other students was riding then in a Mitsu'ishi (eepne+
owned '+ defendant Cillanueva 'ut was driven '+ =ames Daniel &&&, then 1! +ears old
and a student of the same school. .s the+ proceed to #ara+an <lementar+ *chool in
Dapitan 2it+, the (eepne+ turned turtle causing the death of *herwin.
ISS$E:
,hether the petitioner academ+ is lia'le for damages against the death of
*herwin 2arpitanos.
R$LING:
1o, the petitioner can not 'e held lia'le for the death of the son of the respondent
'ecause the accident was not the pro:imate cause of the death of *herwin, instead even
Daniel e:plained that the accident was caused '+ the steering wheel guide of the
(eepne+, thus the petitioner has no negligence in the performance of its duties.
Therefore, the owner or registered owner of the (eepne+ can 'e held lia'le for the death
of *herwin due to his negligence in maintaining the good condition of the vehicle which
is necessaril+ re4uired for the contract of common carriage.
Page | 7
#SPIC CORPORA#ION VS. #SPIC EMPLO,EES $NION
G.R No. 16'41+. February 1', !!"
FAC#S:
T*P& 2orporation entered into a 2ollective Bargaining .greement with the
corporation Dnion for the increase of salar+ for the latter9s mem'ers for the +ear )000
to )00) starting from =anuar+ )000. thus, the increased in salar+ was materiali>ed on
=anuar+ 1, )000. However, on cto'er ", )000, the @egional Tripartite ,age and
production Board raised dail+ minimum wage from P ))0.!0 to P )!0.00 starting
1ovem'er 1, )000. 2onforma'l+, the wages of the 18 pro'ationar+ emplo+ees were
increased to P)!0.00 and 'ecame regular emplo+ees therefore receiving another 10E
increase in salar+. &n =anuar+ )001, T*P&2 implemented the new wage rates as
mandated '+ the 2B.. .s a result, the nine emplo+ees who were senior to the 18 recentl+
regulari>ed emplo+ees, received less wages. n =anuar+ 1/, )001, T*P&29s H@D notified
the )F emplo+ees who are private respondents, that due to an error in the automated
pa+roll s+stem, the+ were overpaid and the overpa+ment would 'e deducted from their
salaries starting %e'ruar+ )001. The Dnion on the other hand, asserted that there was
no error and the deduction of the alleged overpa+ment constituted diminution of pa+.
ISS$E:
,hether the alleged overpa+ment constitutes diminution of pa+ as alleged '+ the
Dnion.
R$LING:
-es, 'ecause it is considered that 2ollective Bargaining .greement entered into
'+ unions and their emplo+ers are 'inding upon the parties and 'e acted in strict
compliance therewith. Thus, the 2B. in this case is the law 'etween the emplo+ers and
their emplo+ees.
Therefore, there was no overpa+ment when there was an increase of salar+ for the
mem'ers of the union simultaneous with the increasing of minimum wage for wor$ers
in the 1ational 2apital @egion. The 2B. should 'e followed thus, the senior emplo+ees
who were first promoted as regular emplo+ees shall 'e entitled for the increase in their
salaries and the same with lower ran$ wor$ers.
Page | 8
REGINO VS. PCS#
G.R No. 1561!+. No5e2ber 1", !!4
FAC#S:
Petitioner Gristine @egino was a poor student enrolled at the Pangasinan 2ollege
of *cience and Technolog+. Thus, a fund raising pro(ect pertaining to a dance part+ was
organi>ed '+ P2*T, re4uiring all its students to purchase two tic$ets in consideration as
a prere4uisite for the final e:am.
@egino, an underprivileged, failed to purchase the tic$ets 'ecause of her status as
well as that pro(ect was against her religious 'elief, thus, she was not allowed to ta$e the
final e:amination '+ her two professors.
ISS$E:
,as the refusal of the universit+ to allow @egino to ta$e the final e:amination
valid;
R$LING:
1o, the *upreme 2ourt declared that the act of P2*T was not valid, though, it can
impose its administrative policies, necessaril+, the amount of tic$ets or pa+ment shall 'e
included or e:pressed in the student hand'oo$s given to ever+ student 'efore the start
of the regular classes of the semester. &n this case, the fund raising pro(ect was not
included in the activities to 'e underta$en '+ the universit+ during the semester. The
petitioner is entitled for damages due to her traumatic e:perience on the acts of the
universit+ causing her to stop stud+ing sand later transfer to another school.
Page | 9
PS%A VS. CA
G.R No. February 4, 1++
FAC#S:
n .ugust 00, 1/H!, 2arlitos Bautista was sta''ed and $illed inside the campus
of Philippine *chool of Business .dministration where the accused were outsiders, while
the victim was an enrolled third +ear student of commerce.
Thus, the parents of Bautista sued the school for the collection of damages due to
the latter9s alleged negligence.
ISS$E:
,hether or not P*B. is lia'le for the damages against the death of Bautista
R$LING:
-es, although, the action does not fall under uasi I delicts, there is negligence
on the part of the school in maintaining peace and order inside the premisesJ thus, there
was a 'reach contractual relation committed '+ P*B. since the incident occurred inside
the campus. The failure of the petitioner school in providing securit+ measures inside
the campus implies the negligence of the same and constitute the 'reach of contract
entered into '+ the petitioner and the victim Bautista when the latter was enrolled and
fall under the supervision of the petitioner.
Page | 10
COSMOPOLI#AN VS. LA VILLE
G.R No. 15"!1. Au6us7 !, !!4
FAC#S:
2osmo entertainment entered into a contract lease with the respondent owner #a
Cille 2ommercial 2orporation for a parcel of land. The contract includes pa+ment of the
first three months of rentalJ hence, the lease is good for seven +ears. Thus, when 2osmo
has paid the initial pa+ment, it suffered 'usiness reverse and stopped operations over
the land, however, the respondent demanded for the pa+ment of lease up to 1//8. Thus
'eing insolvent 2osmo, su'lease the land in favor of another part+ without the consent
of the owner of the land.
ISS$E:
,as the petitioner has the right to su'lease the propert+;
R$LING:
1o, 'ecause it was esta'lished in the contract that the owner I lessor has the
right to approve su'lease of the propert+, thus, 2osmo violated the condition of the
contract. Thus, the e(ectment of 2osmo from one lot is reasona'le. The petitioner,
having voluntaril+ given its consent thereto, was 'ound '+ this stipulation. .nd, having
failed to pa+ the monthl+ rentals, the petitioner is deemed to have violated the terms of
the contract, warranting its e(ectment from the leased premises. The 2ourt finds no
cogent reason to depart from this factual dis4uisition of the courts 'elow in view of the
rule that findings of facts of the trial courts are, as a general rule, 'inding on this 2ourt.
Page | 11
A,ALA CORPORA#ION VS. ROSA- 0IANA REAL#,
G.R No. 1'4"4. 0e1e2ber 1, !!!
FAC#S:
.+ala 2orporation contracted a deed of sale over a parcel of land owned '+ the
latter with Manuel *+, with special conditions on the 'uilding construction at the area,
Thus, restrictions on the height, area and structure of the 'uilding were stipulated.
However, *+ contracted another sale of the su'(ect propert+ to @osa Diana
@ealt+, with the approval of .+ala as well as the promise of @osa Diana to follow such
conditions and restrictions upon 'uilding constructions.
Thus, @osa Diana violated the contract and restrictions when it passed different
'uilding plans to the cit+ of Ma$ati and to .+ala 2orporation, where the former plan has
e:ceeded the stipulated num'er of store+ and the prescri'ed land area.
ISS$E:
,hether @osa Diana @ealt+ must follow the deed of restriction contained in the
contract it entered with .+ala.
R$LING8
-es, 'ecause in contractual o'ligations the contract has the force of a law that the
same is not contrar+ to law or pu'lic polic+, thus, it must 'e performed with in good
faith.
Thus, the pa+ment of damages is an o'ligation of @osa Diana @ealt+ to .+ala
2orp. since the former violation can no longer lead to the destruction of the 'uilding
'ecause the 'uilding was alread+ occupied '+ several persons and offices.
Page | 12
%RIC4#O9N VS. AMOR #IERRA
G.R No. 111" 0e1e2ber 1, 1++4
FAC#S:
Bric$town Development 2orporation entered into a two contracts to sell in favor
.mor Tierra Development 2orporation. The total price of the sell was P)1,"0/,H8!.00
was stipulated to 'e paid '+ private respondent in such amounts and maturit+ dates, as
follows: P),)00,000.00 on 01 March 1/H1J P0,)0/,/"H.8! on 00 =une 1/H1J
PF,8)/,/0".)! on 01 Decem'er 1/H1J and the 'alance of P11,!00,000.00 to 'e paid '+
means of an assumption '+ private respondent of petitioner corporationKs mortgage
lia'ilit+ to the Philippine *avings Ban$ or, alternatel+, to 'e made pa+a'le in cash. n
the same date, parties e:ecuted a *upplemental .greement providing that private
respondent would additionall+ pa+ to petitioner corporation the amounts of P!!,0"F."H,
or )1E interest on the 'alance of down pa+ment for the period from 01 march to 00
=une 1/H1, and of P0/0,0"/.08 representing interest paid '+ petitioner corporation to
the Philippine *avings Ban$. Private respondent was onl+ a'le to pa+ petitioner
corporation for the su'(ect land from the installment not covered '+ the initial pa+ment
up to the time the contract 'e nullified.
ISS$E:
,hether the act of Bric$town in filing the rescission of contract to sell valid.
R$LING:
1o, 'ecause necessaril+ a grace period must 'e given to the de'tor in case it can
not immediatel+ deliver nor perform the o'ligation. The grace period must not 'e
li$ened to an o'ligation, the non6pa+ment of which, under .rticle 11"/ of the 2ivil 2ode,
would generall+ still re4uire (udicial or e:tra(udicial demand 'efore LdefaultL can 'e said
to arise. Ceril+, in the case at 'ench, the "06da+ grace period under the terms of the
contracts to sell 'ecame ipso facto operative from the moment the due pa+ments were
not met at their stated maturities.
&n this case, the contract was not validl+ made 'ecause it is contrar+ to the
principle that the contract can not 'e reneged without the consent of the contracting
parties affected '+ the cancellation of contract, thus the petitioner did not give due for
the respondent for the chance of performing the o'ligation.
Page | 13
PILIPINAS 3INO INC. VS. CO$R# OF APPEALS
G.R No. 1657!. Au6us7 1", !!!
FAC#S:
. contract of lease was entered into 'etween herein parties, under which the
defendants, as lessors, leased real propert+ to plaintiff for a term of ) +ears, from 1"
.ugust 1/H/ 61! .ugust 1//1. .ccording to the contract, plaintiff6lessee deposited with
the defendants6lessors the amount of PF00,000.00 to answer for repairs and damages.
.fter the e:piration of the contract, the plaintiff and defendants made a (oint inspection
and 'oth agreed that the cost of repairs would amount to P"0,000.00 and that the
amount of P0F0,000.00 shall 'e returned '+ to plaintiff. However, defendants returned
to plaintiff onl+ the amount of P)00,000.00, still having a 'alance of P1F0,000.00.
Defendants un(ustifia'l+ refused to return the 'alance of P1F0,000.00 holding that the
true and actual damage on the lease premises amounted to P)/H,80H./0.
However, the su'(ect propert+ was made into a contract to sell where the
petitioner has paid the initial installment 'ut failed to pa+ the remaining pa+ments.,
thus the owner of the propert+ withhold the amount of P /)F, 000.00 representing the
interest due of the unpaid installments.
ISS$E:
,hether the owner of the propert+ su'(ect to sell is entitled to the interest due of
unpaid installments.
R$LING:
1o, 'ecause paragraph / of the Memorandum of .greement provides in ver+
clear terms that Lwhen the owners e:ercise their option to forfeit the downpa+ment,
the+ shall return to the 'u+er an+ amount paid '+ the 'u+er in e:cess of the
downpa+ment with no o'ligation to pa+ interest thereon.L This should include all
amounts paid, including interest. The court finds no 'asis in the conclusion reached '+
the lower courts that Linterest paidL should not 'e returned to the 'u+er.
Thus, the said interest of the unpaid installments shall 'e returned to the 'u+er
since the seller will un(ustl+ enriched himself at the e:pense of the 'u+er if he will collect
undetermined amount.
Page | 14
#I#AN-I4E0A VS. PRIME#O9N
G.R No. 15"76". February 1, !!"
FAC#S:
The respondent Primetown Propert+ 2orporation entered into contract weith the
petitioner Titan6&$eda 2onstruction 2orporation for the structural wor$s of a 0)6store+
prime tower. .fter the construction of the tower, respondent again awarded to the
petitioner the amount of P 100,000,000.00 for the tower9s architectural design and
structure. Howevere, in 1//F, the respondent entered inot a contract of sale of the tower
in favor of the petitioner in a manner called full6swapping. *ince the respondent had
allegedl+ constructed almost one third of the pro(ect as weel as selling some units to
third persons un$nown to the petitioner. &ntegrated &nc. too$ over the pro(ect, thus the
petitioner is demanding for the return of its advanced pa+ment in the amount of P),
000,000.00 as weel as the $e+s of the unit.
ISS$E:
,hether the petitioner is entitled to damages.
R$LING:
1o, 'ecause in a contract necessaril+ that there is a meeting of the minds of the
parties in which this will 'e the 'inding law upon them. Thus, in a reciprocal o'ligation.
Both parties are o'liged to perform their o'ligation simultaneousl+ and in good faith. &n
this case, petitioner, Titan6&$eda can not recover damages 'ecause it was found out
there was no solutio inde'iti or mista$e in pa+ment in this case since the latter is (ust
entitled to the actual services it rendered to the respondent and thus it is ordered to
return the condominium units to the respondent.
Page | 15
PA0COM VS. OR#IGAS CEN#ER
G.R No. 146"!7. May +, !!
FAC#S:
The petitioner Padilla ffice 2ondominium ac4uired a lot from rtigas and
2ompan+ '+ Tierra Development 2orporation for the construction of a 'uilding. Thus,
petitioner originall+ too$ the land from Tierra Development under a deed of sale
whereas among the terms and conditions of the deed was that, an+ successor in interest
and long term lessee 'e automaticall+ included as mem'ers of a future association in
rtigas area.
&n 1/H), rtigas realt+ owners association was organi>ed and thus a mem'ership
due was esta'lished for the development and improvements of the 'uildings located at
the said area. However, when the respondent association will collect the mem'ership
due of the petitioner, the latter refused and contended that it is not a mem'er of the
association and it can not 'e compelled to (oin the association.
ISS$E:
,hether the petitioner is a mem'er of the association.
R$LIG:
-es. The petitioner is an automatic mem'er of the association 'ecause it was
clearl+ reminded and stated in the contract of sale and conditions on successor in
interest that the latter is ipso facto included in an+ association to 'e formed for the
'enefit and protection of the rtigas 2enter 'uildings, thus the time that the contract
was signed signified the compliance of the petitioner.
%urthermore, the petitioner is estopped when it claimed that there was onl+ a
dela+ in pa+ment of the due, thus it has the intention of pa+ing and ac$nowledging the
dues. Moreover, the petitioner can invo$e his freedom of association 'ecause it will
tantamount to un(ust enrichment when it refused to pa+ due to the respondent even it
affords the protection and 'enefits given '+ the association.
Page | 16
MC ENGINEERING VS. CO$R# OF APPEALS
G.R No. 1!4!47. A(r)* ', !!
FAC#S:
The petitioner entered into agreement with *urigao Development 2orporation for
the restoration of the latter. The original amount was P !, 1!0, 000.00 of which, P).!M
was for the restoration of the damaged 'uildings and land improvement, while the P0M
was for the restoration of the electrical and mechanical wor$s. However, the petitioner
contracted the service of 7erent Builders for the improvements of *urigao Development
2orporation , thus an increased for the amount considered was made turning the
original amount to P 0, 10F, H!1.!1. &t was alleged that 7erent Builders finished the
improvement of the 'uilding 'ut it cancelled the electrical and mechanical wor$s and
simultaneousl+, it demanded the amount of P "0), !/0.10 as share in the ad(usted
contract cost. The petitioner refused to pa+ 7erent using the defense that there was a
4uitclaim which removed the petitioners lia'ilit+.
ISS$E:
,hether the petitioner is o'liged to pa+ 7erent Builders.
R$LING:
1o. 7erent 'uilders can not collect additional pa+ment from the petitioner
'ecause ?uitclaims, 'eing contracts of waiver, involve the relin4uishment of rights, with
$nowledge of their e:istence and intent to relin4uish them. ?uitclaims deserve full
credence and are valid and enforcea'le.
&n this case, 7erent was alread+ estopped to demand additional pa+ment when it
accepted the pa+ment of the su'contract made with it '+ the petitioner, in which the
acceptance implied that the petitioner9s o'ligation to 7erent is alread+ e:tinguished
even for additional services rendered '+ the latter in the improvements 'ecause those
services are deemed contained in the su'contract.
Page | 17
%PI VS. PINE0A
G.R No. L-6441. 0e1e2ber 14, 1+"7
FAC#S:
*outhern &ndustrial Pro(ect and Bacong *hipping 2ompan+ purchased three
vessels thru the financing furnished '+ Ban$ of the Philippine &sland with the vessels as
securities. To secure the pa+ment of whatever amounts ma+ 'e dis'ursed for the
aforesaid purpose, the vessels were mortgaged to BP&. %or the operation of the vessels,
these were placed under respondent &nterocean *hipping 2orporation headed '+
respondent Pineda. .s BP& was not fulfilled with the services of &nterocean, it hired
7acet &nc for a period of si: months. The contract 'etween BP& and 7acet did not
however terminate the services of &nterocean. Due to Bacong and *&P9s ina'ilit+ to pa+
the mortgage, it sold the vessels to BP&. The transfer was entered into 'etween BP& and
*&P and Bacong through a Deed of 2onfirmation.
Thus , the vessels suffered damages and successfull+ repaired '+ Pineda.
However, Pineda demanded for the 'alance of the total amount paid '+ *outhern
&ndustrial Pro(ect 'ut the new owner Ban$ refused to pa+ the 'alance for the repairs
alleging that the de't was incurred during the ownership of *outhern *hipping Pro(ect .
ISS$E8
&s BP& lia'le for the pa+ment of de'ts incurred during the ownership of *outhern
*hipping Pro(ect;
R$LING:
-es, Ban$ of the Philippine &sland can 'e held lia'le to pa+ Pineda for the
remaining 'alance of the shipping compan+ 'ecause the mere fact that the 'an$ and the
shipping compan+ signed the 2onfirmation of the 'ligation, the former 'an$ alread+
assumed an+ o'ligations in relations to the su'(ect vessels. Thus, it can not escape from
the lia'ilit+ of pa+ing the past de'ts of the compan+ in which it gave financial support
otherwise it will result to un(ust enrichment on the part of the petitioner 'an$ to hide
from a confirmed o'ligation.
Page | 18
S#A#E INVES#MEN#S VS. CO$R# OF APPEALS
G.R No. +!676. -u.e 1+, 1++1
FAC#S:
Private respondents *pouses .4uino pledged certain shares of stoc$s with
petitioner *tate &nvestments for a loan of P1)0, 000.00, together with the pledge was
the securing of another loan '+ another spouses =ose and Marcelina .4uino.
,hen the original spouses .4uino were willing and availa'le to pa+ the loan, the
petitioner refused to accept pa+ment and released of the shares of stoc$s for the reason
that the second loaner *pouses =ose and Marcelina .4uino were not +et read+ to pa+
their loan. Thus, the trial court ruled that the petitioner must accept the pa+ment from
*pouses .4uino as long as the+ pa+ the loan of P 1)0, 000.00 and there pledged shares
of stoc$s 'e releases. However, there was confusion in the ruling of the trial court
whether or not the interest 'e paid.
ISS$E:
,hether the spouses .4uino 'e o'liged to pa+ the interest of the loanM
R$LING:
-es. The claim of the spouses .4uino for the acceptance of their earl+ pa+ment
must 'e accepted '+ the petitioner, however, the spouses can escape from the lia'ilit+ of
pa+ing the interest of the loan for it was stipulated that there must 'e a 18 E interest per
annum of the loan even there was dela+ or pa+ment 'efore its maturit+. Thus, the
alleged interest is alread+ a part of the contract and not as a penalt+ for it will constitute
un(ust enrichment on the part of the spouses .4uino at the e:pense and pre(udice of the
petitioner *tate &nvestments.
Page | 19
PEOPLE VS. MALICSI
G.R No. 175"''. -a.uary +, !!"
FAC#S:
The accused6appellant was accused for the crime of rape against his niece. The
incident was repeated trice '+ the appellant. The appellant contended that he and the
victim were sweethearts 'ut the trial court did not give weight to that theor+.
The trial court found appellant guilt+ of the crime of four counts of 4ualified rape
and was sentenced to suffer the penalt+ of death for each count of rape, to pa+
P000,000.00 as civil indemnit+ AP8!,000.00 for each countB, and P)00,000.00 as
moral damages AP!0,000.00 for each countB. The 2. however modified the findings of
the @T2 declaring that appellant is guilt+ of four counts of simple rape and to suffer the
penalt+ of reclusion perpetua.
ISS$E:
,hether the award of damages was properl+ made.
R$LING:
1o, 'ecause the *upreme 2ourt declared that the crime committed was four
count of simple rape onl+ and not 4ualified rape 'ecause the special aggravating
circumstances of minorit+ and relationship must 'e alleged in the information 'ut the
prosecution failed to do so. *ince it is not included, four counts of simple rape should 'e
underta$en. The penalt+ imposed then should 'e reclusion perpetua. The appellate
court also correctl+ affirmed the award '+ the trial court of P)00,000.00 for moral
damages. Moral damages are automaticall+ granted to rape victim. However, the award
of civil indemnit+ is reduced to P)00,000.00 in the amount of P!0,000.00 for each
count of simple rape is automaticall+ granted.
Page | 20
PEOPLE VS. SIA
G.R No. 1'7457. No5e2ber 1, !!1
FAC#S:
The accused6appellants conspired to $ill the victim Bermudes and carried w4ith
them the victim9s ta:ica'. .fter several da+s of lost, Bermude>9s corpse was discovered
inside a carton 'o: located in a fishpond. Thus the appellants were convicted for
separate crimes of anti6carnapping and murder, thus sentenced to suffer the penalt+ of
reclusion perpetua. The trial court also awarded to the victim9s heirs, sums of
P!0,000.00 as compensator+ damages for the death of 2hristian Bermude>,
P)00,000.00 as 'urial and other e:penses incurred in connection with the death
P0,008,1//."0 A)M0 : NH06)8O : 000 per da+ : )" da+s : 1) monthsB representing the loss
of earning capacit+ of 2hristian Bermude> as ta:i driver.
ISS$E8
,hether the amount of damages awarded was correct.
R$LING8
The *upreme 2ourt affirmed the award of P !0, 000.00 as civil indemnit+ for the
death of Bermude> without even presenting of evidence. The court also affirmed the
award of moral damages for the suffering of the victim9s famil+. However, the
compensator+ or actual damages were deleted 'ecause of lac$ of proofs, thus in
determining the loss of income , the following must 'e ta$en into account: the num'er
of +ears for which the victim would have livedJ and the rate of the loss sustained '+ the
heirs of the deceased.
Page | 21
PEOPLE VS. 0OC#OLERO
G.R No. 1'1"66. Au6us7 !, !!1
FAC#S:
7anongan and his friends went to Hone+moon road at Baguio 2it+. ,hile the+
were leaving the place, armed person stopped them, hence when 7anongan, the victim
reacted the appellant Doctolero shot him twice causing the victim9s death as *aint #ouis
Hospital The @T2 finds the accused 2arlos Doctolero, *r. guilt+ of the offense of
Murder and here'+ sentences him to @eclusion Perpetua and to indemnif+ the heirs of
deceased, the sum of P!0,000.00 as indemnit+ for his deathJ the sum of P))8,H0H.H0
as actual damages for e:penses incurred for hospitali>ation, doctor9s fees, funeral
e:penses, vigil and 'urial as a result of his death, and P000,000.00 as Moral damages
for the pain and mental anguish suffered '+ the heirs '+ reason of his death.
ISS$E8
,hether the award of actual damages is correct;
R$LING8
1o, the award of actual damages in incorrect thus *upreme 2ourt reduced the
award of actual damages to P11), F10.F0 representing funeral e:penses, which proven
during the proceedings. <:penses relating to the /th da+, F0th da+ and 1st +ear
anniversaries cannot 'e considered in the award of actual damages as these were
incurred after a considera'le lapse of time from the 'urial of the victim. However, the
award of moral damages is reduced to P!0, 000.00 in accordance with e:isting
(urisprudence for the death of the victim.
Page | 22
PEOPLE VS. A%$LENCIA
G.R No. 1'"4!'. Au6us7 !!1
FAC#S8
The appellant had a drin$ with the 'rother of the victim, @e'el+n, when the
appellant along with the victim who was then 1) +ears old to 'ut dilis in the near'+
store. The appellant and the victim never returned 'ut the former surrendered to the
authorities and alleged that the victim has accidentall+ fallen into the river. However,
when the 'od+ was found, it was discovered that the victim was raped 'efore thrown to
the river. The trial court foud .'ulencia guilt+ of the crime of aggravated rape with
homicide and sentenced him to suffer the penalt+ of death. &t was also ordered that the
accused indemnif+ the heirs of @e'el+n 7arcia, the sum of P8!,000.00 damages, and
another sum of P)0,000.00 for e:emplar+ damages plus P",F)!.00 as actual damages.
ISS$E:
,hether the award of damages is correctl+ imposed.
R$LING:
1o. the award of damages and penalt+ was incorrect, thus the *upreme 2ourt
'oth modified the penalt+ '+ reducing it to reclusion perpetua and the award of civil
damages. The court awarded the amount of P !0, 000.00 as moral damages for the
moral suffering of the heirs of the raped victim. However, the award of civil indemnit+
was increasea from P 8!, 000.00 to p 100, 000.00 'ased on current (urisprudence in
cases of rape with homicide.
Page | 23
%ERM$0E: VS. -$0GE MELENCIO-3ERRERA
G.R No. L-'!55. February 6, 1+""
FAC#S:
The victim @ogelio, a si: +ears old son of the petitioners was $illed in a vehicular
accident caused '+ the alleged negligenc of 2ordova, the driver of a (eep who 'umped
with the victim9s passenger seat. The parents instituted an action for collection of
damages against the accused 2ordova from the crime of homicide thru rec$less
imprudence. The petitioner parents reserved their right to file an independent action
'ased on 4uasi6delicts. However, the trial court decided to order the dismissal of the
complaint against defendant 2ordova 1g *un Gwan and to suspend the hearing of the
case against Domingo Pontino until after the criminal case for Homicide Through
@ec$less &mprudence is finall+ terminated.
ISS$E:
,hether the action is 'ased on 4uasi6delicts and can not stand independentl+
from the criminal case.
R$LING8
-es. The action was 'ased on 4uasi6delicts, thus it can 'e 'ased on the provisions
of the 1ew 2ivil 2ode under .rticle )18"6 )1/F where an action for damages from fault,
omission or negligence can prosper independentl+ even during the proceeding in the
criminal case
The parents of the victim made a reservation to file an independent civil action in
accordance with the provisions of *ection ) of @ule 111, @ules of 2ourt. &n fact, even
without such a reservation, the court has allowed the in(ured part+ in the criminal case
which resulted in the ac4uittal of the accused to recover damages 'ased on 4uasi6delict.
Page | 24
PEOPLE VS. -$0GE RELOVA
G.R No. L-451+
FAC#S:
Batangas <lectric *+stem together with police officers, has searched the premises
of the &ce Plant 'uilding owned and managed '+ pulencia. The authorities discovered
that pulencia made illegal installment of electrical wirings and devices causing the
diminution of his electric 'ill. Thus, he was charge of violatin cit+ ordinance enacted in
1/8F. pulencia contended that the offense has alread+ prescri'ed thus, the Batangas
2it+ 2ourt granted the motion to dismiss on the ground of prescription, it appearing
that the offense charged was a light felon+ which prescri'es two months from the time
of discover+ thereof, and it appearing further that the information was filed '+ the fiscal
more than nine months after discover+ of the offense charged in %e'ruar+ 1/8!. .fter
two wee$s, another violation was again filed against pulencia, this time for theft of
electric power under .rticle 00H in relation to .rticle 00/ of the @evised Penal 2ode.
ISS$E8
,hether the electric compan+ can file separate civil action for collection of
damagers against pulencia.
R$LING:
-es, the electric compan+ ma+ file another civil action for the theft of electric
power '+ pulencia. .lthough the criminal aspect was alread+ prescri'ed in the first
criminal case .nd '+ 'ar on dou'le (eopard+ in the second case, pulencia can not
escape his civil lia'ilit+.
Thus, the *upreme 2ourt ordered pulencia to pa+ the damages in the amount
he stole from the cit+ and or the electric compan+ from the time he installed the electric
wirings and devices.
Page | 25
MANAN#AN VS. CO$R# OF APPEALS
G.R No. 1!715. -a.uary +, !!1
FAC#S8
The deceased 1icolas suggested to %iscal .m'rocio that the+ will 'orrow the for
fiera of the accused Manantan, in order for the former to have eas+ access for their
planned activit+. Thus, when the+ proceeded catching shrimps, the+ had drin$ing spree
until the+ decided to go to *antiago 2it+ in the evening and have another drin$ing spree
there. However, after the+ ate snac$s in the cit+, the+ decided to go home. ,hile the
Manantan was driving the carat the speed of F0 $ilometer per hour, the car 'umped a
coming (eepne+ causing the former car to swerve into the ne:t line. @u'en 1icolas died ,
however Manantan and the %iscal suffered in(uries.
The trial court ac4uitted the accused of the crime of Homicide through @ec$less
&mprudence. Thus, Manantan appealed for the civil lia'ilit+ he is going to fulfill to the
heirs of the victim. However, it was found out that the pro:imate cause of the death of
the victim was the negligence of Manantan and the latter was ordered to pa+ the heirs of
the victim in the amount of P 18F, F00.00.

ISS$E:
,hether the e:tinguishment of the criminal lia'ilit+ in the case carries also the
e:tinguishment of the civil lia'ilit+.
R$LING:
1o. the e:tinguishment of the criminal lia'ilit+ of Manantan does not carr+ the
e:tinguishment of his civil lia'ilit+ 'ecause his ac4uittal was 'ased on reasona'le dou't
or the failure to prove the guilt of the accused 'e+ond reasona'le dou't. However, it was
not proven that he was ac4uitted as if he was not present at the happening of the crime
which totall+ o'literates his civil lia'ilit+. Thus, article )/ of the 2ivil 2ode can 'e
applied in case of omission or fault.
Page | 26
PEOPLE VS. %A,O#AS
G.R No. 1!!!7. Se(7e2ber , 1++4
FAC#S:
.ppellant Ba+otas was charged with rape and was convicted for the said crime in
1//1. while his appeal was pending, he died at the 1ew Bili'id Hospital due to
respirator+ attac$. Thus, when the *upreme 2ourt dismissed the criminal aspect, the
*olicitor6 7eneral e:pressed that the civil lia'ilit+ of the accused was not also e:tinguish
upon the death of the appellant.
ISS$E8
,hether the civil lia'ilit+ of the accused was e:tinguished upon his death.
R$LING:
1o, the civil lia'ilit+ in general of the accused was not e:tinguished upon the
death of the accused. However, necessaril+, the civil lia'ilit+ in the rape case was
e:tinguished since it was included in the act complained of 'ut the remed+ of the victim
is to proceed to the estate of the accused through the filing of a separate independent
action for collection of damages.
Page | 27
%arre;o 5s. Gar1)a
7' P<)* 6!7
FAC#S:
The ta:ica' owned '+ petitioner Barredo collided to a carratela. Thus, the
carratela fall down and overturned causing the death of the son of respondent 7arcia.
The trial court convicted the driver of the ta:ica'. However, the respondent has reserved
his right to file independent civil action for collection of damages for the death of his
son.
ISS$E:
,hether Barredo can held primar+ lia'le for the death of the son of the
respondent.
R$LING8
-es. Barredo can also 'e held primar+ and directl+ lia'le in the civil case 'ecause
it was found out that 'eing the owner and operator of the ta:ica', his negligence to
supervise and e:ert e:traordinar+ diligence in the performance of his emplo+ees made
him lia'le together with his convicted emplo+ee. Thus, the failure to prove that there
was no negligence on the part of the owner of the ta:ica' made no wa+ for the petitioner
to escape his civil lia'ilit+. Therefore, the acts of the emplo+ee reflects the act of the
emplo+er causing the latter lia'le in case of negligence in supervision.
Page | 28
0, #E%AN VS. LI%ER#, FORES#
G.R No. 161"!'. February 4, !!"
FAC#S:
. Prime Mover Trailer suffered a tire 'low out during the night of its travel at a
national highwa+. The trailer was owned '+ the respondent #i'ert+ %orest. The driver
allegedl+ put earl warning devices 'ut the onl+ evidence 'eing witnessed was a 'anana
trun$s and candles. *ince the car was placed at the right wing of the road, thus it cause
the swerving of a 1issan van owned '+ the petitioner when a passenger 'us was coming
in 'etween the trailer. The 1issan van owner claimed for damages against the
respondent. The trial court found that the pro:imate cause of the three Iwa+ accident is
the negligence and carelessness of driver of the respondent . However reversed the
decision of the trial court.
ISS$E:
,hether there was negligence on the part of the respondent.
R$LING:
-es. There was negligence on the part of the respondent when the latter failed to
put and used an earl+ warning device 'ecause it was found out that there was no earl+
warning device 'eing prescri'ed '+ law that was used '+ the driver in order to warn
incoming vehicle. %urthermore, the pro:imate cause of the accident was due to the
position of the trailer where it covered a cemented part of the road, thus confused and
made tric$ wa+ for other vehicles to pass '+. Thus the respondent is declared lia'le due
to violation of road rules and regulations.

Page | 29
SAFEG$AR0 SEC$RI#, VS. #ANGCO
G.R No. 1657'. 0e1e2ber 14, !!6
FAC#S:
The victim <vangeline Tangco was depositor of <colog+ Ban$. *he was also a
licensed6fire arm holder, thus during the incident, she was entering the 'an$ to renew
her time deposit and along with her was her firearm. *uddenl+, the securit+ guard of the
'an$, upon $nowing that the victim carries a firearm, the securit+ guard shot the victim
causing the latter9s instant death. The heirs of the victim filed a criminal case against
securit+ guard and an action against *afeguard *ecurit+ for failure to o'serve diligence
of a goof father implied upon the act of its agent.
ISS$E:
,hether *afeguard *ecurit+ can 'e held lia'le for the acts of its agent.
R$LING:
-es. The law presumes that an+ in(ur+ committed either '+ fault or omission of
an emplo+ee reflects the negligence of the emplo+er. &n 4uasi6delicts cases, in order to
overcome this presumption, the emplo+er must prove that there was no negligence on
his part in the supervision of his emplo+ees.
&t was declared that in the selection of emplo+ees and agents, emplo+ers are
re4uired to e:amine them as to their 4ualifications, e:perience and service records.
Thus, due diligence on the supervision and operation of emplo+ees includes the
formulation of suita'le rules and regulations for the guidance of emplo+ees and the
issuance of proper instructions intended for the protection of the pu'lic and persons
with whom the emplo+er has relations through his emplo+ees. Thus, in this case,
*afeguard *ecurit+ committed negligence in identif+ing the 4ualifications and a'ilit+ of
its agents.
Page | 30
VILLAN$EVA VS. 0OMINGO
G.R No. 14474. Se(7e2ber !, !!4
FAC#S:
&n 1//1, a collision was made '+ a green Mitsu'ishi lancer owned '+ cfemia
against a silver Mitsu'ishi lancer driven '+ #eandro Domingo and owned '+ petitioner
Priscilla Domingo. The incident caused the car of Domingo 'umped another two par$ed
vehicles. . charged was filed against cfemia and the owner Cillanueva. Cillanueva
claimed that he must not 'e held lia'le for the incident 'ecause he is no longer the
owner of the car, that it was alread+ swapped to another car . however, the trial court
ordered the petitioner to pa+ the damages incurred '+ the silver Mitsu'ishi lancer car.
ISS$E:
,hether the owner Cillanueva 'e held lia'le for the mishap.
R$LING:
Dnder the Motor Cehicle law, it was declared that the registered owner of an+
vehicle is primar+ land directl+ lia'le for an+ in(ur+ it incurs while it is 'eing operated.
Thus, even the petitioner claimed that he was no longer the present owner of the car,
still the registr+ was under his name, thus it is presumed that he still possesses the car
and that the damages caused '+ the car 'e charge against him 'eing the registered
owner. The primar+ function of Motor vehicle registration is to identif+ the owner so
that if an+ accident happens, or that an+ damage or in(ur+ is caused '+ the vehicle,
responsi'ilit+ therefore can 'e fi:ed on a definite individual, the registered owner.
Page | 31
CALALAS VS. CO$R# OF APPEALS
G.R No. 1!'+. May '1, !!!
FAC#S:
<li>a *unga was a passenger of a (eepne+ owned and operated '+ the petitioner
2alalas. Private respondent *unga sat in the rear protion of the (eepne+ where the
conductor gave *unga an e:tension seat. ,hen the (eep stopped, *unga gave wa+ to a
passenger going outside the (eep. However, an &su>u Truc$ driven '+ Cerene and owned
'+ *alva, accidentall+ hit *unga causing the latter to suffer ph+sical in(uries where the
attending ph+sician ordered a three months of rest. *unga filed an action for damages
against the petitioner for 'reach of contract of common carriage '+ the petitioner.
n the other hand, the petitioner 2alalas filed an action against *alva, 'eing the
owner of the truc$. The lower court ruled in favor of ther petitioner, thus the truc$
owner is lia'le for the damage to the (eep of the petitioner.
ISS$E:
,hether the petitionerr is lia'le.
R$LING:
-es. The petitioner is lia'le for the in(ur+ suffered '+ *unga. Dnder .rticle 18!"
of the 1ew 2ivil 2ode, it provides that common carriers are presumed to have 'een at
fault or to have acted negligentl+ unless the+ prove that the+ o'served e:traordinar+
diligence as defined in .rts. 1800 and 18!! of the 2ode. This provision necessaril+ shifts
to the common carrier the 'urden of proof.
&n this case, the law presumes that an+ in(ur+ suffered '+ a passenger of the (eep
is deemed to 'e due to the negligence of the driver. This is a case on 2ulpa 2ontractual
where there was pre6e:isting o'ligations and that the fault is incidental to the
performance of the o'ligation. Thus, it was clearl+ o'served that the petitioner has
negligence in the conduct of his dut+ when he allowed *unga to seat in the rear portion
of the (eep which is prone to accident.
Page | 32
L$0O AN0 L$,M CORPORA#ION 5s. CO$R# OF APPEALS
G.R. No. 154"'. FE%R$AR, 1, !!1
FAC#S8
#udo P #u+m 2orporation is a domestic corporation engaged in copra
processing. Private @espondent 7a'isan *hipping #ines was the registered owner and
operator of the motor vessel MC Miguela, while the other private respondent, .nselmo
lasiman, was its captain. n Ma+ )1, 1//0, while MC Miguela was doc$ing at
petitioner9s wharf, it rammed and destro+ed a fender pile cluster. &reneo 1aval,
petitioner9s emplo+ee, guided the vessel to its doc$ing place. .fter the small rope was
thrown from the vessel and while the petitioner9s securit+ guard was pulling the 'ig rope
to 'e tied to the 'olar, MC Miguela did not slow down. The crew did not release the
vessel9s anchor. 1aval shouted 3@everse5 to the vessel9s crew, 'ut it was too late when
the latter responded, for the vessel alread+ rammed the pile cluster. Petitioner
demanded for damages 'ut private respondents denied the incident and the damage.
Their witnesses claimed that the damage, if an+, must have occurred prior to their
arrival and caused '+ another vessel or '+ ordinar+ wear and tear.
ISS$E8
&s the doctrine of res ipsa lo4uitur applica'le to this case;
R$LING8
The doctrine of res ipsa lo4uitor provides that where the thing which causes
in(ur+ is shown to 'e under the management of the defendant, and the accident is such
as in the ordinar+ course of things does not happen if those who have the management
use proper care, it affords reasona'le evidence, in the a'sence of an e:planation '+ the
defendant, that the accident arose from want of care. &n this case, all the re4uisites for
this doctrine e:ist. %irst, MC Miguela was under the e:clusive control of its officers and
crew. *econd, aside from the testimon+ that MC Miguela rammed the cluster pile,
private respondent did not show persuasivel+ other possi'le causes of the damage.
There e:ists a presumption of negligence against private respondents which the+ failed
to overcome. .dditionall+, petitioner presented proof that demonstrated private
respondents9 negligence. .s testified '+ 2apt. lasiman, from command of 3slow ahead5
to 3stop engine5, the vessel will still travel 100 meters 'efore it finall+ stops. However,
he ordered 3stop engine5 when the vessel was onl+ !0 meters from the pier. %urther, he
testified that 'efore the vessel is put to slow astern, the engine has to 'e restarted.
However, lasiman can not estimate how long it ta$es 'efore the engine goes to slow
astern after the engine is restarted. %rom these declarations, the conclusion is that it was
alread+ too late when the captain ordered reverse. B+ then, the vessel was onl+ F meters
from the pier, and thus rammed it.
@espondent compan+9s negligence consists in allowing
incompetent crew to man its vessel. .s shown also '+ petitioner, 'oth 2aptain lasiman
and 2hief Mate 7a'isan did not have a formal training in marine navigation. The former
was a mere elementar+ graduate while the latter is a high school graduate. Their
e:perience in navigationwas onl+ as a watchman and a 4uartermaster, respectivel+.
7a'isan *hipping #ines and the ship captain are held (ointl+ and severall+ lia'le for
damages caused to the petitioner.
Page | 33
#3ERMOC3EM INCORPORA#E0 5s. LEONORA NAVAL
G.R. No. 1'1541. OC#O%ER !, !!!
FAC#S8
Ln Ma+ 10, 1//), at around 1):00 oKcloc$ midnight, <duardo <dem was driving
a L#uring Ta:iL along rtigas .venue, near @osario, Pasig, going towards 2ainta.
Thereafter, the driver e:ecuted a D6turn to traverse the same road, going to the direction
of <D*.. .t this point, the 1issan Pathfinder traveling along the same road going to the
direction of 2ainta collided with the ta:ica'. The point of impact was so great that the
ta:ica' was hit in the middle portion and was pushed sideward, causing the driver to
lose control of the vehicle. The ta:ica' was then dragged into the near'+ ?uestion
Tailoring *hop, thus, causing damage to the said tailoring shop, and its driver, <duardo
<den, sustained in(uries as a result of the incident.L
Private respondent, as owner of the ta:i, filed a damage suit against petitioner,
Thermochem &ncorporated, as the owner of the 1issan Pathfinder, and its driver,
petitioner =erome 2astro. .fter trial, the lower court ad(udged petitioner 2astro
negligent and ordered petitioners, (ointl+ and severall+, to pa+ private respondent
actual, compensator+ and e:emplar+ damages plus attorne+Ks fees and costs of suit.
ISS$E:
,hat are the lia'ilities of 'oth parties;
R$LING8
The driver of the oncoming 1issan Pathfinder vehicle was lia'le and the driver of
the D6turning ta:ica' was contri'utoril+ lia'le. &t is esta'lished that 2astro was driving
at a speed faster than !0 $ilometers per hour 'ecause it was a downhill slope. But as he
allegedl+ stepped on the 'ra$e, it loc$ed causing his 1issan Pathfinder to s$id to the left
and conse4uentl+ hit the ta:ica'. Malfunction or loss of 'ra$e is not a fortuitous event.
Between the owner and his driver, on the one hand, and third parties such as
commuters, drivers and pedestrians, on the other, the former is presumed to $now
a'out the conditions of his vehicle and is dut+ 'ound to ta$e care thereof with the
diligence of a good father of the famil+. . mechanicall+ defective vehicle should avoid
the streets. .s petitionerKs vehicle was moving downhill, the driver should have slowed
down since a downhill drive would naturall+ cause the vehicle to accelerate. Moreover,
the record shows that the 1issan Pathfinder was on the wrong lane when the collision
occurred.
The ta:i driver is contri'utoril+ lia'le since he too$ a D6turn where it is not
generall+ advisa'le. The ta:i was hit on its side which means that it had not +et full+
made a turn to the other lane. The driver of the ta:i ought to have $nown that vehicles
coming from the @osario 'ridge are on a downhill slope. 'viousl+, there was lac$ of
foresight on his part, ma$ing him contri'utoril+ lia'le. 2onsidering the contri'utor+
negligence of the driver of private respondentKs ta:i, the award of PF8,H!0.00, for the
repair of the ta:i, should 'e reduced in half. .ll other awards for damages are deleted for
lac$ of merit.
Page | 34
AMA0O PICAR# 5s. FRAN4 SMI#3, -R.
G.R. No. L-11+. MARC3 15, 1+1"
FAC#S8
The plaintiff, riding on his pon+ was half wa+ across the 2arlatan 'ridge when the
defendant approached from the opposite direction in an automo'ile, going at the rate of
a'out ten or twelve miles per hour. .s the defendant neared the 'ridge he saw a
horseman on it and 'lew his horn to give warning of his approach. He continued his
course and after he had ta$en the 'ridge he gave two more successive 'lasts, as it
appeared to him that the man on horse'ac$ 'efore him was not o'serving the rule of the
road. The plaintiff saw the automo'ile coming and heard the warning signals. However,
thin$ing that he has no sufficient time to go to the other side of the road, he pulled the
pon+ closel+ up against the railing on the right side of the 'ridge instead of going to the
left. The defendant, instead of veering to the right while +et some distance awa+ or
slowing down, continued to approach directl+ toward the horse. ,hen he had gotten
4uite near, there 'eing then no possi'ilit+ of the horse getting across to the other side,
the defendant 4uic$l+ turned his car sufficientl+ to the right to escape hitting the horse
alongside of the railing where it as then standingJ 'ut in so doing the automo'ile passed
in such close pro:imit+ to the animal that it 'ecame frightened and turned its 'od+
across the 'ridge with its head toward the railing. &n so doing, it as struc$ on the hoc$ of
the left hind leg '+ the flange of the car and the lim' was 'ro$en. The horse fell and its
rider was thrown off with some violence. .s a result of its in(uries the horse died. The
plaintiff received contusions which caused temporar+ unconsciousness and re4uired
medical attention for several da+s.
ISS$E8
,hether or not the defendant is guilt+ of negligence.
R$LING8
.s the defendant started across the 'ridge, he had the right to assume that the
horse and the rider would pass over to the proper sideJ 'ut as he moved toward the
center of the 'ridge he clearl+ saw that this would not 'e doneJ and he must in a
moment have perceived that it was too late for the horse to cross with safet+ in front of
the moving vehicle. The control of the situation had then passed entirel+ to the
defendantJ and it was his dut+ either to 'ring his car to an immediate stop or, seeing
that there were no other persons on the 'ridge, to ta$e the other side and pass
sufficientl+ far awa+ from the horse to avoid the danger of collision. &nstead of doing
this, the defendant ran straight on until he was almost upon the horse.
The plaintiff himself was not free from fault, for he was guilt+ of antecedent
negligence in planting himself on the wrong side of the road. But it was the defendant
who had the last clear chance to avoid the impending harm and when he failed to do so,
he is deemed negligent, thus lia'le to pa+ damages in favor of the plaintiff.
Page | 35
-OSE V. LAGON 5s. 3OOVEN COMALCO IN0$S#RIES, INC
G.R. No. 1'5657. -AN$AR, 17, !!1
FAC#S8
*ometime in .pril 1/H1 #agon, a 'usinessman and HC<1 entered into two A)B
contracts, denominated Proposal, where'+ for a total consideration of P10F,H80.00
HC<1 agreed to sell and install various aluminum materials in #agon9s commercial
'uilding in Tacurong, *ultan Gudarat. HC<1 filed an action against #agon claiming
that the latter failed to pa+ his due despite HC<19s performance of its o'ligation.
#agon, in his answer, denied lia'ilit+ and averred that HC<1 was the part+ guilt+ of
'reach of contract '+ failing to deliver and install some of the materials specified in the
proposalsJ that as a conse4uence he was compelled to procure the undelivered materials
from other sourcesJ that as regards the materials dul+ delivered and installed '+
HC<1, the+ were full+ paid.
ISS$E8
,ho among the parties is entitled to damages;
R$LING8
HC<1Ks 'ad faith lies not so much on its 'reach of contract 6 as there was no
showing that its failure to compl+ with its part of the 'argain was motivated '+ ill will or
done with fraudulent intent 6 'ut rather on its appalling temerit+ to sue petitioner for
pa+ment of an alleged unpaid 'alance of the purchase price notwithstanding $nowledge
of its failure to ma$e complete deliver+ and installation of all the materials under their
contracts. .lthough petitioner was found to 'e lia'le to respondent to the e:tent of
P",088."", petitionerKs right to withhold full pa+ment of the purchase price prior to the
deliver+ and installation of all the merchandise cannot 'e denied since under the
contracts the 'alance of the purchase price 'ecame due and demanda'le onl+ upon the
completion of the pro(ect. 2onse4uentl+, the resulting social humiliation and damage to
petitionerKs reputation as a respected 'usinessman in the communit+, occasioned '+ the
filing of this suit provide sufficient grounds for the award of P!0,000.00 as moral
damages. n the part of #agon, he is ordered '+ the court to pa+ HC<1 the amount
corresponding to the value of the materials admittedl+ delivered to him.
Page | 36
SPO$SES FRANCISCO 5s. 3ONORA%LE CO$R# OF APPEALS
G.R. No. 11"74+. APRIL 5, !!'
FAC#S8
n 0 %e'ruar+ 1/HF, the spouses #oren>o and #oren>a %rancisco and <ngineer
Bienvenido 2. Mercado entered into a 2ontract of Development for the development
into a su'division of several parcels of land in Pampanga. Dnder the 2ontract,
respondent agreed to underta$e at his e:pense the development wor$ for the %randa
Cillage *u'division. @espondent committed to complete the construction within )8
months. @espondent also advanced P)00,000.00 for the initial e:penses of the
development wor$. &n return, respondent would receive !0E of the total gross sales of
the su'division lots and other income of the su'division. @espondent also en(o+ed the
e:clusive and irrevoca'le authorit+ to manage, control and supervise the sales of the lots
within the su'division. The 2ontract re4uired respondent to su'mit to petitioners,
within the first 1! da+s of ever+ month, a report on pa+ments collected from lot 'u+ers
with copies of all the contracts to sell. However, respondent failed to su'mit the monthl+
report.
n )8 %e'ruar+ 1/H8, respondent filed with the trial court an action to rescind
the 2ontract with a pra+er for damages. Petitioners countered that respondent 'reached
the 2ontract '+ failing to finish the su'division within the )8 months agreed upon, and
therefore respondent was in dela+.
ISS$E8
Did <ngr. Mercado incur dela+ in the case at 'ench;
R$LING8
The petitioners 'reached the 2ontract '+: A1B hiring @osales to do development
wor$ on the su'division within the )86month period e:clusivel+ granted to respondentJ
A)B interfering with the latterKs development wor$J and A0B stopping respondent from
managing the sale of lots and collection of pa+ments. Because petitioners were the first
to 'reach the 2ontract and even interfered with the development wor$, respondent did
not incur dela+ even if he completed onl+ )HE of the development wor$. %urther, the
H*@2 e:tended the 2ontract up to =ul+ 1/H8. *ince the 2ontract had not e:pired at the
time respondent filed the action for rescission, petitionersK defense that respondent did
not finish the development wor$ on time was without 'asis. The law provides that dela+
ma+ e:ist when the o'ligor fails to fulfill his o'ligation within the time e:pressl+
stipulated. &n this case, the H*@2 e:tended the period for respondent to finish the
development wor$ until 00 =ul+ 1/H8. @espondent did not incur dela+ since the period
granted him to fulfill his o'ligation had not e:pired at the time respondent filed the
action for rescission on )8 %e'ruar+ 1/H8.
Moreover, since petitioners stopped respondent from selling lots and collecting
pa+ments from lot 'u+ers, which was the primar+ source of development funds, the+ in
effect, rendered respondent incapa'le, or at least made it difficult for him, to develop
the su'division within the allotted period. &n reciprocal o'ligations, neither part+ incurs
in dela+ if the other does not compl+ or is not read+ to compl+ with what is incum'ent
upon him. &t is onl+ when one of the parties fulfills his o'ligation that dela+ '+ the other
'egins.
Page | 37
-ACIN#O #ANG$ILIG 5s. CO$R# OF APPEALS a.; VICEN#E 3ERCE -R.
G.R. No. 1171+!. -AN$AR, , 1++7
FAC#S8
Petitioner =acinto M. Tanguilig proposed to respondent Cicente Herce =r. to
construct a windmill s+stem for him. .fter some negotiations the+ agreed on the
construction of the windmill for a consideration of P"0,000.00. n 1F March 1/HH, due
to the refusal and failure of respondent to pa+ the 'alance, petitioner filed a complaint
to collect the amount. @espondent denied the claim sa+ing that he had alread+ paid this
amount to the *an Pedro 7eneral Merchandising &nc. A*P7M&B which constructed the
deep well to which the windmill s+stem was to 'e connected. .ccording to respondent,
since the deep well formed part of the s+stem the pa+ment he tendered to *P7M& should
'e credited to his account '+ petitioner. Moreover, assuming that he owed petitioner a
'alance of P1!,000.00, this should 'e offset '+ the defects in the windmill s+stem which
caused the structure to collapse after a strong wind hit their place.
Petitioner denied that the construction of a deep well was included in the
agreement to 'uild the windmill s+stem, for the contract price of P"0,000.00 was solel+
for the windmill assem'l+ and its installation. He also disowned an+ o'ligation to repair
or reconstruct the s+stem since its collapse was attri'uta'le to a t+phoon, a force
ma(eure, which relieved him of an+ lia'ilit+.
ISS$E8
,hether or not the pa+ment for the deep well is part of the contract price.
,hether or not Tanguilig is lia'le to reconstruct the damaged windmill considering that
its collapse is due to a t+phoon.
R$LING8
There is a'solutel+ no mention in the two A)B documents that a deep well pump is
a component of the proposed windmill s+stem. The contract prices fi:ed in 'oth
proposals cover onl+ the features specificall+ descri'ed therein and no other.
@espondent is directed to pa+ petitioner Tanguilig the 'alance of P1!,000.00 plus legal
interest.
@egarding the second issue, the *upreme 2ourt has consistentl+ held that in
order for a part+ to claim e:emption from lia'ilit+ '+ reason of fortuitous event under
.rt. 118F of the 2ivil 2ode four AFB re4uisites must concur: AaB the cause of the 'reach of
the o'ligation must 'e independent of the will of the de'torJ A'B the event must 'e either
unforeseea'le or unavoida'leJ AcB the event must 'e such as to render it impossi'le for
the de'tor to fulfill his o'ligation in a normal mannerJ and, AdB the de'tor must 'e free
from an+ participation in or aggravation of the in(ur+ to the creditor. Petitioner failed to
show that the collapse of the windmill was due solel+ to a fortuitous event. Petitioner
merel+ stated that there was a Lstrong wind.L But a strong wind in this case cannot 'e
fortuitous. n the contrar+, a strong wind should 'e present in places where windmills
are constructed. Petitioner is ordered to Lreconstruct su'(ect defective windmill s+stem,
in accordance with the one6+ear guarant+L.

Page | 38
0R. FERNAN0O PERI/$E#, -R. 5s. #3E CO$R# OF APPEALS
G.R. No. L-6+++6. 0ECEM%ER 5, 1++4
FAC#S8
*pouses %ernando Peri4uet and Petra %rancisco were left childless after the death
of their onl+ child, <lvira,

so the+ too$ in a son out of wedloc$ of Marta %rancisco6@e+es,
sister of Petra. Though he was not legall+ adopted, the 'o+ was given the name
%ernando Peri4uet, =r. and was reared to manhood '+ the spouses Peri4uet. n March
)0, 1/"", %ernando Peri4uet died. ,hen Petra died, she was survived '+ her si'lings,
nieces and nephews and '+ the petitioner. But a few da+s 'efore her death, Petra as$ed
her law+er to prepare her last will and testament. However, she died 'efore she could
sign it. &n the said will, Petra left her estate to petitioner, %ernando Peri4uet, =r. and
provided for certain legacies to her other heirs. %eli: %ranciso, 'rother of Petra, assigned
his hereditar+ rights to the petitioner. However, later on, he filed an action for
annulment of the .ssignment of Hereditar+ @ights claiming Lgross misrepresentation
and fraud,L Lgrave a'use of confidence,L Lmista$e and undue influence,L and Llac$ of
cause andMor considerationL in the e:ecution of the challenged deed of assignment.
ISS$E8
,hether or not the .ssignment of Hereditar+ @ights is tainted with fraud.
R$LING8
The $ind of fraud that will vitiate a contract refers to those insidious words or
machinations resorted to '+ one of the contracting parties to induce the other to enter
into a contract which without them he would not have agreed to. &n the case at 'ench, no
such fraud was emplo+ed '+ herein petitioner. @esultantl+, the assignment of hereditar+
rights e:ecuted '+ %eli: %rancisco in favor of herein petitioner is valid and effective.
%eli: %rancisco could not 'e considered to have 'een deceived into signing the
su'(ect deed of assignment for the following reasons: The assignment was e:ecuted and
signed freel+ and voluntaril+ '+ %eli: %rancisco in order to honor, respect and give full
effect to the last wishes of his deceased sister, Petra. The same was read '+ him and was
further e:plained '+ .tt+. Diosdado 7u+tingco.

%urthermore, witnesses for petitioner,
who also served as witnesses in the e:ecution and signing of the deed of assignment,
declared that %eli: %rancisco was neither forced nor intimidated to sign the assignment
of hereditar+ rights.
Page | 39
LEGASPI OIL CO., INC. vs. #3E CO$R# OF APPEALS
G.R. No. +65!5 -$L, 1, 1++'
FAC#S8
Bernard seraos had several transactions with #egaspi il 2o. for the sale of
copra to the latter. The price at which appellant sells the copra varies from time to time,
depending on the prevailing mar$et price when the contract is entered into. n
%e'ruar+ 1", 1/8", appellantKs agent =ose #lover signed contract 1o. 0H0F for the sale of
100 tons of copra at PH).00 per 100 $ilos with deliver+ terms of )0 da+s effective March
H, 1/8". .fter the period to deliver had lapsed, appellant sold onl+ F",00F $ilos of copra
thus leaving a 'alance of !0,""" $ilos. .ccordingl+, demands were made upon appellant
to deliver the 'alance with a final warning that failure to deliver will mean cancellation
of the contract, the 'alance to 'e purchased at open mar$et and the price differential to
'e charged against appellant. n cto'er )), 1/8", since there was still no compliance,
appellee e:ercised its option under the contract and purchased the undelivered 'alance
from the open mar$et at the prevailing price of P1"H.00 per 100 $ilos, or a price
differential of PH".00 per 100 $ilos, a net loss of PF",1!).8" chargea'le against
appellant.
&**D<:
,hether or not private respondent is guilt+ of 'reach of contact.
@D#&17:
Private respondent is guilt+ of fraud in the performance of his o'ligation under
the sales contract whereunder he 'ound himself to deliver to petitioner 100 metric tons
of copra. However within the deliver+ period, seraos delivered onl+ F",00F $ilograms
of copra to petitioner. Petitioner made repeated demands upon private respondent to
deliver the 'alance of !0,""" $ilograms 'ut private respondent ignored the same.
Petitioner made a final demand with a warning that, should private respondent fail to
complete deliver+ of the 'alance of !0,""" $ilograms of copra, petitioner would
purchase the 'alance at the open mar$et and charge the price differential to private
respondent. *till private respondent failed to fulfill his contractual o'ligation to deliver
the remaining !0,""" $ilograms of copra and since there was still no compliance '+
private respondent, petitioner e:ercised its right under the contract and purchased
!0,""" $ilograms of copra, the undelivered 'alance, at the open mar$et at the then
prevailing price of P1"H.00 per 100 $ilograms, a price differential of PF",1!).8".
The conduct of private respondent clearl+ manifests his deli'erate fraudulent
intent to evade his contractual o'ligation for the price of copra had in the meantime
more than dou'led from PH).00 to P1"H per 100 $ilograms. Dnder .rticle 1180 of the
2ivil 2ode of the Philippines, those who in the performance of their o'ligation are guilt+
of fraud, negligence, or dela+, and those who in an+ manner contravene the tenor
thereof, are lia'le for damages. Pursuant to said article, private respondent is lia'le for
damages.
Page | 40
#I#AN-I4E0A CONS#R$C#ION 5s. PRIME#O9N
G.R. No. 15"76", FE%R$AR, 1, !!"
FAC#S8
&n 1//), respondent Primetown Propert+ 7roup, &nc. awarded the contract for
the structural wor$s of its 0)6store+ Ma$ati Prime Tower AMPTB to petitioner Titan6
&$eda 2onstruction and Development 2orporation. &n *eptem'er 1//!, respondent
engaged the services of &ntegratech, &nc. A&T&B, an engineering consultanc+ firm, to
evaluate the progress of the pro(ect. &n its report, &T& informed respondent that
petitioner, at that point, had onl+ accomplished 01.H/E of the pro(ect Aor was 11 months
and si: da+s 'ehind scheduleB. Meanwhile, petitioner and respondent were discussing
the possi'ilit+ of the latter9s ta$e over of the pro(ect9s supervision. Despite ongoing
negotiations, respondent did not o'tain petitioner9s consent in hiring &T& as the pro(ect9s
construction manager. 1either did it inform petitioner of &T&9s *eptem'er 8, 1//!
report.
*u'se4uentl+, 'oth parties agreed that Primetown will ta$e over the pro(ect.
Petitioner then demanded for the pa+ment due him in relation to its partial performance
of its o'ligation. %or failure of Primetown to pa+ despite repeated demands, petitioner
filed a case for specific performance against Primetown. Meanwhile, Primetown
demanded reim'ursement for the amount it spent in having the pro(ect completed.
ISS$E8
,hether or not Tit>n6&$eda is responsi'le for the pro(ect9s dela+.
R$LING8
&t was found that 'ecause respondent modified the MPTKs architectural design,
petitioner had to ad(ust the scope of wor$. Moreover, respondent 'elatedl+ informed
petitioner of those modifications. &t also failed to deliver the concrete mi: and re'ars
according to schedule. %or this reason, petitioner was not responsi'le for the pro(ectKs
dela+. Mora or dela+ is the failure to perform the o'ligation in due time 'ecause of dolo
AmaliceB or culpa AnegligenceB. . de'tor is deemed to have violated his o'ligation to the
creditor from the time the latter ma$es a demand. nce the creditor ma$es a demand,
the de'tor incurs mora or dela+. @espondent never sent petitioner a written demand
as$ing it to accelerate wor$ on the pro(ect and reduce, if not eliminate, slippage. &n view
of the foregoing, we hold that petitioner did not incur dela+ in the performance of its
o'ligation.
Page | 41
PN% MA0ECOR 5s. GERAR0O C. $,
G.R. No. 1+5+". A$G$S# 15, !!1
FAC#S8
7uillermo D+ assigned to respondent 7erardo D+ his receiva'les due from
Pantranco 1orth <:press &nc. AP1<&B. The deed of assignment included sales invoices
containing stipulations regarding pa+ment of interest and attorne+9s fees. n =anuar+
)0, 1//!, 7erardo D+ filed with the @T2 a collection suit against P1<&. He alleged that
P1<& was guilt+ of fraud in contracting the o'ligation sued upon, hence his pra+er for a
writ of preliminar+ attachment. The sheriff issued a notice of garnishment addressed to
the Philippine 1ational Ban$ AP1BB and P1B M.D<2@ attaching the 3goods, effects,
credits, monies and all other personal properties5 of P1<& in the possession of the 'an$.
P1B M.D<2@ however claimed that the receiva'les of 7uillermo D+ have 'een
applied to P1<&9s unpaid rentals to the 'an$ thru compensation, thus private
respondent is no longer entitled to such. @espondent pointed out that the demand letter
sent '+ P1<& to petitioner was made 'efore petitioner9s o'ligation to P1<& 'ecame due.
This 'eing so, respondent argues that there can 'e no compensation since there was as
+et no compensa'le de't in 1/HF when P1<& demanded pa+ment from petitioner.
ISS$E8
,hether or not P1B M.D<2@ is correct in its contention that compensation is
applica'le to its receiva'les from and its pa+a'les to P1<&.
R$LING8
Petitioner9s o'ligation to P1<& appears to 'e pa+a'le on demand. However, the
2ourt found that the letter sent '+ P1<& to P1B M.D<2@ was not one demanding
pa+ment, 'ut one that merel+ informed petitioner of the conve+ance of a certain portion
of its o'ligation to P1<&. *ince petitioner9s o'ligation to P1<& is pa+a'le on demand,
and there 'eing no demand made, it follows that the o'ligation is not +et due.
Therefore, this o'ligation ma+ not 'e su'(ect to compensation for lac$ of a re4uisite
under the law. ,ithout compensation having ta$en place, petitioner remains o'ligated
to P1<& to the e:tent stated in the promissor+ note. This o'ligation ma+ undou'tedl+
'e garnished in favor of respondent to satisf+ P1<&9s (udgment de't.
.s regards respondent9s averment that there was as +et no compensa'le de't
when P1<& sent petitioner a demand letter on *eptem'er 1/HF, since P1<& was not +et
inde'ted to petitioner at that time, the law does not re4uire that the parties9 o'ligations
'e incurred at the same time. ,hat the law re4uires onl+ is that the o'ligations 'e due
and demanda'le at the same time.
Page | 42
IGNACIO %AR:AGA 5s. CO$R# OF APPEALS a.; ANGELI#O ALVIAR
G.R. No. 1151+. FE%R$AR, 1, 1++7
FAC#S8
Bar>aga went to the hardware store of respondent .lviar to in4uire a'out the
availa'ilit+ of certain materials to 'e used in the construction of a niche for his wife.
The following morning, Bar>aga went 'ac$ to the store and told the emplo+ees that the
materials he was 'u+ing would have to 'e delivered at the Memorial 2emeter+ '+ eight
oKcloc$ that morning since his hired wor$ers were alread+ at the 'urial site and time was
of the essence. . store emplo+ee agreed to deliver the items at the designated time,
date and place. ,ith this assurance, Bar>aga purchased the materials and paid in full.
The construction materials did not arrive at eight oKcloc$ as promised. .fter follow6ups
and several hours later, when there was +et no deliver+ made, Bar>aga went 'ac$ to the
store. He saw the deliver+ truc$ 'ut the things he purchased were not +et read+ for
loading. Distressed '+ the seeming lac$ of concern on the store9s part, Bar>aga decided
to cancel his transaction with the store and 'u+ from another store.
1ot 'eing a'le to fulfill the scheduled 'urial of his wife, Bar>aga demanded
damages from .lviar 'ut the latter refused claiming that he is not lia'le for damages
considering that he did not incur legal dela+ since there was no specific time of deliver+
agreed upon.
ISS$E8
,hether or not the respondent incurred dela+ in the performance of his
o'ligation.
R$LING8
@espondent .ngelito .lviar was negligent and incurred in dela+ in the
performance of his contractual o'ligation. The niche had to 'e constructed at the ver+
least on the twent+6second of Decem'er considering that it would ta$e a'out two A)B
da+s to finish the (o' if the interment was to ta$e place on the twent+6fourth of the
month. @espondentKs dela+ in the deliver+ of the construction materials wasted so much
time that construction of the tom' could start onl+ on the twent+6third. &t could not 'e
read+ for the scheduled 'urial of petitionerKs wife.
This case is clearl+ one of non6performance of a reciprocal o'ligation. &n their
contract of purchase and sale, petitioner had alread+ complied full+ with what was
re4uired of him as purchaser, i.e., the pa+ment of the purchase price of P),110.00. &t
was incum'ent upon respondent to immediatel+ fulfill his o'ligation to deliver the
goods otherwise dela+ would attach.
Page | 43
-ACIN#O #ANG$ILIG 5s. CO$R# OF APPEALS a.; VICEN#E 3ERCE -R.
G.R. No. 1171+!. -AN$AR, , 1++7
FAC#S8
Petitioner =acinto M. Tanguilig proposed to respondent Cicente Herce =r. to
construct a windmill s+stem for him. .fter some negotiations the+ agreed on the
construction of the windmill for a consideration of P"0,000.00. n 1F March 1/HH, due
to the refusal and failure of respondent to pa+ the 'alance, petitioner filed a complaint
to collect the amount. @espondent denied the claim sa+ing that he had alread+ paid this
amount to the *an Pedro 7eneral Merchandising &nc. A*P7M&B which constructed the
deep well to which the windmill s+stem was to 'e connected. .ccording to respondent,
since the deep well formed part of the s+stem the pa+ment he tendered to *P7M& should
'e credited to his account '+ petitioner. Moreover, assuming that he owed petitioner a
'alance of P1!,000.00, this should 'e offset '+ the defects in the windmill s+stem which
caused the structure to collapse after a strong wind hit their place.
Petitioner refused to pa+ and argued that private respondent was alread+ in
default in the pa+ment of his outstanding 'alance of P1!,000.00 and hence should 'ear
his own loss.
ISS$E8
,hether or not petitioner is correct in his contention that respondent is alread+
in default thus he should 'ear the loss of the windmill.
R$LING8
PetitionerKs argument that private respondent was alread+ in default in the
pa+ment of his outstanding 'alance of P1!,000.00 and hence should 'ear his own loss,
is untena'le. &n reciprocal o'ligations, neither part+ incurs in dela+ if the other does not
compl+ or is not read+ to compl+ in a proper manner with what is incum'ent upon him.
,hen the windmill failed to function properl+ it 'ecame incum'ent upon petitioner to
institute the proper repairs in accordance with the guarant+ stated in the contract.
Thus, respondent cannot 'e said to have incurred in dela+J instead, it is petitioner who
should 'ear the e:penses for the reconstruction of the windmill. .rticle 11"8 of the 2ivil
2ode is e:plicit on this point that if a person o'liged to do something fails to do it, the
same shall 'e e:ecuted at his cost.
Page | 44
#A,AG 5s. CO$R# OF APPEALS
G.R. No. +6!5'. MARC3 ', 1++'
FAC#S8
=uan 7alicia, *r. e:ecuted a deed of conve+ance, prior to his demise in 1/8/ in
favor of .l'rigido #e+va involving the undivided one6half portion of a piece of land
situated at Po'lacion, 7uim'a, 1ueva <ci(a for the sum of P!0,000.00. There is no
dispute that the first installment was received '+ =uan 7alicia, *r. .nd according to
petitioners, of the P10,000.00 to 'e paid within ten da+s from e:ecution of the
instrument, onl+ P/,808.00 was tendered to, and received '+, them on numerous
occasions from Ma+ )/, 1/8!, up to 1ovem'er 0, 1/8/. &t was also agreed upon that
private respondent will assume the vendorsK o'ligation to the Philippine Ceterans Ban$,
however, he paid onl+ the sum of P",/)".F1 while the difference of the inde'tedness was
paid '+ =uan 7alicia, *r.9s sister. Moreover, petitioners claimed that not a single centavo
of the P)8,000.00 representing the remaining 'alance was paid to them. Petitioners
averred that private respondent9s failure to pa+ full consideration of the agreement to
sell gave them the right to have the contract rescinded.
ISS$E8
,hether or not the petitioners have the right to rescind the contract in the
present case.
R$LING8
2onsidering that the heirs of =uan 7alicia, *r. accommodated private respondent
'+ accepting the latterKs dela+ed pa+ments not onl+ 'e+ond the grace periods 'ut also
during the pendenc+ of the case for specific performance, petitionersK actuation is
suscepti'le of 'ut one construction that the+ are now estopped from reneging from their
commitment on account of acceptance of 'enefits arising from overdue accounts of
private respondent. &ndeed, the right to rescind is not a'solute and will not 'e granted
where there has 'een su'stantial compliance '+ partial pa+ments.
Private respondent is ordered to pa+ the 'alance of the purchase price and to
reim'urse the sum paid '+ =uan 7alicia *r.9s sister to the Philippine Ceteran9s 'an$,
minus the attorne+Ks fees and damages awarded in favor of private respondent.
Page | 45
0R. FERNAN0O PERI/$E#, -R. 5s. #3E CO$R# OF APPEALS
G.R. No. L-6+++6. 0ECEM%ER 5, 1++4
FAC#S8
*pouses %ernando Peri4uet and Petra %rancisco were left childless after the death
of their onl+ child, <lvira,

so the+ too$ in a son out of wedloc$ of Marta %rancisco6@e+es,
sister of Petra. Though he was not legall+ adopted, the 'o+ was given the name
%ernando Peri4uet, =r. and was reared to manhood '+ the spouses Peri4uet. n March
)0, 1/"", %ernando Peri4uet died. ,hen Petra died, she was survived '+ her si'lings,
nieces and nephews and '+ the petitioner. But a few da+s 'efore her death, Petra as$ed
her law+er to prepare her last will and testament. However, she died 'efore she could
sign it. &n the said will, Petra left her estate to petitioner, %ernando Peri4uet, =r. and
provided for certain legacies to her other heirs. %eli: %ranciso, 'rother of Petra, assigned
his hereditar+ rights to the petitioner. However, later on, he filed an action for
annulment of the .ssignment of Hereditar+ @ights claiming Lgross misrepresentation
and fraud,L Lgrave a'use of confidence,L Lmista$e and undue influence,L and Llac$ of
cause andMor considerationL in the e:ecution of the challenged deed of assignment.
ISS$E8
,hether or not the .ssignment of Hereditar+ @ights is tainted with fraud.
R$LING8
The $ind of fraud that will vitiate a contract refers to those insidious words or
machinations resorted to '+ one of the contracting parties to induce the other to enter
into a contract which without them he would not have agreed to. &n the case at 'ench, no
such fraud was emplo+ed '+ herein petitioner. @esultantl+, the assignment of hereditar+
rights e:ecuted '+ %eli: %rancisco in favor of herein petitioner is valid and effective.
%eli: %rancisco could not 'e considered to have 'een deceived into signing the
su'(ect deed of assignment for the following reasons: The assignment was e:ecuted and
signed freel+ and voluntaril+ '+ %eli: %rancisco in order to honor, respect and give full
effect to the last wishes of his deceased sister, Petra. The same was read '+ him and was
further e:plained '+ .tt+. Diosdado 7u+tingco.

%urthermore, witnesses for petitioner,
who also served as witnesses in the e:ecution and signing of the deed of assignment,
declared that %eli: %rancisco was neither forced nor intimidated to sign the assignment
of hereditar+ rights.
Page | 46
RI:AL COMMERCIAL %AN4ING CORPORA#ION 5s. CO$R# OF APPEALS
G.R. No. 1''1!7. MARC3 5, 1+++
FAC#S8
Private respondent .tt+. %elipe #ustre purchased a To+ota 2orolla from To+ota
*haw, &nc. for which he made a down pa+ment of P1"F,")0.00, the 'alance of the
purchase price to 'e paid in )F e4ual monthl+ installments. Private respondent thus
issued )F postdated chec$s for the amount of P1F,/8".00 each. To secure the 'alance,
he e:ecuted a promissor+ note and a contract of chattel mortgage over the vehicle in
favor of To+ota *haw, &nc. The contract of chattel mortgage, in paragraph 11 thereof,
provided for an acceleration clause stating that should the mortgagor default in the
pa+ment of an+ installment, the whole amount remaining unpaid shall 'ecome due. &n
addition, the mortgagor shall 'e lia'le for )!E of the principal due as li4uidated
damages. n March 1F, 1//1, To+ota *haw, &nc. assigned all its rights and interests in
the chattel mortgage to petitioner @i>al 2ommercial Ban$ing 2orporation A@2B2B.
n the theor+ that respondent defaulted in his pa+ments, the chec$ representing the
pa+ment for .ugust 10, 1//1 'eing unsigned, petitioner demanded from private
respondent the pa+ment of the remaining 'alance of the de't pursuant to the
acceleration clause, and also of the li4uidated damages,. The latter refused, prompting
petitioner to file an action for replevin and damages against him.
ISS$E8
,hether or not petitioner is correct that private respondent is in default thus
(ustif+ing its treating the 'alance of the purchase price as due and demanda'le.
R$LING8
&n the case at 'ench, plaintiff6appellantKs imputation of default to defendant6
appellee rested solel+ on the fact that the !
th
chec$ issued '+ appellee was recalled for
lac$ of signature. The LdefaultL was not a case of failure to pa+, the chec$ 'eing
sufficientl+ funded, and which amount was in fact alread+ de'ited from appelleeKs
account '+ the appellant 'an$ which su'se4uentl+ re6credited the amount to defendant6
appelleeKs account for lac$ of signature. .ll these actions @2B2 did on its own without
notif+ing defendant until si:teen A1"B months later when it wrote its demand letter
dated =anuar+ )1, 1//0.
.rticle 1180 of the 2ivil 2ode states that those who in the performance of their
o'ligations are guilt+ of dela+ are lia'le for damages. The dela+ in the performance of
the o'ligation, however, must 'e either malicious or negligent. Thus, assuming that
private respondent was guilt+ of dela+ in the pa+ment of the value of the unsigned chec$,
private respondent cannot 'e held lia'le for damages. There is no imputation, much
less evidence, that private respondent acted with malice or negligence in failing to sign
the chec$. &ndeed, we agree with the 2ourt of .ppealsK finding that such omission was
mere LinadvertenceL on the part of private respondent. .s pointed out '+ the trial court,
this whole controvers+ could have 'een avoided if onl+ petitioner 'othered to call up
private respondent and as$ him to sign the chec$.
Page | 47
S#A#E INVES#MEN# 3O$SE INC. 5s. CO$R# OF APPEALS
G.R. No. 11554". MARC3 5, 1++6
FAC#S8
*pouses reta and the *olid Homes, &nc. A*#&DB entered into a 2ontract to *ell
involving a parcel of land for a consideration of P0/,0F8.00. Dpon signing of the
contract, the spouses reta paid the downpa+ment with the agreement that the 'alance
shall 'e pa+a'le in monthl+ installments of PF! 1.80, at 1)E interest per annum. n
1ovem'er F, 1/8", *#&D e:ecuted several real estate mortgage contracts in favor of
*tate &nvestment House &nc. A*T.T<B over its su'divided parcels of land, one of which
is the su'(ect lot which is the one su'(ect of the a'ove stated 2ontract to *ell. %or failure
of *#&D to compl+ with its mortgage o'ligations contract, *T.T< e:tra6(udiciall+
foreclosed the mortgaged properties including the su'(ect lot on .pril ", 1/H0. .s a
result of the foreclosure, the spouses filed a complaint against *#&D and *T.T< for
*#&D9s failure to e:ecute the a'solute deed of sale despite full pa+ment of the purchase
price as of 1/H1.
ISS$E8
,ho has the 'etter right over the su'(ect lot;
R$LING8
Petitioner admits the superior rights of respondents6spouses reta over the
su'(ect propert+ as it did not pra+ for the nullification of the contract 'etween
respondents6spouses and *#&D, 'ut instead as$ed for the pa+ment of the release value
of the propert+ in 4uestion, plus interest, attorne+9s fees and costs of suit against *#&D
or, in case of the latter9s ina'ilit+ to pa+, against respondents6spouses 'efore it can 'e
re4uired to release the title of the su'(ect propert+ in favor of the respondent spouses.
.nd even if we were to pass upon the first assigned error, we find respondent court9s
ruling on the matter to 'e well6founded. *T.T<9s registered mortgage right over the
propert+ is inferior to that of respondents6spouses9 unregistered right. The unrecorded
sale 'etween respondents6spouses and *#&D is preferred for the reason that if the
original owner A*#&D, in this caseB had parted with his ownership of the thing sold
then he no longer had ownership and free disposal of that thing so as to 'e a'le to
mortgage it again. @egistration of the mortgage is of no moment since it is understood
to 'e without pre(udice to the 'etter right of third parties.
Page | 48
%PI INVES#MEN# CORPORA#ION vs. 3ON. CO$R# OF APPEALS
G.R. No. 1''6'. FE%R$AR, 15, !!
FAC#S8
%ran$ @oa o'tained a loan at an interest rate of 1" 1MFE per annum from .+ala
&nvestment and Development 2orporation A.&D2B, predecessor of petitioner BP&&2 for
the construction of a house on his lot. *aid house and lot were mortgaged to .&D2 to
secure the loan. *ometime in 1/H0, @oa sold the house and lot to private respondents
.#* and .ntonio #iton(ua. The+ paid P0!0,000 in cash and assumed the P!00,000
'alance of @oa9s inde'tedness with .&D2. The latter, however, was not willing to e:tend
the old interest rate to private respondents and proposed to grant them a new loan of
P!00,000 to 'e applied to @oa9s de't and secured '+ the same propert+, at an interest
rate of )0E per annum. &n =une 1/HF, BP&&2 instituted foreclosure proceedings against
private respondents on the ground that the+ failed to pa+ the mortgage inde'tedness.
Private respondents on the other hand alleged that the+ were not in arrears in their
pa+ment, 'ut in fact made an overpa+ment as of =une 00, 1/HF.
ISS$E8
,hether or not petitioner ma+ 'e held lia'le for moral and e:emplar+ damages.
R$LING8
Petitioner claims that it should not 'e held lia'le for moral and e:emplar+
damages for it did not act maliciousl+ when it initiated the foreclosure proceedings. &t
merel+ e:ercised its right under the mortgage contract 'ecause private respondents
were irregular in their monthl+ amorti>ation. Private respondents counter that BP&&2
was guilt+ of 'ad faith and should 'e lia'le for said damages 'ecause it insisted on the
pa+ment of amorti>ation on the loan even 'efore it was released. %urther, it did not
ma$e the corresponding deduction in the monthl+ amorti>ation to conform to the actual
amount of loan released, and it immediatel+ initiated foreclosure proceedings when
private respondents failed to ma$e timel+ pa+ment. But as admitted '+ private
respondents themselves, the+ were irregular in their pa+ment of monthl+ amorti>ation.
Thus, we can not properl+ declare BP&&2 in 'ad faith. 2onse4uentl+, we should rule out
the award of moral and e:emplar+ damages. However, in our view, BP&&2 was negligent
in rel+ing merel+ on the entries found in the deed of mortgage, without chec$ing and
correspondingl+ ad(usting its records on the amount actuall+ released to private
respondents and the date when it was released. *uch negligence resulted in damage to
private respondents, for which an award of nominal damages should 'e given in
recognition of their rights which were violated '+ BP&&2. %or this purpose, the amount
of P)!,000 is sufficient. #astl+, we sustain the award of P!0,000 in favor of private
respondents as attorne+9s fees since the+ were compelled to litigate.
Page | 49
CARMELI#A LEA=O 5s. CO$R# OF APPEALS
G.R. No. 1+!1". NOVEM%ER 15, !!1
FAC#S8
Hermogenes %ernando, as vendor and 2armelita #eaQo, as vendee e:ecuted a
contract to sell involving a piece of land. &n the contract, #eaQo 'ound herself to pa+
%ernando P10,88!.00 at the signing of the contract with the 'alance of P/",/8!.00 to 'e
paid within a period of T<1 A10B +ears at a monthl+ amorti>ation of P1,8F8.00. The
contract also provided for a grace period of one month within which to ma$e pa+ments,
together with the one corresponding to the month of grace. *hould the month of grace
e:pire without the installments for 'oth months having 'een satisfied, an interest of
1HE per annum will 'e charged on the unpaid installments.
ISS$E8
,hether petitioner was in dela+ in the pa+ment of the monthl+ amorti>ations.
R$LING8
n the issue of whether petitioner #eaQo was in dela+ in pa+ing the
amorti>ations, we rule that while the contract provided that the total purchase price was
pa+a'le within a ten6+ear period, the same contract specified that the purchase price
shall 'e paid in monthl+ installments for which the corresponding penalt+ shall 'e
imposed in case of default. Petitioner #eaQo cannot ignore the provision on the
pa+ment of monthl+ installments '+ claiming that the ten6+ear period within which to
pa+ has not elapsed.
.rticle 11"/ of the 2ivil 2ode provides that in reciprocal o'ligations, neither part+
incurs in dela+ if the other does not compl+ or is not read+ to compl+ in a proper manner
with what is incum'ent upon him. %rom the moment one of the parties fulfills his
o'ligation, dela+ '+ the other 'egins. &n the case at 'ar, respondent %ernando
performed his part of the o'ligation '+ allowing petitioner #eaQo to continue in
possession and use of the propert+. 2learl+, when petitioner #eaQo did not pa+ the
monthl+ amorti>ations in accordance with the terms of the contract, she was in dela+
and lia'le for damages. However, we agree with the trial court that the default
committed '+ petitioner #eaQo in respect of the o'ligation could 'e compensated '+ the
interest and surcharges imposed upon her under the contract in 4uestion.
Page | 50
3EIRS OF L$IS %AC$S 5s. 3ON. CO$R# OF APPEALS
G.R. No. 176+5. 0ECEM%ER ', !!1
FAC#S8
#uis Bacus leased to private respondent %austino Dura+ a parcel of agricultural
land. The contract contained an option to 'u+ clause. Dnder said option, the lessee had
the e:clusive and irrevoca'le right to 'u+ ),000 s4uare meters of the propert+ within
five +ears from a +ear after the effectivit+ of the contract. 2lose to the e:piration of the
contract, #uis Bacus died. Thereafter, the Dura+ spouses informed one of the heirs of
#uis Bacus, that the+ were willing and read+ to purchase the propert+ under the option
to 'u+ clause. Due to the refusal of petitioners to sell the propert+, Dura+ filed a
complaint for specific performance against the heirs of #uis Bacus as$ing that he 'e
allowed to purchase the lot specificall+ referred to in the lease contract with option to
'u+. n the other hand, petitioners alleged that 'efore #uis Bacus9 death, private
respondents conve+ed to them the former9s lac$ of interest to e:ercise their option
'ecause of insufficienc+ of funds. The+ further alleged that private respondents did not
deposit the mone+ as re4uired '+ the #upon and instead presented a 'an$ certification
which cannot 'e deemed legal tender.
ISS$E8
Did private respondents incur in dela+ when the+ did not deliver the purchase
price or consign it in court on or 'efore the e:piration of the contract;
R$LING8
'ligations under an option to 'u+ are reciprocal o'ligations. The performance
of one o'ligation is conditioned on the simultaneous fulfillment of the other o'ligation.
&n other words, in an option to 'u+, the pa+ment of the purchase price '+ the creditor is
contingent upon the e:ecution and deliver+ of a deed of sale '+ the de'tor. &n this case,
when private respondents opted to 'u+ the propert+, their o'ligation was to advise
petitioners of their decision and their readiness to pa+ the price. The+ were not +et
o'liged to ma$e actual pa+ment. nl+ upon petitioners9 actual e:ecution and deliver+ of
the deed of sale were the+ re4uired to pa+. 1otice of the creditor9s decision to e:ercise
his option to 'u+ need not 'e coupled with actual pa+ment of the price, so long as this is
delivered to the owner of the propert+ upon performance of his part of the agreement.
2onse4uentl+, since the o'ligation was not +et due, consignation in court of the
purchase price was not +et re4uired.
Private respondents did not incur in dela+ when the+ did not +et deliver pa+ment
nor ma$e a consignation 'efore the e:piration of the contract. &n reciprocal o'ligations,
neither part+ incurs in dela+ if the other does not compl+ or is not read+ to compl+ in a
proper manner with what is incum'ent upon him. nl+ from the moment one of the
parties fulfills his o'ligation, does dela+ '+ the other 'egin. &n this case, as there was no
compliance +et with what was incum'ent upon petitioners under the option to 'u+,
private respondents had not incurred in dela+ when the cashier9s chec$ was issued even
after the contract e:pired.
Page | 51
IN#EGRA#E0 PAC4AGING CORP. 5s. CO$R# OF APPEALS
G.R. No. 115117. -$NE ", !!!
FAC#S8
Petitioner and private respondent e:ecuted an order agreement where'+ private
respondent 'ound itself to deliver to petitioner 0,F!0 reams of printing papers under
specified schedule of deliver+. .s of =ul+ 00, 1/8/, private respondent had delivered to
petitioner 1,0/8 reams of printing paper out of the total 0,F!0 reams stated in the
agreement. Petitioner alleged it wrote private respondent to immediatel+ deliver the
'alance 'ecause further dela+ would greatl+ pre(udice petitioner. %rom =une !, 1/H0
and until =ul+ )0, 1/H1, private respondent delivered again to petitioner various
4uantities of printing paper amounting to P8"",101.80. However, petitioner
encountered difficulties pa+ing private respondent said amount. .ccordingl+, private
respondent made a formal demand upon petitioner to settle the outstanding account.
Private respondent filed a collection suit against petitioner for the sum of P8"",101.80,
representing the unpaid purchase price of printing paper 'ought '+ petitioner on credit.
&n its answer, petitioner denied the material allegations of the complaint. &t alleged that
private respondent was a'le to deliver onl+ 1,0/8 reams of printing paper which was
short of ),H8! reams, in total disregard of their agreementJ that private respondent
failed to deliver the 'alance of the printing paper despite demand therefor, hence,
petitioner suffered actual damages and failed to reali>e e:pected profits.
ISS$E8
,hether or not private respondent violated the order agreement.
R$LING8
The transaction 'etween the parties is a contract of sale where'+ private
respondent AsellerB o'ligates itself to deliver printing paper to petitioner A'u+erB which,
in turn, 'inds itself to pa+ its e4uivalent ApriceB. Both parties concede that the order
agreement gives rise to a reciprocal o'ligation such that the o'ligation of one is
dependent upon the o'ligation of the other. @eciprocal o'ligations are to 'e performed
simultaneousl+, so that the performance of one is conditioned upon the simultaneous
fulfillment of the other. Thus, private respondent underta$es to deliver printing paper of
various 4uantities su'(ect to petitioner9s corresponding o'ligation to pa+, on a
ma:imum /06da+ credit, for these materials. 2learl+, petitioner did not fulfill its side of
the contract as its last pa+ment in .ugust 1/H1 could cover onl+ materials covered '+
deliver+ invoices dated *eptem'er and cto'er 1/H0. Thus, private respondent did not
violate the order agreement.
Page | 52
LAFOR#E:A 5s. MAC3$CA
G.R. No. 1'755. -$NE 16, !!!
FAC#S8
&n the e:ercise of the *pecial Power of .ttorne+ e:ecuted '+ their co6heirs, '+
@o'erto R. #aforte>a and 7on>alo R. #aforte>a, =r. entered into a Memorandum of
.greement A2ontract to *ellB with the plaintiff over the su'(ect house and lot for the sum
of P"00,000.00. n *eptem'er 1H, 1//H, defendant heirs, through their counsel wrote a
letter to the plaintiff furnishing the latter a cop+ of the reconstituted title to the su'(ect
propert+, advising him that he had thirt+ A0B da+s to produce the 'alance of
P"00,000.00 under the Memorandum of .greement which plaintiff received on the
same date. The plaintiff re4uested a 006da+ e:tension within which he would pa+ the
'alance of the purchase price. This was granted '+ @o'erto #aforte>a 'ut not '+ 7on>alo
#aforte>a, the second attorne+6in6fact.
n 1ovem'er 1!, 1/H/, plaintiff informed the defendant heirs, through
defendant @o'erto R. #aforte>a, that he alread+ has the mone+. However, the
defendants, refused to accept the told him that the su'(ect propert+ was no longer for
sale. Thereafter, plaintiff reiterated his re4uest to tender pa+ment of the 'alance 'ut the
defendants insisted on the rescission of the Memorandum of .greement. Thereafter,
plaintiff filed the instant action for specific performance.
ISS$E8
,hether or not defendants ma+ rescind the contract of sale entered with
Machuca.
R$LING8
.dmittedl+, the failure of the respondent to pa+ the 'alance of the purchase price
was a 'reach of the contract and was a ground for rescission thereof. The e:tension of
thirt+ A00B da+s allegedl+ granted to the respondent '+ @o'erto R. #aforte>a was
correctl+ found '+ the 2ourt of .ppeals to 'e ineffective inasmuch as the signature of
7on>alo R. #aforte>a did not appear thereon as re4uired '+ the *pecial Powers of
.ttorne+. However, the evidence reveals that after the e:piration of the si:6month
period provided for in the contract, the petitioners were not read+ to compl+ with what
was incum'ent upon them, i.e. the deliver+ of the reconstituted title of the house and
lot. &t was onl+ on *eptem'er 1H, 1/H/ or nearl+ eight months after the e:ecution of the
Memorandum of .greement when the petitioners informed the respondent that the+
alread+ had a cop+ of the reconstituted title and demanded the pa+ment of the 'alance
of the purchase price. The respondent could not therefore 'e considered in dela+ for in
reciprocal o'ligations, neither part+ incurs in dela+ if the other part+ does not compl+ or
is not read+ to compl+ in a proper manner with what was incum'ent upon him.
<ven assuming for the sa$e of argument that the petitioners were read+ to
compl+ with their o'ligation, we find that rescission of the contract will still not prosper.
Dela+ in pa+ment was onl+ thirt+ da+s which was caused '+ the respondent9s (ustified
'ut mista$en 'elief that an e:tension to pa+ was granted to him. ,e agree with the
2ourt of .ppeals that the dela+ of one month in pa+ment was a mere casual 'reach that
would not entitle the respondents to rescind the contract. @escission of a contract will
not 'e permitted for a slight or casual 'reach, 'ut onl+ such su'stantial and
Page | 53
fundamental 'reach as would defeat the ver+ o'(ect of the parties in ma$ing the
agreement.
#3E IN#ERNA#IONAL CORPORA#E 5s. SPS. G$ECO
G.R. No. 141+6". FE%R$AR, 1, !!1
FAC#S8
The 7ueco *pouses o'tained a loan from petitioner &nternational 2orporate Ban$
Anow Dnion Ban$ of the PhilippinesB to purchase a car. &n consideration thereof, the
*pouses e:ecuted promissor+ notes which were pa+a'le in monthl+ installments and
chattel mortgage over the car to serve as securit+ for the notes. The *pouses defaulted in
pa+ment of installments. .fter some negotiations and computation, the amount of car
loan was lowered. %inall+, Dr. 7ueco delivered a manager9s chec$ in the amount of
reduced car loan 'ut the car was not released 'ecause of his refusal to sign the =oint
Motion to Dismiss. Petitioner, however, insisted that the (oint motion to dismiss is
standard operating procedure in their 'an$ to effect a compromise and to preclude
future filing of claims, counterclaims or suits for damages.
ISS$E8
,hether or not there was fraud in the part of herein petitioner.
R$LING8
%raud has 'een defined as the deli'erate intention to cause damage or pre(udice.
&t is the voluntar+ e:ecution of a wrongful act, or a willful omission, $nowing and
intending the effects which naturall+ and necessaril+ arise from such act or omission.
,e fail to see how the act of the petitioner 'an$ in re4uiring the respondent to sign the
(oint motion to dismiss could constitute as fraud. True, petitioner ma+ have 'een remiss
in informing Dr. 7ueco that the signing of a (oint motion to dismiss is a standard
operating procedure of petitioner 'an$. However, this can not in an+wa+ have
pre(udiced Dr. 7ueco. The motion to dismiss was in fact also for the 'enefit of Dr.
7ueco, as the case filed '+ petitioner against it 'efore the lower court would 'e
dismissed with pre(udice. The whole point of the parties entering into the compromise
agreement was in order that Dr. 7ueco would pa+ his outstanding account and in return
petitioner would return the car and drop the case for mone+ and replevin 'efore the
Metropolitan Trial 2ourt. PetitionerKs act of re4uiring Dr. 7ueco to sign the (oint
motion to dismiss can not 'e said to 'e a deli'erate attempt on the part of petitioner to
renege on the compromise agreement of the parties. &t should, li$ewise, 'e noted that in
cases of 'reach of contract, moral damages ma+ onl+ 'e awarded when the 'reach was
attended '+ fraud or 'ad faith. The law presumes good faith. Dr. 7ueco failed to present
an iota of evidence to overcome this presumption. 1ecessaril+, the claim for e:emplar+
damages must fail. &n no wa+, ma+ the conduct of petitioner 'e characteri>ed as
3wanton, fraudulent, rec$less, oppressive or malevolent.5
Page | 54
REP$%LIC OF #3E P3ILIPPINES 5s. #3E CO$R# OF #A> APPEALS
G.R. No. 1'+!5!. OC#O%ER , !!1
FAC#S8
n 1) Decem'er 1//), a shipment of 'ales of te:tile gra+ cloth arrived at the
Manila &nternational 2ontainer Port AM&2PB. There has 'een a mista$e in the name of
the consignee provided in the shipmentKs &nward %oreign Manifest. %orthwith, the
shipping agent, %&#6=.P.1, re4uested for an amendment of the &nward %oreign
Manifest so as to correct the name of the consignee from that of 7? 7.@M<1T*, &nc.,
to that of .7%H., &nc. *u'se4uentl+, %&#6=.P.1 forwarded to .7%H., &nc., the
amended &nward %oreign Manifest which the latter, in turn, su'mitted to the M&2P #aw
Division. The M&2P indorsed the document to the 2ustoms &ntelligence &nvestigation
*ervices A2&&*B. The 2&&* placed the su'(ect shipment under Hold rder on the ground
that 7? 7.@M<1T*, &nc., could not 'e located in its given address and was thus
suspected to 'e a fictitious firm. %orfeiture proceedings under *ection )!00AfB and AlB
A06!B of the Tariff and 2ustoms 2ode were initiated.
ISS$E8
,hether or not the private respondent is guilt+ of fraud in relation to the
shipment su'(ect of the case at 'ench.
R$LING8
Petitioner asserts that all of the re4uisites for forfeiture proceedings under the
Tariff and 2ustoms 2ode are present in this case. Private respondent .7%H., &nc., on
the other hand, maintains that there has onl+ 'een an inadvertent error and not an
intentional wrongful declaration '+ the shipper to evade pa+ment of an+ ta: due.
%raud must 'e proved to (ustif+ forfeiture. &t must 'e actual, amounting to
intentional wrong6doing with the clear purpose of avoiding the ta:. %orfeiture is not
favored in law nor in e4uit+. Mere negligence is not e4uivalent to the fraud
contemplated '+ law. ,hat is here involved is an honest mista$e, not even directl+
attri'uta'le to private respondent, which will not deprive the government of its right to
collect the proper ta:. The conclusion of the appellate court, 'eing consistent with the
evidence on record and not contrar+ to law and (urisprudence, hardl+ can 'e overturned
'+ this 2ourt.
Page | 55
,AM%AO 5s. :$=IGA
G.R. No. 14617'. 0ECEM%ER 11, !!'
FAC#S8
.t around 0:00 p.m. of Ma+ ", 1//), the 'us owned '+ the petitioner was 'eing
driven '+ her driver, 2eferino 7. Centurina along the north'ound lane of <pifanio delos
*antos .venue A<D*.B. *uddenl+, the 'us 'umped Herminigildo RuQiga, a pedestrian.
*uch was the force of the impact that the left side of the front windshield of the 'us was
crac$ed. RuQiga was rushed to the ?ue>on 2it+ 7eneral Hospital where he was given
medical attention, 'ut due to the massive in(uries sustained, he succum'ed shortl+
thereafter.
Private respondents, heirs of the victim, filed a 2omplaint against petitioner and
her driver, Centurina, for damages. The complaint alleged that Centurina drove the 'us
in a rec$less, careless and imprudent manner, in violation of traffic rules and
regulations, without due regard to pu'lic safet+, thus resulting in the victim9s premature
death. &n her .nswer, the petitioner denied the allegations of the complaint, tr+ing to
shift the 'lame to the victim, theori>ing that Herminigildo 'umped into her 'us, while
avoiding an unidentified woman who was chasing him. *he further alleged that she was
not lia'le for an+ damages 'ecause as an emplo+er, she e:ercised the proper diligence of
a good father of a famil+, 'oth in the selection and supervision of her 'us driver.
ISS$E8
,hether petitioner e:ercised the diligence of a good father of a famil+ in the
selection and supervision of her emplo+ees, thus a'solving her from an+ lia'ilit+.
R$LING8
Petitioner claimed that she e:ercised due diligence in the selection and
supervision of her driver, Centurina. Her allegation that 'efore she hired Centurina she
re4uired him to su'mit his driver9s license and clearances is worthless, in view of her
failure to offer in evidence certified true copies of said license and clearances. Moreover,
petitioner contradicted herself. *he declared that Centurina applied with her sometime
in =anuar+ 1//) and she then re4uired him to su'mit his license and clearances.
However, the record li$ewise shows that Centurina su'mitted the said re4uirements
onl+ on Ma+ ", 1//), or on the ver+ da+ of the fatal accident itself. &n other words,
petitioner9s own admissions clearl+ and categoricall+ show that she did not e:ercise due
diligence in the selection of her 'us driver.
&n an+ case, assuming arguendo that Centurina did su'mit his license and
clearances when he applied with petitioner in =anuar+ 1//), the latter still fails the test
of due diligence in the selection of her 'us driver. Petitioner failed to present convincing
proof that she went to this e:tent of verif+ing Centurina9s 4ualifications, safet+ record,
and driving histor+. 1or did petitioner show that she e:ercised due supervision over
Centurina after his selection. %or as pointed out '+ the 2ourt of .ppeals, petitioner did
not present an+ proof that she drafted and implemented training programs and
guidelines on road safet+ for her emplo+ees. &n fact, the record is 'are of an+ showing
that petitioner re4uired Centurina to attend periodic seminars on road safet+ and traffic
efficienc+. Hence, petitioner cannot claim e:emption from an+ lia'ilit+ arising from the
rec$lessness or negligence of Centurina.
Page | 56
SMI#3 %ELL 0O09ELL 5s. CA#ALINO %OR-A
G.R. No. 14'!!". -$NE 1!, !!
FAC#S8
*mith Bell filed a written re4uest with the Bureau of 2ustoms for the attendance
of the latter9s inspection team on vessel MMT Ging %amil+ which was due to arrive at the
port of Manila on *eptem'er )F, 1/H8. &n response, 2atalino Bor(a was instructed to
'oard the said vessel and inspect the vessel. .t a'out 11 o9cloc$ in the morning on
*eptem'er )F, 1/H8, while MMT Ging %amil+ was unloading chemicals unto two A)B
'arges owned '+ respondent &TT2, a sudden e:plosion occurred setting the vessels afire.
Dpon hearing the e:plosion, Bor(a, who was at that time inside the ca'in preparing
reports, ran outside to chec$ what happened. .gain, another e:plosion was heard.
*eeing the fire Bor(a hurriedl+ (umped over 'oard to save himself. However, the water
was li$ewise on fire due mainl+ to the spilled chemicals. Despite the tremendous heat,
Bor(a swam his wa+ until he was rescued '+ the people living in the s4uatters9 area and
sent to *an =uan De Dios Hospital.
.fter wee$s of intensive care at the hospital, Bor(a was diagnosed to 'e
permanentl+ disa'led due to the incident. Thus, he made demands against *mith Bell
and &TT2 for the damages caused '+ the e:plosion. However, 'oth denied lia'ilities and
attri'uted to each other negligence.5
ISS$ES8
,ho, if an+, is lia'le for Bor(a9s in(uries;
R$LING8
Both the @T2 and the 2. ruled that the fire and the e:plosion had originated
from petitioner9s vessel. The attempts of *mith Bell to shift the 'lame on &TT2 were all
for naught. %irst, the testimon+ of its alleged e+ewitness was stric$en off the record for
his failure to appear for cross6e:amination. *econd, the documents offered to prove that
the fire originated from 'arge &TT26101 were all denied admission '+ the court for
'eing, hearsa+. Thus, there is nothing in the record to support petitioner9s contention
that the fire and e:plosion originated from 'arge &TT26101.
The three elements of 4uasi delict are: AaB damages suffered '+ the plaintiff, A'B
fault or negligence of the defendant, and AcB the connection of cause and effect 'etween
the fault or negligence of the defendant and the damages inflicted on the plaintiff. .ll
these elements were esta'lished in this case. Gnowing full+ well that it was carr+ing
dangerous chemicals, petitioner was negligent in not ta$ing all the necessar+
precautions in transporting the cargo. .s a result of the fire and the e:plosion during the
unloading of the chemicals from petitioner9s vessel, @espondent Bor(a suffered severe
in(uries. Hence, the owner or the person in possession and control of a vessel and the
vessel are lia'le for all natural and pro:imate damage caused to persons and propert+ '+
reason of negligent management or navigation.
Page | 57
RAMON 4. IL$SORIO 5s. 3ON. CO$R# OF APPEALS
G.R. No. 1'+1'!. NOVEM%ER 7, !!
FAC#S8
Petitioner is a prominent 'usinessman and was a depositor in good standing of
respondent 'an$, the Manila Ban$ing 2orporation. .s he was then running a'out )0
corporations, and was going out of the countr+ a num'er of times, petitioner entrusted
to his secretar+, Gatherine <. <ugenio, his credit cards and his chec$'oo$ with 'lan$
chec$s. <ugenio was a'le to encash and deposit to her personal account a'out
seventeen A18B chec$s drawn against the account of the petitioner at the respondent
'an$, with an aggregate amount of P11/,"0F.0F. Petitioner did not 'other to chec$ his
statement of account until a 'usiness partner apprised him that he saw <ugenio use his
credit cards. Petitioner fired <ugenio immediatel+, and instituted a criminal action
against her for estafa thru falsification.
Petitioner then re4uested the respondent 'an$ to credit 'ac$ and restore to its
account the value of the chec$s which were wrongfull+ encashed 'ut respondent 'an$
refused. Hence, petitioner filed the instant case.
ISS$E8
&s Manila Ban$ lia'le for damages for its negligence in failing to detect the
discrepant chec$s;
R$LING8
Petitioner9s contention that Manila Ban$ was remiss in the e:ercise of its dut+ as
drawee lac$s factual 'asis. Manila Ban$ emplo+ees e:ercised due diligence in cashing
the chec$s. &ts verifiers first verified the drawer9s signatures thereon as against his
specimen signature cards, and when in dou't, the verifier went further, such as '+
referring to a more e:perienced verifier for further verification. &n some instances the
verifier made a confirmation '+ calling the depositor '+ phone. &t is onl+ after ta$ing
such precautionar+ measures that the su'(ect chec$s were given to the teller for
pa+ment.
f course it is possi'le that the verifiers of TMB2 might have made a mista$e in
failing to detect an+ forger+ 66 if indeed there was. However, a mista$e is not e4uivalent
to negligence if the+ were honest mista$es. &n the instant case, we 'elieve and so hold
that if there were mista$es, the same were not deli'erate, since the 'an$ too$ all the
precautions. .s 'orne '+ the records, it was petitioner, not the 'an$, who was negligent.
1egligence is the omission to do something which a reasona'le man, guided '+ those
considerations which ordinaril+ regulate the conduct of human affairs, would do, or the
doing of something which a prudent and reasona'le man would do. &n the present case,
it appears that petitioner accorded his secretar+ unusual degree of trust and unrestricted
access to his credit cards, pass'oo$s, chec$ 'oo$s, 'an$ statements, including custod+
and possession of cancelled chec$s and reconciliation of accounts.
Page | 58
NA#IONAL PO9ER CORPORA#ION 5s. #3E CO$R# OF APPEALS
G.R. No. 14'7". MARC3 ", !!5
FAC#S8
n 1! 1ovem'er 1/80, the ffice of the President of the Philippines issued
Memorandum rder 1o. 0/H instructing the 1P2 to 'uild the .gus @egulation Dam at
the mouth of .gus @iver in #anao del *ur, at a normal ma:imum water level of #a$e
#anao at 80) meters elevation. Pursuant thereto, petitioner 'uilt and operated the said
dam in 1/8H. Private respondents Had(i .'dul 2arim .'dullah, 2aris .'dullah, Had(i
.li #angco and Diamael Pangcatan own fishponds along the #a$e #anao shore. &n
cto'er and 1ovem'er of 1/H", all the improvements were washed awa+ when the
water level of the la$e escalated and the su'(ect la$eshore area was flooded. Private
respondents 'lamed the inundation on the .gus @egulation Dam 'uilt and operated '+
the 1P2 in 1/8H. The+ theori>ed that 1P2 failed to increase the outflow of water even as
the water level of the la$e rose due to the heav+ rains.
ISS$E8
,hether or not the 2ourt of .ppeals erred in affirming the trial court9s verdict
that petitioner was legall+ answera'le for the damages endured '+ the private
respondents.
R$LING8
Memorandum rder 1o. 0/H clothes the 1P2 with the power to 'uild the .gus
@egulation Dam and to operate it for the purpose of generating energ+. Twin to such
power are the duties: ?1B to maintain the normal ma:imum la$e elevation at 80) meters,
and A)B to 'uild 'enchmar$s to warn the inha'itants in the area that cultivation of land
'elow said elevation is for'idden.
,ith respect to its (o' to maintain the normal ma:imum level of the la$e at 80)
meters, the 2ourt of .ppeals, echoing the trial court, o'served with alacrit+ that when
the water level rises due to the rain+ season, the 1P2 ought to release more water to the
.gus @iver to avoid flooding and prevent the water from going over the ma:imum level.
.nd +et, petitioner failed to do so, resulting in the inundation of the near'+ estates.
2onse4uentl+, even assuming that the fishponds were erected 'elow the 80)6meter
level, 1P2 must, nonetheless, 'ear the 'runt for such damages inasmuch as it has the
dut+ to erect and maintain the 'enchmar$s precisel+ to warn the owners of the
neigh'oring properties not to 'uild fishponds 'elow these mar$s. ,ithout such points
of reference, the inha'itants in said areas are clueless whether or not their
improvements are within the prohi'ited area. 2onversel+, without such 'enchmar$s,
1P2 has no wa+ of telling if the fishponds, su'(ect matter of the present controvers+, are
indeed 'elow the prescri'ed ma:imum level of elevation. Due to 1P29s negligence in the
performance of its duties, it shall 'e held lia'le for the resulting damages suffered '+
private respondents.
Page | 59
M$A-E-#$A:ON 5s. 9ENP3IL
G.R. No. 16447. 0ECEM%ER 7, !!6
FAC#S8
Petitioners .nna'elle M. Tua>on and .lmer @. .'ing wor$ed as 'ranch
managers of the ,end+Ks food chains. &n ,end+9s 3Biggie *i>e &tS 2rew 2hallengeL
promotion contest, 'ranches managed '+ petitioners won first and second places,
respectivel+. Because of its success, respondent had a second run of the contest from
.pril )" to =ul+ F, 1///. The Me+caua+an 'ranch won again. The M2D 2aloocan 'ranch
failed to ma$e it among the winners. Before the announcement of the third round
winners, management received reports that as earl+ as the first round of the contest, the
Me+caua+an, M2D 2aloocan, Tandang *ora and %airview 'ranches cheated. .n internal
investigation ensued. Petitioners were summoned to the main office regarding the
reported anomal+. Petitioners denied there was cheating. &mmediatel+ thereafter,
petitioners were notified, in writing, of hearings and of their immediate suspension.
Thereafter, petitioners were dismissed.
ISS$E8
&s the respondent guilt+ of illegal suspension and dismissal in the case at 'ench;
R$LING8
There is no den+ing that petitioners were managerial emplo+ees. The+ e:ecuted
management policies, the+ had the power to hire personnel and assign them tas$sJ and
discipline the emplo+ees in their 'ranch. The+ recommended actions on emplo+ees to
the head office..rticle )1) AmB of the #a'or 2ode defines a managerial emplo+ee as one
who is vested with powers or prerogatives to la+ down and e:ecute management policies
andMor hire, transfer, suspend, la+6off, recall, discharge, assign or discipline emplo+ees.
2onse4uentl+, as managerial emplo+ees, in the case of petitioners, the mere e:istence of
grounds for the loss of trust and confidence (ustif+ their dismissal. Pursuant to our
ruling in 2aoile v. 1ational #a'or @elations 2ommission, as long as the emplo+er has a
reasona'le ground to 'elieve that the managerial emplo+ee concerned is responsi'le for
the purported misconduct, or the nature of his participation renders him unworth+ of
the trust and confidence demanded '+ his position, the managerial emplo+ee can 'e
dismissed.
&n the present case, the tape receipts presented '+ respondents showed that there
were anomalies committed in the 'ranches managed '+ the petitioners. n the principle
of respondeat superior or command responsi'ilit+ alone, petitioners ma+ 'e held lia'le
for negligence in the performance of their managerial duties, unless petitioners can
positivel+ show that the+ were not involved. Their position re4uires a high degree of
responsi'ilit+ that necessaril+ includes unearthing of fraudulent and irregular activities.
Their 'are, unsu'stantiated and uncorro'orated denial of an+ participation in the
cheating does not prove their innocence nor disprove their alleged guilt. .dditionall+,
some emplo+ees declared in their affidavits that the cheating was actuall+ the idea of the
petitioners.
Page | 60
RCPI 5s. VERC3E:
G.R. No. 164'4+. -AN$AR, '1, !!6
FAC#S8
<ditha He'ron Cerche> A<dithaB was confined in the hospital due to an ailment.
Her daughter 7race immediatel+ went to the *orsogon Branch of @2P& whose services
she engaged to send a telegram to her sister Renaida. .s three da+s after @2P& was
engaged to send the telegram to Renaida no response was received from her, 7race sent
a letter to Renaida, this time thru =@* Deliver+ *ervice, reprimanding her for not
sending an+ financial aid. &mmediatel+ after she received 7race9s letter, Renaida, along
with her hus'and left for *orsogon. n her arrival at *orsogon, she disclaimed having
received an+ telegram.
The telegram was finall+ delivered to Renaida )! da+s later. n in4uir+ from
@2P& wh+ it too$ that long to deliver it, @2P& claimed that deliver+ was not immediatel+
effected due to the occurrence of circumstances which were 'e+ond the control and
foresight of @2P&.
ISS$E8
,hether or not @2P& is negligent in the performance of its o'ligation.
R$LING8
.rticle 1180 of the 2ivil 2ode provides: Those who in the performance of their
o'ligations are guilt+ of fraud, negligence, or dela+, and those who in an+ manner
contravene the tenor thereof, are lia'le for damages. &n culpa contractual, the mere
proof of the e:istence of the contract and the failure of its compliance (ustif+, prima
facie, a corresponding right of relief. The law, recogni>ing the o'ligator+ force of
contracts, will not permit a part+ to 'e set free from lia'ilit+ for an+ $ind of
misperformance of the contractual underta$ing or a contravention of the tenor thereof.
2onsidering the pu'lic utilit+ of @2P&9s 'usiness and its contractual o'ligation to
transmit messages, it should e:ercise due diligence to ascertain that messages are
delivered to the persons at the given address and should provide a s+stem where'+ in
cases of undelivered messages the sender is given notice of non6deliver+. Messages sent
'+ ca'le or wireless means are usuall+ more important and urgent than those which can
wait for the mail. @2P& argues, however, against the presence of urgenc+ in the deliver+
of the telegram, as well as the 'asis for the award of moral damages. @2P&9s arguments
fail. %or it is its 'reach of contract upon which its lia'ilit+ is, it 'ears repeating,
anchored. *ince @2P& 'reached its contract, the presumption is that it was at fault or
negligent. &t, however, failed to re'ut this presumption. %or 'reach of contract then,
@2P& is lia'le to 7race for damages. @2P&9s lia'ilit+ as an emplo+er could of course 'e
avoided if it could prove that it o'served the diligence of a good father of a famil+ to
prevent damage.
Page | 61
VIC#OR, LINER, INC. 5s. GAMMA0
G.R. No. 15+6'6. NOVEM%ER 5, !!4
FAC#S8
Marie 7race Pagula+an67ammad was on 'oard an air6conditioned Cictor+ #iner
'us 'ound for Tuguegarao, 2aga+an from Manila. .t a'out 0:00 a.m., the 'us while
running at a high speed fell on a ravine which resulted in the death of Marie 7race and
ph+sical in(uries to other passengers. n Ma+ 1F, 1//", respondent heirs of the deceased
filed a complaint for damages arising from culpa contractual against petitioner. &n its
answer, the petitioner claimed that the incident was purel+ accidental and that it has
alwa+s e:ercised e:traordinar+ diligence in its !0 +ears of operation.
ISS$E8
,hether petitioner should 'e held lia'le for 'reach of contract of carriage.
R$LING8
Petitioner was correctl+ found lia'le for 'reach of contract of carriage. .
common carrier is 'ound to carr+ its passengers safel+ as far as human care and
foresight can provide, using the utmost diligence of ver+ cautious persons, with due
regard to all the circumstances. &n a contract of carriage, it is presumed that the
common carrier was at fault or was negligent when a passenger dies or is in(ured. Dnless
the presumption is re'utted, the court need not even ma$e an e:press finding of fault or
negligence on the part of the common carrier. This statutor+ presumption ma+ onl+ 'e
overcome '+ evidence that the carrier e:ercised e:traordinar+ diligence.
&n the instant case, there is no evidence to re'ut the statutor+ presumption that
the pro:imate cause of Marie 7race9s death was the negligence of petitioner. Hence, the
courts 'elow correctl+ ruled that petitioner was guilt+ of 'reach of contract of carriage.

Page | 62
FG$ INS$RANCE CORP. 5s. G.P. SARMIEN#O #R$C4ING CORPORA#ION
G.R. No. 141+1!. A$G$S# 6, !!
FAC#S8
7.P. *armiento Truc$ing 2orporation A7P*B undertoo$ to deliver refrigerators
a'oard one of its &su>u truc$, driven '+ #am'ert <roles, from the plant site of
2oncepcion &ndustries, &nc. to the 2entral #u>on .ppliances in Dagupan 2it+. ,hile the
truc$ was traversing the north diversion road along Mc.rthur highwa+ in Baranga+
.nupol, Bam'an, Tarlac, it collided with an unidentified truc$, causing it to fall into a
deep canal, resulting in damage to the cargoes. %7D &nsurance 2orporation A%7DB, an
insurer of the shipment, paid to 2oncepcion &ndustries, &nc., the value of the covered
cargoes. %7D, in turn, 'eing the su'rogee of the rights and interests of 2oncepcion
&ndustries, &nc., sought reim'ursement of the amount it had paid to the latter from
7P*. *ince the truc$ing compan+ failed to heed the claim, %7D filed a complaint for
damages and 'reach of contract of carriage against 7P* and its driver #am'ert <roles.
@espondents asserted that that the cause of damage was purel+ accidental.
ISS$E8
,hether or not 7P* is lia'le for damages arising from negligence.
R$LING8
&n culpa contractual, upon which the action of petitioner rests as 'eing the
su'rogee of 2oncepcion &ndustries, &nc., the mere proof of the e:istence of the contract
and the failure of its compliance (ustif+, prima facie, a corresponding right of relief.
@espondent truc$ing corporation recogni>es the e:istence of a contract of carriage
'etween it and petitioner and admits that the cargoes it has assumed to deliver have
'een lost or damaged while in its custod+. &n such a situation, a default on, or failure of
compliance with, the o'ligation I in this case, the deliver+ of the goods in its custod+ to
the place of destination 6 gives rise to a presumption of lac$ of care and corresponding
lia'ilit+ on the part of the contractual o'ligor the 'urden 'eing on him to esta'lish
otherwise. 7P* has failed to do so.
@espondent driver, without concrete proof of his negligence or fault, ma+ not
himself 'e ordered to pa+ petitioner. The driver, not 'eing a part+ to the contract of
carriage 'etween petitioner and defendant, ma+ not 'e held lia'le under the agreement.
. contract can onl+ 'ind the parties who have entered into it or their successors who
have assumed their personalit+ or their (uridical position. Petitioner9s civil action
against the driver can onl+ 'e 'ased on culpa a4uiliana, which, unli$e culpa contractual,
would re4uire the claimant for damages to prove negligence or fault on the part of the
defendant.
Page | 63
LR#A 5s. NAVI0A0
G.R. No. 145"!4. FE%R$AR, 6, !!'
FAC#S8
n 1F cto'er 1//0, in the evening, 1icanor 1avidad, then drun$, entered the
<D*. #@T station. ,hile 1avidad was standing on the platform near the #@T trac$s,
=unelito <scartin, the securit+ guard assigned to the area approached 1avidad. .
misunderstanding or an altercation 'etween the two apparentl+ ensued that led to a fist
fight. 1o evidence, however, was adduced to indicate how the fight started or who,
'etween the two, delivered the first 'low or how 1avidad later fell on the #@T trac$s. .t
the e:act moment that 1avidad fell, an #@T train, operated '+ petitioner @odolfo
@oman, was coming in. 1avidad was struc$ '+ the moving train, and he was $illed
instantaneousl+. The widow of 1icanor, along with her children, filed a complaint for
damages against =unelito <scartin, @odolfo @oman, the #@T., the Metro Transit
rgani>ation, &nc. AMetro TransitB, and Prudent for the death of her hus'and. #@T.
and @oman filed a counterclaim against 1avidad and a cross6claim against <scartin and
Prudent. Prudent, in its answer, denied lia'ilit+ and averred that it had e:ercised due
diligence in the selection and supervision of its securit+ guards.
ISS$E8
,ho, if an+, is lia'le for damages in relation to the death of 1avidad;
R$LING8
The foundation of #@T.9s lia'ilit+ is the contract of carriage and its o'ligation to
indemnif+ the victim arises from the 'reach of that contract '+ reason of its failure to
e:ercise the high diligence re4uired of the common carrier. &n the discharge of its
commitment to ensure the safet+ of passengers, a carrier ma+ choose to hire its own
emplo+ees or avail itself of the services of an outsider or an independent firm to
underta$e the tas$. &n either case, the common carrier is not relieved of its
responsi'ilities under the contract of carriage.
@egretta'l+ for #@T., as well as perhaps the surviving spouse and heirs of the
late 1icanor 1avidad, this 2ourt is concluded '+ the factual finding of the 2ourt of
.ppeals that 3there is nothing to lin$ Prudent to the death of 1avidad, for the reason
that the negligence of its emplo+ee, <scartin, has not 'een dul+ proven. There 'eing,
similarl+, no showing that petitioner @odolfo @oman himself is guilt+ of an+ culpa'le act
or omission, he must also 'e a'solved from lia'ilit+.
Page | 64
RO0:SSEN S$PPL, CO, INC. VS. FAR EAS# %AN4 @ #R$S# CO.
GR No. 1!+!"7 May +, !!1
FAC#S8
Defendant @od>ssen *uppl+, &nc. opened with plaintiff %ar <ast Ban$ and Trust
2o. a 006da+ domestic letter of credit in the amount of P1/0,000.00 in favor of <$man
and 2ompan+, &nc. A<$manB for the purchase from the latter of five units of h+draulic
loaders, to e:pire on %e'ruar+ 1!, 1/8/. Defendant refused to pa+ without an+ valid
reason. Plaintiff pra+s for (udgment ordering defendant to pa+ the a'ovementioned
P8",000.00 plus due interest thereon, plus )!E of the amount of the award as
attorne+9s fees. Gnowing that the two units of h+draulic loaders had 'een delivered to
defendant after the e:pir+ date of su'(ect #2J and that in view of the 'reach of contract,
defendant offered to return to plaintiff the two units of h+draulic loaders, Tpresentl+ still
with the defendant9 'ut plaintiff refused to ta$e possession thereof.
Dnder the contract of sale of the five loaders 'etween <$man and defendant,
upon <$man9s deliver+ to, and acceptance '+, defendant of the two remaining units of
the five loaders, defendant 'ecame lia'le to <$man for the pa+ment of said two units.
However, as defendant did not pa+ <$man, the latter pressed plaintiff for the pa+ment
of said two loaders in the amount of P8",000.00. &n the honest 'elief that it was still
under o'ligation to <$man for said amount, considering that <$man had presented all
the necessar+ documents, plaintiff voluntaril+ paid the said amount to <$man.
The 2. re(ected petitioner9s imputation of 'ad faith and negligence to respondent
'an$ for pa+ing for the two h+draulic loaders, which had 'een delivered after the
e:piration of the su'(ect letter of credit. To a'solve defendant from lia'ilit+ for the price
of the same,L the 2. e:plained, Lis to allow it to get awa+ with its un(ust enrichment at
the e:pense of the plaintiff.L
ISS$E8
,hether petitioner is lia'le to respondent.
R$LING8
Petitioner claims that it accepted the late deliver+ of the e4uipment, onl+ 'ecause
it was 'ound to accept it under the compan+9s trust receipt arrangement with
respondent 'an$.
7ranting that petitioner was 'ound under such arrangement to accept the late
deliver+ of the e4uipment, we note its une:plained inaction for almost four +ears with
regard to the status of the ownership or possession of the loaders. Bewildering was its
lac$ of action to validate the ownership and possession of the loaders, as well as its
stolidit+ over the purported failed sales transaction. *ignificant too is the fact that it
formali>ed its offer to return the two pieces of e4uipment onl+ after respondent9s
demand for pa+ment, which came more than three +ears after it accepted deliver+.
,hen 'oth parties to a transaction are mutuall+ negligent in the performance of
their o'ligations, the fault of one cancels the negligence of the other and, as in this case,
their rights and o'ligations ma+ 'e determined e4uita'l+ under the law proscri'ing
un(ust enrichment.
Page | 65
Petitioner @od>ssen *uppl+ 2o., &nc. is orderd to reim'urse @espondent %ar <ast
Ban$ and Trust 2o., &nc. P8",000 plus interest thereon at the rate of " percent per
annum computed from .pril 8, 1/H0. .fter this (udgment 'ecomes final, the interest
shall 'e 1) percent per annum.
$NIVERSI#, OF #3E EAS# VS. -A0ER
GR. No. 1''44 February 17, !!!
FAC#S8
Plaintiff was enrolled in the defendantsK 2ollege of #aw from 1/HF up to 1/HH. &n
the first semester of his last +ear A*chool +ear 1/H861/HHB, he failed to ta$e the regular
final e:amination in Practice 2ourt & for which he was given an incomplete grade. He
enrolled for the second semester as fourth +ear law student and on %e'ruar+ 1, 1/HH he
filed an application for the removal of the incomplete grade given him '+ Professor
2arlos rtega which was approved '+ Dean 2eledonio Tiongson after pa+ment of the
re4uired fee. He too$ the e:amination on March )H, 1/HH. n Ma+ 00, 1/HH, Professor
2arlos rtega su'mitted his grade. &t was a grade of five. &n the meantime, the Dean and
the %acult+ Mem'ers of the 2ollege of #aw met to deli'erate on who among the fourth
+ear students should 'e allowed to graduate. The plaintiffKs name appeared in the
Tentative #ist of 2andidates for graduation for the Degree of Bachelor of #aws A##.BB as
of *econd *emester A1/H861/HHB. The plaintiff attended the investiture ceremonies at %.
dela 2ru> ?uadrangle, D.<., @ecto 2ampus, during the program of which he went up the
stage when his name was called.
He thereafter prepared himself for the 'ar e:amination. He too$ a leave of
a'sence without pa+ from his (o' from .pril )0, 1/HH to *eptem'er 00, 1/HH and
enrolled at the pre6'ar review class in %ar <astern Dniversit+. Having learned of the
deficienc+ he dropped his review class and was not a'le to ta$e the 'ar e:amination. N.
chec$ with the .ttorne+Ks #ist in the 2ourt shows that private respondent is not a
mem'er of the Philippine Bar.O
ISS$E8
,hether petitioner is lia'le for damages under culpa contractual.
R$LING8
,hen a student is enrolled in an+ educational or learning institution, a contract
of education is entered into 'etween said institution and the student. The professors,
teachers or instructors hired '+ the school are considered merel+ as agents and
administrators tas$ed to perform the schoolKs commitment under the contract. *ince the
contracting parties are the school and the student, the latter is not dut+6'ound to deal
with the formerKs agents, such as the professors with respect to the status or result of his
grades, although nothing prevents either professors or students from sharing with each
other such information. The 2ourt ta$es (udicial notice of the traditional practice in
Page | 66
educational institutions wherein the professor directl+ furnishes hisMher students their
grades.
&t is the contractual o'ligation of the school to timel+ inform and furnish
sufficient notice and information to each and ever+ student as to whether he or she had
alread+ complied with all the re4uirements for the conferment of a degree or whether
the+ would 'e included among those who will graduate. Prior or su'se4uent to the
ceremon+, the school has the o'ligation to promptl+ inform the student of an+ pro'lem
involving the latterKs grades and performance and also most importantl+, of the
procedures for remed+ing the same.
Petitioner, in 'elatedl+ informing respondent of the result of the removal
e:amination, particularl+ at a time when he had alread+ commenced preparing for the
'ar e:ams, cannot 'e said to have acted in good faith.
,H<@<%@<, Petitioner is ordered to pa+ respondent the sum of Thirt+6five
Thousand %our Hundred *event+ Pesos AP0!,F80.00B, with legal interest of "E per
annum computed from the date of filing of the complaint until full+ paidJ the amount of
%ive Thousand Pesos AP!,000.00B as attorne+Ks feesJ and the costs of the suit. The award
of moral damages is deleted.
Page | 67
%A,NE A0-$S#ERS VS. CA
GR No. 116'' -a.uary 5, !!!
FAC#S8
&n Ma+ 1/H8 2olgate Palmolive Philippine, &nc., imported al$+l 'en>ene from
=apan valued at D*U)!!,H0).HH. The said li4uid cargo was insured with herein private
respondent &nsurance 2ompan+ of 1orth .merica against all ris$ for its full value.
Petitioner Ba+ne .d(usters and *urve+ors &nc., was contracted '+ the consignee to
supervise the proper handling and discharge of the cargo from the chemical tan$er to a
receiving 'arge until the cargo is pumped into the consignee9s shore tan$. ,hen the
cargo arrived in Manila petitioner9s surve+or supervised the transfer of the cargo from
the chemical tan$er to the receiving 'arge. Pumping operation from the 'arge to the
consignee9s shore tan$ commenced at )0)0 hours of =une )8, 1/H8. Pumping of the
li4uid cargo from the 'arge to the consignee9s tan$ was interrupted several times due to
mechanical pro'lems with the pump. ,hen the pump 'ro$e down once again at a'out
1000 hours of =une )/, 1/H8, the petitioner9s surve+or left the premises without leaving
an+ instruction with the 'arge foreman what to do in the event that the pump 'ecomes
operational again. Petitioner sent .mado %ontillas, a cargo surve+or, not a li4uid 'ul$
surve+or, to the premises and it was agreed that pumping operation would resume the
following da+ at 1000 hours. %ontillas tried to inform 'oth the 'arge men and the
assigned surve+or of the scheduled resumption of pumping operation 'ut he could not
find them so he left the premises. ,hen the 'arge men arrived in the earl+ evening, the+
found the valves of the tan$ open and resumed pumping operation in the a'sence of an+
instruction from the surve+or to the contrar+. The following morning it was found that
an undetermined amount of al$+l 'en>ene was lost due to overflow.
The consignee filed a claim with the private respondent insurance corporation
for the value of the lost li4uid cargo.
Both the trial court and the appellate court found the petitioner9s failure to
compl+ with the *tandard perating Procedure for Handling #i4uid Bul$ 2argo when
pumping operation is suspended as the pro:imate cause of the loss.
ISS$E8
,hether petitioner is lia'le for the damages incurred arising from culpa
contractual.
R$LING8
The negligence of the o'ligor in the performance of the o'ligation renders him
lia'le for damages for the resulting loss suffered '+ the o'ligee. %ault or negligence of
the o'ligor consists in his failure to e:ercise due care and prudence in the performance
of the o'ligation as the nature of the o'ligation so demands. The factual findings and
conclusions of the trial and appellate court when supported '+ su'stantial evidence are
entitled to great respect and will not 'e distur'ed on appeal e:cept on ver+ strong and
cogent grounds. Both parties agree that the petitioner is 'ound to supervise the proper
Page | 68
discharge of the li4uid cargo from the chemical tan$er to the receiving 'arge and from
the latter to the consignee9s shore tan$.
&t is clear that under the standard procedure the surve+or is re4uired to seal all
cargo compartment manhole covers and the 'arge and manifold covers to avoid
unsupervised discharge of the li4uid cargo and to avert loss or contamination thereof.
The petitioner9s failure to closel+ supervise the discharge of the cargo in accordance with
accepted guidelines is the pro:imate cause of the loss. ,e find no cogent reason to
overturn the legal conclusion reached '+ the lower courts that the petitioner is negligent
in the performance of its dut+ as a marine superintendent surve+or under the *tandard
perating Procedure in handling li4uid cargo and held the petitioner lia'le for damages
for the loss of the cargo.
Page | 69
0ELSAN #RANSPOR# VS. C @ A CONSOR#I$M
GR No. 156!'4 O17ober 1, !!'
FAC#S8
n cto'er /, 1//F, MMC Delsan <:press, a ship owned and operated '+
petitioner Delsan Transport #ines, &nc., anchored at the 1avotas %ish Port for the
purpose of installing a cargo pump and clearing the cargo oil tan$. .t around 1):00
midnight of cto'er )0, 1//F, 2aptain Demetrio T. =usep of MMC Delsan <:press
received a report from his radio head operator in =apan that a t+phoon was going to hit
Manila in a'out eight AHB hours. .t appro:imatel+ H:0! in the morning of cto'er )1,
1//F, 2apt. =usep tried to see$ shelter at the 1orth Har'or 'ut could not enter the area
'ecause it was alread+ congested. .t 10:00 a.m., 2apt. =usep decided to drop anchor at
the vicinit+ of Citas mouth, F miles awa+ from a 1apocor power 'arge. .t that time, the
waves were alread+ reaching H to 10 feet high. 2apt. =usep ordered his crew to go full
ahead to counter the wind which was dragging the ship towards the 1apocor power
'arge. To avoid collision, 2apt. =usep ordered a full stop of the vessel.N/O He succeeded
in avoiding the power 'arge, 'ut when the engine was re6started and the ship was
maneuvered full astern, it hit the deflector wall constructed '+ respondent.
@espondent demanded pa+ment of the damage from petitioner 'ut the latter
refused to pa+.
The trial court ruled that petitioner was not guilt+ of negligence 'ecause it had ta$en all
the necessar+ precautions to avoid the accident. .ppl+ing the Lemergenc+ ruleL, it
a'solved petitioner of lia'ilit+ 'ecause the latter had no opportunit+ to ade4uatel+ weigh
the 'est solution to a threatening situation. &t further held that even if the maneuver
chosen '+ petitioner was a wrong move, it cannot 'e held lia'le as the cause of the
damage sustained '+ respondent was t+phoon LGatringL, which is an act of 7od.
n appeal to the 2ourt of .ppeals, the decision of the trial court was reversed and
set aside. &t found 2apt. =usep guilt+ of negligence in deciding to transfer the vessel to
the 1orth Har'or onl+ at H:0! a.m. of cto'er )1, 1//F and thus held petitioner lia'le
for damages.
ISS$ES8
1. ,hether or not 2apt. =usep was negligentJ
). &f +es, whether or not petitioner is solidaril+ lia'le under for the 4uasi6delict
committed '+ 2apt. =usep;
R$LING8
.rticle )18" of the 2ivil 2ode provides that whoever '+ act or omission causes
damage to another, there 'eing fault or negligence, is o'liged to pa+ for the damage
done. *uch fault or negligence, if there is no pre6e:isting contractual relation 'etween
the parties, is called a 4uasi6delict. The test for determining the e:istence of negligence
in a particular case ma+ 'e stated as follows: Did the defendant in doing the alleged
negligent act use the reasona'le care and caution which an ordinar+ prudent person
would have used in the same situation; &f not, then he is guilt+ of negligence.
Page | 70
&n the case at 'ar, the 2ourt of .ppeals was correct in holding that 2apt. =usep
was negligent in deciding to transfer the vessel onl+ at H:0! in the morning of cto'er
)1, 1//F. .s earl+ as 1):00 midnight of cto'er )0, 1//F, he received a report from his
radio head operator in =apan that a t+phoon was going to hit Manila after H hours. This,
notwithstanding, he did nothing, until H:0! in the morning of cto'er )1, 1//F, when he
decided to see$ shelter at the 1orth Har'or, which unfortunatel+ was alread+ congested.
The finding of negligence cannot 'e re'utted upon proof that the ship could not
have sought refuge at the 1orth Har'or even if the transfer was done earlier. &t is not the
speculative success or failure of a decision that determines the e:istence of negligence in
the present case, 'ut the failure to ta$e immediate and appropriate action under the
circumstances. 2apt. =usep, despite $nowledge that the t+phoon was to hit Manila in H
hours, complacentl+ waited for the lapse of more than H hours thin$ing that the t+phoon
might change direction. %urthermore, he did not transfer as soon as the sun rose
'ecause, according to him, it was not ver+ cloud+ and there was no weather distur'ance
+et.
.nent the second issue, we find petitioner vicariousl+ lia'le for the negligent act
of 2apt. =usep. Dnder .rticle )1H0 of the 2ivil 2ode an emplo+er ma+ 'e held solidaril+
lia'le for the negligent act of his emplo+ee. Thus 6
.rt. )1H0. The o'ligation imposed in .rticle )18" is demanda'le not onl+ for
one9s own acts or omissions, 'ut also for those of persons for whom one is responsi'le.
<mplo+ers shall 'e lia'le for the damages caused '+ their emplo+ees and
household helpers acting within the scope of their assigned tas$s, even though the
former are not engaged in an+ 'usiness or industr+.
,henever an emplo+ee9s negligence causes damage or in(ur+ to another, there
instantl+ arises a presumption (uris tantum that the emplo+er failed to e:ercise
diligentissimi patris families in the selection Aculpa in eligiendoB or supervision Aculpa in
vigilandoB of its emplo+ees. To avoid lia'ilit+ for a 4uasi6delict committed '+ his
emplo+ee, an emplo+er must overcome the presumption '+ presenting convincing proof
that he e:ercised the care and diligence of a good father of a famil+ in the selection and
supervision of his emplo+ee.
There is no 4uestion that petitioner, who is the ownerMoperator of MMC Delsan
<:press, is also the emplo+er of 2apt. =usep who at the time of the incident acted within
the scope of his dut+. The defense raised '+ petitioner was that it e:ercised due diligence
in the selection of 2apt. =usep 'ecause the latter is a licensed and competent Master
Mariner. &t should 'e stressed, however, that the re4uired diligence of a good father of a
famil+ pertains not onl+ to the selection, 'ut also to the supervision of emplo+ees. &t is
not enough that the emplo+ees chosen 'e competent and 4ualified, inasmuch as the
emplo+er is still re4uired to e:ercise due diligence in supervising its emplo+ees.
Page | 71
PCI% VS. CA
GR No. 1141' -a.uary +, !!1
FAC#S8
The plaintiff %ord drew and issued its 2iti'an$ 2hec$ 1o. *160FH"8 in the
amount of PF,8F",11F.F1, in favor of the 2ommissioner of &nternal @evenue as pa+ment
of plaintiff9s percentage or manufacturer9s sales ta:es for the third 4uarter of 1/88. The
aforesaid chec$ was deposited with the defendant &B.. Anow P2&Ban$B and was
su'se4uentl+ cleared at the 2entral Ban$. Dpon presentment with the defendant
2iti'an$, the proceeds of the chec$ was paid to &B.. as collecting or depositor+ 'an$.
The proceeds of the same 2iti'an$ chec$ of the plaintiff was never paid to or received '+
the pa+ee thereof, the 2ommissioner of &nternal @evenue. .s a conse4uence, upon
demand of the Bureau andMor 2ommissioner of &nternal @evenue, the plaintiff was
compelled to ma$e a second pa+ment to the Bureau of &nternal @evenue of its
percentageMmanufacturers9 sales ta:es for the third 4uarter of 1/88 and that said second
pa+ment of plaintiff in the amount of PF,8F",11F.F1 was dul+ received '+ the Bureau of
&nternal @evenue.
The .cting 2ommissioner of &nternal @evenue addressed to the plaintiff that its
chec$ in the amount of PF,8F",11F.F1 was not paid to the government or its authori>ed
agent and instead encashed '+ unauthori>ed persons, hence, plaintiff has to pa+ the said
amount within fifteen da+s from receipt of the letter. Dpon advice of the plaintiff9s
law+ers, plaintiff paid to the Bureau of &nternal @evenue, the amount of PF,8F",11F.F1,
representing pa+ment of plaintiff9s percentage ta: for the third 4uarter of 1/88. Plaintiff
demanded defendant to reim'urse him of the said amount paid for the second time to
B&@ 'ut the latter refused.
ISS$E8
,hether P2&B is lia'le to %ord Philippines the amount of several chec$s which
were allegedl+ em'e>>led '+ a s+ndicate group.
R$LING8
=urisprudence regarding the imputed negligence of emplo+er in a master6servant
relationship is instructive. *ince a master ma+ 'e held for his servant9s wrongful act, the
law imputes to the master the act of the servant, and if that act is negligent or wrongful
and pro:imatel+ results in in(ur+ to a third person, the negligence or wrongful conduct
is the negligence or wrongful conduct of the master, for which he is lia'le. The general
rule is that if the master is in(ured '+ the negligence of a third person and '+ the
concurring contri'utor+ negligence of his own servant or agent, the latter9s negligence is
imputed to his superior and will defeat the superior9s action against the third person,
assuming, of course that the contri'utor+ negligence was the pro:imate cause of the
in(ur+ of which complaint is made.
&t appears that although the emplo+ees of %ord initiated the transactions
attri'uta'le to an organi>ed s+ndicate, in our view, their actions were not the pro:imate
Page | 72
cause of encashing the chec$s pa+a'le to the 2&@. The degree of %ord9s negligence, if
an+, could not 'e characteri>ed as the pro:imate cause of the in(ur+ to the parties.
2iti'an$ should have scrutini>ed 2iti'an$ 2hec$ 'efore pa+ing the amount of the
proceeds thereof to the collecting 'an$ of the B&@. ne thing is clear from the record:
the clearing stamps at the 'ac$ of 2iti'an$ 2hec$ 1os. *1 10!/8 and 1"!0H do not 'ear
an+ initials. 2iti'an$ failed to notice and verif+ the a'sence of the clearing stamps. Had
this 'een dul+ e:amined, the switching of the worthless chec$s to 2iti'an$ 2hec$ 1os.
10!/8 and 1"!0H would have 'een discovered in time. %or this reason, 2iti'an$ had
indeed failed to perform what was incum'ent upon it, which is to ensure that the
amount of the chec$s should 'e paid onl+ to its designated pa+ee. The fact that the
drawee 'an$ did not discover the irregularit+ seasona'l+, in our view, constitutes
negligence in carr+ing out the 'an$9s dut+ to its depositors. The point is that as a
'usiness affected with pu'lic interest and 'ecause of the nature of its functions, the
'an$ is under o'ligation to treat the accounts of its depositors with meticulous care,
alwa+s having in mind the fiduciar+ nature of their relationship.
2iti'an$ must li$ewise answer for the damages incurred '+ %ord on 2iti'an$
2hec$s 'ecause of the contractual relationship e:isting 'etween the two. 2iti'an$, as the
drawee 'an$ 'reached its contractual o'ligation with %ord and such degree of
culpa'ilit+ contri'uted to the damage caused to the latter.
Page | 73
SAN MIG$EL CORPORA#ION AN0 3EIRS OF O$ANA VS. CA
GR No. 141716 -u*y 4, !!
FAC#S8
*an Miguel 2orporation entered into a Time 2harter Part+ .greement with =ulius
uano, doing 'usiness under the name and st+le =. uano Marine *ervices. Dnder the
terms of the agreement, *M2 chartered the MMC DoQa @o'erta owned '+ =ulius uano
for a period of two +ears, from =une 1, 1/H/ to Ma+ 01, 1//1, for the purpose of
transporting *M29s 'everage products from its Mandaue 2it+ plant to various points in
Cisa+as and Mindanao.
n 1ovem'er 11, 1//0, during the term of the charter, *M2 issued sailing orders
to the Master of the M1 DoQa @o'erta, 2aptain *a'iniano &nguito, to sail for pol,
2aga+an 1ov. 1), 1//0. Meanwhile, at F:00 a.m. of 1ovem'er 1), 1//0, t+phoon
@uping was spotted !80 $ilometers east6southeast of Borongan, *amar, moving west6
northwest at )) $ilometers per hour in the general direction of <astern Cisa+as. The
t+phoon had ma:imum sustained winds of )F0 $ilometers per hour near the center with
gustiness of up to )H0 $ilometers per hour.
.t 8:00 a.m., 1ovem'er 1), 1//0, one hour after the MMC DoQa @o'erta departed
from Mandaue 2it+ *M2 @adio perator @ogelio P. Moreno contacted 2aptain &nguito
through the radio and advised him to ta$e shelter. 2aptain &nguito replied that the+ will
proceed since the t+phoon was far awa+ from them, and that the winds were in their
favor.
.t 1:1! a.m., 1ovem'er 10, 1//0, 2aptain &nguito called Moreno over the radio
and re4uested him to contact @ico uano, son of =ulius uano, 'ecause the+ needed a
helicopter to rescue them. The vessel was a'out )0 miles west of *ulauan Point.
Dpon 'eing told '+ *M29s radio operator, @ico uano turned on his radio and
read the distress signal from 2aptain &ngiuto. ,hen he tal$ed to the captain, the latter
re4uested for a helicopter to rescue them. @ico uano tal$ed to the 2hief <ngineer who
informed him that the+ can no longer stop the water from coming into the vessel
'ecause the crew mem'ers were feeling di>>+ from the petroleum fumes.
.t ):00 a.m. of 1ovem'er 10, 1//0, the MMC DoQa @o'erta san$. ut of the )!
officers and crew on 'oard the vessel, onl+ five survived.
ISS$E8
,hether or nor uano is lia'le for the negligence of his emplo+ee.
R$LING8
. charter part+ is a contract '+ virtue of which the owner or the agent of a vessel
'inds himself to transport merchandise or persons for a fi:ed price. &t has also 'een
defined as a contract '+ virtue of which the owner or the agent of the vessel leases for a
certain price the whole or a portion of the vessel for the transportation of goods or
persons from one port to another.
&f the charter is a contract of affreightment, which leaves the general owner in
possession of the ship as owner for the vo+age, the rights and the responsi'ilities of
Page | 74
ownership rest on the owner. The charterer is free from lia'ilit+ to third persons in
respect of the ship.
*2 concur with the findings of the 2ourt of .ppeals that the charter part+ in these
cases was a contract of affreightment, contrar+ to petitioner uano9s protestation that it
was a demise charter.
&t appearing that uano was the emplo+er of the captain and crew of the MMC
DoQa @o'erta during the term of the charter, he therefore had command and control
over the vessel. His son, @ico uano, even testified that during the period that the vessel
was under charter to *M2, the 2aptain thereof had control of the navigation of all
vo+ages.
Dnder the foregoing definitions, as well as the clear terms of the 2harter Part+
.greement 'etween the parties, the charterer, *M2, should 'e free from lia'ilit+ for an+
loss or damage sustained during the vo+age, unless it 'e shown that the same was due to
its fault or negligence.
The evidence does not show that *M2 or its emplo+ees were amiss in their duties.
The facts indu'ita'l+ esta'lish that *M29s @adio perator, @ogelio P. Moreno, who was
tas$ed to monitor ever+ shipment of its cargo, contacted 2aptain &nguito as earl+ as 8:00
a.m., one hour after the MMC DoQa @o'erta departed from Mandaue, and advised him to
ta$e shelter from t+phoon @uping. This advice was reiterated at ):00 p.m. .t that point,
Moreno thought of calling uano;s son, @ico, 'ut failed to find him. .t F:00 p.m.,
Moreno again advised 2aptain &nguito to ta$e shelter and stressed the danger of
venturing into the open sea. The 2aptain insisted that he can handle the situation.
&n the assailed decision, the 2ourt of .ppeals found that the pro:imate cause of the
sin$ing of the vessel was the negligence of 2aptain *a'iniano &nguito
*2 li$ewise agrees with the 2. that uano is vicariousl+ lia'le for the negligent
acts of his emplo+ee, 2aptain &nguito. Dnder .rticles )18" and )1H0 of the 2ivil 2ode,
owners and managers are responsi'le for damages caused '+ the negligence of a servant
or an emplo+ee, the master or emplo+er is presumed to 'e negligent either in the
selection or in the supervision of that emplo+ee. This presumption ma+ 'e overcome
onl+ '+ satisfactoril+ showing that the emplo+er e:ercised the care and the diligence of a
good father of a famil+ in the selection and the supervision of its emplo+ee.
0/
uano misera'l+ failed to overcome the presumption of his negligence. He failed to
present proof that he e:ercised the due diligence of a 'onus paterfamilias in the
selection and supervision of the captain of the MMC DoQa @o'erta. Hence, he is
vicariousl+ lia'le for the loss of lives and propert+ occasioned '+ the lac$ of care and
negligence of his emplo+ee
Page | 75
MERC$R, 0R$G CORPORA#ION VS. 3$ANG
GR No. 171 -u.e , !!7
FAC#S8
Petitioner Mercur+ Drug is the registered owner of a si:6wheeler 1//0 Mitsu'ishi
Truc$. &t has in its emplo+ petitioner @olando Del @osario as driver. @espondent
spouses @ichard and 2armen Huang are the parents of respondent *tephen Huang and
own the red 1//1 To+ota 2orolla. These two vehicles figured in a road accident. .t the
time of the accident, petitioner Del @osario onl+ had a Traffic Ciolation @eceipt. .
driver9s license had 'een confiscated 'ecause he had 'een previousl+ apprehended for
rec$less driving. @espondent *tephen Huang sustained massive in(uries to his spinal
cord, head, face and lung. He is paral+>ed for life from his chest down and re4uires
continuous medical and reha'ilitation treatment. @espondent9s fault petitioner Del
@osario for committing gross negligence and rec$less imprudence while driving, and
petitioner Mercur+ Drug for failing to e:ercise the diligence of a good father of a famil+
in the selection and supervision of its driver.
The trial court found Mercur+ Drug and Del @osario (ointl+ and severall+ lia'le to
pa+ respondents. The 2ourt of .ppeals affirmed the said decision.
ISS$E8
,hether or not petitioner Mercur+ Drug is lia'le for the negligence of its
emplo+ee.
R$LING8
.rticle )18" and )1H0 of the 2ivil 2ode provide:
3,hoever '+ act or omission causes damage to another, there 'eing fault
or negligence, is o'liged to pa+ for the damages done. *uch fault or negligence, if there is
no pre6e:isting contractual relationship 'etween the parties, is called a 4uasi6delict and
is governed '+ the provisions of this 2hapter.5
3The o'ligation imposed '+ article )18" is demanda'le not onl+ for one9s
own acts or omissions, 'ut also for those of persons for whom one is responsi'le.5
The lia'ilit+ of the emplo+er under .rticle )1H0 is direct and immediate. &t is not
conditioned on a prior recourse against the negligent emplo+ee, or a prior showing of
insolvenc+ of such emplo+ee. &t is also (oint and solidar+ with the emplo+ee. To 'e
relieved f the lia'ilit+, petitioner should show that it e:ercised the diligence of a good
father of a famil+, 'oth in the selection of the emplo+ee and in the supervision of the
performance of his duties.
&n this case, the petitioner Mercur+ Drug does not provide for 'ac$6up driver for
long trips. .s the time of the accident, Del @osario has 'een driving for more than
thirteen hours, without an+ alternate. Moreover, Del @osario too$ the driving test and
ps+chological e:am for the position of Deliver+ Man and not as Truc$ Man.
,ith this, petitioner Mercur+ Drug is lia'le (ointl+ and severall+ lia'le to pa+ the
respondents.
Page | 76
MEN0O:A VS. SORIANO
GR No. 164!1 -u.e ", !!7
FAC#S8
*onn+ *oriano, while crossing 2ommonwealth .venue near #u>on .venue, was
hit '+ a speeding Tamaraw %V driven '+ #omer Macasasa. *oriano was thrown five
meters awa+, while the vehicle stopped some )! meters from the point of impact. 7erard
Cillaspin, one of *oriano9s companions, as$ed Macasasa to 'ring *oriano to the hospital,
'ut the first flee. @espondent9s wife and daughter filed a complaint for damages against
Macasasa and petitioner %lordeli>a Mendo>a, the registered owner of the vehicle.
Petitioner Mendo>a contends that she was not lia'le since as owner of the
vehicle, she had e:ercised the diligence of a good father of a famil+ over her emplo+ee.
Macasas.
The trial court dismissed the complaint against Macasasa and Mendo>a. &t found
*oriano negligent for crossing not in the pedestrian overpass. The 2ourt of .ppeals, on
the other hand, reversed the assailed decision of the lower court.
ISS$E8
,hether or not petitioner is lia'le for damages.
R$LING8
,hile the appellate court agreed that *oriano was negligent, it also found
Macasasa negligent for speeding, such that he was una'le to avoid hitting the victim. &t
o'served that *oriano9s own negligence did not preclude recover+ for damages from
Macasasa9s negligence. &t further held that since petitioner failed to present evidenced to
the contrar+ and conforma'l+ with .rticle )1H0 of the 2ivil 2ode, the presumption of
negligence of the emplo+er in the selection and supervision of emplo+ees stood.
The records show that Macasasa violated two traffic rules under the #and
Transportation and ffice 2ode. Dnder .rticle )1H! of the 2ivil 2ode, a person driving a
motor vehicle is presumed negligent if at the time of the mishap, he was violating traffic
regulations.
%urther, under .rticle )1H0, emplo+ers are lia'le for the damages caused '+ their
emplo+ees acting within the scope of their assigned tas$s. The lia'ilit+ arises due to the
presumed negligence of the emplo+ers in supervising their emplo+ees unless the+ prove
that the+ o'served all the diligence of a good father of a famil+ to prevent the damage. &n
this case petitioner is held primaril+ and solidaril+ lia'le for the damages caused '+
Macasasa.
However, .rticle )18/ states that 3when the plaintiff9s own negligence was the
immediate and pro:imate cause of his in(ur+, he cannot recover damages. But if his
negligence was onl+ contri'utor+, the immediate and pro:imate cause of the in(ur+
'eing the defendant9s lac$ of due care, the plaintiff ma+ recover damages, 'ut the court
shall mitigate the damages awarded.
Page | 77
@uling that *oriano was guilt+ of contri'utor+ negligence for not using the
pedestrian overpass, )0E reduction of the amount of the damages awarded was
awarded to petitioner.
Page | 78
CERE:O VS. #$A:ON
GR No. 1415'" Mar1< ', !!4
FAC#S8
2ountr+ Bus #ines passenger 'us collided with a tric+cle. Tric+cle driver Tua>on
filed a complaint for damages against Mrs. 2ere>o, as owner of the 'us line, her hus'and
.ttorne+ =uan 2ere>o, and 'us driver Danilo .. %oronda.
.fter considering Tua>on9s testimonial and documentar+ evidence, the trial court
ruled in Tua>on9s favor. The trial court made no pronouncement on %oronda9s lia'ilit+
'ecause there was no service of summons on him. The trial court did not hold .tt+.
2ere>o lia'le as Tua>on failed to show that Mrs. 2ere>o9s 'usiness 'enefited the famil+,
pursuant to .rticle 1)1A0B of the %amil+ 2ode. The trial court held Mrs. 2ere>o solel+
lia'le for the damages sustained '+ Tua>on arising from the negligence of Mrs. 2ere>o9s
emplo+ee, pursuant to .rticle )1H0 of the 2ivil 2ode.
ISS$E8
,hether petitioner is solidaril+ lia'le.
R$LING8
2ontrar+ to Mrs. 2ere>o9s assertion, %oronda is not an indispensa'le part+ to the
case. .n indispensa'le part+ is one whose interest is affected '+ the court9s action in the
litigation, and without whom no final resolution of the case is possi'le. However, Mrs.
2ere>o9s lia'ilit+ as an emplo+er in an action for a 4uasi6delict is not onl+ solidar+, it is
also primar+ and direct. %oronda is not an indispensa'le part+ to the final resolution of
Tua>on9s action for damages against Mrs. 2ere>o.
The responsi'ilit+ of two or more persons who are lia'le for a 4uasi6delict is
solidar+. ,here there is a solidar+ o'ligation on the part of de'tors, as in this case, each
de'tor is lia'le for the entire o'ligation. Hence, each de'tor is lia'le to pa+ for the
entire o'ligation in full. There is no merger or renunciation of rights, 'ut onl+ mutual
representation. ,here the o'ligation of the parties is solidar+, either of the parties is
indispensa'le, and the other is not even a necessar+ part+ 'ecause complete relief is
availa'le from either. Therefore, (urisdiction over %oronda is not even necessar+ as
Tua>on ma+ collect damages from Mrs. 2ere>o alone.
Moreover, an emplo+er9s lia'ilit+ 'ased on a 4uasi6delict is primar+ and direct,
while the emplo+er9s lia'ilit+ 'ased on a delict is merel+ su'sidiar+. The words 3primar+
and direct,5 as contrasted with 3su'sidiar+,5 refer to the remed+ provided '+ law for
enforcing the o'ligation rather than to the character and limits of the o'ligation.
.lthough lia'ilit+ under .rticle )1H0 originates from the negligent act of the emplo+ee,
the aggrieved part+ ma+ sue the emplo+er directl+.
,hen an emplo+ee causes damage, the law presumes that the emplo+er has
himself committed an act of negligence in not preventing or avoiding the damage. This
is the fault that the law condemns. ,hile the emplo+er is civill+ lia'le in a su'sidiar+
capacit+ for the emplo+ee9s criminal negligence, the emplo+er is also civill+ lia'le
directl+ and separatel+ for his own civil negligence in failing to e:ercise due diligence in
selecting and supervising his emplo+ee. The idea that the emplo+er9s lia'ilit+ is solel+
su'sidiar+ is wrong.
Page | 79
To hold the emplo+er lia'le in a su'sidiar+ capacit+ under a delict, the aggrieved
part+ must initiate a criminal action where the emplo+ee9s delict and corresponding
primar+ lia'ilit+ are esta'lished. &f the present action proceeds from a delict, then the
trial court9s (urisdiction over %oronda is necessar+.
However, the present action is clearl+ for the 4uasi6delict of Mrs. 2ere>o and not
for the delict of %oronda.
Thus, the petition was denied ordering the defendant Hermana 2ere>o to pa+ the
plaintiff.
VIRON #RANSPOR#A#ION CO., INC. VS. 0ELOS SAN#OS
GR No. 54!"! No5e2ber , !!!
FAC#S8
Defendant .l'erto delos *antos was the driver of defendant @ud+ *amidan
of the latter9s vehicle, a %orward 2argo Truc$. .t a'out 1):00 in the afternoon, he
was driving said truc$ along the 1ational Highwa+ within the vicinit+ of 7erona,
Tarlac. The Ciron Bus, driven '+ ,ilfredo Cillanueva, tried to overta$e his truc$,
and he swerved to the right shoulder of the highwa+, 'ut as soon as he occupied
the right lane of the road, the cargo truc$ which he was driving was hit '+ the
Ciron 'us on its left front side, as the 'us swerved to his lane to avoid an
incoming 'us on its opposite direction. ,ith the driver of another truc$ dealing
li$ewise in vegeta'les, Dulnuan, the two of them and the driver of the Ciron 'us
proceeded to report the incident to the Police *tation.
Both the @T2 and the 2. rendered its decision in favor of the private
respondents.
ISS$E8
,hether the emplo+er is lia'le to the negligence of his emplo+ee.
R$LING8
.s emplo+ers of the 'us driver, the petitioner is, under .rticle )1H0 of the
2ivil 2ode, directl+ and primaril+ lia'le for the resulting damages. The
presumption that the+ are negligent flows from the negligence of their emplo+ee.
That presumption, however, is onl+ (usris tantum, not (uris et de (ure. Their onl+
possi'le defense is that the+ e:ercised all the diligence of a good father of a famil+
to prevent the damage.
&n fine, when the emplo+ee causes damage due to his own negligence while
performing his own duties, there arises the (uris tantum presumption that the
emplo+er is negligent, re'utta'le onl+ '+ proof of o'servance of the diligence of a
good father of a famil+.
Petitioner, through its witnesses, failed to re'ut such legal presumption of
negligence in the selection and supervision of emplo+ees, thus, petitioner as the
emplo+er is responsi'le for damages, the 'asis of the lia'ilit+ 'eing the
Page | 80
relationship of pater familias or on the emplo+er9s own negligence. Hence, with
the allegations and su'se4uent proof of negligence against the 'us driver of
petitioner, petitioner Aemplo+erB is lia'le for damages.
MERC$R, 0R$G CORPORA#ION VS. %A4ING
GR No. 574'5 May 5, !!7
FAC#S8
*e'astian Ba$ing, respondent, went to the clinic of Dr. 2esar *+ for a medical
chec$6up. Dr. *+ gave respondent two medical prescriptions I Diomicron for his 'lood
sugar and Benali>e ta'lets for his trigl+ceride.
@espondent then proceeded to petitioner Mercur+ Drug 2orporation A.la'ang
BranchB to 'u+ the prescri'ed medicines. However, the saleslad+ misread the
prescription Diamicron as a prescription for Dormicum. Dnaware that what was given
to him was the wrong medicine, respondent too$ one pill of dormicum on three
consecutive da+s. n the third da+ he too$ the medicine, and he figured in a vehicular
accident. The car he was driving collided with the car of one =ose Peralta. @espondent
fell asleep while driving he could not remem'er an+thing a'out the collision nor felt its
impact.
*uspecting that the ta'let he too$ ma+ have 'earing on his ph+sical and mental
state at the time of the collision, respondent returned to Dr. *+. Dpon 'eing shown the
medicine, Dr. *+ was shoc$ed to find that what was sold to him was Dormicum, instead
of the prescri'ed Diamicron
The @T2 and 2. rendered their decision in favor of respondent.
ISS$E8
,hether petitioner was negligent, and if so, whether such negligence was the
pro:imate cause of respondent9s accident.
R$LING8
.rticle )18" states that 3whoever '+ act or omission causes damage to another,
there 'eing fault or negligence, is o'liged to pa+ for the damages done. *uch fault or
negligence, if there is no pre6e:isting contractual relationship 'etween the parties, is
called a 4uasi6delictW5
'viousl+, petitioner9s emplo+ee was grossl+ negligent in selling respondent
domicrum, instead of the prescri'ed diamicron. 2onsidering that a fatal mista$e could
'e a matter of life and death for a 'u+ing patient, the emplo+ee should have 'een ver+
cautious in dispensing medicines.
Petitioner contends that the pro:imate cause of the accident was respondent9s
negligence in driving. The court disagrees. The accident could have not occurred had
petitioner9s emplo+ee 'een careful in reading the prescription.
Page | 81
.rticle )1H0 in complementing the preceding article states that 3the o'ligation
imposed '+ articles )18" is demanda'le not onl+ for one9s own acts or omissions, 'ut
also for those of persons for whom one is responsi'le5
&t is thus clear that the emplo+er of a negligent emplo+ee is lia'le for the damages
caused '+ the latter. ,hen an in(ur+ is caused '+ the negligence of an emplo+ee, there
instantl+ arises a presumption of the law that there has 'een negligence on the part of
the emplo+er either in the selection of the emplo+ee or the supervision over him, after
such selection. The presumption, however, ma+ 'e re'utted '+ a clear showing on the
part of the emplo+er that he has e:ercised the care and diligence of a good father of a
famil+ in the selection and supervision of his emplo+ee.
&n this case, petitioner failed to prove such e:ercised of due diligence of a good
father of a famil+ in the selection and supervision of emplo+ee, thus ma$ing the
petitioner solidaril+ lia'le for the damages.
Page | 82
SAFEG$AR0 SEC$RI#, V. #ANGCO
GR No. 1657' 0e1e2ber 14, !!6
FAC#S8
<vangeline Tangco A<vangelineB went to <colog+ Ban$, Gatipunan Branch,
?ue>on 2it+, to renew her time deposit per advise of the 'an$Ks cashier as she would
sign a specimen card. <vangeline, a dul+ licensed firearm holder with corresponding
permit to carr+ the same outside her residence, approached securit+ guard Pa(arillo,
who was stationed outside the 'an$, and pulled out her firearm from her 'ag to deposit
the same for safe$eeping. *uddenl+, Pa(arillo shot <vangeline with his service shotgun
hitting her in the a'domen instantl+ causing her death.
@espondent filed a complaint for damages against Pa(arillo for negligentl+
shooting <vangeline and against *afeguard for failing to o'serve the diligence of a good
father of a famil+ to prevent the damage committed '+ its securit+ guard.
Petitioners denied the material allegations in the complaint and alleged that
*afeguard e:ercised the diligence of a good father of a famil+ in the selection and
supervision of Pa(arilloJ that <vangelineKs death was not due to Pa(arilloKs negligence as
the latter acted onl+ in self6defense.
The @T2 found respondents to 'e entitled to damages. &t re(ected Pa(arilloKs
claim that he merel+ acted in self6defense. The @T2 also found *afeguard as emplo+er of
Pa(arillo to 'e (ointl+ and severall+ lia'le with Pa(arillo. &t ruled that while it ma+ 'e
conceded that *afeguard had perhaps e:ercised care in the selection of its emplo+ees,
particularl+ of Pa(arillo, there was no sufficient evidence to show that *afeguard
e:ercised the diligence of a good father of a famil+ in the supervision of its emplo+ee.
ISS$ES8
1. ,hether Pa(arillo is guilt+ of negligence in shooting <vangelineJ and
). ,hether *afeguard should 'e held solidaril+ lia'le for the damages awarded to
respondents.
R$LING8
.@T&2#< )18". ,hoever '+ act or omission causes damage to another, there
'eing fault or negligence, is o'liged to pa+ for the damage done. *uch fault or
negligence, if there is no pre6e:isting contractual relation 'etween the parties is called a
4uasi6delict and is governed '+ the provisions of this 2hapter.
*afeguard contends that it cannot 'e (ointl+ held lia'le since it had ade4uatel+
shown that it had e:ercised the diligence re4uired in the selection and supervision of its
emplo+ees. &t claims that it had re4uired the guards to undergo the necessar+ training
and to su'mit the re4uisite 4ualifications and credentials which even the @T2 found to
have 'een complied withJ that the @T2 erroneousl+ found that it did not e:ercise the
diligence re4uired in the supervision of its emplo+ee. *afeguard further claims that it
conducts monitoring of the activities of its personnel, wherein supervisors are assigned
Page | 83
to routinel+ chec$ the activities of the securit+ guards which include among others,
whether or not the+ are in their proper post and with proper e4uipment, as well as
regular evaluations of the emplo+eesK performancesJ that the fact that Pa(arillo loaded
his firearm contrar+ to *afeguardKs operating procedure is not sufficient 'asis to sa+ that
*afeguard had failed its dut+ of proper supervisionJ that it was li$ewise error to sa+ that
*afeguard was negligent in seeing to it that the procedures and policies were not
properl+ implemented '+ reason of one unfortunate event. The *upreme 2ourt was not
convinced. .rticle )1H0 of the 2ivil 2ode provides: The o'ligation imposed '+ .rticle
)18" is demanda'le not onl+ for oneKs own acts or omissions, 'ut also for those of
persons for whom one is responsi'le.
.s the emplo+er of Pa(arillo, *afeguard is primaril+ and solidaril+ lia'le for the
4uasi6delict committed '+ the former. *afeguard is presumed to 'e negligent in the
selection and supervision of his emplo+ee '+ operation of law. This presumption ma+ 'e
overcome onl+ '+ satisfactoril+ showing that the emplo+er e:ercised the care and the
diligence of a good father of a famil+ in the selection and the supervision of its emplo+ee.
&n the selection of prospective emplo+ees, emplo+ers are re4uired to e:amine them as to
their 4ualifications, e:perience, and service records. n the other hand, due diligence in
the supervision of emplo+ees includes the formulation of suita'le rules and regulations
for the guidance of emplo+ees and the issuance of proper instructions intended for the
protection of the pu'lic and persons with whom the emplo+er has relations through his
or its emplo+ees and the imposition of necessar+ disciplinar+ measures upon emplo+ees
in case of 'reach or as ma+ 'e warranted to ensure the performance of acts
indispensa'le to the 'usiness of and 'eneficial to their emplo+er. To this, we add that
actual implementation and monitoring of consistent compliance with said rules should
'e the constant concern of the emplo+er, acting through dependa'le supervisors who
should regularl+ report on their supervisor+ functions. To esta'lish these factors in a
trial involving the issue of vicarious lia'ilit+, emplo+ers must su'mit concrete proof,
including documentar+ evidence.
Page | 84
PLE,#O VS. LOM%O,
GR No. 14"7'7 0e1e2ber 16, !!4
FAC#S8
@espondent Maria D. #om'o+ of 2alasiao, Pangasinan, is the surviving spouse of
the late @icardo #om'o+, who died in Pasolingan, 7erona, Tarlac, in a vehicular
accident. The accident was a head6on collision 'etween the P@B# 'us driven '+
petitioner Ple+to and the car where @icardo was a passenger. 2armela suffered in(uries
re4uiring hospitali>ation in the same accident which resulted in her father9s death.
.ccording to @oll+ rpilla, a witness and one of the 'us passengers, Ple+to tried
to overta$e <sguerra9s tric+cle 'ut hit it instead. Ple+to then swerved into the left
opposite lane. 2oming down the lane, some fift+ meters awa+, was a south'ound
Mitsu'ishi #ancer car, driven '+ .rnulfo .suncion. The car was headed for Manila with
some passengers. *eated 'eside .rnulfo was his 'rother6in6law, @icardo #om'o+, while
in the 'ac$ seat were @icardo9s 1H6+ear old daughter 2armela and her friend, one @hino
Da'a. P@B# Bus 1o. 1!0/ smashed head6on the car, $illing .rnulfo and @icardo
instantl+. 2armela and @hino suffered in(uries, 'ut onl+ 2armela re4uired
hospitali>ation.
The 2ourt of .ppeals found P@B# lia'le for Ple+to9s negligence pursuant to
.rticle )1H0 in relation to .rticle )18" of the 2ivil 2ode. Dnder .rticle )1H0, when an
in(ur+ is caused '+ the negligence of a servant or an emplo+ee, the master or emplo+er is
presumed to 'e negligent either in the selection or in the supervision of that emplo+ee.
This presumption ma+ 'e overcome onl+ '+ satisfactoril+ showing that the emplo+er
e:ercised the care and the diligence of a good father of a famil+ in the selection and the
supervision of its emplo+ee.
ISS$E8
Page | 85
Did petitioner o'served the proper diligence of a good father of a famil+;
R$LING8
The negligence and fault of appellant driver is manifest. He overtoo$ the tric+cle
despite the oncoming car onl+ fift+ A!0B meters awa+ from him. Defendant6appellant9s
claim that he was driving at a mere 00 to 0! $ilometers per hour does not deserve
credence as it would have 'een eas+ to stop or properl+ maneuver the 'us at this speed.
The speed of the 'us, the dri>>le that made the road slipper+, and the pro:imit+ of the
car coming from the opposite direction were dul+ esta'lished '+ the evidence. The
speed at which the 'us traveled, inappropriate in the light of the aforementioned
circumstances, is evident from the fact despite the application of the 'ra$es, the 'us still
'umped the tric+cle, and then proceeded to collide with the incoming car with such
force that the car was pushed 'e+ond the edge of the road to the ricefield.
&n the present case, petitioners presented several documents in evidence to show
the various tests and pre64ualification re4uirements imposed upon petitioner Ple+to
'efore his hiring as a driver '+ P@B#. However, no documentar+ evidence was
presented to prove that petitioner P@B# e:ercised due diligence in the supervision of its
emplo+ees, including Ple+to. 2iting precedents, the 2ourt of .ppeals opined,
&n order that the defense of due diligence in the selection and supervision of
emplo+ees ma+ 'e deemed sufficient and plausi'le, it is not enough for the emplo+er to
emptil+ invo$e the e:istence of compan+ guidelines and policies on hiring and
supervision. .s the negligence of the emplo+ee gives rise to the presumption of
negligence on the part of the emplo+er, the latter has the 'urden of proving that it has
'een diligent not onl+ in the selection of emplo+ees 'ut also in the actual supervision of
their wor$. The mere allegation of the e:istence of hiring procedures and supervisor+
policies without an+thing more is decidedl+ not sufficient to overcome such
presumption.
VIRON #RANSPOR#A#ION CO., INC. VS. 0ELOS SAN#OS
GR No. 54!"! No5e2ber , !!!
FAC#S8
Defendant .l'erto delos *antos was the driver of defendant @ud+ *amidan
of the latter9s vehicle, a %orward 2argo Truc$. .t a'out 1):00 in the afternoon, he
was driving said truc$ along the 1ational Highwa+ within the vicinit+ of 7erona,
Tarlac. The Ciron Bus, driven '+ ,ilfredo Cillanueva, tried to overta$e his truc$,
and he swerved to the right shoulder of the highwa+, 'ut as soon as he occupied
the right lane of the road, the cargo truc$ which he was driving was hit '+ the
Ciron 'us on its left front side, as the 'us swerved to his lane to avoid an
incoming 'us on its opposite direction. ,ith the driver of another truc$ dealing
li$ewise in vegeta'les, Dulnuan, the two of them and the driver of the Ciron 'us
proceeded to report the incident to the Police *tation.
Page | 86
Both the @T2 and the 2. rendered its decision in favor of the private
respondents.
ISS$E8
,hether the emplo+er is lia'le to the negligence of his emplo+ee.
R$LING8
.s emplo+ers of the 'us driver, the petitioner is, under .rticle )1H0 of the
2ivil 2ode, directl+ and primaril+ lia'le for the resulting damages. The
presumption that the+ are negligent flows from the negligence of their emplo+ee.
That presumption, however, is onl+ (usris tantum, not (uris et de (ure. Their onl+
possi'le defense is that the+ e:ercised all the diligence of a good father of a famil+
to prevent the damage.
&n fine, when the emplo+ee causes damage due to his own negligence while
performing his own duties, there arises the (uris tantum presumption that the
emplo+er is negligent, re'utta'le onl+ '+ proof of o'servance of the diligence of a
good father of a famil+.
Petitioner, through its witnesses, failed to re'ut such legal presumption of
negligence in the selection and supervision of emplo+ees, thus, petitioner as the
emplo+er is responsi'le for damages, the 'asis of the lia'ilit+ 'eing the
relationship of pater familias or on the emplo+er9s own negligence. Hence, with
the allegations and su'se4uent proof of negligence against the 'us driver of
petitioner, petitioner Aemplo+erB is lia'le for damages.
S,4I VS. %EGASA
GR No. 14+14+ O17ober ', !!'
FAC#S8
@espondent *alvador Begasa and his three companions flagged down a passenger
(eepne+ driven '+ =oa4uin <spina and owned '+ .urora Pisuena. ,hile respondent was
'oarding the passenger (eepne+ Ahis right foot alread+ inside while his left foot still on
the 'oarding step of the passenger (eepne+B, a truc$ driven '+ <li>alde *a'la+an and
owned '+ petitioner <rnesto *+$i 'umped the rear end of the passenger (eepne+.
@espondent fell and fractured his left thigh 'one.
@espondent filed a complaint for damages for 'reach of common carrier9s
contractual o'ligations and 4uasi6delict against .urora Pisuena, the owner of the
passenger (eepne+J, herein petitioner <rnesto *+$i, the owner of the truc$J, and <li>alde
*a'la+an, the driver of the truc$.
.fter hearing, the trial court dismissed the complaint against .urora Pisuena, the
owner and operator of the passenger (eepne+, 'ut ordered petitioner <rnesto *+$i and
his truc$ driver, <li>alde *a'la+an, to pa+ respondent *alvador Begasa, (ointl+ and
severall+
ISS$E8
Page | 87
1. ,hether or not petitioner is lia'le for the act of his emplo+ee.
). ,hether he e:ercised the diligence of a good father of a famil+.
R$LING8
1. .rticle )1H0 of the 2ivil 2ode provides:
<mplo+ers shall 'e lia'le for the damages caused '+ their emplo+ees and
household helpers acting within the scope of their assigned tas$s, even though the
former are not engaged in an+ 'usiness or industr+.
%rom the a'ove provision, when an in(ur+ is caused '+ the negligence of an
emplo+ee, a legal presumption instantl+ arises that the emplo+er was negligent, either or
'oth, in the selection andMor supervision of his said emplo+ee duties. The said
presumption ma+ 'e re'utted onl+ '+ a clear showing on the part of the emplo+er that
he had e:ercised the diligence of a good father of a famil+ in the selection and
supervision of his emplo+ee. &f the emplo+er successfull+ overcomes the legal
presumption of negligence, he is relieved of lia'ilit+. &n other words, the 'urden of proof
is on the emplo+er.
). The 4uestion is: how does an emplo+er prove that he had indeed e:ercised the
diligence of a good father of a famil+ in the selection and supervision of his emplo+ee.
Ma$ing proof in its or his case, it is paramount that the 'est and most complete
evidence is formall+ entered.
&n the case at 'ar, while there is no rule which re4uires that testimonial evidence,
to hold swa+, must 'e corro'orated '+ documentar+ evidence, inasmuch as the
witnesses9 testimonies dwelt on mere generalities, we cannot consider the same as
sufficientl+ persuasive proof that there was o'servance of due diligence in the selection
and supervision of emplo+ees. Petitioner9s attempt to prove its 3deligentissimi patris
familias5 in the selection and supervision of emplo+ees through oral evidence must fail
as it was una'le to 'uttress the same with an+ other evidence, o'(ect or documentar+,
which might o'viate the apparent 'iased nature of the testimon+.
&n the selection of prospective emplo+ees, emplo+ers are re4uired to e:amine
them as to their 4ualifications, e:perience, and service records. n the other hand, with
respect to the supervision of emplo+ees, emplo+ers should formulate standard operating
procedures, monitor their implementation, and impose disciplinar+ measures for
'reaches thereof. To esta'lish these factors in a trial involving the issue of vicarious
lia'ilit+, emplo+ers must su'mit concrete proof, including documentar+ evidence.
The emplo+er must not merel+ present testimonial evidence to prove that he had
o'served the diligence of a good father of a famil+ in the selection and supervision of his
emplo+ee, 'ut he must also support such testimonial evidence with concrete or
documentar+ evidence. The reason for this is to o'viate the 'iased nature of the
emplo+er9s testimon+ or that of his witnesses.
&n this case, petitioner9s evidence consisted entirel+ of testimonial evidence. He
testified that 'efore he hired <li>alde *a'la+an, he re4uired him to su'mit a police
clearance in order to determine if he was ever involved in an+ vehicular accident. He
also re4uired *a'la+an to undergo a driving test with conducted '+ his mechanic,
<ste'an =aca. Petitioner claimed that he, in fact, accompanied *a'la+an during the
Page | 88
driving test and that during the test, *a'la+an was taught to read and understand traffic
signs li$e 3Do 1ot <nter,5 3ne ,a+,5 3#eft Turn,5 and 3@ight Turn.5
Petitioner9s mechanic, <ste'an =aca, on the other hand, testified that *a'la+an
passed the driving test and had never figured in an+ vehicular accident e:cept the one in
4uestion. He also testified that he maintained in good condition all the truc$s of
petitioner '+ chec$ing the 'ra$es, horns and tires thereof 'efore leaving for providing
hauling services.
Petitioner, however, never presented the alleged police clearance given to him '+
*a'la+an, nor the results of *a'la+an9s driving test. Petitioner also did not present
records of the regular inspections that his mechanic allegedl+ conducted.
&n sum, the sole and pro:imate cause of the accident was the negligence of
petitioner9s driver who, as found '+ the lower courts, did not slow down even when he
was alread+ approaching a 'us+ intersection within the cit+ proper. The passenger
(eepne+ had long stopped to pic$ up respondent and his three companions and, in fact,
respondent was alread+ partl+ inside the (eepne+, when petitioner9s driver 'umped the
rear end ofrear6ended it.
*ince the negligence of petitioner9s driver was the sole and pro:imate cause of the
accident, in the present case, petitioner is lia'le, under .rticle )1H0 of the 2ivil 2ode, to
pa+ damages to respondent Begasa for the in(uries sustained '+ latter.
,AM%AO VS. :$NIGA
GR No. 14617' 0e1e2ber 11, !!'
FAC#S8
The 'us owned '+ the petitioner was 'eing driven '+ her driver, one 2eferino 7.
Centurina along the north'ound lane of <pifanio delos *antos .venue A<D*.B. ,ith
Centurina was the 'us conductor, %ernando Dumaliang. *uddenl+, the 'us 'umped
Page | 89
Herminigildo RuQiga, a pedestrian. *uch was the force of the impact that the left side of
the front windshield of the 'us was crac$ed. RuQiga was rushed to the ?ue>on 2it+
7eneral Hospital where he was given medical attention, 'ut due to the massive in(uries
sustained, he succum'ed shortl+ thereafter.
Private respondents, as heirs of the victim, filed a 2omplaint against petitioner
and her driver, Centurina, for damages. The complaint essentiall+ alleged that
Centurina drove the 'us in a rec$less, careless and imprudent manner, in violation of
traffic rules and regulations, without due regard to pu'lic safet+, thus resulting in the
victim9s premature death.
The petitioner vehementl+ denied the material allegations of the complaint. *he
tried to shift the 'lame for the accident upon the victim, theori>ing that Herminigildo
'umped into her 'us, while avoiding an unidentified woman who was chasing him. *he
further alleged that she was not lia'le for an+ damages 'ecause as an emplo+er, she
e:ercised the proper diligence of a good father of a famil+, 'oth in the selection and
supervision of her 'us driver.
ISS$E8
,hether or not petitioner o'served the diligence of a good father of a famil+, so
as not to 'e lia'le for the act committed '+ her emplo+ee;
R$LING8
&t held that this was a case of 4uasi6delict, there 'eing no pre6e:isting contractual
relationship 'etween the parties. The court a 4uo then found the petitioner directl+ and
primaril+ lia'le as Centurina9s emplo+er pursuant to .rticle )1H0 of the 2ivil 2ode as
she failed to present evidence to prove that she has o'served the diligence of a good
father of a famil+ in the selection and supervision of her emplo+ees.
.rt. )1H0 states that 3the o'ligation imposed '+ .rticle )18" is demanda'le not
onl+ for one9s own acts or omissions, 'ut also for those of persons for whom one is
responsi'le5
<mplo+ers shall 'e lia'le for the damages caused '+ their emplo+ees and
household helpers acting within the scope of their assigned tas$s, even though the
former are not engaged in an+ 'usiness or industr+.
Petitioner contends that as an emplo+er, she o'served the proper diligence of a
good father of a famil+, 'oth in the selection and supervision of her driver and therefore,
is relieved from an+ lia'ilit+ for the latter9s misdeed. To support her claim, she points
out that when Centurina applied with her as a driver in =anuar+ 1//), she re4uired him
to produce not (ust his driver9s license, 'ut also clearances from the 1ational Bureau of
&nvestigation A1B&B, the Philippine 1ational Police, and the 'aranga+ where he resides.
*he also re4uired him to present his *ocial *ecurit+ *+stem A***B 1um'er prior to
accepting him for emplo+ment. *he li$ewise stresses that she in4uired from Centurina9s
previous emplo+er a'out his emplo+ment record, and onl+ hired him after it was shown
to her satisfaction that he had no 'lot upon his record.
&n sum, petitioner9s lia'ilit+ to private respondents for the negligent and
imprudent acts of her driver, Centurina, under .rticle )1H0 of the 2ivil 2ode is 'oth
manifest and clear. Petitioner, having failed to re'ut the legal presumption of
Page | 90
negligence in the selection and supervision of her driver, is responsi'le for damages, the
'asis of the lia'ilit+ 'eing the relationship of pater familias or on the emplo+er9s own
negligence.
REGINO VS. PANGASINAN COLLEGES
GR No. 1561!+ No5e2ber 1", !!4
FAC#S8
Petitioner Ghristine @ea M. @egino was a first +ear computer science student at
@espondent Pangasinan 2olleges of *cience and Technolog+ AP2*TB. &n %e'ruar+ )00),
P2*T held a fund raising campaign du''ed the 3@ave Part+ and Dance @evolution,5 the
proceeds of which were to go to the construction of the school9s tennis and volle+'all
courts. <ach student was re4uired to pa+ for two tic$ets at the price of P100 each. The
pro(ect was allegedl+ implemented '+ recompensing students who purchased tic$ets
with additional points in their test scoresJ those who refused to pa+ were denied the
opportunit+ to ta$e the final e:aminations. %inanciall+ strapped and prohi'ited '+ her
religion from attending dance parties and cele'rations, @egino refused to pa+ for the
tic$ets. n March 1F and March 1!, )00), the scheduled dates of the final e:aminations
in logic and statistics, her teachers 66 @espondents @achelle .. 7amurot and <lissa
Baladad 66 allegedl+ disallowed her from ta$ing the tests.
ISS$E8
,hether or not the purchased of the tic$ets are mandator+ and are part of the
contract 'etween school and student.
R$LING8
Reciprocity of the School-Student Contract
The school6student relationship is also reciprocal. Thus, it has conse4uences
appurtenant to and inherent in all contracts of such $ind 66 it gives rise to 'ilateral or
reciprocal rights and o'ligations. The school underta$es to provide students with
education sufficient to ena'le them to pursue higher education or a profession. n the
other hand, the students agree to a'ide '+ the academic re4uirements of the school and
to o'serve its rules and regulations.
The terms of the school6student contract are defined at the moment of its
inception 66 upon enrolment of the student. *tandards of academic performance and
the code of 'ehavior and discipline are usuall+ set forth in manuals distri'uted to new
students at the start of ever+ school +ear. %urther, schools inform prospective enrollees
the amount of fees and the terms of pa+ment.
&n practice, students are normall+ re4uired to ma$e a down pa+ment upon
enrollment, with the 'alance to 'e paid 'efore ever+ preliminar+, midterm and final
e:amination. Their failure to pa+ their financial o'ligation is regarded as a valid ground
for the school to den+ them the opportunit+ to ta$e these e:aminations.
Page | 91
The foregoing practice does not merel+ ensure compliance with financial
o'ligationsJ it also underlines the importance of ma(or e:aminations. %ailure to ta$e a
ma(or e:amination is usuall+ fatal to the students9 promotion to the ne:t grade or to
graduation. <:amination results form a significant 'asis for their final grades. These
tests are usuall+ a primar+ and an indispensa'le re4uisite to their elevation to the ne:t
educational level and, ultimatel+, to their completion of a course.
Thus, students e:pect that upon their pa+ment of tuition fees, satisfaction of the
set academic standards, completion of academic re4uirements and o'servance of school
rules and regulations, the school would reward them '+ recogni>ing their 3completion5
of the course enrolled in.
P2*T imposed the assailed revenue6raising measure 'elatedl+, in the middle of the
semester. &t e:acted the dance part+ fee as a condition for the students9 ta$ing the final
e:aminations, and ultimatel+ for its recognition of their a'ilit+ to finish a course. The
fee, however, was not part of the school6student contract entered into at the start of the
school +ear. Hence, it could not 'e unilaterall+ imposed to the pre(udice of the
enrollees.
,3# REAL#, VS. CA
GR. No. 167"! February 17, !!5
FAC#S8
Mc#oughlin arrived from .ustralia and registered with Tropicana. He rented a
safet+ deposit 'o: as it was his practice to rent a safet+ deposit 'o: ever+ time he
registered at Tropicana in previous trips. .s a tourist, Mc#oughlin was aware of the
procedure o'served '+ Tropicana relative to its safet+ deposit 'o:es. The safet+ deposit
'o: could onl+ 'e opened through the use of two $e+s, one of which is given to the
registered guest, and the other remaining in the possession of the management of the
hotel. ,hen a registered guest wished to open his safet+ deposit 'o:, he alone could
personall+ re4uest the management who then would assign one of its emplo+ees to
accompan+ the guest and assist him in opening the safet+ deposit 'o: with the two $e+s.
However, when he returned coming from a trip, he noticed that his mone+ in the
envelope was lac$ing and that the (ewelries were gone.
ISS$E8
,hether petitioner is lia'le for the loss of the personal properties of respondent.
R$LING8
Dnder .rticle 1180 of the 1ew 2ivil 2ode, those who, in the performance of their
o'ligations, are guilt+ of negligence, are lia'le for damages. .rticle )1H0 provides that
the owners and managers of an esta'lishment or enterprise are li$ewise responsi'le for
damages caused '+ their emplo+ees in the service of the 'ranches in which the latter are
emplo+ed or on the occasion of their functions. .lso, this 2ourt has ruled that if an
emplo+ee is found negligent, it is presumed that the emplo+er was negligent in selecting
andMor supervising him for it is hard for the victim to prove the negligence of such
Page | 92
emplo+er. Thus, given the fact that the loss of Mc#oughlin9s mone+ was
consummated through the negligence of Tropicana9s emplo+ees in allowing Tan to open
the safet+ deposit 'o: without the guest9s consent, 'oth the assisting emplo+ees and
-HT @ealt+ 2orporation itself, as owner and operator of Tropicana, should 'e held
solidaril+ lia'le.
.rt. )000. The hotel6$eeper cannot free himself from responsi'ilit+ '+ posting
notices to the effect that he is not lia'le for the articles 'rought '+ the guest. .n+
stipulation 'etween the hotel6$eeper and the guest where'+ the responsi'ilit+ of the
former as set forth in .rticles 1//H to )001 is suppressed or diminished shall 'e void.
The hotel 'usiness li$e the common carrier9s 'usiness is im'ued with pu'lic
interest. The twin dut+ constitutes the essence of the 'usiness. The law in turn does not
allow such dut+ to the pu'lic to 'e negated or diluted '+ an+ contrar+ stipulation in so6
called 3underta$ings5 that ordinaril+ appear in prepared forms imposed '+ hotel
$eepers on guests for their signature.
&n the case at 'ar, the responsi'ilit+ of securing the safet+ deposit 'o: was
shared not onl+ '+ the guest himself 'ut also '+ the management since two $e+s are
necessar+ to open the safet+ deposit 'o:. ,ithout the assistance of hotel emplo+ees, the
loss would not have occurred.
Thus, Tropicana was guilt+ of concurrent negligence in allowing Tan, who was
not the registered guest, to open the safet+ deposit 'o: of Mc#oughlin, even assuming
that the latter was also guilt+ of negligence in allowing another person to use his $e+. To
rule otherwise would result in undermining the safet+ of the safet+ deposit 'o:es in
hotels for the management will 'e given imprimatur to allow an+ person, under the
pretense of 'eing a famil+ mem'er or a visitor of the guest, to have access to the safet+
deposit 'o: without fear of an+ lia'ilit+ that will attach thereafter in case such person
turns out to 'e a complete stranger. This will allow the hotel to evade responsi'ilit+ for
an+ lia'ilit+ incurred '+ its emplo+ees in conspirac+ with the guest9s relatives and
visitors.
RAMOS VS. CA
GR No. 14'54 0e1e2ber +, 1+++
FAC#S8
Plaintiff <rlinda @amos was a ro'ust woman <:cept for occasional complaints of
discomfort due to pains allegedl+ caused '+ the presence of a stone in her gall 'ladder.
Because the discomforts somehow interfered with her normal wa+s, she sought
professional advice. *he was advised to undergo an operation for the removal of a stone
in her gall 'ladder. Through the intercession of a mutual friend, Dr. Buenvia(e she and
her hus'and @ogelio met for the first time Dr. rlino one of the defendants in this case,
on =une 10, 1/H!. The+ agreed that their date at the operating ta'le at the D#*M2
Aanother defendant. Dr. Hosa$a decided that she should undergo a Lcholec+stectom+L
operation after e:amining the documents Afindings from the 2apitol Medical 2enter,
%<D Hospital and D#*M2B presented to him. @ogelio <. @amos, however, as$ed Dr.
Hosa$a to loo$ for a good anesthesiologist. Dr. Hosa$a, in turn, assured @ogelio that he
will get a good anesthesiologist. Dr. Hosa$a charged a fee of P1",000.00, which was to
include the anesthesiologistKs fee and which was to 'e paid after the operation. . da+
Page | 93
'efore the scheduled date of operation, she was admitted at one of the rooms of the
D#*M2, located along <. @odrigue> .venue, ?ue>on 2it+.
.t around 8:00 ..M. of =une 18, 1/H! and while still in her room, she was
prepared for the operation '+ the hospital staff. Her sister6in6law, Herminda 2ru>, who
was the Dean of the 2ollege of 1ursing at the 2apitol Medical 2enter, was also there for
moral support. Herminda was allowed to sta+ inside the operating room.
.t around /:00 ..M., Dr. 7utierre> reached a near'+ phone to loo$ for Dr.
Hosa$a who was not +et in Dr. 7utierre> thereafter informed Herminda 2ru> a'out the
prospect of a dela+ in the arrival of Dr. Hosa$a. Herminda then went 'ac$ to the patient
who as$ed, LMind+, wala pa 'a ang DoctorL; The former replied, LHuwag $ang mag6
alaala, darating na i+on. Thereafter, Herminda went out of the operating room and
informed the patientKs hus'and, @ogelio, that the doctor was not +et around.
.t a'out 1):1! P.M., Herminda 2ru>, who was inside the operating room with the
patient, heard some'od+ sa+ that LDr. Hosa$a is alread+ here.L *he then saw people
inside the operating room Lmoving, doing this and that, preparing the patient for the
operationL .s she held the hand of <rlinda @amos, she then saw Dr. 7utierre>
intu'ating the hapless patient. *he thereafter heard Dr. 7utierre> sa+, Lang hirap ma6
intu'ate nito, mali +ata ang pag$a$apaso$. lumala$i ang ti+anL, 'ecause of the
remar$s of Dra. 7utierre>, she focused her attention on what Dr. 7utierre> was doing.
*he thereafter noticed 'luish discoloration of the nail'eds of the left hand of the hapless
<rlinda even as Dr. Hosa$a approached her. *he then heard Dr. Hosa$a issue an order
for someone to call Dr. 2alderon, another anesthesiologist. .fter Dr. 2alderon arrived at
the operating room, she saw this anesthesiologist tr+ing to intu'ate the patient. The
patientKs nail'ed 'ecame 'luish and the patient was placed in a trendelen'urg position 6
a position where the head of the patient is placed in a position lower than her feet which
is an indication that there is a decrease of 'lood suppl+ to the patientKs 'rain.
&mmediatel+ thereafter, she went out of the operating room, and she told @ogelio <.
@amos Lthat something wrong was happeningL. Dr. 2alderon was then a'le to intu'ate
the patient.
Meanwhile, @ogelio, who was outside the operating room, saw a respirator+
machine 'eing rushed towards the door of the operating room. He also saw several
doctors rushing towards the operating room. ,hen informed '+ Herminda 2ru> that
something wrong was happening, he told her AHermindaB to 'e 'ac$ with the patient
inside the operating room. Herminda immediatel+ rushed 'ac$, and saw that the
patient was still in trendelen'urg position. .t almost 0:00 P.M. of that fateful da+, she
saw the patient ta$en to the &ntensive 2are Dnit A&2DB. Doctors 7utierre> and Hosa$a
were also as$ed '+ the hospital to e:plain what happened to the patient. The doctors
e:plained that the patient had 'ronchospasm. <rlinda @amos sta+ed at the &2D for a
month. .'out four months thereafter the patient was released from the hospital.
ISS$E8
1. ,hether the respondent doctors are negligent.
). ,hether the respondent doctors and the hospital are solidaril+ lia'le.
R$LING8
Page | 94
@es ipsa lo4uitur is a #atin phrase which literall+ means Lthe thing or the
transaction spea$s for itself.L The phrase Lres ipsa lo4uiturL is a ma:im for the rule that
the fact of the occurrence of an in(ur+, ta$en with the surrounding circumstances, ma+
permit an inference or raise a presumption of negligence, or ma$e out a plaintiffKs prima
facie case, and present a 4uestion of fact for defendant to meet with an e:planation
.t the time of su'mission, <rlinda was neurologicall+ sound and, e:cept for a few
minor discomforts, was li$ewise ph+sicall+ fit in mind and 'od+. However, during the
administration of anesthesia and prior to the performance of cholec+stectom+ she
suffered irrepara'le damage to her 'rain. Thus, without undergoing surger+, she went
out of the operating room alread+ decere'rate and totall+ incapacitated. 'viousl+,
'rain damage, which <rlinda sustained, is an in(ur+ which does not normall+ occur in
the process of a gall 'ladder operation. &n fact, this $ind of situation does not happen in
the a'sence of negligence of someone in the administration of anesthesia and in the use
of endotracheal tu'e. 1ormall+, a person 'eing put under anesthesia is not rendered
decere'rate as a conse4uence of administering such anesthesia if the proper procedure
was followed. %urthermore, the instruments used in the administration of anesthesia,
including the endotracheal tu'e, were all under the e:clusive control of private
respondents, who are the ph+sicians6in6charge. #i$ewise, petitioner <rlinda could not
have 'een guilt+ of contri'utor+ negligence 'ecause she was under the influence of
anesthetics which rendered her unconscious.
,ith regard to Dra. 7utierre>, we find her negligent in the care of <rlinda during
the anesthesia phase. .s 'orne '+ the records, respondent Dra. 7utierre> failed to
properl+ intu'ate the patient.
The 2ourt finds that she omitted to e:ercise reasona'le care in not onl+
intu'ating the patient, 'ut also in not repeating the administration of atropine without
due regard to the fact that the patient was inside the operating room for almost three A0B
hours. %or after she committed a mista$e in intu'ating the patient, the patientKs nail'ed
'ecame 'luish and the patient, thereafter, was placed in trendelen'urg position, 'ecause
of the decrease of 'lood suppl+ to the patientKs 'rain. The evidence further shows that
the hapless patient suffered 'rain damage 'ecause of the a'sence of o:+gen in her
ApatientKsB 'rain for appro:imatel+ four to five minutes which, in turn, caused the
patient to 'ecome comatose.
n the part of Dr. rlino Hosa$a, this 2ourt finds that he is lia'le for the acts of
Dr. Perfecta 7utierre> whom he had chosen to administer anesthesia on the patient as
part of his o'ligation to provide the patient a Xgood anesthesiologistK, and for arriving
for the scheduled operation almost three A0B hours late.
n the part of D#*M2 Athe hospitalB, this 2ourt finds that it is lia'le for the acts
of negligence of the doctors in their Xpractice of medicineK in the operating room.
Moreover, the hospital is lia'le for failing through its responsi'le officials, to cancel the
scheduled operation after Dr. Hosa$a ine:cusa'l+ failed to arrive on time.
&n having held thus, this 2ourt re(ects the defense raised '+ defendants that the+
have acted with due care and prudence in rendering medical services to plaintiff6patient.
%or if the patient was properl+ intu'ated as claimed '+ them, the patient would not have
'ecome comatose. .nd, the fact that another anesthesiologist was called to tr+ to
intu'ate the patient after her Athe patientKsB nail'ed turned 'luish, 'elie their claim.
%urthermore, the defendants should have rescheduled the operation to a later date.
Page | 95
This, the+ should have done, if defendants acted with due care and prudence as the
patientKs case was an elective, not an emergenc+ case.
,herefore (udgment is rendered in favor of the plaintiffs and against the
defendants. .ccordingl+, the latter are ordered to pa+, (ointl+ and severall+.
RE,ES VS. SIS#ERS OF MERC, 3OSPI#AL
GR No. 1'!547 O17ober ', !!!
FAC#S8
=orge @e+es was ta$en to the Merc+ 2ommunit+ 2linic. He was attended to '+
respondent Dr. Marl+n @ico, a resident ph+sician and admitting ph+sician on dut+, who
gave =orge a ph+sical e:amination and too$ his medical records. T+phoid fever was then
prevalent in the localit+. *uspecting that =orge could 'e suffering from this disease, Dr.
@ico ordered a ,idal Test, a standard test for t+phoid fever, to 'e performed on =orge.
The results of the test from which Dr. @ico concluded that =orge was positive for t+phoid
fever. .s her shift was onl+ up to !:00 p.m., Dr. @ico indorsed =orge to respondent Dr.
Marivie Blanes.
Dr. Blanes also too$ the ph+sical e:amination of =orge. .nti'iotics 'eing the
accepted treatment for t+phoid fever, she ordered that a compati'ilit+ test with the
anti'iotic chlorom+cetin 'e done on =orge. .s she did not o'serve an+ adverse reaction,
she ordered the first !00 mg. of said anti'iotic. .t around 1:00 in the morning, Dr.
Blanes was called as =orge9s temperature rose to F1 degrees and then valium was
administered. However, the patient did not respond to the treatment and slipped into
c+anosis, a 'luish or purplish discoloration of the s$in or mucous mem'rane due to
deficient o:+genation of the 'lood. .t around ):00 a.m. =orge died.
ISS$ES:
,hether the death of =orge @e+es was due to or caused '+ the negligence,
carelessness, imprudence, and lac$ of s$ill or foresight on the part of the
defendants.
R$LING8
Petitioner9s action is for medical malpractice. &t is a form of negligence which
consists in the failure of the ph+sician or surgeon to appl+ to his practice of medicine
that degree of care and s$ill which is ordinaril+ emplo+ed '+ the profession. %our
elements involve in medical negligence cases, namel+: dut+, 'reach, in(ur+, and
pro:imate causation.
&n this case, there is no dou't that ph+sician6patient relationship e:isted 'etween
respondent doctors and =orge @e+es. &t is 'reach of this dut+ which constitutes
actiona'le malpractice. .s to this aspect of medical malpractice, the determination of
reasona'le level of care and 'reach thereof, e:pert testimon+ is essential.
The petitioner presented Dr. Cacalares, 2hief Pathologist of the 1orthern
Mindanao Training Hospital, 2aga+an de ro, who performed the autops+ of =orge. He
testified that =orge did not die of t+phoid fever 'ut of shoc$ undetermined, which could
Page | 96
'e due to allergic reaction or chlorom+cetin overdose. The court was not persuaded.
.lthough Dr. Cacalares ma+ have had e:tensive e:perience in performing autopsies, he
admitted that he had +et to do one on the 'od+ of a t+phoid victim at the time he
conducted the post mortem of =orge. &t is also plain from his testimon+ that he treated
onl+ a'out three cases of t+phoid fever.
n the other hand, the two doctors presented '+ respondents clearl+ were e:perts
on the su'(ect. The+ vouched for the correctness of Dr. @ico9s diagnosis. Dr. 7otiong, a
diplomate whose speciali>ation is infectious diseases and micro'iolog+ and an associate
professor at the *outhern Dniversit+ 2ollege of Medicine and the 7ullas 2ollege of
Medicine, testified that he has alread+ treated over a thousand cases of t+phoid fever.
.ccording to him a case of t+phoid fever is suspected using the widal test, if the 1:0)0
results of the said test has 'een presented to him. .s to the treatment of the disease, he
stated that chlorom+cetin was the drug of choice. He also e:plained that despite the
measures ta$en '+ respondents and the intravenous administration of the two doses of
chlorom+cetin, complications of the disease could not 'e discounted.
Dr. Maril+n did not depart from the reasona'le standard recommended '+ the
e:perts as she in fact o'served the due care re4uired under the circumstances. Though
the widal test is not conclusive, it remains a standard diagnostic test for t+phoid fever
and, in the present case, a greater accurac+ through repeated testing was rendered
uno'taina'le '+ the earl+ death of the patient. The results of the widal test and the
patient9s histor+ of fever with chills for five da+s, ta$en with the fact that t+phoid fever
was then prevalent, were sufficient to give upon an+ doctor of reasona'le s$ill the
impression that the patient had t+phoid fever.
NOGALES VS. CAPI#OL ME0ICAL CEN#ER
GR No. 45641 0e1e2ber 1+, !!6
FAC#S8
Pregnant with her fourth child, 2ora>on 1ogales was under the e:clusive prenatal
care of Dr. <strada. ,hile 2ora>on was on her lat trimester of pregnanc+, Dr. <strada
noted an increase in her 'lood pressure and development of leg edema indicating
preeclampsia, which is dangerous complication of pregnanc+. ,hen 2ora>on started to
e:perience mild la'or, he and her hus'and, prompted to see Dr. <strada at his home.
.fter e:amining 2ora>on, he advised her to immediate admission to the 2apitol Medical
2enter. Dpon admission at the 2M2, @ogelio 1ogales e:ecuted and signed the 2onsent
on .dmission and .greement and .dmission .greement. Then 2ora>on was 'rought to
the la'or room. Dr. D+, a resident ph+sician, conducted an internal e:amination of
2ora>on and notified Dr. <strada of her findings. Dr. <strada ordered for 10 mg. of
valium to 'e administered immediatel+ '+ intramascular in(ection. #ater he ordered
that start of intravenous administration of s+ntocinon admi:ed with de:trose, !E in
lactated @ingers9 solution, at the rate of eight to ten micro6drops per minute.
Dr. <nri4ue>, an anesthesiologist, was notified of 2ora>on9s admission.
*u'se4uentl+ he as$ed if Dr. <strada needed his service 'ut the latter refused. Despite
refusal he sta+ed to o'serve 2ora>on9s condition.
Page | 97
2ora>on9s water 'ag ruptured spontaneousl+ and started to e:perience
convulsions. Dr. <strada ordered the in(ectionof ten grams of magnesium sulfate.
However, Dr. Cillaflor, who is assisting Dr. <strada, administered onl+ ).! grams of
magnesium sulfate. Dr. <strada applied low forceps to e:tract the 'a'+. The 'a'+ came
out in a wea$ and in(ured condition and conse4uentl+ had to 'e intu'ated and
resuscitated.
2ora>on 'egan to manifest moderate vaginal 'leeding which rapidl+ 'ecame
profuse. Dr. <strada ordered 'lood t+ping and cross matching with 'ottled 'lood. Dr.
<spinola, head of the 'stetrics67+necolog+ Department of the 2M2, was apprised of
2ora>on9s condition '+ telephone. Dpon 'eing informed of 2ora>on9s profuse 'leeding,
Dr. <spinola ordered immediate h+sterectom+. Dr. <spinola, due to the inclement
weather, arrived a'out an hour late. he e:amined the patient 'ut despite his efforts
2ora>on died.
Petitioners filed a case against 2M2 personnel and ph+sicians on the ground that
the+ were negligent in the treatment and management of 2ora>on9s condition and
charged 2M2 with negligence in the selection and supervision of defendant ph+sicians
and hospital staff.
.fter more than 11 +ears the Trial 2ourt rendered its (udgment finding Dr.
<strada solel+ lia'le for damages.
ISS$E8
,hether 2M2 is vicariousl+ lia'le for the negligence of Dr. <strada.
R$LING8
&n general, a hospital is not lia'le for the negligence of an independent
contractor6ph+sician. However, the hospital ma+ 'e held lia'le if the ph+sician is the
3ostensi'le5 agent of the hospital. This e:ception is also $nown as the 3doctrine of
apparent authorit+5.
Dnder the doctrine of apparent authorit+ a hospital can 'e held vicariousl+ lia'le
for the negligent act of a ph+sician providing care at eh hospital, regardless of whether
the ph+sician is an independent contractor, unless the patient $nows, or should have
$nown, that the ph+sician is an independent contractor.
The doctrine of apparent authorit+ involves two factors to determine the lia'ilit+
of an independent contractor6ph+sician. %irst factor focuses on the hospital9s
manifestations and is sometimes descri'ed as an in4uir+ whether the hospital acted in a
manner which would lead a responsi'le person to conclude that the individual who was
alleged to 'e negligent was an emplo+ee or agent of the hospital. The second factor
focuses on the patient9s reliance. &t is sometimes characteri>ed as an in4uir+ on whether
the plaintiff acted in reliance upon the conduct of the hospital or its agent, consistent
with ordinar+ care and prudence.
&n this case, 2M2 impliedl+ held out Dr. <strada as a mem'er of its medical staff.
%irst, 2M2 granted staff privileges to Dr. <strada when it e:tended its medical staff and
facilities. Dpon re4uest to admit 2ora>on, through its personnel, readil+ accommodated
the patient and updated Dr. <strada of the patient9s condition. *econd, 2M2 made
@ogelio sign a consent forms printed in 2M2 letterhead. .nd third, Dr. <strada9s
Page | 98
referral to Dr. <spinola, who then was the Head of the 'stetrics and 7+necolog+
Department of 2M2.
,herefore the court finds respondent 2apitol Medical 2enter vicariousl+ lia'le
for the negligence of Dr. scar <strada.

PROFESSIONAL SERVICES VS. AGANA
GR No. 16467 February 11, !!"
FAC#S8
n .pril 0F, 1/HF, 1atividad .gana was admitted at the Medical 2it+ 7eneral
Hospital 'ecause of difficult+ of 'owel movement and 'lood+ anal discharge. Dr. .mpil
diagnosed her to 'e suffering from 3cancer of the sigmoid5. Thus, Dr. .mpil, assisted '+
the medical staff of Medical 2it+, performed a surger+ upon her. During the surger+, he
found that the malignanc+ in her sigmoid area had spread to her left ovar+, necessitating
the removal of certain portions of it. Thus, Dr. .mpil o'tained the consent of
1atividad9s hus'and to permit Dr. %uentes to perform h+sterectom+ upon 1atividad.
Dr. %uentes performed and completed the h+sterectom+. .fterwards, Dr. .mpil too$
over, completed the operation and closed the incision. The operation, however,
appeared to 'e flawed as the attending nurses entered in the corresponding @ecord of
peration that there were ) lac$ing sponge and announced that it was searched '+ the
surgeon 'ut to no avail.
.fter a couple of da+s, 1atividad complained e:cruciating pain in her anal region.
*he consulted 'oth Dr. .mpil and Dr. %uentes. The+ told her that the pain was the
natural conse4uence of the surgical operation performed upon her. Dr. .mpil
recommended that she consult an oncologist to treat the cancerous nodes which were
not removed. 1atividad and her hus'and went to the D* to see$ further treatment. .fter
F months she was told that she was free of cancer. The+ then flew 'ac$ to the
Philippines. Two wee$s thereafter , 1atividad9s daughter found a piece of gau>e
protruding from her vagina. Dr. .mpil saw immediatel+ informed. He proceeded to
1atividad9s house where he e:tracted '+ hand a piece of gau>e. 1atividad sought the
treatment of Pol+medic 7eneral Hospital thereat Dr. 7utierre> detected a foreign o'(ect
in her vagina 6 a foul6smelling gau>e which infected her vaginal vault. . recto6vaginal
fistula had formed in her reproductive organ which forced stool to e:crete in her vagina.
.nother surgical operation was performed upon her.
*pouses .gana filed a complaint against P*& Aowner of Medical 2it+B, Dr. .mpil
and Dr. %uentes. The Trial 2ourt found the respondents (ointl+ and severall+ lia'le. The
2. affirmed said decision with modification that Dr. %uentes was dismissed.

ISS$E8
,hether the 2ourt of .ppeals erred in a'solving Dr. %uentes of an+ lia'ilit+.
R$LING8
&t was dul+ esta'lished that Dr. .mpil was the lead surgeon during the operation
of 1atividad. He re4uested the assistance of Dr. %uentes onl+ to perform h+sterectom+
Page | 99
when he ADr. .mpilB found that the malignanc+ in her sigmoid area had spread to her
left ovar+. Dr. %uentes performed the surger+ and thereafter reported and showed his
wor$ to Dr. .mpil. The latter e:amined it and finding ever+thing to 'e in order, allowed
Dr. %uentes to leave the operating room. Dr. .mpil then resumed operating on
1atividad. He was a'out to finish the procedure when the attending nurses informed
him that two pieces of gau>e were missing. . Ldiligent searchL was conducted, 'ut the
misplaced gau>es were not found. Dr. .mpil then directed that the incision 'e closed.
During this entire period, Dr. %uentes was no longer in the operating room and had, in
fact, left the hospital.
Dnder the L2aptain of the *hipL rule, the operating surgeon is the person in
complete charge of the surger+ room and all personnel connected with the operation.
Their dut+ is to o'e+ his orders. .s stated 'efore, Dr. .mpil was the lead surgeon. &n
other words, he was the L2aptain of the *hip.L That he discharged such role is evident
from his following conduct. 2learl+, the control and management of the thing which
caused the in(ur+ was in the hands of Dr. .mpil, not Dr. %uentes.
Here, the negligence was proven to have 'een committed '+ Dr. .mpil and not '+
Dr. %uentes.
PROFESSIONAL SERVICES, INC. VS. CO$R# OF APPEALS
GR No. 16+7 February 11, !!"
FAC#S8
n .pril 0F, 1/HF, 1atividad .gana was admitted at the Medical 2it+ 7eneral
Hospital 'ecause of difficult+ of 'owel movement and 'lood+ anal discharge. Dr. .mpil
diagnosed her to 'e suffering from 3cancer of the sigmoid5. Thus, Dr. .mpil, assisted '+
the medical staff of Medical 2it+, performed a surger+ upon her. During the surger+, he
found that the malignanc+ in her sigmoid area had spread to her left ovar+, necessitating
the removal of certain portions of it. Thus, Dr. .mpil o'tained the consent of
1atividad9s hus'and topermit Dr. %uentes to perform h+sterectom+ upon 1atividad. Dr.
%uentes performed and completed the h+sterectom+. .fterwards, Dr. .mpil too$ over,
completed the operation and closed the incision. The operation, however, appeared to
'e flawed as the attending nurses entered in the corresponding @ecord of peration that
there were ) lac$ing sponge and announced that it was searched '+ the surgeon 'ut to
no avail.
.fter a couple of da+s, 1atividad complained e:cruciating pain in her anal region.
*he consulted 'oth Dr. .mpil and Dr. %uentes. The+ told her that the pain was the
natural conse4uence of the surgical operation performed upon her. Dr. .mpil
recommended that she consult an oncologist to treat the cancerous nodes which were
not removed. 1atividad and her hus'and went to the D* to see$ further treatment. .fter
F months she was told that she was free of cancer. The+ then flew 'ac$ to the
Philippines. Two wee$s thereafter , 1atividad9s daughter found a piece of gau>e
protruding from her vagina. Dr. .mpil saw immediatel+ informed. He proceeded to
1atividad9s house where he e:tracted '+ hand a piece of gau>e. 1atividad sought the
treatment of Pol+medic 7eneral Hospital thereat Dr. 7utierre> detected a foreign o'(ect
in her vagina 6 a foul6smelling gau>e which infected her vaginal vault. . recto6vaginal
fistula had formed in her reproductive organ which forced stool to e:crete in her vagina.
.nother surgical operation was performed upon her.
Page | 100
*pouses .gana filed a complaint against P*& Aowner of Medical 2it+B, Dr. .mpil
and Dr. %uentes. The Trial 2ourt found the respondents (ointl+ and severall+ lia'le. The
2. affirmed said decision with modification that Dr. %uentes was dismissed.
ISS$E8
,hether there is an emplo+ee6emplo+er relationship in order to hold P*& solidar+
lia'le.

R$LING8
P*& contends that the pro:imate cause of 1atividad9s in(ur+ was Dr. .mpil9s
negligence and that there is no emplo+ee6emplo+er relationship 'etween them 'ecause
Dr. .mpil is onl+ a consultant of the said hospital.
The court held that there is an emplo+ee6emplo+er relationship 'etween hospital
and their attending and visiting ph+sician. .fter a ph+sician is accepted, either as a
visiting or attending consultant, he is normall+ re4uired to attend clinicopathological
conferences, conduct 'edside rounds for cler$s, interns and residents, moderate grand
rounds and patient audits and perform other tas$s and responsi'ilities, for the privilege
of 'eing a'le to maintain a clinic in the hospital, andMor privilege of admitting patients
into the hospital. The ph+sician9s performance is generall+ evaluated and if said
ph+sician falls short of the minimum standards he is normall+ terminated. &n the said
case, the hospital has a control over its attending or visiting ph+sician.
&n general, a hospital is not lia'le for the negligence of an independent
contractor6ph+sician. However, the hospital ma+ 'e held lia'le if the ph+sician is the
3ostensi'le5 agent of the hospital. This e:ception is also $nown as the 3doctrine of
apparent authorit+5.
The doctrine of apparent authorit+ involves two factors to determine the lia'ilit+
of an independent contractor6ph+sician. %irst factor focuses on the hospital9s
manifestations and is sometimes descri'ed as an in4uir+ whether the hospital acted in a
manner which would lead a responsi'le person to conclude that the individual who was
alleged to 'e negligent was an emplo+ee or agent of the hospital. The second factor
focuses on the patient9s reliance. &t is sometimes characteri>ed as an in4uir+ on whether
the plaintiff acted in reliance upon the conduct of the hospital or its agent, consistent
with ordinar+ care and prudence.
&n this case, it has 'een proven that the two factors were present. The hospital
indeed made it appear that Dr. .mpil was its emplo+ee when the+ advertise and
displa+ed his name in the director+ at the lo''+ of the said hospital and that 1atividad
relied on such $nowledge that Dr. .mpil was indeed an emplo+ee of the hospital.
,herefore P*& and Dr. .mpil are lia'le (ointl+ and severall+.
0IA: VS. 0AVAO LIG3#
GR No. 16!+5+ A(r)* , !!7
FAC#S8
Page | 101
Plaintiff as$s for damages for defendant9s alleged malicious prosecution of a
criminal case of theft of electricit+ against him, for plaintiff9s filing of a charge of
violation of P.D. F01 as amended after dismissal of the theft case, the filing of a damage
suit against him 'efore the @T2 of 2e'u 2it+ which was dismissed and the filing of
another damage suit 'efore the same 2e'u @T2 which is still pending. Damages are also
'eing sought for defendant9s removal of <lectric Meter, 'ut this is a su'(ect matter of a
case pending 'efore Branch 10 of this 2ourt and therefore said court retains (urisdiction
over the said cause of action.
The @T2 held that while the 2it+ Prosecutor, and later the *ecretar+ of =ustice,
concluded that there was no pro'a'le cause for the crime of theft, this did not change
the fact that plaintiff made an illegal connection for electricit+. . person9s right to
litigate should not 'e penali>ed '+ holding him lia'le for damages.
n cto'er 1, )000, the 2. affirmed the decision of the @T2. &t concluded that
the evidence on hand showed good faith on the part of D#P2 in filing the su'(ect
complaints. &t pointed out that Dia> had 'een using the electrical services of D#P2
without its consent. .s to the effect of the compromise agreement, the 2. ruled that it
did not 'ar the filing of the criminal action. Thus, under the principle of damnum
a's4ue in(uria, the legitimate e:ercise of a person9s right, even if it causes loss to
another, does not automaticall+ result in an actiona'le in(ur+.
Dia>, now petitioner, comes 'efore this 2ourt in this petition for review on
certiorari
ISS$ES8
1. ,hether or not the compromise agreement entered into 'etween D#P2 and
Dia> 'arred the former from instituting further actionsJ and
). ,hether or not D#P2 acted in 'ad faith in instituting the criminal cases
against Dia>
R$LING8
The petition is without merit. Petitioner insists that the compromise agreement
as well as the decision of the 2. alread+ settled the controversies 'etween themJ +et,
D#P2 instituted the theft case against Dia>, and worse, instituted another action for
violation of P.D. F01, as amended '+ B.P. Blg. H8". Thus, the onl+ conclusion that can 'e
inferred from the acts of D#P2 is that the+ were designed to harass, em'arrass,
pre(udice, and ruin him. He further avers that the compromise agreement completel+
erased litigious matters that could necessaril+ arise Moreover, Dia> asserts that the
evidence he presented is sufficient to prove the damages he suffered '+ reason of the
malicious institution of the criminal cases.
The court does not agree. .rticle )0)H of the 2ivil 2ode defines a compromise as
a contract where'+ the parties, '+ ma$ing reciprocal concessions, avoid litigation or put
an end to one alread+ commenced. The purpose of compromise is to settle the claims of
the parties and 'ar all future disputes and controversies. However, criminal lia'ilit+ is
not affected '+ compromise for it is a pu'lic offense which must 'e prosecuted and
punished '+ the 7overnment on its own motion, though complete reparation should
have 'een made of the damages suffered '+ the offended part+. . criminal case is
committed against the People, and the offended part+ ma+ not waive or e:tinguish the
Page | 102
criminal lia'ilit+ that the law imposes for the commission of the offense. Moreover, a
compromise is not one of the grounds prescri'ed '+ the @evised Penal 2ode for the
e:tinction of criminal lia'ilit+. n the other hand,
malicious prosecution has 'een defined as an action for damages 'rought '+ or against
whom a criminal prosecution, civil suit or other legal proceeding has 'een instituted
maliciousl+ and without pro'a'le cause, after the termination of such prosecution, suit,
or other proceeding in favor of the defendant therein. &t is an esta'lished rule that in
order for malicious prosecution to prosper, the following re4uisites must 'e proven '+
petitioner: A1B the fact of prosecution and the further fact that the defendant
ArespondentB was himself the prosecutor, and that the action finall+ terminated with an
ac4uittalJ A)B that in 'ringing the action, the prosecutor acted without pro'a'le causeJ
and A0B that the prosecutor was actuated or impelled '+ legal malice, that is, '+
improper or sinister motive. The foregoing are necessar+ to preserve a person9s right to
litigate which ma+ 'e emasculated '+ the undue filing of malicious prosecution cases.
%rom the foregoing re4uirements, it can 'e inferred that malice and want of
pro'a'le cause must 'oth 'e clearl+ esta'lished to (ustif+ an award of damages 'ased on
malicious prosecution. D#P2 was not motivated '+ malicious intent or '+ a sinister
design to undul+ harass petitioner, 'ut onl+ '+ a well6founded an:iet+ to protect its
rights. @espondent D#P2 cannot therefore 'e faulted in availing of the remedies
provided for '+ law.
,ASO=A VS. 0E RAMOS
GR No. 156''+ O17ober 6, !!4
FAC#S8
.urea -asoQa and her son, *aturnino, went to the house of =ovencio de @amos to
as$ for financial assistance in pa+ing their loans to Philippine 1ational Ban$ AP1BB,
otherwise their residential house and lot would 'e foreclosed. &nasmuch as .urea was
his aunt, =ovencio acceded to the re4uest. The+ agreed that, upon pa+ment '+ =ovencio
of the loan to P1B, half of -asoQas9 su'(ect propert+ would 'e sold to him. =ovencio paid
.urea9s 'an$ loan. .s agreed upon, .urea e:ecuted a deed of a'solute sale in favor of
=ovencio over half of the lot consisting of 1)0 s4uare meters. Thereafter, the lot was
surve+ed and separate titles were issued '+ the @egister of Deeds of *ta. 2ru>, #aguna in
the names of .urea and =ovencio
Twent+6two +ears later, in .ugust 1//0, .urea filed an estafa complaint against
'rothers =ovencio and @odencio de @amos on the ground that she was deceived '+ them
when she as$ed for their assistance in 1/81 concerning her mortgaged propert+. &n her
complaint, .urea alleged that @odencio as$ed her to sign a 'lan$ paper on the prete:t
that it would 'e used in the redemption of the mortgaged propert+
n %e'ruar+ )1, 1//F, .ssistant Provincial Prosecutor @odrigo B. Ra+enis
dismissed the criminal complaint for estafa for lac$ of evidence. n account of this
dismissal, =ovencio and @odencio filed a complaint for damages on the ground of
malicious prosecution. The+ alleged that the filing of the estafa complaint against them
was done with malice and it caused irrepara'le in(ur+ to their reputation, as .urea $new
full+ well that she had alread+ sold half of the propert+ to =ovencio.
Page | 103
ISS$E8
,hether or not the filing of the criminal complaint for estafa '+ petitioners
against respondents constituted malicious prosecution;
R$LING8
To constitute 3malicious prosecution,5 there must 'e proof that the prosecution
was prompted '+ a sinister design to ve: or humiliate a person, and that it was initiated
deli'eratel+ '+ the defendant $nowing that his charges were false and groundless.
2oncededl+, the mere act of su'mitting a case to the authorities for prosecution does not
ma$e one lia'le for malicious prosecution.
&n this case, the records show that the sale of the propert+ was evidenced '+ a
deed of sale dul+ notari>ed and registered with the local @egister of Deeds. .fter the
e:ecution of the deed of sale, the propert+ was surve+ed and divided into two portions.
*eparate titles were then issued in the names of -asoQa and =ovencio. *ince 1/80,
=ovencio had 'een pa+ing the realt+ ta:es of the portion registered in his name. &n 1/8F,
.urea even re4uested =ovencio to use his portion as 'ond for the temporar+ release of
her son who was charged with malicious mischief. .lso, when .urea 'orrowed mone+
from the @ural Ban$ of #um'an in 1/80 and the P1B in 1/8/, onl+ her portion was
mortgaged.
.ll these pieces of evidence indicate that .urea had long ac$nowledged =ovencio9s
ownership of half of the propert+. %urthermore, it was onl+ in 1//0 when petitioners
decided to file the estafa complaint against respondents. &f petitioners had honestl+
'elieved that the+ still owned the entire propert+, it would not have ta$en them )) +ears
to 4uestion =ovencio9s ownership of half of the propert+.
Malicious prosecution, 'oth in criminal and civil cases, re4uires the elements of A1B
malice and A)B a'sence of pro'a'le cause.These two elements are present in the present
controvers+. The complaint for estafa was dismissed outright as the prosecutor did not
find an+ pro'a'le cause against respondents. . suit for malicious prosecution will
prosper where legal prosecution is carried out without pro'a'le cause.
PEOPLE VS. 0ELOS SAN#OS
GR No. 1'15"" Mar1< 7, !!1
FAC#S8
Philippine 1ational Police AP1PB, undergoing a *pecial Training 2ourse A*cout
2lass 086/!B, wearing 'lac$ T6shirts and 'lac$ short pants, performing an L<ndurance
@unL of 0! $ilometers coming from their camp in Manolo %ortich, Bu$idnon, heading to
@egional Training Head4uarters in 2amp .lagar, 2aga+an de ro 2it+, running in a
column of 0, with a distance of two feet, more or less, from one trainee to another, thus
forming a three lines, with a length of more or less !0 meters from the 1
st
man to the
last man, una'le to defend themselves, 'ecause the accused ran or moved his driven
vehicle on the direction of the 'ac$s of the P1P (oggers in spite of the continuous
warning signals made '+ si: of the (oggers, namel+: P1 .llan Ta'acon <spana, ,aldon
Page | 104
*inda *acro, #emuel -'ane> Pangca, .rtemio =amil Cillaflor, 1ardo masas 2ollantes
and =oselito Bu+ser <scartin, who were at the rear echelon of said run, acting as guards,
'+ continuousl+ waving their hands at the accused for him to ta$e the left lane of the
highwa+, going to the 2it+ proper, from a distance of 100 meters awa+ from the (ogger9s
rear portion, 'ut which accused failed and refused to heedJ instead, he proceeded to
operate his driven vehicle Aan &su>u <lfB on high speed directl+ towards the (oggers, thus
forcing the rear hitting, 'umping, or ramming the first four AFB victims, causing the
'odies to 'e thrown towards the windshields of said &su>u <lf, 'rea$ing said windshield,
and upon 'eing aware that 'odies of the victims flew on the windshield of his driven
vehicle, instead of appl+ing his 'ra$e, continued to travel on a high speed, this time
putting off its headlights, thus hitting the succeeding (oggers on said 1
st
line, as a result
thereof $illed them.
ISS$E8
,hether or not accused is guilt+ 'e+ond reasona'le dou't of the comple: crime
of multiple murder, multiple frustrated murder, and multiple attempted multiple
murder.
R$LING8
&t is a well6entrenched rule that if the inculpator+ facts are capa'le of two or more
e:planations one consistent with the innocence or lesser degree of lia'ilit+ of the
accused, and the other consistent with his guilt or graver responsi'ilit+ the 2ourt should
adopt the e:planation which is more favora'le to the accused.
The incident, tragic though it was in light of the num'er of persons $illed and
seriousl+ in(ured, was an accident and not an intentional felon+. &t is significant to note
that there is no shred of evidence that accused had an a:e to grind against the police
trainees that would drive him into deli'eratel+ hitting them with intent to $ill.
The test for determining whether a person is negligent in doing an act where'+
in(ur+ or damage results to the person or propert+ of another is this: 2ould a prudent
man, in the position of the person to whom negligence is attri'uted, foresee harm to the
person in(ured as a reasona'le conse4uence of the course actuall+ pursued; &f so, the
law imposes a dut+ on the actor to refrain from that course or to ta$e precautions to
guard against its mischievous results, and the failure to do so constitutes negligence.
@easona'le foresight of harm, followed '+ the ignoring of the admonition 'orn of this
prevision, is alwa+s necessar+ 'efore negligence can 'e held to e:ist.
.ccused showed an ine:cusa'le lac$ of precaution. .rticle 0"! of the @evised
Penal 2ode states that rec$less imprudence consists in voluntaril+, 'ut without malice,
doing or failing to do an act from which material damage results '+ reason of
ine:cusa'le lac$ of precaution on the part of the person performing or failing to perform
such act, ta$ing into consideration A1B his emplo+ment or occupationJ A)B his degree of
intelligenceJ AFB his ph+sical conditionJ and A0B other circumstances regarding persons,
time
2onsidering that the incident was not a product of a malicious intent 'ut rather
the result of a single act of rec$less driving, should 'e held guilt+ of the comple: crime of
Page | 105
rec$less imprudence resulting in multiple homicide with serious ph+sical in(uries and
less serious ph+sical in(uries.
.rticle FH of the @evised Penal 2ode provides that when the single act constitutes
two or more grave or less grave felonies, or when an offense is a necessar+ means for
committing the other, the penalt+ for the most serious crime shall 'e imposed, the same
to 'e applied in its ma:imum period. *ince .rticle FH spea$s of felonies, it is applica'le
to crimes through negligence in view of the definition of felonies in .rticle 0 as Lacts or
omissions punisha'le '+ lawL committed either '+ means of deceit YdoloB or fault
AculpaB.
,H<@<%@<, accused6appellant 7#<11 D< #* *.1T* guilt+ 'e+ond
reasona'le dou't of A1B the comple: crime of rec$less imprudence resulting in multiple
homicide with serious ph+sical in(uries and less serious ph+sical in(uries, and
sentencing him to suffer an indeterminate penalt+ of four AFB +ears of prision
correccional, as minimum, to ten A10B +ears of prision ma+or, as ma:imumJ and A)B ten
A10B counts of rec$less imprudence resulting in slight ph+sical in(uries and sentencing
him, for each count, to the penalt+ of two A)B months of arresto ma+or. %urthermore, the
awards of death indemnit+ for each group of heirs of the trainees $illed are reduced to
P!0,000J and the awards in favor of the other victims are deleted.
MAGA# VS. ME0IAL0EA
L-'71! A(r)* !, 1+"'
FAC#S8
That sometime in *eptem'er 1/8), the defendant entered into a contract with the
D.*. 1av+ <:change, *u'ic Ba+, Philippines, for the operation of a fleet of ta:ica's, each
ta:ica' to 'e provided with the necessar+ ta:imeter and a radio transceiver for receiving
and sending of messages from mo'ile ta:ica' to fi:ed 'ase stations within the 1aval
Base at *u'ic Ba+, Philippines.
ISS$E8
,hether or not there is contravention of the terms.
R$LING8
.fter a thorough e:amination of the complaint at 'ar, ,e find the test of legal
sufficienc+ of the cause of action ade4uatel+ satisfied. &n a methodical and logical
se4uence, the complaint recites the circumstances that led to the perfection of the
contract entered into '+ the parties. &t further avers that while petitioner had fulfilled
his part of the 'argain, private respondent failed to compl+ with his correlative
o'ligation '+ refusing to open a letter of credit to cover pa+ment of the goods ordered '+
him and that conse4uentl+, petitioner suffered not onl+ loss of his e:pected profits, 'ut
moral and e:emplar+ damages as well. %rom these allegations, the essential elements of
a cause of action are present, to wit: the e:istence of a legal right to the plaintiffJ a
correlative dut+ of the defendant and an act or omission of the defendant in violation of
Page | 106
the plaintiffKs right, with conse4uent in(ur+ or damage to the latter for which he ma+
maintain an action for recover+ of damages or other appropriate relief.
&ndisputa'l+, the parties, 'oth 'usinessmen, entered into the aforesaid contract
with the evident intention of deriving some profits therefrom. Dpon 'reach of the
contract '+ either of them, the other would necessaril+ suffer loss of his e:pected profits.
*ince the loss comes into 'eing at the ver+ moment of 'reach, such loss is real, Lfi:ed
and vestedL and, therefore, recovera'le under the law.
.rticle 1180 of the 2ivil 2ode provides:
LThose who in the performance of their o'ligation are guilt+ of fraud, negligence,
or dela+, and those who in an+ manner contravene the tenor thereof are lia'le for
damages.L
The phrase Lin an+ manner contravene the tenorL of the o'ligation includes an+
illicit act or omission which impairs the strict and faithful fulfillment of the o'ligation
and ever+ $ind of defective performance.
The damages which the o'ligor is lia'le for includes not onl+ the value of the loss
suffered '+ the o'ligee NdaQo emergenteO 'ut also the profits which the latter failed to
o'tain Nlucro cesanteO. &f the o'ligor acted in good faith, he shall 'e lia'le for those
damages that are the natural and pro'a'le conse4uences of the 'reach of the o'ligation
and which the parties have foreseen or could have reasona'l+ foreseen at the time the
o'ligation was constitutedJ and in case of fraud, 'ad faith, malice or wanton attitude, he
shall 'e lia'le for all damages which ma+ 'e reasona'l+ attri'uted to the
nonperformance of the o'ligation
V0A. 0E MIS#ICA VS. NAG$IA#
GR. No 1'7+!+ 0e1e2ber 11, !!'
FAC#S8
<ulalio Mistica, predecessor6in6interest of herein petitioner, is the owner of a
parcel of land. . portion thereof was leased to N@espondent Bernardino 1aguiatO
sometime in 1/80. n ! .pril 1/8/, <ulalio Mistica entered into a contract to sell with
@espondent 1aguiat over a portion of the aforementioned lot containing an area of )00
s4uare meters.
Pursuant to said agreement, @espondent Bernardino 1aguiat gave a
downpa+ment of P),000.00. He made another partial pa+ment of P1,000.00 on 8
%e'ruar+ 1/H0. He failed to ma$e an+ pa+ments thereafter. <ulalio Mistica died
sometime in cto'er 1/H".
n F Decem'er 1//1, petitioner filed a complaint for rescission alleging inter alia:
that the failure and refusal of respondents to pa+ the 'alance of the purchase price
constitutes a violation of the contract which entitles her to rescind the sameJ that
NrespondentsO have 'een in possession of the su'(ect portion and the+ should 'e ordered
to vacate and surrender possession of the same to petitioner. @espondents contended
that the contract cannot 'e rescinded on the ground that it clearl+ stipulates that in case
of failure to pa+ the 'alance as stipulated, a +earl+ interest of 1)E is to 'e paid. #i$ewise
alleged that sometime in cto'er 1/H", during the wa$e of the late <ulalio Mistica, he
offered to pa+ the remaining 'alance to petitioner 'ut the latter refused and hence, there
Page | 107
is no 'reach or violation committed '+ them and no damages could +et 'e incurred '+
the late <ulalio Mistica, his heirs or assigns pursuant to the said document.
ISS$E8
,hether petitioner ma+ rescind the contract.
R$LING8
Disallowing rescission, the 2. held that respondents did not 'reach the 2ontract
of *ale. &t e:plained that the conclusion of the ten6+ear period was not a resolutor+
term, 'ecause the 2ontract had stipulated that pa+ment 66 with interest of 1) percent 66
could still 'e made if respondents failed to pa+ within the period. .ccording to the
appellate court, petitioner did not disprove the allegation of respondents that the+ had
tendered pa+ment of the 'alance of the purchase price during her hus'and9s funeral,
which was well within the ten6+ear period.
Moreover, rescission would 'e un(ust to respondents, 'ecause the+ had alread+
transferred the land title to their names. The proper recourse, the 2. held, was to order
them to pa+ the 'alance of the purchase price, with 1) percent interest.
Petitioner claims that she is entitled to rescind the 2ontract under .rticle 11/1 of
the 2ivil 2ode, 'ecause respondents committed a su'stantial 'reach when the+ did not
pa+ the 'alance of the purchase price within the ten6+ear period.
,e disagree. The transaction 'etween <ulalio Mistica and respondents, as
evidenced '+ the Gasulatan, was clearl+ a 2ontract of *ale. . deed of sale is considered
a'solute in nature when there is neither a stipulation in the deed that title to the
propert+ sold is reserved to the seller until the full pa+ment of the priceJ nor a
stipulation giving the vendor the right to unilaterall+ resolve the contract the moment
the 'u+er fails to pa+ within a fi:ed period. The 2. further ruled that rescission in this
case would 'e un(ust to respondents, 'ecause a certificate of title had alread+ 'een
issued in their names.
CO VS. CA
GR No. 11''! Au6us7 17, 1+++
FAC#S8
Plaintiff entered into a ver'al contract with defendant for her purchase of the
latter9s house and lot located at 01" Beata *t., 1ew .la'ang Cillage, Muntinlupa, Metro
Manila, for and in consideration of the sum of U100,000.00. ne wee$ thereafter, and
shortl+ 'efore she left for the Dnited *tates, plaintiff paid to the defendants the amounts
of U1,000.00 and PF0,000.00 as earnest mone+, in order that the same ma+ 'e reserved
for her purchase, said earnest mone+ to 'e deducted from the total purchase price. The
purchase price of U100,000.00 is pa+a'le in two pa+ments UF0,000.00 on Decem'er F,
1/HF and the 'alance of U"0,000.00 on =anuar+ !, 1/H!. n =anuar+ )!, 1/H!,
although the period of pa+ment had alread+ e:pired, plaintiff paid to the defendant
Melod+ 2o in the Dnited *tates, the sum of U00,000.00, as partial pa+ment of the
purchase price. Defendant9s counsel, .tt+. #eopoldo 2otaco, wrote a letter to the
plaintiff dated March 1!, 1/H!, demanding that she pa+ the 'alance of U80,000.00 and
Page | 108
not receiving an+ response thereto, said law+er wrote another letter to plaintiff dated
.ugust H, 1/H", informing her that she has lost her Toption to purchase9 the propert+
su'(ect of this case and offered to sell her another propert+.
ISS$E8
,hether or not the 2ourt of .ppeals erred in ordering the 2* to return the
U00,000.00 paid '+ 2ustodio pursuant to the 3option5 granted to her over the Beata
propert+;
R$LING8
The 2*9 main argument is that 2ustodio lost her 3option5 over the Beata
propert+ and her failure to e:ercise said option resulted in the forfeiture of an+ amounts
paid '+ her pursuant to the .ugust letter.
.n option is a contract granting a privilege to 'u+ or sell within an agreed time
and at a determined price.
.rticle 1F8/.
.n accepted unilateral promise to 'u+ or to sell a determinate thing for a price
certain is 'inding upon the promissor if the promise is supported '+ a consideration
distinct from the price.5
However, the March 1!, 1/H! letter sent '+ the 2* through their law+er to the
2ustodio reveals that the parties entered into a perfected contract of sale and not an
option contract.
&n the case at 'ar, the propert+ involved has not 'een delivered to the appellee.
*he has therefore nothing to return to the appellants. The price received '+ the
appellants has to 'e returned to the appellee as aptl+ ruled '+ the lower court, for such is
a conse4uence of rescission, which is to restore the parties in their former situations.
$NIVERSAL FOO0 CORPORA#ION VS. CA
L-+155 February , 1+71
FAC#S8
The petitioner contends that AaB under the terms of the Bill of .ssignment, e:h. .,
the respondent Magdalo C. %rancisco ceded and transferred to the petitioner not onl+
the right to the use of the formula for Mafran sauce 'ut also the formula itself, 'ecause
this, allegedl+, was the intention of the partiesJ A'B that on the 'asis of the entire
evidence on record and as found '+ the trial court, the petitioner did not dismiss the
respondent %rancisco 'ecause he was, and still is, a mem'er of the 'oard of directors, a
stoc$holder, and an officer of the petitioner corporation, and that as such, had actual
$nowledge of the resumption of production '+ the petitioner, 'ut that despite such
$nowledge, he refused to report 'ac$ for wor$ notwithstanding the petitionerKs call for
him to do soJ AcB that the private respondents are not entitled to rescind the Bill of
.ssignmentJ and AdB that the evidence on record shows that the respondent %rancisco
was the one not read+, willing and a'le to compl+ with his o'ligations under the Bill of
Page | 109
.ssignment, in the sense that he not onl+ irregularl+ reported for wor$ 'ut also failed to
assign, transfer and conve+ to the petitioner of the said deed of conve+ance.
ISS$E8
,hether respondent %rancisco ceded to the petitioner merel+ the use of the
formula for Mafran sauce and not the formula itself.
R$LING8
The 2ourt concluded that what was actuall+ ceded and transferred was onl+ the use of
the Mafran sauce formula. The fact that the trademar$ LMafranL was dul+ registered in
the name of the petitioner pursuant to the Bill of .ssignment, standing '+ itself alone, to
'orrow the petitionerKs language, is not sufficient proof that the respondent %rancisco
was supposedl+ o'ligated to transfer and cede to the petitioner the formula for Mafran
sauce and not merel+ its use. %or the said respondent allowed the petitioner to register
the trademar$ for purposes merel+ of the Lmar$eting of said pro(ect.L
$NIVERSI#, OF #3E P3ILIPPINES VS. 0ELOS ANGELES
L-"6! Se(7e2ber +, 1+7!
FAC#S8
DP and .#DM2 entered into a logging agreement under which the latter was
granted e:clusive authorit+, for a period starting from the date of the agreement to 01
Decem'er 1/"!, e:tendi'le for a further period of five A!B +ears '+ mutual agreement, to
cut, collect and remove tim'er from the #and 7rant, in consideration of pa+ment to DP
of ro+alties, forest fees, etc.J that .#DM2 cut and removed tim'er therefrom 'ut, as of
H Decem'er 1/"F, it had incurred an unpaid account of P)1/,0")./F, which, despite
repeated demands, it had failed to pa+J that after it had received notice that DP would
rescind or terminate the logging agreement, .#DM2 e:ecuted an instrument, entitled
L.c$nowledgment of De't and Proposed Manner of Pa+ments,L dated / Decem'er 1/"F,
which was approved '+ the president of DP. .#DM2 continued its logging operations,
'ut again incurred an unpaid account, for the period from / Decem'er 1/"F to 1! =ul+
1/"!, in the amount of P"1,100.8F, in addition to the inde'tedness that it had previousl+
ac$nowledged.
That on 1/ =ul+ 1/"!, petitioner DP informed respondent .#DM2 that it had, as
of that date, considered as rescinded and of no further legal effect the logging agreement
that the+ had entered in 1/"0.
That 'efore the issuance of the aforesaid preliminar+ in(unction DP had ta$en
steps to have another concessionaire ta$e over the logging operation, and the concession
was awarded to *ta. 2lara #um'er 2ompan+, &nc.
ISS$E8
,hether petitioner D.P. can treat its contract with .#DM2 rescinded, and ma+
disregard the same 'efore an+ (udicial pronouncement to that effect.
Page | 110
R$LING8
@espondent .#DM2 contended, and the lower court, in issuing the in(unction
order of )! %e'ruar+ 1/"". apparentl+ sustained it Aalthough the order e:presses no
specific findings in this regardB, that it is onl+ after a final court decree declaring the
contract rescinded for violation of its terms that D.P. could disregard .#DM2Ks rights
under the contract and treat the agreement as 'reached and of no force or effect.
DP and .#DM2 had e:pressl+ stipulated in the L.c$nowledgment of De't and
Proposed Manner of Pa+mentsL that, upon default '+ the de'tor .#DM2, the creditor
ADPB has Lthe right and the power to consider the #ogging .greement dated ) Decem'er
1/"0 as rescinded without the necessit+ of an+ (udicial suit.L LThere is nothing in the law
that prohi'its the parties from entering into agreement that violation of the terms of the
contract would cause cancellation thereof, even without court intervention. &n other
words, it is not alwa+s necessar+ for the in(ured part+ to resort to court for rescission of
the contract.L
&n other words, the part+ who deems the contract violated ma+ consider it
resolved or rescinded, and act accordingl+, without previous court action, 'ut it
proceeds at its own ris$. %or it is onl+ the final (udgment of the corresponding court that
will conclusivel+ and finall+ settle whether the action ta$en was or was not correct in
law. But the law definitel+ does not re4uire that the contracting part+ who 'elieves itself
in(ured must first file suit and wait for a (udgment 'efore ta$ing e:tra(udicial steps to
protect its interest. therwise, the part+ in(ured '+ the otherKs 'reach will have to
passivel+ sit and watch its damages accumulate during the pendenc+ of the suit until the
final (udgment of rescission is rendered when the law itself re4uires that he should
e:ercise due diligence to minimi>e its own damages.
Page | 111
FRANCISCO VS. 0EAC CONS#R$C#ION, INC.
GR No. 171'1 February 4, !!"
FAC#S8
*pouses %rancisco o'tained the services of D<.2 2onstruction, &nc. to construct
a 06store+ residential 'uilding with me>>anine and roof dec$ on their lot for a contract
price of 0.!M. as agreed upon, a downpa+ment of )M should 'e paid upon signing of the
construct of construction, and the remaining 'alance of 1.!M was to 'e paid in two e4ual
installments. To underta$e the said pro(ect, D<.2 engaged the services of a su'6
contractor, Cigor 2onstruction and Development 2orporation, 'ut allegedl+ without the
spouses9 $nowledge and consent.
<ven prior to the e:ecution of the contract, spouses %rancisco had paid the
downpa+ment. However, the said construction commenced although D<.2 had not +et
o'tained the necessar+ 'uilding permit for the proposed construction and that the
contractor deviated from the approved plans.
*pouses %rancisco demanded D<.2 to compl+ with the approved plan,
otherwise, the+ would 'e compelled to invo$e legal remedies. ,or$ stoppage was issued
against #ino %rancisco pursuant to the previous 1otice of Ciolations. The plaintiffs then
file civil case for @escission of 2ontract and Damages against D<.2.
ISS$E8
,hether or not spouses %rancisco ma+ rescind the contract.
R$LING8
.rticle 11/1 of the 2ivil 2ode provides that the power to rescind o'ligations is
implied in reciprocal ones, in case one of the o'ligors should not compl+ with what is
incum'ent upon him. The rescission referred to in this article, more appropriatel+
referred to a resolution, is not predicated on in(ur+ to economic interests on the part of
the part+ plaintiff, 'ut of 'reach of faith '+ the defendant which is violative of the
reciprocit+ 'etween the parties.
7iven the fact that the construction in this case is alread+ 8!E complete, that trial
court was correct in ordering partial rescission of the portion of the construction.
<4uita'le considerations (ustif+ rescission of the portion of the o'ligation which has not
'een delivered
SPS. FELIPE AN0 LE#ICIA CANN$ 5ersus SPS. GIL AN0 FERNAN0INA
GALANG AN0 NA#IONAL 3OME MOR#GAGE FINANCE CORPORA#ION
G.R. No. 1'+5' !!5 May 6
FAC#S8
@espondents6spouses 7il and %ernandina 7alang o'tained a loan from %ortune
*avings P #oan .ssociation for P180,H00.00 to purchase a house and lot located at
Pulang #upa, #as PiQas, in the names of respondents6spouses. To secure pa+ment, a
real estate mortgage was constituted on the said house and lot in favor of %ortune
*avings P #oan .ssociation. &n earl+ 1//0, 1HM%2 purchased the mortgage loan of
Page | 112
respondents6spouses from %ortune *avings P #oan .ssociation for P180,H00.00.
Petitioner #eticia 2annu agreed to 'u+ the propert+ for P1)0,000.00 and to assume the
'alance of the mortgage o'ligations with the 1HM%2 and with 2<@% @ealt+ Athe
Developer of the propert+B.
. Deed of *ale with .ssumption of Mortgage 'ligation dated )0 .ugust 1//0 was
made and entered into '+ and 'etween spouses %ernandina and 7il 7alang AvendorsB
and spouses #eticia and %elipe 2annu AvendeesB over the house and lot and petitioners
immediatel+ too$ possession and occupied the house and lot. However, despite re4uests
from .delina @. Tim'ang and %ernandina 7alang to pa+ the 'alance of PF!,000.00 or
in the alternative to vacate the propert+ in 4uestion, petitioners refused to do so.
Because the 2annus failed to full+ compl+ with their o'ligations, respondent %ernandina
7alang, on )1 Ma+ 1//0, paid P)00,/!8."F as full pa+ment of her remaining mortgage
loan with 1HM%2.
%rom 1//1 until the present, no other pa+ments were made '+ plaintiffs6
appellants to defendants6appellees spouses 7alang. ut of the P)!0,000.00 purchase
price which was supposed to 'e paid on the da+ of the e:ecution of contract in =ul+,
1//0 plaintiffs6appellants have paid, in the span of eight AHB +ears, from 1//0 to
present, the amount of onl+ P8!,000.00. Plaintiffs6appellants should have paid the
P)!0,000.00 at the time of the e:ecution of contract in 1//0. <ight AHB +ears have
alread+ lapsed and plaintiffs6appellants have not +et complied with their o'ligation.
ISS$E8
,hether or not the action for rescission was su'sidiar+, and that there was a
su'stantial 'reach of the o'ligation.
R$LING8
@escission or, more accuratel+, resolution, of a part+ to an o'ligation under
.rticle 11/1 is predicated on a 'reach of faith '+ the other part+ that violates the
reciprocit+ 'etween them.

.rt. 11/1 states that the power to rescind o'ligations is implied in reciprocal ones,
in case one of the o'ligors should not compl+ with what is incum'ent upon him. The
in(ured part+ ma+ choose 'etween the fulfillment and the rescission of the o'ligation,
with the pa+ment of damages in either case. He ma+ also see$ rescission, even after he
has chosen fulfillment, if the latter should 'ecome impossi'le. The court shall decree the
rescission claimed, unless there 'e (ust cause authori>ing the fi:ing of a period.
@escission will not 'e permitted for a slight or casual 'reach of the contract.
@escission ma+ 'e had onl+ for such 'reaches that are su'stantial and fundamental as to
defeat the o'(ect of the parties in ma$ing the agreement. The 4uestion of whether a
'reach of contract is su'stantial depends upon the attending circumstances and not
merel+ on the percentage of the amount not paid.
Page | 113
Thus, the petitioners9 failure to pa+ the remaining 'alance of PF!,000.00 is
su'stantial. <ven assuming arguendo that onl+ said amount was left out of the
supposed consideration of P)!0,000.00, or eighteen percent thereof, this percentage is
still su'stantial. Their failure to fulfill their o'ligation gave the respondents6spouses
7alang the right to rescission.
.lso, there was no waiver on the part of petitioners to demand the rescission of
the Deed of *ale with .ssumption of Mortgage. The fact that respondents6spouses
accepted, through their attorne+6in6fact, pa+ments in installments does not constitute
waiver on their part to e:ercise their right to rescind the Deed of *ale with .ssumption
of Mortgage. .delina Tim'ang merel+ accepted the installment pa+ments as an
accommodation to petitioners since the+ $ept on promising the+ would pa+. However,
after the lapse of considera'le time A1H months from last pa+mentB and the purchase
price was not +et full+ paid, respondents6spouses e:ercised their right of rescission
when the+ paid the outstanding 'alance of the mortgage loan with 1HM%2. &t was onl+
after petitioners stopped pa+ing that respondents6spouses moved to e:ercise their right
of rescission.

The su'sidiar+ character of the action for rescission applies to contracts
enumerated in .rticles 10H1 of the 2ivil 2ode. However, the contract involved in the
case is not one of those mentioned therein. The provision that applies in the case at 'ar
is .rticle 11/1. @escission under .rticle 11/1 is a principal action, while rescission under
.rticle 10H0 is a su'sidiar+ action. The former is 'ased on 'reach '+ the other part+
that violates the reciprocit+ 'etween the parties, while the latter is not.
&n the case at 'ar, the reciprocit+ 'etween the parties was violated when
petitioners failed to full+ pa+ the 'alance of PF!,000.00 to respondents6spouses and
their failure to update their amorti>ations with the 1HM%2. Therefore, the *pouses 7il
and %ernandina 7alang are ordered to return the partial pa+ments made '+ petitioners
in the amount of P1"!,01).F8.
GENEROSO VILLAN$EVA a.; RA$L VILLAN$EVA -R.. 5ersus ES#A#E OF
GERAR0O GON:AGAA MA. VILLA GON:AGA ). <er 1a(a1)7y as
A;2).)s7ra7r)B
G.R. No. 157'1 !!6 Au6us7 !+
FAC#S8
n =anuar+ 1!, 1//0, petitioners 7eneroso Cillanueva and @aul Cillanueva, =r.,
'usiness entrepreneurs engaged in the operation of transloading stations and sugar
trading, and respondent <state of 7erardo #. 7on>aga, represented '+ its =udicial
.dministratri:, respondent Ma. Cilla =. 7on>aga, e:ecuted a M..
.s stipulated in the agreement, petitioners introduced improvements after pa+ing
P)/1,"00.00 constituting si:t+ A"0EB percent of the total purchase price of the lots.
Petitioners then re4uested permission from respondent .dministratri: to use the
premises for the ne:t milling season. @espondent refused on the ground that petitioners
cannot use the premises until full pa+ment of the purchase price. Petitioners informed
respondent that their immediate use of the premises was a'solutel+ necessar+ and that
Page | 114
an+ dela+ will cause them su'stantial damages. @espondent remained firm in her
refusal, and demanded that petitioners stop using the lots as a transloading station to
service the Cictorias Milling 2ompan+ unless the+ pa+ the full purchase price. &n a
letter6repl+ dated .pril !, 1//1, petitioners assured respondent of their readiness to pa+
the 'alance 'ut reminded respondent of her o'ligation to redeem the lots from
mortgage with the Philippine 1ational Ban$ AP1BB. Petitioners gave respondent ten A10B
da+s within which to do so.
n .pril 10, 1//1, respondent .dministratri: wrote petitioners informing them
that the P1B had agreed to release the lots from mortgage. *he demanded pa+ment of
the 'alance of the purchase price. <nclosed with the demand letter was the P1B9s letter
of approval dated .pril H, 1//1. Petitioners demanded that respondent show the clean
titles to the lots first 'efore the+ pa+ the 'alance of the purchase price. @espondent
merel+ reiterated the demand for pa+ment. Petitioners stood pat on their demand.
n Ma+ )H, 1//1, respondent .dministratri: e:ecuted a Deed of @escission
rescinding the M.. &n their #etter dated =une 10, 1//1, petitioners, through counsel,
formall+ demanded the production of the titles to the lots 'efore the+ pa+ the 'alance of
the purchase price. The demand was ignored. 2onse4uentl+, on =une 1/, 1//1,
petitioners filed a complaint against respondents for 'reach of contract, specific
performance and damages 'efore the @T26Bacolod 2it+. The trial court decided the case
in favor of respondents. Petitioners filed a petition for review 'efore the 2ourt of
.ppeals. The 2ourt of .ppeals affirmed the trial court9s decision 'ut deleted the award
for moral damages on the ground that petitioners were not guilt+ of 'ad faith in refusing
to pa+ the 'alance of the purchase price.
ISS$E8
,hether there is legal, or even a factual, ground for the rescission of the
Memorandum of .greement.
R$LING8
There is no legal 'asis for the rescission. The remed+ of rescission under .rt. 11/1
of the 2ivil 2ode is predicated on a 'reach of faith '+ the other part+ that violates the
reciprocit+ 'etween them. The court have held in numerous cases that the remed+ does
not appl+ to contracts to sell.
&n *antos v. 2ourt of .ppeals, in a contract to sell, title remains with the vendor
and does not pass on to the vendee until the purchase price is paid in full. Thus, in a
contract to sell, the pa+ment of the purchase price is a positive suspensive condition.
%ailure to pa+ the price agreed upon is not a mere 'reach, casual or serious, 'ut a
situation that prevents the o'ligation of the vendor to conve+ title from ac4uiring an
o'ligator+ force. This is entirel+ different from the situation in a contract of sale, where
non6pa+ment of the price is a negative resolutor+ condition. The effects in law are not
identical. &n a contract of sale, the vendor has lost ownership of the thing sold and
cannot recover it, unless the contract of sale is rescinded and set aside. &n a contract to
sell, however, the vendor remains the owner for as long as the vendee has not complied
Page | 115
full+ with the condition of pa+ing the purchase price. &f the vendor should e(ect the
vendee for failure to meet the condition precedent, he is enforcing the contract and not
rescinding it.
The M. 'etween petitioners and respondents is a conditional contract to sell.
wnership over the lots is not to pass to the petitioners until full pa+ment of the
purchase price. Petitioners9 o'ligation to pa+, in turn, is conditioned upon the release of
the lots from mortgage with the P1B to 'e secured '+ the respondents. .lthough there
was no e:press provision regarding reserved ownership until full pa+ment of the
purchase price, the intent of the parties in this regard is evident from the provision that
a deed of a'solute sale shall 'e e:ecuted onl+ when the lots have 'een released from
mortgage and the 'alance paid '+ petitioners. *ince ownership has not 'een transferred,
no further legal action need have 'een ta$en '+ the respondents, e:cept an action to
recover possession in case petitioners refuse to voluntaril+ surrender the lots.
The records show that the lots were finall+ released from mortgage in =ul+ 1//1.
Petitioners have alwa+s e:pressed readiness to pa+ the 'alance of the purchase price
once that is achieved. Hence, petitioners should 'e allowed to pa+ the 'alance now, if
the+ so desire, since it is esta'lished that respondents9 demand for them to pa+ in .pril
1//1 was premature. However, petitioners ma+ not demand production '+ the
respondents of the titles to the lots as a condition for their pa+ment. &t was not re4uired
under the M.. The M. merel+ states that petitioners shall pa+ the 'alance 3upon
approval '+ the P1B of the release of the lots5 from mortgage. Petitioners ma+ not add
further conditions now. 'ligations arising from contracts have the force of law 'etween
the contracting parties and should 'e complied with in good faith.
Thus, the petiotion is 7@.1T<D, an the assailed decision is @<C<@*<D and *<T
.*&D<.
SPO$SES 0OMINGO a.; LO$R0ES PAG$,O 5ersus P)erre As7or6a a.; S7.
A.;reC Rea*7y, I.1.
G.R. No. 1'!+" !!5 Se(7e2ber 16
FAC#S8
*pouses Domingo Pagu+o and #ourdes Pagu+o, were the owners of a small five6
store+ 'uilding $nown as the Pagu+o Building located at Ma$ati .venue, corner Calde>
*treet, Ma$ati 2it+. The lot on which the Pagu+o Building stands was the su'(ect of 2ivil
2ase wherein the @T2 of Ma$ati 2it+, Branch !8, rendered a decision on )0 =anuar+
1/HH approving a 2ompromise .greement made 'etween the .rmases and the
petitioners. The compromise agreement provided that in consideration of the total sum
of ne Million *even Hundred Thousand Pesos AP1,800,000.00B, the .rmases
committed to e:ecute in favor of petitioners a deed of sale andMor conve+ance assigning
and transferring unto said petitioners all their rights and interests over the parcel of
land containing an area of )// s4uare meters. &n order for the petitioners to complete
their title and ownership over the lot in 4uestion, there was an urgent need to ma$e
Page | 116
complete pa+ment to the .rmases, which at that time stood at P/18,F80.00 considering
that petitioners had previousl+ made partial pa+ments to the .rmases.
n )/ 1ovem'er 1/HH, in order to raise the much needed amount, petitioner
#ourdes Pagu+o entered into an agreement captioned as @eceipt of <arnest Mone+ with
respondent Pierre .storga, for the sale of the former9s propert+ consisting of the lot
which was to 'e purchased from the .rmases, together with the improvements thereon,
particularl+, the e:isting 'uilding $nown as the Pagu+o Building. However, contrar+ to
their e:press representation with respect to the su'(ect lot, petitioners failed to compl+
with their o'ligation to ac4uire the lot from the .rmas famil+ despite the full financial
support of respondents. 1evertheless, the parties maintained their 'usiness relationship
under the terms and conditions of the a'ove6mentioned @eceipt of <arnest Mone+.

n 1) Decem'er 1/HH, petitioners as$ed for and were given '+ respondents an
additional P!0,000.00 to meet the former9s urgent need for mone+ in connection with
their construction 'usiness. Thus, on ! =anuar+ 1/H/, the parties e:ecuted the four
documents in 4uestion namel+, the Deed of .'solute *ale of the Pagu+o Building, the
Mutual Dnderta$ing, the Deed of @eal <state Mortgage, and the Deed of .ssignment of
@ights and &nterest. *imultaneousl+ with the signing of the four documents,
respondents paid petitioners the additional amount of P!00,000.00. Thereafter, the
respondents renamed the Pagu+o Building into 7&1R. Bldg. and registered the same in
the name of respondent *t. .ndrew @ealt+, &nc. at the Ma$ati .ssessor9s ffice after
pa+ing accrued real estate ta:es in the total amount of P1"/,18F./!.
n 0" cto'er 1/H/, petitioners filed a 2omplaint for the rescission of the
@eceipt of <arnest Mone+ with the underta$ing to return the sum of P8"0,H/0.!0. The+
also sought the rescission of the Deed of @eal <state Mortgage, the Mutual Dnderta$ing,
the Deed of .'solute *ale of Building, and the Deed of .ssignment of @ights and
&nterest.
.fter trial, the @T2 ruled in favor of respondents. The petition for preliminar+
in(unction is denied, and the court ordered the plaintiff spouses Domingo and #ourdes
Pagu+o to pa+ the defendants Pierre .storga and *t. .ndrew @ealt+, &nc. on their
counterclaim. n appeal, the 2ourt of .ppeals affirmed the decision of the trial court
ISS$E8
Did the 2ourt of .ppeals err in upholding the trial court9s decision den+ing
petitioners9 complaint for rescission;
R$LING8
1o. The right to rescind a contract involving reciprocal o'ligations is provided for
in .rticle 11/1 of the 2ivil 2ode. .rticle 11/1 states: The power to rescind o'ligations is
implied in reciprocal ones, in case one of the o'ligors should not compl+ with what is
incum'ent upon him. The in(ured part+ ma+ choose 'etween the fulfillment and the
rescission of the o'ligation, with the pa+ment of damages in either case. He ma+ also
Page | 117
see$ rescission, even after he has chosen fulfillment, if the latter should 'ecome
impossi'le. The court shall decree the rescission claimed, unless there 'e (ust cause
authori>ing the fi:ing of a period.
Moreover, .rticles 10!! and 1F80 of the 2ivil 2ode state: .rt. 10!!. <:cept in
cases specified '+ law, lesion or inade4uac+ of cause shall not invalidate a contract,
unless there has 'een fraud, mista$e or undue influence. .rt. 1F80. 7ross inade4uac+ of
price does not affect a contract of sale, e:cept as ma+ indicate a defect in the consent, or
that the parties reall+ intended a donation or some other act or contract.
Petitioners failed to prove an+ of the instances mentioned in .rticles 10!! and
1F80 of the 2ivil 2ode, which would invalidate, or even affect, the Deed of *ale of the
Building and the related documents. &ndeed, there is no re4uirement that the price 'e
e4ual to the e:act value of the su'(ect matter of sale. &n sum, petitioners pra+ for
rescission of the Deed of *ale of the 'uilding and offer to repa+ the purchase price after
their li4uidit+ position would have improved and after respondents would have
refur'ished the 'uilding, updated the real propert+ ta:es, and turned the 'uilding into a
profita'le 'usiness venture. The court stated however that, it will not allow itself to 'e
an instrument to the dissolution of contract validl+ entered into, for a part+ should not,
after its opportunit+ to en(o+ the 'enefits of an agreement, 'e allowed to later disown
the arrangement when the terms thereof ultimatel+ would prove to operate against its
hopeful e:pectations.
,H<@<%@<, the Decision of the 2ourt of .ppeals is .%%&@M<D with
MD&%&2.T&1.
%IENVENI0O M. CASI=O, -R. 5ersus #3E CO$R# OF APPEALS a.;
OC#AGON REAL#, 0EVELOPMEN# CORPORA#ION
G.R. No. 1''"!' !!5 Se(7e2ber 16
FAC#S8
n cto'er ), 1//1, respondent ctagon @ealt+ Development 2orporation, filed a
complaint for rescission of contract with damages against petitioner Bienvenido M.
2asiQo, =r., owner and proprietor of the 2asiQo ,ood Par4uet and *anding *ervices,
relative to the parties9 agreement for the suppl+ and installation '+ petitioner of narra
wood par4uet ordered '+ respondent.
&n its complaint, respondent alleges that on Decem'er )), 1/H/, it entered into a
contract with petitioner for the suppl+ and installation '+ the latter of narra wood
Page | 118
par4uet A$iln driedB to the Manila #u:ur+ 2ondominium Pro(ect, of which respondent is
the developer, for a total price of P1,1!H,FH8.00J that the contract stipulated that full
deliver+ '+ petitioner of la'or and materials was in Ma+ 1//0J that in accordance with
the terms of pa+ment in the contract, respondent paid to petitioner the amount
PF"0,0/F.!0, representing F0E of the total contract priceJ that after delivering onl+
)",8)8.0) s4. ft. of wood par4uet materials, petitioner incurred in dela+ in the deliver+
of the remainder of 0F,)F!./H s4. ft.J that petitioner misrepresented to respondent that
he is 4ualified to do the wor$ contracted when in truth and in fact he was not and,
furthermore, he lac$ed the necessar+ funds to e:ecute the wor$ as he was totall+
dependent on the funds advanced to him '+ respondentJ that due to petitioner9s
unlawful and malicious refusal to compl+ with its o'ligations, respondent incurred
actual damages in the amount of P/1),F!).0/ representing estimated loss on the
new price, unli4uidated damages and cost of mone+J that in order to minimi>e losses,
the respondent contracted the services of Hilvano ?ualit+ Par4uet and *anding *ervices
to complete the petitioner9s unfinished wor$, respondent there'+ agreeing to pa+ the
latter P1,1/H,"0/.00.
However, petitioner avers that the manner of pa+ment, period of deliver+ and
completion of wor$ andMor full deliver+ of la'or and materials were modifiedJ that the
deliver+ and completion of the wor$ could not 'e done upon the re4uest andMor
representations '+ the respondent 'ecause he failed to ma$e availa'le andMor to prepare
the area in a suita'le manner for the wor$ contracted, preventing the petitioner from
compl+ing with the deliver+ schedule under the contractJ that petitioner delivered the
re4uired materials and performed the wor$ despite these constraintsJ that the
respondent failed to pa+ the petitioner9s second and third 'illings for deliveries and
wor$ performed in the sum of P10!,F)!."H, which amount the petitioner demanded
from the respondent with the warning of suspension of deliveries or rescission for
contract for non6pa+mentJ that it was the respondent who failed to prepare the area
suita'le for the deliver+ and installation of the wood par4uet, respondent who advised
or issued orders to the petitioner to suspend the deliver+ and installation of the wood
par4uet, which created a storage pro'lem for the petitioner.
ISS$E8

,hether or not the rescission of the contract '+ the private respondent is valid.
R$LING8
Dnder the contract, petitioner and respondent had respective o'ligations, i.e., the
former to suppl+ and deliver the contracted volume of narra wood par4uet materials and
install the same at respondent9s condominium pro(ect '+ Ma+, 1//0, and the latter, to
pa+ for said materials in accordance with the terms of pa+ment set out under the parties9
agreement. But while respondent was a'le to fulfill that which is incum'ent upon it '+
ma$ing a downpa+ment representing F0E of the agreed price upon the signing of the
contract and even paid the first 'illing of petitioner, the latter failed to compl+ with his
contractual commitment. %or, after delivering onl+ less than one6half of the contracted
Page | 119
materials, petitioner failed, '+ the end of the agreed period, to deliver and install the
remainder despite demands for him to do so. Thus, it is petitioner who 'reached the
contract.
The petitioner therefore, has failed to compl+ with his prestations under his
contract with respondent, the latter is vested '+ law with the right to rescind the parties9
agreement, conforma'l+ with .rticle 11/1 of the 2ivil 2ode.

However, the right to rescind a contract for non6performance of its stipulations is
not a'solute. The general rule is that rescission of a contract will not 'e permitted for a
slight or casual 'reach, 'ut onl+ for such su'stantial and fundamental violations as
would defeat the ver+ o'(ect of the parties in ma$ing the agreement. 2ontrar+ to
petitioner9s asseveration, the 'reach he committed cannot, '+ an+ measure, 'e
considered as 3slight or casual5. %or petitioner9s failure to ma$e complete deliver+ and
installation wa+ 'e+ond the time stipulated despite respondent9s demands, is dou'tless
a su'stantial and fundamental 'reach, more so when viewed in the light of the large
amount of mone+ respondent had to pa+ another contractor to complete petitioner9s
unfinished wor$.
#i$ewise, contrar+ to petitioner9s claim, it cannot 'e said that he had no in$ling
whatsoever of respondent9s recourse to rescission. True, 3the act of a part+ in treating a
contract as cancelled or resolved on account of infractions '+ the other part+ must 'e
made $nown to the other5. &n the case, however, petitioner cannot feign ignorance of
respondent9s intention to rescind, full+ aware, as he was, of his non6compliance with
what was incum'ent upon him, not to mention the several letters respondent sent to
him demanding compliance with his o'ligation. &t is thus proper that respondent acted
well within its rights in unilaterall+ terminating its contract with petitioner and in
entering into a new one with a third person in order to minimi>e its losses, without prior
need of resorting to (udicial action.
,H<@<%@<, the petition is D<1&<D and the assailed Decision and
@esolution of the appellate court .%%&@M<D.
FERNAN0O CARRASCOSO -R. 5ersus CO$R# OF APPEALS, LA$RO
Page | 120
LEVIS#E, as 0)re17or a.; M).or)7y S7o1D<o*;er a.; O. %e<aE oE O7<er
S7o1D<o*;ers oE E* 0ora;o P*a.7a7)o. I.1. a.; EL 0ORA0O
PLAN#A#ION, INC., re(rese.7e; by o.e oE )7s 2).or)7y s7o1D<o*;ers,
Lauro P. Le5)s7e
G.R. No. 1'67 @ G. R. No. 1644"+ 0e1e2ber 14, !!5
FAC#S8
<l Dorado Plantation, &nc. A<l DoradoB was the registered owner of a parcel of
land with an area of appro:imatel+ 1,H)! hectares covered '+ Transfer 2ertificate of
Title AT2TB 1o. T6/0 situated in *a'la+an, ccidental Mindoro.
n %e'ruar+ 1!, 1/8), at a special meeting of <l Dorado9s Board of Directors, a
@esolution was passed authori>ing %eliciano #eviste, then President of <l Dorado, to
negotiate the sale of the propert+ and sign all documents and contracts 'earing thereon.
<l Dorado, through %eliciano #eviste, sold the propert+ to %ernando . 2arrascoso, =r.
Dnder the Deed of *ale, 2arrascoso was to pa+ the full amount of the purchase price on
March )0, 1/8!.
n March )F, 1/8), 2arrascoso and his wife Marlene e:ecuted a @eal <state
MortgageF over the propert+ in favor of Home *avings Ban$ AH*BB to secure a loan in
the amount of P1,000,000.00. f this amount, P)/0,000.00 was paid to Philippine
1ational Ban$ to release the mortgage priorl+ constituted on the propert+ and
P)10,000.00 was paid to <l Dorado pursuant to the terms and conditions of the Deed
of *ale.
n Ma+ 1H, 1/8), the real estate mortgage in favor of H*B was amended to
include an additional three +ear loan of P80,000.00 as re4uested '+ the spouses
2arrascoso. However, the 06+ear period for 2arrascoso to full+ pa+ for the propert+ on
March )0, 1/8! passed without him having complied therewith. &n the meantime, on
=ul+ 11, 1/8!, 2arrascoso and the Philippine #ong Distance Telephone 2ompan+
AP#DTB, through its President @amon 2o(uangco, e:ecuted an .greement to Bu+ and
*ell where'+ the former agreed to sell 1,000 hectares of the propert+ to the latter at a
consideration of P0,000.00 per hectare or a total of P0,000,000.00.
#auro #eviste, a stoc$holder and mem'er of the Board of Directors of <l Dorado,
called the attention of the Board to 2arrascoso9s failure to pa+ the 'alance of the
purchase price of the propert+ amounting to P1,000,000.00. #auro9s desire to rescind
the sale was reiterated in two other letters addressed to the Board. =ose P. #eviste, as
President of <l Dorado, later sent a letter of %e'ruar+ )1, 1/88 to 2arrascoso informing
him that in view of his failure to pa+ the 'alance of the purchase price of the propert+, <l
Dorado was see$ing the rescission of the March )0, 1/8) Deed of *ale of @eal Propert+.
%or the failure of 2arrascoso to give his repl+, #auro and <l Dorado finall+ filed a
complaint for rescission of the Deed of *ale. The+ also sought the cancellation of T2T
1o. T6"0!! in the name of 2arrascoso and the revival of T2T 1o. T6/0 in the name of <l
Dorado, free from an+ liens and encum'rances.
Page | 121
&n the meantime, 2arrascoso, as vendor and P#DT, as vendee forged on .pril ",
1/88 a Deed of .'solute *ale over the 1,000 hectare portion of the propert+ su'(ect of
their =ul+ 11, 1/8! .greement to Bu+ and *ell. &n turn, P#DT, '+ Deed of .'solute *ale
conve+ed the aforesaid 1,000 hectare portion of the propert+ to its su'sidiar+, P#DT
.gricultural 2orporation AP#DT.2B, for a consideration of P0,000,000.00, the amount
of P),")0,000.00 of which was pa+a'le to P#DT upon signing of said Deed, and
P0H0,000.00 to 2arrascoso upon issuance of title to P#DT.2.
n =ul+ 01, 1/8H, P#DT and P#DT.2 filed an Drgent Motion for &ntervention
which was granted '+ the trial court. P#DT and P#DT.2 thereupon filed their .nswer
&n &ntervention with 2ompulsor+ 2ounterclaim and 2rossclaim against 2arrascoso. The
@T2 dismissed the complaint. 2arrascoso, P#DT and P#DT.2 filed their respective
appeals to the 2ourt of .ppeals. The appellate court reversed the decision of the trial
court. Thereafter, different motions and actions were done '+ 'oth parties.
ISS$E8
,hether or not the rescission is valid.
R$LING8
The right of rescission of a part+ to an o'ligation under .rticle 11/1 is predicated
on a 'reach of faith '+ the other part+ who violates the reciprocit+ 'etween them.
. contract of sale is a reciprocal o'ligation. The seller o'ligates itself to transfer
the ownership of and deliver a determinate thing, and the 'u+er o'ligates itself to pa+
therefor a price certain in mone+ or its e4uivalent. The non6pa+ment of the price '+ the
'u+er is a resolutor+ condition which e:tinguishes the transaction that for a time
e:isted, and discharges the o'ligations created thereunder. *uch failure to pa+ the price
in the manner prescri'ed '+ the contract of sale entitles the unpaid seller to sue for
collection or to rescind the contract.
&n the case at 'ar, <l Dorado alread+ performed its o'ligation through the
e:ecution of the March )0, 1/8) Deed of *ale of @eal Propert+ which effectivel+
transferred ownership of the propert+ to 2arrascoso. The latter, on the other hand,
failed to perform his correlative o'ligation of pa+ing in full the contract price in the
manner and within the period agreed upon.
The terms of the Deed are clear and une4uivocal: 2arrascoso was to pa+ the
'alance of the purchase price of the propert+ amounting to P1,000,000.00 plus interest
thereon at the rate of 10E per annum within a period of three A0B +ears from the signing
of the contract on March )0, 1/8). ,hen =ose #eviste informed him that <l Dorado was
see$ing rescission of the contract '+ letter of %e'ruar+ )1, 1/88, the period given to him
within which to full+ satisf+ his o'ligation had long lapsed.
The <l Dorado Board @esolution and the .ffidavit of =ose #eviste interposing no
o'(ection to 2arrascoso9s mortgaging of the propert+ to an+ 'an$ did not have the effect
Page | 122
of suspending the period to full+ pa+ the purchase price, as e:pressl+ stipulated in the
Deed, pending full pa+ment of an+ mortgage o'ligation of 2arrascoso.
P#DT cannot shield itself from the notice of lis pendens 'ecause all that it had at the
time of its inscription was an .greement to Bu+ and *ell with 2arrascoso, which in
effect is a mere contract to sell that did not pass to it the ownership of the propert+.
wnership was retained '+ 2arrascoso which <l Dorado ma+ ver+ well recover through
its action for rescission.
The appellate court9s decision ordering the rescission of the March )0, 1/8) Deed of
*ale of @eal Propert+ 'etween <l Dorado and 2arrascoso 'eing in order, mutual
restitution follows to put 'ac$ the parties to their original situation prior to the
consummation of the contract. Between 2arrascoso and P#DTMP#DT.2, the former
acted in 'ad faith while the latter acted in good faith. This is so 'ecause it was
2arrascoso9s refusal to pa+ his (ust de't to <l Dorado that caused P#DTMP#DT.2 to
suffer pecuniar+ losses. Therefore, 2arrascoso should return to P#DTMP#DT.2 the
P0,000,000.00 price of the farm plus legal interest from receipt thereof until paid.
The e:ercise of the power to rescind e:tinguishes the o'ligator+ relation as if it
had never 'een created, the e:tinction having a retroactive effect. The rescission is
e4uivalent to invalidating and unma$ing the (uridical tie, leaving things in their status
'efore the cele'ration of the contract.
,here a contract is rescinded, it is the dut+ of the court to re4uire 'oth parties to
surrender that which the+ have respectivel+ received and to place each other as far as
practica'le in his original situation, the rescission has the effect of a'rogating the
contract in all parts.
The .pril ", 1/88 and Ma+ 00, 1/88 Deeds of .'solute *ale 'eing su'(ect to the
notice of lis pendens, and as the 2ourt affirms the declaration '+ the appellate court of
the rescission of the Deed of *ale e:ecuted '+ <l Dorado in favor of 2arrascoso,
possession of the 1,000 hectare portion of the propert+ should 'e turned over '+ P#DT
to <l Dorado.
.s regards the improvements introduced '+ P#DT on the 1,000 hectare portion
of the propert+, a distinction should 'e made 'etween those which it 'uilt prior to the
annotation of the notice of lis pendens and those which it introduced su'se4uent
thereto.
,H<@<%@<, the petitions are D<1&<D.
Page | 123
GOL0ENRO0, INC. 5s. CO$R# OF APPEALS %ARRE##O @ SONS, INC., PIO
%ARRE##O REAL#, 0EVELOPMEN#, INC., a.; AN#3ON, /$E
G.R. No. 16"1 1++" No5 4
FAC#S8
Pio Barretto and *ons, &nc. AB.@@<TT P *1*B owned fort+6three parcels of
registered land with a total area of 1H,!00 s4uare meters located at 2arlos Palanca *t.,
?uiapo, Manila, which were mortgaged with the Dnited 2oconut Planters Ban$ AD2PBB.
&n 1/HH, the o'ligation of the corporation with D2PB remained unpaid ma$ing
foreclosure of the mortgage imminent. 7oldenrod, &nc. A7#D<1@DB, offered to 'u+
the propert+ from B.@@<TT P *1*.
,hen the term of e:istence of B.@@<TT P *1* e:pired, all its assets and
lia'ilities including the propert+ located in ?uiapo were transferred to respondent Pio
Barretto @ealt+ Development, &nc. PetitionerKs offer to 'u+ the propert+ resulted in its
agreement with respondent B.@@<TT @<.#T- that petitioner would pa+ P)F.!
million representing the outstanding o'ligations of B.@@<TT @<.#T- with D2PB on
00 =une 1/HH, the deadline set '+ the 'an$ for pa+mentJ and P)0 million which was the
'alance of the purchase price of the propert+ to 'e paid in installments within a 06+ear
period with interest at 1HE per annum. However, petitioner did not pa+ D2PB the P)F.!
million loan o'ligation of B.@@<TT @<.#T- on the deadline set for pa+ment. &t
as$ed for an e:tension of one month or up to 01 =ul+ 1/HH to settle the o'ligation, which
the 'an$ granted. Moreover, petitioner again re4uested another e:tension of si:t+ da+s
to pa+ the loan, 'ut the 'an$ demurred.
&n the meantime B.@@<TT @<.#T- was a'le to cause the reconsolidation of
the fort+6three titles covering the propert+ su'(ect of the purchase into two titles
covering #ots 1 and ). The reconsolidation of the titles was made pursuant to the
re4uest of petitioner in its letter to private respondents on )! Ma+ 1/HH. @espondent
B.@@<TT @<.#T- allegedl+ incurred e:penses for the reconsolidation amounting to
P)!0,000.00.
n 00 .ugust 1/HH .licia P. #ogarta, President of #ogarta @ealt+ and
Development 2orporation, which acted as agent and 'ro$er of petitioner, wrote private
respondent .nthon+ ?ue informing him on 'ehalf of petitioner that it could not go
through with the purchase of the propert+ due to circumstances 'e+ond its fault A the
denial '+ D2PB of its re4uest for e:tension of time to pa+ the o'ligationB.
n 01 .ugust 1/HH respondent B.@@<TT @<.#T- sold to .siaworld Trade
2enter Phils., &nc., #ot ), one of the two consolidated lots, for the price of P)0 million.
n 10 cto'er 1/HH respondent B.@@<TT @<.#T- e:ecuted a deed transferring '+
wa+ of LdacionL the propert+ reconsolidated as #ot 1 in favor of D2PB, which in turn
sold the propert+ to .*&.,@#D for P)F million. *ometime after the said sale, #ogarta
again wrote respondent ?ue demanding the return of the earnest mone+ to
7#D<1@D, 'ut to no avail. Petitioner then filed a complaint with the @T2 of Manila
Page | 124
against private respondents for the return of the amount of P1 million and the pa+ment
of damages including lost interests or profits.
ISS$E8
,hether or not the petitionerKs e:tra(udicial rescission of its agreement with
private respondents was valid.
R$LING8
Dnder .rt. 1FH) of the 2ivil 2ode, whenever earnest mone+ is given in a contract
of sale, it shall 'e considered as part of the purchase price and as proof of the perfection
of the contract. Petitioner clearl+ stated without an+ o'(ection from private respondents
that the earnest mone+ was intended to form part of the purchase price. &t was an
advance pa+ment which must 'e deducted from the total price. Hence, the parties could
not have intended that the earnest mone+ or advance pa+ment would 'e forfeited when
the 'u+er should fail to pa+ the 'alance of the price, especiall+ in the a'sence of a clear
and e:press agreement thereon. B+ reason of its failure to ma$e pa+ment petitioner,
through its agent, informed private respondents that it would no longer push through
with the sale. &n other words, petitioner resorted to e:tra(udicial rescission of its
agreement with private respondents.
&t was held in the case of Dniversit+ of the Philippines v. de los .ngeles that the
right to rescind contracts is not a'solute and is su'(ect to scrutin+ and review '+ the
proper court. &t was held further that rescission of reciprocal contracts ma+ 'e
e:tra(udiciall+ rescinded unless successfull+ impugned in court. &f the part+ does not
oppose the declaration of rescission of the other part+, specif+ing the grounds therefor,
and it fails to repl+ or protest against it, its silence thereon suggests an admission of the
veracit+ and validit+ of the rescinding part+Ks claim. . such, private respondents did not
interpose an+ o'(ection to the rescission '+ petitioner of the agreement. .s found '+ the
2ourt of .ppeals, private respondent B.@@<TT @<.#T- even sold #ot ) of the su'(ect
consolidated lots to another 'u+er, .*&.,@#D, one da+ after its President .nthon+
?ue received the 'ro$erKs letter rescinding the sale. *u'se4uentl+, on 10 cto'er 1/HH
respondent B.@@<TT @<.#T- also conve+ed ownership over #ot 1 to D2PB which, in
turn, sold the same to .*&.,@#D.
.rticle 10H! of the 2ivil 2ode provides that rescission creates the o'ligation to
return the things which were the o'(ect of the contract together with their fruits and
interest. Therefore, '+ virtue of the e:tra(udicial rescission of the contract to sell '+
petitioner without opposition from private respondents who, in turn, sold the propert+
to other persons, private respondent B.@@<TT @<.#T-, as the vendor, had the
o'ligation to return the earnest mone+ of P1,000,000.00 plus legal interest from the
date it received notice of rescission from petitioner, i.e., 00 .ugust 1/HH, up to the date
of the return or pa+ment. &t would 'e most ine4uita'le if respondent B.@@<TT
@<.#T- would 'e allowed to retain petitionerKs pa+ment of P1,000,000.00 and at the
same time appropriate the proceeds of the second sale made to another.
Page | 125
LORE#A SERRANO 5s. CO$R# OF APPEALS a.; LONG LIFE PA9NS3OP,
INC.
G.R. No. 4515 1++1 A(r
FAC#S8
*ometime in earl+ March 1/"H, petitioner #oreta *errano 'ought some pieces of
(ewelr+ for PFH,!00.00 from 1iceta @i'a+a. However, when petitioner was in need of
mone+, she instructed her private secretar+, =osefina @occo, to pawn the (ewelr+.
=osefina then went to private respondent #ong #ife Pawnshop, &nc. AL#ong #ifeLB,
pledged the (ewelr+ for P)),000.00 with its principal owner and 7eneral Manager, -u
.n Giong, and then a'sconded with said amount and the pawn tic$et. The pawnshop
tic$et issued to =osefina @occo stipulated that it was redeema'le Lon presentation '+ the
'earer.L
Three months later, 7loria Du4ue and .malia 2eleste informed 1iceta @i'a+a
that a pawnshop tic$et issued '+ private respondent was 'eing offered for sale. The+
told 1iceta the tic$et pro'a'l+ covered (ewelr+ once owned '+ the latter which (ewelr+
had 'een pawned '+ one =osefina @occo. *uspecting that it was the same (ewelr+ she
had sold to petitioner, 1iceta informed the latter of this offer and suggested that
petitioner go to the #ong #ife pawnshop to chec$ the matter out. Petitioner claims she
went to private respondent pawnshop, verified that indeed her missing (ewelr+ was
pledged there and told -u .n Giong not to permit an+one to redeem the (ewelr+ 'ecause
she was the lawful owner thereof. Petitioner claims that -u .n Giong agreed.
n / =ul+ 1/"H, petitioner went to the Manila Police Department to report the
loss, and a complaint first for 4ualified theft and later changed to estafa was
su'se4uentl+ filed against =osefina @occo. Thereafter, a mem'er of the Manila Police
went to the pawnshop, showed -u .n Giong petitionerKs report and left the latter a note
as$ing him to hold the (ewelr+ and notif+ the police in case someone should redeem the
same. However, the ne:t da+, -u .n Giong permitted one Tomasa de #eon, e:hi'iting
the appropriate pawnshop tic$et, to redeem the (ewelr+.
n F cto'er 1/"H, petitioner filed a complaint for damages against private
respondent #ong #ife for failure to hold the (ewelr+ and for allowing its redemption
without first notif+ing petitioner or the police. Hon. #uis B. @e+es, rendered a decision
in favor of petitioner. The decision was however reversed on appeal and the complaint
dismissed '+ the pu'lic respondent 2ourt of .ppeals.
ISS$E8
,hether or not the 2ourt of .ppeals committed reversi'le error in rendering its
Decision.
R$LING8
Page | 126
Having 'een notified '+ petitioner and the police that (ewelr+ pawned to it was
either stolen or involved in an em'e>>lement of the proceeds of the pledge, private
respondent pawn'ro$er 'ecame dut+ 'ound to hold the things pledged and to give
notice to petitioner and the police of an+ effort to redeem them. *uch a dut+ was
imposed '+ .rticle )1 of the 2ivil 2ode. The circumstance that the pawn tic$et stated
that the pawn was redeema'le '+ the 'earer, did not dissolve that dut+. The pawn tic$et
was not a negotia'le instrument under the 1egotia'le &nstruments #aw nor a negotia'le
document of title under .rticles 1!08 et se4. of the 2ivil 2ode. &f the third person
Tomasa de #eon, who redeemed the things pledged a da+ after petitioner and the police
had notified #ong #ife, claimed to 'e owner thereof, the prudent recourse of the
pawn'ro$er was to file an interpleader suit, impleading 'oth petitioner and Tomasa de
#eon. The respondent pawn'ro$er was, of course, entitled to demand pa+ment of the
loan e:tended on the securit+ of the pledge 'efore surrendering the (ewelr+, upon the
assumption that it had given the loan in good faith and was not a LfenceL for stolen
articles and had not conspired with the faithless =osefina @occo or with Tomasa de
#eon.
@espondent pawn'ro$er acted in rec$less disregard of that dut+ in the instant
case and must 'ear the conse4uences, without pre(udice to its right to recover damages
from =osefina @occo. Hence, the trial court correctl+ held that private respondent was
lia'le to petitioner for actual damages which corresponded to the difference in the value
of the (ewelr+ and the amount of the loan, or the sum of P)",!00.00. Petitioner is
entitled to collect the 'alance of the value of the (ewelr+, corresponding to the amount of
the loan, in an appropriate action against =osefina @occo. Private respondent #ong #ife
in turn is entitled to see$ reim'ursement from =osefina @occo of the amount of the
damages it must pa+ to petitioner.
,herefore, the Petition is 7@.1T<D and the decision of the 2ourt of .ppelas
was @<C<@*<D and *<T .*&D<.
PERLA PALMA GIL, VICEN#E 3I:ON, -R., a.; ANGEL PALMA GIL 5s.
3ON. CO$R# OF APPEALS, 3EIRS OF EMILIO MA#$LAC, CONS#ANCIO
MAGLANA, AGAPI#O PACE#ES @ #<e REGIS#ER OF 0EE0S OF 0AVAO
CI#,
G.R. No. 17!6 Se(7e2ber 1, !!'
FAC#S8
2oncepcion Palma 7il, and her sister, 1ieves Palma 7il, married to .ngel
Cillarica, were the co6owners of a parcel of commercial land with an area of H)/ s4uare
meters, identified as #ot 1o. !/62, covered '+ Transfer 2ertificate of Title AT2TB 1o.
F0) located in Davao 2it+. The spouses .ngel and 1ieves Cillarica had constructed a
two6store+ commercial 'uilding on the propert+. n cto'er 10, 1/!0, 2oncepcion filed
a complaint against her sister 1ieves for specific performance, to compel the defendant
to cede and deliver to her an undivided portion of the said propert+ with an area of
Page | 127
)!".) s4uare meters. .fter due proceedings, the court rendered (udgment on .pril 8,
1/!F in favor of 2oncepcion, ordering the defendant to deliver to the plaintiff an
undivided portion of the said propert+ with an area of )!".) s4uare meters.
1ieves appealed to the 2ourt of .ppeals which affirmed the assailed decision. &n
due course, the decision 'ecame final and e:ecutor+. n motion of the plaintiff
A2oncepcionB, the court issued a writ of e:ecution. 1ieves, however, refused to e:ecute
the re4uisite deed in favor of her sister. n .pril )8, 1/!", the court issued an order
authori>ing e:6officio *heriff <ri'erto Dnson to e:ecute the re4uisite deed of transfer to
the plaintiff over an undivided portion of the propert+ with a total area of )!".) s4uare
meters. &nstead of doing so, the sheriff had the propert+ su'divided into four lots. The
sheriff thereafter e:ecuted a Deed of Transfer to 2oncepcion.
n cto'er )F, 1/!", 2oncepcion e:ecuted a deed of a'solute sale over #ot !/6261 in
favor of &luminada Pacetes. &n the said deed, the area of #ot !/6261 appeared as 3)!"
s4uare meters5 although under the su'division plan, the area of the propert+ was onl+
)1H s4uare meters.
n Decem'er )1, 1/!", &luminada Pacetes filed a motion to intervene as vendee of
the propert+ su'(ect of the case and a motion to dismiss the complaint which was 'oth
granted '+ the court. n the 'asis of the deed of transfer e:ecuted '+ *heriff &ri'erto ..
Dnson, the @egister of Deeds issued T2T 1o. 8F!0 over #ot !/6261 and !/626) on =ul+
18, 1/!8 in the name of 2oncepcion, with a total area of )!".) s4uare meters. However,
the latter failed to transfer title to the propert+ to and under the name of &luminada
Pacetes. 2onse4uentl+, the latter did not remit the 'alance of the purchase price of the
propert+ to 2oncepcion.
&n the interim, the spouses .ngel and 1ieves Cillarica e:ecuted a real estate
mortgage over #ot !/626F in favor of Prudential Ban$ as securit+ for a loan. n .ugust
F, 1/!/, 2oncepcion died intestate and was survived '+ 1ieves Cillarica and her
nephews and nieces. &luminada filed a motion for her su'stitution as part+6plaintiff in
lieu of the deceased 2oncepcion. n .ugust ), 1/"1, the court issued an order granting
the motion.
The 2ourt rendered (udgment setting aside the deed of transfer e:ecuted '+ the
sheriff in favor of 2oncepcion Palma 7il, and remanding the records to the trial court for
further proceedings. &n compliance with the Decision of the 2ourt in the other case, the
trial court conducted further proceedings and discovered that the defendant had
mortgaged #ot !/626F to the Prudential Ban$. 2onse4uentl+, the court issued an order
on %e'ruar+ 18, 1/"F, declaring that the defendant had waived the 'enefits of the
Decision of the 2ourt, thus, the conve+ance of the propert+ made '+ 2oncepcion in favor
of &luminada on cto'er )F, 1/!" must stand. 1ieves filed a motion for the
reconsideration of the said order 'ut the court denied the same in an rder dated
%e'ruar+ )/, 1/"F. 1ieves appealed the order to the 2. which dismissed the appeal. for
her failure to file a record on appeal.
ISS$E8
,hether or not the rescission made was valid and 'inding upon the parties.
R$LING8
Dnder the last paragraph of .rticle 11"/ of the 1ew 2ivil 2ode, in reciprocal
o'ligations, neither part+ incurs in dela+ if the other does not compl+ or is not read+ to
compl+ in a proper manner with what is incum'ent upon him. %rom the moment one of
the parties fulfills his o'ligation, dela+ in the other 'egins. Thus, reciprocal o'ligations
Page | 128
are to 'e performed simultaneousl+ so that the performance of one is conditioned upon
the simultaneous fulfillment of the other. The right of rescission of a part+ to an
o'ligation under .rticle 11/1 of the 1ew 2ivil 2ode is predicated on a 'reach of faith '+
the other part+ that violates the reciprocit+ 'etween them.
The deed of a'solute sale e:ecuted '+ 2oncepcion 7il in favor of &luminada Pacetes
is an e:ecutor+ contract and not an e:ecuted contract is a settled matter. &n a perfected
contract of sale of realt+, the right to rescind the said contract depends upon the
fulfillment or non6fulfillment of the prescri'ed condition. The court ruled that the
condition pertains in realit+ to the compliance '+ one part+ of an underta$ing the
fulfillment of which would give rise to the demanda'ilit+ of the reciprocal o'ligation
pertaining to the other part+. The reciprocal o'ligation envisaged would normall+ 'e, in
the case of the vendee, the pa+ment '+ the vendee of the agreed purchase price and in
the case of the vendor, the fulfillment of certain e:press warranties.
&n this case, 2oncepcion 7il sold #ot !/6261 to &luminada Pacetes for P)1,"00.00,
that P8,!00.00, to 'e paid upon the signing of this instrumentJ and the 'alance of
P1F,100.00, to 'e paid upon the deliver+ of the corresponding 2ertificate of Title.
&ndeed, 2oncepcion 7il o'liged herself to transfer title over the propert+ to and under
the name of the vendee within 1)0 da+s from the e:ecution of the deed.
The vendee paid the downpa+ment of P8,!00.00. B+ the terms of the contract,
the o'ligation of the vendee to pa+ the 'alance of the purchase price ensued onl+ upon
the issuance of the certificate of title '+ the @egister of Deeds over the propert+ sold to
and under the name of the vendee, and the deliver+ thereof '+ the vendor 2oncepcion
7il to the latter. 2oncepcion failed to secure a certificate of title over the propert+. ,hen
she died intestate on .ugust F, 1/!/, her o'ligation to deliver the said title to the vendee
devolved upon her heirs, including the petitioners. The said heirs, including the
petitioners failed to do so, despite the lapse of eighteen +ears since 2oncepcion9s death.
The petitioners, as successors6in6interest of the vendor, are not the in(ured parties
entitled to a rescission of the deed of a'solute sale. &t was 2oncepcion9s heirs, including
the petitioners, who were o'liged to deliver to the vendee a certificate of title over the
propert+ under the latter9s name, free from all liens and encum'rances within 1)0 da+s
from the e:ecution of the deed of a'solute sale on cto'er )F, 1/!", 'ut had failed to
compl+ with the o'ligation.
The consignation '+ the vendee of the purchase price of the propert+ is sufficient to
defeat the right of the petitioners to demand for a rescission of the said deed of a'solute
sale.
Thus, the decision of the 2. affirming the decision of the @T2 dismissing the
complaint of the petitioners is affirmed.
0AVI0 RE,ES 5s. -OSE LIM, C3$, C3ENG 4ENG a.; 3ARRISON
L$M%ER, INC.
4!" SCRA 56!
FAC#S8
n 8 1ovem'er 1//F, @e+es as seller and #im as 'u+er entered into a contract to sell
a parcel of land located along %.B. Harrison *treet, Pasa+ 2it+. Harrison #um'er
Page | 129
occupied the Propert+ as lessee with a monthl+ rental of P0!,000. The total
consideration for the purchase of the aforedescri'ed parcel of land together with the
perimeter walls found therein P)H,000,000.00 pesos.
The complaint claimed that @e+es had informed Harrison #um'er to vacate the
Propert+ 'efore the end of =anuar+ 1//!. @e+es also informed Geng and Harrison
#um'er that if the+ failed to vacate '+ H March 1//!, he would hold them lia'le for the
penalt+ of PF00,000 a month as provided in the 2ontract to *ell. The complaint further
alleged that #im connived with Harrison #um'er not to vacate the Propert+ until the
PF00,000 monthl+ penalt+ would have accumulated and e4ualed the unpaid purchase
price of P1H,000,000.
n the other hand, Geng and Harrison #um'er

denies that the+ connived with #im
to defraud @e+es. Geng and Harrison #um'er alleged that @e+es approved their re4uest
for an e:tension of time to vacate the Propert+ due to their difficult+ in finding a new
location for their 'usiness. Harrison #um'er claimed that as of March 1//!, it had
alread+ started transferring some of its merchandise to its new 'usiness location in
Mala'on.
#im alleged that he was read+ and willing to pa+ the 'alance of the purchase price
on or 'efore H March 1//!, 'ut @e+es $ept postponing their meeting. n / March 1//!,
@e+es offered to return the P10 million down pa+ment to #im 'ecause @e+es was having
pro'lems in removing the lessee from the Propert+. #im re(ected @e+es9 offer and
proceeded to verif+ the status of @e+es9 title to the Propert+. #im learned that @e+es had
alread+ sold the Propert+ to #ine ne %oods 2orporation on 1 March 1//! for
P1",8H),HF0.
ISS$E8
,hether or not @e+es has the right to o'(e t to the deposit of the 10 million pesos
downpa+ment in court.
R$LING8
There is also no plausi'le or (ustifia'le reason for @e+es to o'(ect to the deposit of
the P10 million down pa+ment in court. The 2ontract to *ell can no longer 'e enforced
'ecause @e+es himself su'se4uentl+ sold the Propert+ to #ine ne. Both @e+es and #im
are see$ing rescission of the 2ontract to *ell. Dnder .rticle 10H! of the 2ivil 2ode,
rescission creates the o'ligation to return the things that are the o'(ect of the contract.
@escission is possi'le onl+ when the person demanding rescission can return whatever
he ma+ 'e o'liged to restore. . court of e4uit+ will not rescind a contract unless there is
restitution, that is, the parties are restored to the status 4uo ante.
Thus, since @e+es is demanding to rescind the 2ontract to *ell, he cannot refuse to
deposit the P10 million down pa+ment in court. *uch deposit will ensure restitution of
the P10 million to its rightful owner. #im, on the other hand, has nothing to refund, as
he has not received an+thing under the 2ontract to *ell.
&n another case, the 2ourt ruled the refund of amounts received under a contract is
a precondition to the rescission of the contract. the part+ who have as$ed for rescission,
must restore to the defendants whatever it has received under the contract. &t will onl+
'e (ust if, as a condition to rescission, the other part+ 'e re4uired to refund to the
defendants an amount e4ual to the purchase price, plus the sums e:pended '+ them in
improving the land.
The principle that no person ma+ un(ustl+ enrich himself at the e:pense of another
is em'odied in .rticle )) of the 2ivil 2ode. This principle applies not onl+ to su'stantive
Page | 130
rights 'ut also to procedural remedies. ne condition for invo$ing this principle is that
the aggrieved part+ has no other action 'ased on contract, 4uasi6contract, crime, 4uasi6
delict or an+ other provision of law. 2ourts can e:tend this condition to the hiatus in the
@ules of 2ourt where the aggrieved part+, during the pendenc+ of the case, has no other
recourse 'ased on the provisional remedies of the @ules of 2ourt.
Thus, a court ma+ not permit a seller to retain, pendente lite, mone+ paid '+ a 'u+er
if the seller himself see$s rescission of the sale 'ecause he has su'se4uentl+ sold the
same propert+ to another 'u+er. B+ see$ing rescission, a seller necessaril+ offers to
return what he has received from the 'u+er. *uch a seller ma+ not ta$e 'ac$ his offer if
the court deems it e4uita'le, to prevent un(ust enrichment and ensure restitution, to put
the mone+ in (udicial deposit.
Thus, it was (ust, e4uita'le and proper for the trial court to order the deposit of the
P10 million down pa+ment to prevent un(ust enrichment '+ @e+es at the e:pense of
#im.
,H<@<%@<, the decision of the 2ourt of .ppeals is .%%&@M<D.
Page | 131
Page | 132
ONG ,ONG e7 a*., 5s. 0AVI0 S. #I$ e7 a*.
G.R. No. 144476 !! Feb 1
FAC#S:
Masagana 2itimall was owned and managed '+ the %irst #andlin$ .sia
Development 2orporation A%#.D2B. %#.D2 was full+ owned '+ the Tiu 7roup. &n order
to recover from floundering finances, the Tiu group entered into a Pre6*u'scription
.greement with the ng group wherein 'oth parties agreed to maintain e4ual
shareholdings in %#.D2 the ngs investing cash, while the Tius contri'uting propert+.
The ngs gave P100M as pa+ment of their 1 Million su'scription shares at a par value of
1 peso per share.
&ntraland @esources and Development 2orporation e:ecuted a re4uisite Deed of
.ssignment over a 'uilding it owned in favor of %#.D2 and was dul+ credited with
)00,000 shares in %#.D2. Masagana Telamart transferred titles of ) properties in favor
of %#.D2. The ngs had to pa+ P80M more, aside from their P100M su'scription
pa+ment in order to settle the P1/0M loan of %#.D2 from P1B. The Tius also had to
advance P)0M, which amount was loaned to them '+ the ngs. The Tius rescinded the
Pre6*u'scription .greement when the ngs refused to credit the %#.D2 shares in the
name of Masagana Telamart commensurate to its 1, /0).00 s4uare meter contri'ution
and to credit the num'er of %#.D2 shares in favor of the Tius commensurate to its 1!1
s4uare meter propert+ contri'utionJ and when David Tius and 2el+ Tiu were proscri'ed
from assuming and performing their duties as C6P and Treasurer, respectivel+. *<2
confirmed the unilateral rescission of the agreement.
ISS$E8
,hether the rescission applies onl+ to reciprocal o'ligations and the Pre6
*u'scription agreement does not provide for reciprocit+.
R$LING8
The ngs illustrate reciprocit+ in the following manner: &n a contract of sale, the
correlative dut+ of the o'ligation of the seller to deliver the propert+ is the o'ligation of
the 'u+er to pa+ the agreed price. &n the case, the correlative o'ligation of the Tius to let
the ngs have and e:ercise the functions of the positions of President and *ecretar+ is
the o'ligation of the ngs to let the Tius have and e:ercise the functions of Cice6
President and Treasurer.
Petitioners $eep on harping for the Pre6*u'scription .greement9s specific
performance +et the+ also actuall+ failed to give a legal 'asis therefor. The+ den+ that the
Tiu 7roup has a right to as$ for rescission of their agreement per .rticle 11/1 of the 2ivil
2ode when the+ themselves invo$e the same law as 'asis for as$ing the specific
performance of the same agreement.
Page | 133
The 2ourts of .ppeals then correctl+ confirmed the rescission of the Pre6
*u'scription .greement on the 'asis of .rt. 11/1 of the 2ivil 2ode. &t could have relied
on the said provision and nonetheless stood on valid ground. &t, however, (udiciousl+
too$ into account the special circumstances of the case and further (ustified its decision
confirming the rescission of the Pre6*u'scription .greement on the 'asis of its
perception that the two groups Lcan no longer wor$ harmoniousl+ togetherL and that Lto
pit them together in the management of %#.D2 will onl+ result to further s4ua''les and
numerous litigation.L
.s a legal conse4uence of rescission, the order of the 2ourt of .ppeals to return
the cash and propert+ contri'ution of the parties is 'ased on law, hence, cannot 'e
considered an act of misappropriation. &n order for the rescission of the Pre6
*u'scription .greement 'e implemented, the returning to the two groups whatever the+
delivered to the corporation in accordance with the .greement is needed.
,ith regard to the order of the 2ourt of .ppeals transferring to the Tiu 7roup
whatever remains of the assets of %#.D2 and the management thereof, the same is 'ut
an inevita'le conse4uence of the rescission of the Pre6*u'scription .greement.
@estoration of the parties to status 4uo ante dictates that the 'uilding constructed on
the two A)B e:isting lots of %#.D2, the remaining asset of %#.D2, 'e transferred to the
Tiu 7roup. The status 4uo ante immediatel+ prior to the e:ecution of the Pre6
*u'scription .greement was that the Tius, then wholl+ owning %#.D2, had control and
custod+ over this remaining asset.
n the other hand, the 2ourt of .ppeals however, erred in finding that the Tiu
7roup violated the Pre6*u'scription .greement since the deed of assignment over the
1!1 s4. m. lot was not e:ecuted '+ the Tiu 7roup 'ut '+ the #ichaucos in favor of
%#.D2. Hence, the Tiu 7roup cannot 'e credited with the num'er of shares
commensurate to the value of said lot and will not, therefore, 'e a'le to e4ual the ng
7roup9s one million su'scription in %#.D2. The #ichaucos are not parties to the Pre6
*u'scription .greement and are not even demanding that the+ 'e credited with such
shares in e:change for the said propert+. =ust li$e the 1, /0).00 s4. m. parcel of land in
the name of Masagana Telamart, &nc. Aalso a corporation owned '+ the TiusB, was also
ac4uired '+ the Tius 'efore the e:ecution of the Pre6*u'scription .greement. The fact
that the 1, /0).00 s4. m. propert+ was ac4uired '+ the Tius 'eforehand does not
pre(udice the ngs, as shown '+ the ngs9 non6o'(ection to crediting the Masagana
Telamart, &nc. with the commensurate num'er of shares, su'(ect onl+ to the Tius9
pa+ment of the e:penses for the transfer of the title in the name of %#.D2. *o, too, in
the case of the 1!1 s4. m. propert+, the fact that the Deed of .ssignment 'etween the
#ichaucos and the %#.D2 was e:ecuted prior to the e:ecution of the Pre6*u'scription
.greement does not pre(udice the ngs. Therefore, the Tius should 'e credited with F/,
H00 shares in %#.D2 for this propert+ contri'ution, pursuant to the Pre6*u'scription
.greement.
Page | 134
E/$A#ORIAL REAL#, 0EVELOPMEN#, I.1. 5s. MA,FAIR #3EA#ER, I.1.,
G.R. No. 1''"7+ !!1 No5 1
FAC#S8
2armelo P Bauermann, &nc. A2armeloB used to own a parcel of land, together
with two )6store+ 'uildings constructed thereon, located at 2laro M. @ecto .venue,
Manila, and covered '+ T2T 1o. 1H!)/ issued in its name '+ the @egister of Deeds of
Manila. n =une 1, 1/"8, 2armelo entered into a 2ontract of #ease with Ma+fair Theater
&nc. AMa+fairB for a period of )0 +ears. The lease covered a portion of the second floor
and me>>anine of a two6store+ 'uilding with a'out 1,"10 s4uare meters of floor area,
which respondent used as a movie house $nown as Ma:im Theater.
Two +ears later, on March 01, 1/"/, Ma+fair entered into a second 2ontract of
#ease with 2armelo for the lease of another portion of the latter9s propert+ 66 namel+, a
part of the second floor of the two6store+ 'uilding, and two store spaces on the ground
floor and the me>>anine. &n that space, Ma+fair put up another movie house $nown as
Miramar Theater. The 2ontract of #ease was li$ewise for a period of )0 +ears. Both
leases contained a provision granting Ma+fair a right of first refusal to purchase the
su'(ect properties. However, on =ul+ 00, 1/8H 6 within the )06+ear6lease term 66 the
su'(ect properties were sold '+ 2armelo to <4uatorial @ealt+ Development, &nc.
A3<4uatorial5B for the total sum of P11,000,000, without their first 'eing offered to
Ma+fair.
.s a result of the sale of the su'(ect properties to <4uatorial, Ma+fair filed a
2omplaint 'efore the @egional Trial 2ourt of Manila for the annulment of the Deed of
.'solute *ale 'etween 2armelo and <4uatorial, specific performance, and damages.
.fter trial on the merits, the lower court rendered a Decision in favor of 2armelo and
<4uatorial. n appeal 2. completel+ reversed and set aside the (udgment of the lower
court. The decision of the 2ourt 'ecame final and e:ecutor+ on March 18, 1//8. n
.pril )!, 1//8, Ma+fair filed a Motion for <:ecution, which the trial court granted.
Page | 135
However, 2armelo could no longer 'e located. Thus, following the order of e:ecution of
the trial court, Ma+fair deposited with the cler$ of court a 4uo its pa+ment to 2armelo in
the sum of P11,000,000 less PHF8,000 as withholding ta:. The lower court issued a
Deed of @econve+ance in favor of 2armelo and a Deed of *ale in favor of Ma+fair. n
the 'asis of these documents, the @egistr+ of Deeds of Manila cancelled <4uatorial9s
titles and issued new 2ertificates of Title in the name of Ma+fair.
The 2. in its @esolution of 1ovem'er )0, 1//H, e:plained that Ma+fair had no
right to deduct the PHF8,000 as withholding ta:. *ince 2armelo could no longer 'e
located, the appellate court ordered Ma+fair to deposit the said sum with the ffice of
the 2ler$ of 2ourt, Manila, to complete the full amount of P11,000,000 to 'e turned over
to <4uatorial. <4uatorial 4uestioned the legalit+ of the 2. ruling. &n its Decision, the
2ourt directed the trial court to follow strictl+ the Decision in the mother case.
Meanwhile, 'arel+ five months after Ma+fair had su'mitted its Motion for <:ecution
'efore the @T2 of Manila, <4uatorial filed with the @egional Trial 2ourt of Manila, an
action for the collection of a sum of mone+ against Ma+fair, claiming pa+ment of rentals
or reasona'le compensation for the defendant9s use of the su'(ect premises after its
lease contracts had e:pired.
ISS$ES8
1. ,hether or not the contract of sale is validl+ rescinded though there was no
actual deliver+ made.
). ,hether or not the rentals paid concede actual deliver+.
R$LING8
. contract of sale is valid until rescinded, and ownership of the thing sold is not
ac4uired '+ mere agreement, 'ut '+ tradition or deliver+. &n the case, it shows that
deliver+ was not actuall+ effectedJ in fact, it was prevented '+ a legall+ effective
impediment. 1ot having 'een the owner, petitioner cannot 'e entitled to the civil fruits
of ownership li$e rentals of the thing sold. %urthermore, petitioner9s 'ad faith, as again
demonstrated '+ the specific factual milieu of said Decision, 'ars the grant of such
'enefits.
&n this case, it is clear that petitioner never too$ actual control and possession of
the propert+ sold, in view of respondent9s timel+ o'(ection to the sale and the continued
actual possession of the propert+. The o'(ection too$ the form of a court action
impugning the sale which, as we $now, was rescinded '+ a (udgment rendered '+ this
2ourt in the mother case. &t has 'een held that the e:ecution of a contract of sale as a
form of constructive deliver+ is a legal fiction. &t holds true onl+ when there is no
impediment that ma+ prevent the passing of the propert+ from the hands of the vendor
into those of the vendee. ,hen there is such impediment, 3fiction +ields to realit+ 6 the
deliver+ has not 'een effected.5 Hence, respondent9s opposition to the transfer of the
propert+ '+ wa+ of sale to <4uatorial was a legall+ sufficient impediment that effectivel+
prevented the passing of the propert+ into the latter9s hands.
Page | 136
The e:ecution of a pu'lic instrument gives rise, therefore, onl+ to a prima facie
presumption of deliver+. *uch presumption is destro+ed when the instrument itself
e:presses or implies that deliver+ was not intendedJ or when '+ other means it is shown
that such deliver+ was not effected, 'ecause a third person was actuall+ in possession of
the thing. &n the latter case, the sale cannot 'e considered consummated.
). The Decision in the mother case stated that 3<4uatorial : : : has received
rents5 from Ma+fair 3during all the +ears that this controvers+ has 'een litigated.5
However, these statements does not concede actual deliver+. The fact that Ma+fair paid
rentals to <4uatorial during the litigation should not 'e interpreted to mean either
actual deliver+ or ipso facto recognition of <4uatorial9s title. The records show that
<4uatorial 6 as alleged 'u+er of the disputed properties and as alleged successor6in6
interest of 2armelo9s rights as lessor 6 su'mitted two e(ectment suits against Ma+fair.
Ma+fair eventuall+ won them 'oth. However, to 'e a'le to maintain ph+sical possession
of the premises while awaiting the outcome of the mother case, it had no choice 'ut to
pa+ the rentals.
Therefore, the rental pa+ments made '+ Ma+fair should not 'e construed as a
recognition of <4uatorial as the new owner. The+ were made merel+ to avoid imminent
eviction. .t 'ottom, it ma+ 'e conceded that, theoreticall+, a rescissi'le contract is valid
until rescinded. However, this general principle is not decisive to the issue of whether
<4uatorial ever ac4uired the right to collect rentals. ,hat is decisive is the civil law rule
that ownership is ac4uired, not '+ mere agreement, 'ut '+ tradition or deliver+. Dnder
the factual environment of this controvers+ as found '+ the 2ourt in the mother case,
<4uatorial was never put in actual and effective control or possession of the propert+
'ecause of Ma+fair9s timel+ o'(ection.
&n short, the sale to <4uatorial ma+ have 'een valid from inception, 'ut it was
(udiciall+ rescinded 'efore it could 'e consummated. Petitioner never ac4uired
ownership, not 'ecause the sale was void, as erroneousl+ claimed '+ the trial court, 'ut
'ecause the sale was not consummated '+ a legall+ effective deliver+ of the propert+
sold.
S(ouses MARIANO :. VELAR0E a.; AVELINA 0. VELAR0E 5s. CO$R# OF
APPEALS, 0AVI0 A. RA,M$N0O a.; GEORGE RA,M$N0O
G.R. No. 1!"'46 !!1 -u* 11
FAC#S8
David @a+mundo is the a'solute and registered owner of a parcel of land,
together with the house and other improvements thereon. Private @espondent 7eorge
@a+mundo is David9s father who negotiated with plaintiffs .velina and Mariano
Celarde, the petitioners, for the sale of said propert+, which was, however, under lease.
n .ugust H, 1/H", a Deed of *ale with .ssumption of Mortgage was e:ecuted '+
defendant David @a+mundo, as vendor, in favor of plaintiff .velina Celarde, as vendee.
Page | 137
&t is further agreed and understood '+ the parties that the capital gains ta: and
documentar+ stamps on the sale shall 'e for the account of the vendorJ whereas, the
registration fees and transfer ta: thereon shall 'e for the account of the vendee. n the
same date, and as part of the a'ove6document, plaintiff .velina Celarde, with the
consent of her hus'and, Mariano, e:ecuted an Dnderta$ing.
&t appears that the negotiated terms for the pa+ment of the 'alance of P1.H
million was from the proceeds of a loan that plaintiffs were to secure from a 'an$ with
defendant9s help. Defendants had a standing approved credit line with the Ban$ of the
Philippine &slands ABP&B. The parties agreed to avail of this, su'(ect to BP&9s approval of
an application for assumption of mortgage '+ plaintiffs. Pending BP&9s approval of the
application, plaintiffs were to continue pa+ing the monthl+ interests of the loan secured
'+ a real estate mortgage. Pursuant to said agreements, plaintiffs paid BP& the monthl+
interest on the loan secured '+ the aforementioned mortgage for three A0B months,
however, plaintiffs were advised that the .pplication for .ssumption of Mortgage with
BP& was not approved, which prompted plaintiffs not to ma$e an+ further pa+ment. n
=anuar+ !, 1/H8, defendants, thru counsel, wrote plaintiffs informing the latter that their
non6pa+ment to the mortgage 'an$ constituted non6performance of their o'ligation.
Thereafter, defendants sent plaintiffs a notarial notice of cancellationMrescission of the
intended sale of the su'(ect propert+ allegedl+ due to the latter9s failure to compl+ with
the terms and conditions of the Deed of *ale with .ssumption of Mortgage and the
Dnderta$ing.
ISS$E8
,hether or not the 2ourt of .ppeals erred in holding that the rescission
AresolutionB of the contract '+ private respondents was (ustified.
R$LING8
. su'stantial 'reach of a reciprocal o'ligation entitles the in(ured part+ to rescind
the o'ligation. @escission a'rogates the contract from its inception and re4uires a
mutual restitution of 'enefits received.
The 'reach committed '+ petitioners was not so much their nonpa+ment of the
mortgage o'ligations, as their nonperformance of their reciprocal o'ligation to pa+ the
purchase price under the contract of sale. Private respondents9 right to rescind the
contract finds 'asis in .rticle 11/1 of the 2ivil 2ode.
The right of rescission of a part+ to an o'ligation under .rticle 11/1 of the 2ivil
2ode is predicated on a 'reach of faith '+ the other part+ who violates the reciprocit+
'etween them. The 'reach contemplated in the said provision is the o'ligor9s failure to
compl+ with an e:isting o'ligation. ,hen the o'ligor cannot compl+ with what is
incum'ent upon it, the o'ligee ma+ see$ rescission and, in the a'sence of an+ (ust cause
for the court to determine the period of compliance, the court shall decree the
rescission.
Page | 138
The private respondents therefore validl+ e:ercised their right to rescind the
contract, 'ecause of the failure of petitioners to compl+ with their o'ligation to pa+ the
'alance of the purchase price. &ndu'ita'l+, the latter violated the ver+ essence of
reciprocit+ in the contract of sale, a violation that conse4uentl+ gave rise to private
respondents9 right to rescind the same in accordance with law. The petitioners e:pressed
their willingness to pa+ the 'alance of the purchase price one month after it 'ecame dueJ
however, this was not e4uivalent to actual pa+ment as would constitute a faithful
compliance of their reciprocal o'ligation. &n effect, the 4ualified offer to pa+ was a
repudiation of an e:isting o'ligation, which was legall+ due and demanda'le under the
contract of sale. Hence, private respondents were left with the legal option of see$ing
rescission to protect their own interest.
The 'reach committed '+ petitioners was the nonperformance of a reciprocal
o'ligation, not a violation of the terms and conditions of the mortgage contract.
Therefore, the automatic rescission and forfeiture of pa+ment clauses stipulated in the
contract does not appl+. &nstead, 2ivil 2ode provisions shall govern and regulate the
resolution of this controvers+. 2onsidering that the rescission of the contract is 'ased on
.rticle 11/1 of the 2ivil 2ode, mutual restitution is re4uired to 'ring 'ac$ the parties to
their original situation prior to the inception of the contract. .ccordingl+, the initial
pa+ment of PH00,000 and the corresponding mortgage pa+ments in the amounts of
P)8,))!, P)0,000 and P)0,/)! Atotaling PH8F,1!0.00B advanced '+ petitioners should
'e returned '+ private respondents, lest the latter un(ustl+ enrich themselves at the
e:pense of the former.
@escission creates the o'ligation to return the o'(ect of the contract. &t can 'e
carried out onl+ when the one who demands rescission can return whatever he ma+ 'e
o'liged to restore. To rescind is to declare a contract void at its inception and to put an
end to it as though it never was. &t is not merel+ to terminate it and release the parties
from further o'ligations to each other, 'ut to a'rogate it from the 'eginning and restore
the parties to their relative positions as if no contract has 'een made.
ALE>AN0ER G. AS$NCION 5s. E0$AR0O %. EVANGELIS#A a.; CO$R#
OF APPEALS
G.R. No. 1''4+1 1+++ O17 1'
FAC#S8
n *eptem'er /, 1/H0, private respondent 'orrowed P!00,000 from Paluwagan
ng Ba+an *avings and #oan .ssociation to use as wor$ing capital for <m'ass+ %arms.
He e:ecuted a real estate mortgage on three of his properties as securit+ for the loan. n
1ovem'er F, 1/H1, private respondent mortgaged 10 titles more in favor of P.&2
*avings and Mortgage Ban$, formerl+ %irst *umma *avings and Mortgage Ban$, as
securit+ for a loan he o'tained from it in the amount of P1,81),000. Private respondent
o'tained another loan in the amount of PHFF,")!.8H from Mercator %inance
Page | 139
2orporation. The loan was secured '+ a real estate mortgage on five ! other
landholdings of private respondent.
Private respondents aggregate de't e:posure totaled P0,0!",")!.8H. However, he
defaulted in his loan pa+ments. B+ =une 1/HF, his aggregate de't had 'allooned to
almost si: million pesos.
n .ugust ), 1/HF, petitioner and private respondent e:ecuted a Memorandum of
.greement. Dpon the e:ecution of the Memorandum, petitioner paid private
respondent one million pesos, P!00,000.00 within a ninet+6da+ period in four
dis'ursements. The second installment, in the li$e amount of three hundred thousand
pesos, was supposed to 'e remitted '+ petitioner to private respondent for the purpose
of financing the operations of the pigger+ pursuant to the Memorandum. &nstead,
petitioner agreed to pa+ to P.&2 *avings P Mortgage Ban$.
.side from pa+ing the aforesaid amount of P000,000.00 to P.&2 *avings P
Mortgage Ban$, petitioner also paid PF00,000.00 in favor of Paluwagan ng Ba+an
*avings and #oan .ssociation.
%or his part, private respondent was o'ligated under the Memorandum of .greement to
Le:ecute, sign and deliver an+ and all documentsL necessar+ for the transfer and
conve+ance of several parcels of land he owned 'ut mortgaged with the 'an$s and
financial institutions and to Lcede, transfer and conve+ in a manner a'solute and
irrevoca'le an+ and all of his shares of stoc$s in <m'ass+ %arms, &nc.L as well as Lcause
to 'e so transferred to petitioner or his nominee such shares of stoc$ until the+
constitute /0E of the paid6in e4uit+ of said corporationL. However, more than a +ear
after the signing of the Memorandum of .greement, the landholdings of private
respondent which were mortgaged to Paluwagan ng Ba+an *avings and #oan
.ssociation, P.&2 *avings and Mortgage Ban$ and Mercator %inance 2orporation still
remained titled in his name. 1either did he inform said mortgagees of the transfer of his
lands. .s to the shares of stoc$, it was incum'ent upon private respondent to endorse
and deliver them to petitioner so he could also have them transferred in his name, 'ut
private respondent never did. He refused to honor his o'ligations under the
Memorandum of .greement and even countered with a demand letter of his own. He
accused petitioner of having failed to restructure his loans with Paluwagan ng Ba+an
*avings and #oan .ssociation, P.&2 *avings and Mortgage Ban$ and Mercator %inance
2orporation and 'lamed him for the foreclosure of his landholdings, including the
pigger+ site of <m'ass+ %arms, &nc.
Petitioner then filed in the @T2 a complaint for rescission of the Memorandum of
.greement with a pra+er for damages. The 2ourt declared the Memorandum of
.greement rescinded and of no further force and effect. Both petitioner and private
respondent repaired to the 2ourt of .ppeals. The court affirmed the decision of the trial
court and ordered its immediate e:ecution.
ISS$ES8
Page | 140
1. ,hether the non6compliance of one part+ in a reciprocal o'ligation amounts to
rescission of the o'ligation.
). ,hether or not the 2ourt shall allow the grant of damages corresponding to
the value of the land foreclosed '+ private respondentKs creditors upon the latterKs failure
to ma$e his loan pa+ments.
R$LING8
1. The partiesK Memorandum of .greement is a contract of sale where a price
certain is paid in e:change for a determinate thing that is sold and delivered. However,
it shows that it constitutes not a mere isolated, simple, short6term 'usiness deal calling
for the outright sale and purchase of land and shares of stoc$s 'elonging to private
respondent, 'ut a set of chronological, reciprocal and conditional o'ligations that 'oth
petitioner and private respondent must faithfull+ compl+ with to ensure the full
enforcement of all its stipulations.
Petitioner and private respondent entered into what the law regards as reciprocal
o'ligations. @eciprocit+ arises from identit+ of cause, and necessaril+ the two
o'ligations are created at the same time. @eciprocal o'ligations, therefore, are those
which arise from the same cause, and in which each part+ is a de'tor and a creditor of
the other, such that the o'ligation of one is dependent upon the o'ligation of the other.
The+ are to 'e performed simultaneousl+, so that the performance of one is conditioned
upon the simultaneous fulfillment of the other.
.rticle 11/1 of the 2ivil 2ode governs the situation where there is non6compliance
'+ one part+ in case of reciprocal o'ligations. &t provides:
LThe power to rescind the o'ligations is implied in reciprocal ones, in case one of the
o'ligors should not compl+ with what is incum'ent upon him.
LThe in(ured part+ ma+ choose 'etween the fulfillment and the rescission of the
o'ligation, with the pa+ment of damages in either case. He ma+ also see$ rescission,
even after he has chosen fulfillment, if the latter should 'ecome impossi'le.
LThe court shall decree the rescission claimed, unless there 'e (ust cause authori>ing the
fi:ing of a period.
LThis is understood to 'e without pre(udice to the rights of third persons who have
ac4uired the thing, in accordance with articles 10H! and )0HH and the Mortgage #aw.L
The effect of rescission is also provided in the 2ivil 2ode in .rticle 10H!:
L@escission creates the o'ligation to return the things which were the o'(ect of the
contract, together with their fruits, and the price with its interest, conse4uentl+, it can
'e carried out onl+ when he who demands rescission can return whatever he ma+ 'e
o'ligated to restore.
Page | 141
L1either shall rescission ta$e place when the things which are the o'(ect of the contract
are legall+ in the possession of third persons who did not act in 'ad faith.
L&n this case, indemnit+ for damages ma+ 'e demanded from the persons causing the
loss.L
Private respondent admitted in open court that petitioner paid him the initial
sum of one million pesos upon the signing of the Memorandum of .greement as well as
various sums of mone+ as fees for the restructuring of his loans. Thereupon, private
respondent was o'ligated to e:ecute a deed of sale with assumption of mortgage, 'oth in
compliance with the Memorandum of .greement and to ensure the legal efficac+ of
petitionerKs promise to assume his loan o'ligations. However, private respondent failed
to perform his su'stantial o'ligations under the Memorandum of .greement. Hence,
petitioner sought the rescission of the Memorandum of .greement and ceased infusing
capital into the pigger+ 'usiness of private respondent.
). The 2ourt cannot allow the grant of damages corresponding to the value of the
land foreclosed '+ private respondentKs creditors upon the latterKs failure to ma$e his
loan pa+ments. &n case of rescission, while damages ma+ 'e assessed in favor of the
pre(udiced part+, onl+ those $inds of damages consistent with the remed+ of rescission
ma+ 'e granted, $eeping in mind that had the parties opted for specific performance,
other $inds of damages would have 'een called for which are a'solutel+ distinct from
those $inds of damages accruing in the case of rescission.
.n o'ligation ma+ 'e resolved if one of the o'ligors fails to compl+ with that
which is incum'ent upon himJ and it is declared that the person pre(udiced ma+ elect
'etween e:acting the fulfillment of the o'ligation Aspecific performanceB and its
resolution, with compensation for damage and pa+ment of interest in either case. ne is
not entitled to pursue 'oth of the inconsistent remedies. &n estimating the damages to
'e awarded in case of rescission, those elements of damages onl+ can 'e admitted that
are compati'le with the idea of rescission and in estimating the damages to 'e awarded
in case the lessor elects for specific performance onl+ those elements of damages can 'e
admitted which are compati'le with the conception of specific performance. Thus,
damages which would onl+ 'e consistent with the conception of specific performance
cannot 'e awarded in an action where rescission is sought.
&n cases of resolution or rescission, the parties are 'ound to restore to each the
thing which has 'een the su'(ect matter of the contract, precisel+ as in the situation
where a decree of nullit+ is granted. &n the common case of the resolution of a contract
of sale for failure of the purchaser to pa+ the stipulated price, the seller is entitled to 'e
restored to the possession of the thing sold, if it has alread+ 'een delivered. But he
cannot have 'oth the thing sold and the price which was agreed to 'e paid, for the
resolution of the contract has the effect of destro+ing the o'ligation to pa+ the price.
*imilarl+, in the case of the resolution, or rescission of a contract of lease, the lessor is
entitled to 'e restored to the possession of the leased premises, 'ut he cannot have 'oth
the possession of the leased premises for the remainder of the term and the rent which
Page | 142
the other part+ had contracted to pa+. The termination of the lease has the effect of
destro+ing the o'ligation to pa+ rent for the future.
9ILLIAM $, a.; RO0EL RO>AS 5s. CO$R# OF APPEALS, 3ON. RO%ER#
%ALAO a.; NA#IONAL 3O$SING A$#3ORI#,
G.R. No. 1!465 1+++ Se( +
FAC#S8
Petitioners ,illiam D+ and @odel @o:as are agents authori>ed to sell eight
parcels of land '+ the owners thereof. B+ virtue of such authorit+, petitioners offered to
sell the lands, located in Tu'a, Tadiangan, Benguet to respondent 1ational Housing
.uthorit+ A1H.B to 'e utili>ed and developed as a housing pro(ect. n %e'ruar+ 1F,
1/H/, the 1H. Board passed @esolution 1o. 1"0) approving the ac4uisition of said
lands at the cost of P)0.H"8 million, pursuant to which the parties e:ecuted a series of
Deeds of .'solute *ale covering the su'(ect lands. f the eight parcels of land, however,
onl+ five were paid for '+ the 1H. 'ecause of the report it received from the #and
7eosciences Bureau of the Department of <nvironment and 1atural @esources AD<1@B
that the remaining area is located at an active landslide area and therefore, not suita'le
for development into a housing pro(ect. n )) 1ovem'er 1//1, the 1H. issued
@esolution 1o. )0!) cancelling the sale over the three parcels of land. The 1H.,
through @esolution 1o. )0/F, su'se4uentl+ offered the amount of P1.))! million to the
landowners as danos per(uicios.
n / March 1//), petitioners filed 'efore the @T2 of ?ue>on 2it+ a 2omplaint for
Damages against 1H. and its 7eneral Manager @o'ert Balao. .fter trial, the @T2
rendered a decision declaring the cancellation of the contract to 'e (ustified. The trial
court nevertheless awarded damages to plaintiffs in the sum of P1.)!! million, the same
amount initiall+ offered '+ 1H. to petitioners as damages. Dpon appeal '+ petitioners,
the 2ourt of .ppeals reversed the decision of the trial court and entered a new one
dismissing the complaint. &t held that since there was Lsufficient (ustifia'le 'asisL in
cancelling the sale, Lit saw no reasonL for the award of damages.
ISS$E8
,hether or not the 2. erred in declaring that respondent 1H. had an+ legal
'asis for rescinding the sale involving the last three parcels covered '+ 1H. @esolution
1o. 1"0).
R$LING8
Petitioners confuse the cancellation of the contract '+ the 1H. as a rescission of
the contract under .rticle 11/1 of the 2ivil 2ode. The right of rescission or, more
accuratel+, resolution, of a part+ to an o'ligation under .rticle 11/1 is predicated on a
Page | 143
'reach of faith '+ the other part+ that violates the reciprocit+ 'etween them. The power
to rescind, therefore, is given to the in(ured part+. .rticle 11/1 states:
The power to rescind o'ligations is implied in reciprocal ones, in case one of the o'ligors
should not compl+ with what is incum'ent upon him.
The in(ured part+ ma+ choose 'etween the fulfillment and the rescission of the
o'ligation, with the pa+ment of damages in either case. He ma+ also see$ rescission,
even after he has chosen fulfillment, if the latter should 'ecome impossi'le.
&n this case, the 1H. did not rescind the contract. &ndeed, it did not have the
right to do so for the other parties to the contract, the vendors, did not commit an+
'reach, much less a su'stantial 'reach of their o'ligation. Their o'ligation was merel+
to deliver the parcels of land to the 1H., an o'ligation that the+ fulfilled. The 1H. did
not suffer an+ in(ur+ '+ the performance thereof.
The cancellation, therefore, was not a rescission under .rticle 11/1. @ather, the
cancellation was 'ased on the negation of the cause arising from the reali>ation that the
lands, which were the o'(ect of the sale, were not suita'le for housing.
2ause is the essential reason which moves the contracting parties to enter into it.
&n other words, the cause is the immediate, direct and pro:imate reason which (ustifies
the creation of an o'ligation through the will of the contracting parties. 2ause, which is
the essential reason for the contract, should 'e distinguished from motive, which is the
particular reason of a contracting part+ which does not affect the other part+. &n this
case, it is clear, and petitioners do not dispute, that 1H. would not have entered into
the contract were the lands not suita'le for housing. &n other words, the 4ualit+ of the
land was an implied condition for the 1H. to enter into the contract. n the part of the
1H., therefore, the motive was the cause for its 'eing a part+ to the sale.
.ccordingl+, we hold that the 1H. was (ustified in cancelling the contract. The
reali>ation of the mista$e as regards the 4ualit+ of the land resulted in the negation of
the motiveMcause thus rendering the contract ine:istent.)H N1ote that said contract is
also avoida'le under .rticle 1001 of the 2ivil 2ode which states:
.rt. 1001. &n order that mista$e ma+ invalidate consent, it should refer to the su'stance
of the thing which is the o'(ect of the contract, or to those conditions which have
principall+ moved one or 'oth parties to enter into the contract. : : :O .rticle 101H of the
2ivil 2ode states that:
.rt. 101H. There is no contract unless the following re4uisites concur:
A1B 2onsent of the contracting partiesJ
A)B '(ect certain which is the su'(ect matter of the contractJ
A0B 2ause of the o'ligation which is esta'lished.
Page | 144
,herefore, the petition was D<1&<D.
VIC#OR, LINER, INC. 5s. 3EIRS OF AN0RES MALEC0AN
G.R. No. 1547" !! 0e1 7
FAC#S8
.ndres Malecdan was a 8! +ear6old farmer residing in Baranga+ 1ungnungan ),
Municipalit+ of 2aua+an, Province of &sa'ela. n =ul+ 1!, 1//F, at around 8:00 p.m.,
while .ndres was crossing the 1ational Highwa+ on his wa+ home from the farm, a
Dalin #iner 'us on the south'ound lane stopped to allow him and his cara'ao to pass.
However, as .ndres was crossing the highwa+, a 'us of petitioner Cictor+ #iner, driven
'+ @icardo 2. =oson, =r., '+passed the Dalin 'us. &n so doing, respondent hit the old
man and the cara'ao on which he was riding. .s a result, .ndres Malecdan was thrown
off the cara'ao, while the 'east toppled over. The Cictor+ #iner 'us sped past the old
man, while the Dalin 'us proceeded to its destination without helping him. Malecdan
sustained a wound on his left shoulder, from which 'one fragments protruded. He was
ta$en '+ #orena, the witness, and another person to the 2aga+an District Hospital
where he died a few hours after arrival The cara'ao also died soon afterwards.
*u'se4uentl+, a criminal complaint for rec$less imprudence resulting in homicide and
damage to propert+ was filed against the Cictor+ #iner 'us driver @icardo =oson, =r.
n cto'er !, 1//F, private respondents 'rought suit for damages in the
@egional Trial 2ourt, Branch !, Baguio 2it+, which, in a decision rendered on =ul+ 18,
)000, found the driver guilt+ of gross negligence in the operation of his vehicle and
Cictor+ #iner, &nc. also guilt+ of gross negligence in the selection and supervision of
=oson, =r. Petitioner and its driver were held lia'le for damages. n appeal, the decision
was affirmed '+ the 2ourt of .ppeals, with the modification that the award of attorne+9s
fees was fi:ed at P!0,000.00.
ISS$E8
1. ,hether or not the emplo+er can 'e held solidaril+ lia'le or vicariousl+ lia'le.
). ,hether or not the award of damages is valid.
R$LING8
1. .rticle )18" provides:
,hoever '+ act or omission causes damage to another, there 'eing fault or negligence, is
o'liged to pa+ for the damage done. *uch fault or negligence, if there is no pre6e:isting
contractual relation 'etween the parties, is called a 4uasi6delict and is governed '+ the
provisions of this 2hapter.
Page | 145
.rticle )1H0 provides for the solidar+ lia'ilit+ of an emplo+er for the 4uasi6delict
committed '+ an emplo+ee. The responsi'ilit+ of emplo+ers for the negligence of their
emplo+ees in the performance of their duties is primar+ and, therefore, the in(ured part+
ma+ recover from the emplo+ers directl+, regardless of the solvenc+ of their emplo+ees.
The rationale for the rule on vicarious lia'ilit+ has 'een e:plained thus:
,hat has emerged as the modern (ustification for vicarious lia'ilit+ is a rule of polic+, a
deli'erate allocation of a ris$. The losses caused '+ the torts of emplo+ees, which as a
practical matter are sure to occur in the conduct of the emplo+er9s enterprise, are placed
upon that enterprise itself, as a re4uired cost of doing 'usiness. The+ are placed upon
the emplo+er 'ecause, having engaged in an enterprise, which will on the 'asis of all
past e:perience involve harm to others through the tort of emplo+ees, and sought to
profit '+ it, it is (ust that he, rather than the innocent in(ured plaintiff, should 'ear
themJ and 'ecause he is 'etter a'le to a'sor' them and to distri'ute them, through
prices, rates or lia'ilit+ insurance, to the pu'lic, and so to shift them to societ+, to the
communit+ at large. .dded to this is the ma$eweight argument that an emplo+er who is
held strictl+ lia'le is under the greatest incentive to 'e careful in the selection,
instruction and supervision of his servants, and to ta$e ever+ precaution to see that the
enterprise is conducted safel+.
<mplo+ers ma+ 'e relieved of responsi'ilit+ for the negligent acts of their
emplo+ees acting within the scope of their assigned tas$ onl+ if the+ can show that Lthe+
o'served all the diligence of a good father of a famil+ to prevent damage.L %or this
purpose, the+ have the 'urden of proving that the+ have indeed e:ercised such diligence,
'oth in the selection of the emplo+ee and in the supervision of the performance of his
duties.
&n the selection of prospective emplo+ees, emplo+ers are re4uired to e:amine
them as to their 4ualifications, e:perience and service records. ,ith respect to the
supervision of emplo+ees, emplo+ers must formulate standard operating procedures,
monitor their implementation and impose disciplinar+ measures for 'reaches thereof.
These facts must 'e shown '+ concrete proof, including documentar+ evidence.
). To (ustif+ an award of actual damages, there should 'e proof of the actual
amount of loss incurred in connection with the death, wa$e or 'urial of the victim. The
court cannot ta$e into account receipts showing e:penses incurred some time after the
'urial of the victim, such as e:penses relating to the /th da+, F0th da+ and 1st +ear death
anniversaries.
&n this case, the trial court awarded PHH,00/.00 as actual damages. ,hile these
were dul+ supported '+ receipts, these included the amount of P!,/00.00, the cost of
one pig which had 'een 'utchered for the /th da+ death anniversar+ of the deceased.
This item cannot 'e allowed. The court therefore, reduce the amount of actual damages
to PH),F0/.00.00. The award of P)00,000.00 for moral damages should li$ewise 'e
reduced. The trial court found that the wife and children of the deceased underwent
Lintense moral sufferingL as a result of the latter9s death. Dnder .rt. ))0" of the 2ivil
Page | 146
2ode, the spouse, legitimate children and illegitimate descendants and ascendants of the
deceased ma+ demand moral damages for mental anguish '+ reason of the death of the
deceased. Dnder the circumstances of this case an award of P100,000.00 would 'e in
$eeping with the purpose of the law in allowing moral damages. n the other hand, the
award of P!0,000.00 for indemnit+ is in accordance with current rulings of the 2ourt.
.rt. ))01 provides that e:emplar+ damages ma+ 'e recovered in cases involving
4uasi6delicts if the defendant acted with gross negligence. <:emplar+ damages are
imposed not to enrich one part+ or impoverish another 'ut to serve as a deterrent
against or as a negative incentive to cur' sociall+ deleterious actions. &n this case,
petitioner9s driver =oson, =r. was grossl+ negligent in driving at such a high speed along
the national highwa+ and overta$ing another vehicle which had stopped to allow a
pedestrian to cross. ,orse, after the accident, =oson, =r. did not stop the 'us to help the
victim. Dnder the circumstances, the court 'elieve that the trial court9s award of
P!0,000.00 as e:emplar+ damages is proper.
%inall+, private respondents are entitled to attorne+9s fees. Dnder .rt. )00H of the
2ivil 2ode, attorne+9s fees ma+ 'e recovered when, as in the instant case, e:emplar+
damages are awarded. &n the recent case of Metro Manila Transit 2orporation v. 2ourt
of .ppeals, the court held an award of P!0,000.00 as attorne+9s fees to 'e reasona'le.
Hence, private respondents are entitled to attorne+9s fees in that amount.
,H<@<%@<, the decision of the 2ourt of .ppeals is .%%&@M<D, with the
MD&%&2.T&1.
GOVERNMEN# SERVICE INS$RANCE S,S#EM 5s. SPO$SES GON:ALO
a.; MA#IL0E LA%$NG-0EANG
G.R. No. 1'5644 !!1 Se( 17
FAC#S8
*ometime in Decem'er 1/"/, the spouses Deang o'tained a housing loan from
the 7*&* in the amount of eight thousand five hundred pesos. Dnder the agreement, the
loan was to mature on Decem'er )0, 1/8/. The loan was secured '+ a real estate
mortgage constituted over the spouses9 propert+ covered '+ Transfer 2ertificate of Title
1o. 1F/)"6@ issued '+ the @egister of Deeds of Pampanga. .s re4uired '+ the mortgage
deed, the spouses Daeng deposited the owner9s duplicate cop+ of the title with the 7*&*.
n =anuar+ 1/, 1/8/, eleven A11B months 'efore the maturit+ of the loan, the
spouses Deang settled their de't with the 7*&* and re4uested for the release of the
owner9s duplicate cop+ of the title since the+ intended to secure a loan from a private
lender and use the land covered '+ it as collateral securit+ for the loan of fift+ thousand
pesos which the+ applied for with one Milagros @unes. However, personnel of the 7*&*
were not a'le to release the owner9s duplicate of the title as it could not 'e found despite
diligent search. .s stated earlier, the spouses as mortgagors deposited the owner9s
duplicate cop+ of the title with the 7*&* located at its office in *an %ernando, Pampanga.
Page | 147
*atisfied that the owner9s duplicate cop+ of the title was reall+ lost, in 1/8/, 7*&*
commenced the reconstitution proceedings with the 2ourt of %irst &nstance of
Pampanga for the issuance of a new owner9s cop+ of the same. n =une )), 1/8/, 7*&*
issued a certificate of release of mortgage. .fter the completion of (udicial proceedings,
7*&* finall+ secured and released the reconstituted cop+ of the owner9s duplicate of
Transfer 2ertificate of Title 1o. 1F/)"6@ to the spouses Deang.
n =ul+ ", 1/8/, the spouses Deang filed with the 2ourt of %irst &nstance, .ngeles
2it+ a complaint against 7*&* for damages, claiming that as result of the dela+ in
releasing the duplicate cop+ of the owner9s title, the+ were una'le to secure a loan from
Milagros @unes, the proceeds of which could have 'een used in defra+ing the estimated
cost of the renovation of their residential house and which could have 'een invested in
some profita'le 'usiness underta$ing. The trial court rendered a decision ruling for the
spouses Deang. The trial court reasoned that the loss of the owner9s duplicate cop+ of
the title 3in the possession of 7*&* as securit+ for the mortgage... without (ustifia'le
cause constitutes negligence on the part of the emplo+ee of 7*&* who lost it,5 ma$ing
7*&* lia'le for damages.
n .ugust 00, 1//!, 7*&* appealed the decision to the 2ourt of .ppeals. n
*eptem'er )1, 1//H, the 2ourt of .ppeals promulgated a decision affirming the
appealed (udgment, ruling: %irst, since government owned and controlled corporations
whose charters provide that the+ can sue and 'e sued have a legal personalit+ separate
and distinct from the government, 7*&* is not covered '+ .rticle )1H0 of the 2ivil 2ode,
and it is lia'le for damages caused '+ their emplo+ees acting within the scope of their
assigned tas$s. *econd, the 7*&* is lia'le to pa+ a reasona'le amount of damages and
attorne+9s fees, which the appellate court will not distur'.
ISS$E8
1. ,hether 7*&*, as a 722 primaril+ performing governmental functions, is
lia'le for a negligent act of its emplo+ee acting within the scope of his assigned tas$s.
). ,hether or no the award of damages is valid.
R$LING8
1. 7*&* is lia'le for damages. .rticle )1H0 and .rticle )18" is not applica'le to the
case. However, the trial court and the 2ourt of .ppeals erred in citing it as the
applica'le law. The trial court and the 2ourt of .ppeals should not have treated the
o'ligation of 7*&* as one springing from 4uasi6delict. Dnder the facts, there was a pre6
e:isting contract 'etween the parties. 7*&* and the spouses Deang had a loan
agreement secured '+ a real estate mortgage. The dut+ to return the owner9s duplicate
cop+ of title arose as soon as the mortgage was released. Thus, negligence is o'vious as
the owners9 duplicate cop+ could not 'e returned to the owners. Therefore, the more
applica'le provisions of the 2ivil 2ode are:
Page | 148
3.rticle 1180. Those who in the performance of their o'ligations are guilt+ of fraud,
negligence, or dela+ and those who in an+ manner contravene the tenor thereof are
lia'le for damages.5
3.rticle ))01. &n contracts and 4uasi6contracts, the damages for which the o'ligor who
acted in good faith is lia'le shall 'e those that are the natural and pro'a'le
conse4uences of the 'reach of the o'ligation, and which the parties have foreseen or
could have reasona'l+ foreseen at the time the o'ligation was constituted :::.5
*ince good faith is presumed and 'ad faith is a matter of fact which should 'e
proved, 7*&* shall 'e treated as a part+ who defaulted in its o'ligation to return the
owners9 duplicate cop+ of the title. .s an o'ligor in good faith, 7*&* is lia'le for all the
3natural and pro'a'le conse4uences of the 'reach of the o'ligation.5 The ina'ilit+ of the
spouses Deang to secure another loan and the damages the+ suffered there'+ has its
roots in the failure of the 7*&* to return the owners9 duplicate cop+ of the title.
). &n a 'reach of contract, moral damages are not awarded if the defendant is
not shown to have acted fraudulentl+ or with malice or 'ad faith. The fact that the
complainant suffered economic hardship or worries and mental an:iet+ is not enough.
There is li$ewise no factual 'asis for an award of actual damages. .ctual
damages to 'e compensa'le must 'e proven '+ clear evidence. . court can not rel+ on
3speculation, con(ecture or guess wor$5 as to the fact and amount of damages, 'ut must
depend on actual proof. However, it is also apparent that the spouses Deang suffered
financial damage 'ecause of the loss of the owners9 duplicate cop+ of the title. Thus,
temperate damages ma+ 'e granted.
3.rticle )))F. Temperate or moderate damages, which are more than nominal 'ut less
than compensator+ damages, ma+ 'e recovered when the court finds that some
pecuniar+ loss has 'een suffered 'ut its amount cannot, from the nature of the case, 'e
proved with certaint+.5
The rationale 'ehind temperate damages is precisel+ that from the nature of the
case, definite proof of pecuniar+ loss cannot 'e offered. ,hen the court is convinced
that there has 'een such loss, the (udge is empowered to calculate moderate damages,
rather than let the complainant suffer without redress from the defendant9s wrongful
act. The award of twent+ thousand pesos AP)0,000.00B in temperate damages is
reasona'le considering that 7*&* spent for the reconstitution of the owners9 duplicate
cop+ of the title.
,H<@<%@<, the petition was D<1&<D, and the decision of the 2ourt of
.ppeals is .%%&@M<D with the MD&%&2.T&1 that award of attorne+9s fees is
D<#<T<D.
Page | 149
%PI INVES#MEN# CORPORA#ION 5s. 0. G. CARREON COMMERCIAL
CORPORA#ION, 0ANIEL G. CARREON, A$RORA -. CARREON, AN0
-OSEFA M. -ECIEL
G.R. No. 1654 !!1 No5 +
FAC#S8
n 1ovem'er 1!, 1/8/, D. 7. 2arreon 2ommercial 2orporation placed with BP&
&nvestments P01H,/H1.!/ in mone+ mar$et placement with a maturit+ term of thirt+ two
da+s, or up to Decem'er 18, 1/8/, at a maturit+ value of P0)0,!1H.)). n Decem'er 1),
1/8/, there appeared in BP& &nvestments ledger due D. 7. 2arreon an amount of
P0)0,!1H.)), which is the e:act amount to mature on Decem'er 18, 1/8/. D. 7. 2arreon
did not ma$e an+ mone+ placement maturing on Decem'er 1), 1/8/.
n Decem'er 18, 1/8/, BP& &nvestments credited D. 7. 2arreon with another
P0)0,!1H.)) via roll over of P000,000.00, for a term of one hundred twent+ da+s at 1/E
interest maturing on .pril 1!, 1/H0, and P)0,!1H.)), paid out in cash. BP& &nvestments
paid the mone+ placement on .pril 1", 1/H0. The mone+ placement in the amount of
P01/,000.00 that matured on .pril 1", 1/H0 was again rolled over for a term of si:t+
one da+s at 1/E interest maturing on =une 1", 1/H0, with a maturit+ value of
P0)/,FF0.H1. The amount was again rolled over for a term of thirt+ da+s at 1HE interest
maturing on =ul+ 1", 1/H0, and again rolled over for another thirt+ da+s at 1HE interest.
BP& &nvestments paid D. 7. 2arreon twice in interest of the amount of
P0)0,!1H.)), representing a single mone+ mar$et placement, the first on Decem'er 1),
1/8/, and the second on Decem'er 18, 1/8/. .ccording to petitioner, their 'oo$$eeper
made an error in posting 31)6185 on the sales order slip for 31)61).5 BP& &nvestments
claimed that the same placement was also 'oo$ed as maturing on Decem'er 1), 1/8/.
.urora 2arreon instructed BP& &nvestments to roll over the whole amount of
P0)0,!1H.)) for another thirt+ da+s, or up to =anuar+ 11, 1/H0, at 1/E interest. BP&
&nvestments claimed that roll overs were su'se4uentl+ made from maturing pa+ments
on which BP& &nvestments had made over pa+ments at a total amount of PF10,/08.0/.
n .pril )1, 1/H), BP& &nvestments wrote respondents Daniel 2arreon and .urora
2arreon, demanding the return of the overpa+ment of PF10,/08.0/.
D.7. 2arreon as$ed for compensator+ damages in an amount to 'e proven during
the trialJ spouses Daniel and .urora 2arreon as$ed for moral damages of
P1,000,000.00 'ecause of the humiliation, great mental anguish, sleepless nights and
deterioration of health due to the filing of the complaint and indiscriminate and
wrongful attachment of their propert+, especiall+ their residential house and pa+ment of
their mone+ mar$et placement of P10/,)H0.8!. =osefa =eceil as$ed for moral damages
of P!00,000.00, 'ecause of sleepless nights and mental anguish, and pa+ment of her
mone+ mar$et placement of P80,H!8.!8J all defendants claimed for e:emplar+ damages
and attorne+9s fees of P100,000.00. However, the petition was dismissed.
Page | 150
Both parties appealed the a'ove decision to the 2ourt of .ppeals. The 2ourt of
.ppeals affirmed the decision of the trial court, while the dismissal of the counterclaim
of defendants was @<C<@*<D and *<T .*&D<. The (udgment is rendered as follows:
31. rdering plaintiff BP& to pa+ the following amounts of damages:
3Moral Damages I
3aBP1,000,000.00 to the late Daniel 7. 2arreon or his estate represented '+ .urora =.
2arreonJ
3'BP1,000,000.00 to .urora =. 2arreonJ P!00,000.00 to the late =osefa M. =eceil or her
estate represented '+ .urora =. 2arreonJ
32ompensator+ Damages I
3P1,!00,000.00 to D. 7. 2arreon 2ommercial 2orporationJ
3<:emplar+ Damages I
P1,000,000.00 to all defendantsJ
3.ttorne+9s %ees I
P!00,000.00 to all defendants
3). rdering plaintiff BP& to pa+ to the estate of Daniel 7. 2arreon, represented '+
.urora =. 2arreon, the mone+ mar$et placement of P10/,)0H.8! with 1)E interest per
annum from =une 0, 1/H) until full+ paidJ
30. rdering plaintiff BP& to pa+ to the estate of =osefa M. =eceil, represented '+ .urora
=. 2arreon, the mone+ mar$et placement in the amount of P80,H!8.!8 at 1)E interest
per annum from maturit+ on =ul+ 1), 1/H) until full+ paidJ
3F. rdering plaintiff BP& to pa+ for the costs of the suit.L
ISS$E8
,hether the 2ourt of .ppeals awarded e:cessive moral and e:emplar+ damages
as well as attorne+9s fees to respondents.
R$LING8
The law on e:emplar+ damages is found in *ection !, 2hapter 0, Title VC&&&, Boo$
&C of the 2ivil 2ode. These are imposed '+ wa+ of e:ample or correction for the pu'lic
good, in addition to moral, temperate, li4uidated, or compensator+ damages. The+ are
recovera'le in criminal cases as part of the civil lia'ilit+ when the crime was committed
Page | 151
with one or more aggravating circumstancesJ in 4uasi6delicts, if the defendant acted
with gross negligenceJ and in contracts and 4uasi6contracts, if the defendant acted in a
wanton, fraudulent, rec$less, oppressive, or malevolent manner.
BP& &nvestments did not act in a wanton, fraudulent, rec$less, oppressive, or
malevolent manner, when it as$ed for preliminar+ attachment. &t was (ust e:ercising a
legal option. The sheriff of the issuing court did the e:ecution and the attachment.
Hence, BP& &nvestments is not to 'e 'lamed for the e:cessive and wrongful attachment.
The award of moral damages and attorne+9s fees is also not in $eeping with
e:isting (urisprudence. Moral damages ma+ 'e awarded in a 'reach of contract when
the defendant acted in 'ad faith, or was guilt+ of gross negligence amounting to 'ad
faith, or in wanton disregard of his contractual o'ligation. %inall+, with the elimination
of award of moral damages, so must the award of attorne+9s fees 'e deleted.
There is no dou't, however, that the damages sustained '+ respondents were due
to petitioner9s fault or negligence, short of gross negligence. Temperate or moderate
damages ma+ 'e recovered when the court finds that some pecuniar+ loss has 'een
suffered 'ut its amount cannot, from the nature of the case, 'e proved with certaint+.
The 2ourt deems it prudent to award reasona'le temperate damages to respondents
under the circumstances.
.s to the claim for pa+ment of the mone+ mar$et placement of =osefa =eceil, the
trial court ma+ release the deposited amount of P80,H!8.!8 to petitioner as the
consignation was not proper or warranted.
This, the decision of the 2ourt of .ppeals was .%%&@M<D with MD&%&2.T&1.
The award of moral, compensator+ and e:emplar+ damages and attorne+9s fees are
deleted. BP& &nvestments is ordered to pa+ to the estate of Daniel 7. 2arreon and
.urora =. 2arreon the mone+ mar$et placement of P10/,)0H.8!, with legal interest of
twelve A1)EB percent per annum from =une 0, 1/H), until full+ paidJ to pa+ the estate of
=osefa M. =eceil, the mone+ mar$et placement in the amount of P80,H!8.!8, with legal
interest at twelve A1)EB percent per annum from maturit+ on =ul+ 1), 1/H), until full+
paid. The petitioner ma+ withdraw its deposit from the lower court at its peril. BP&
&nvestments is li$ewise ordered to pa+ temperate damages to the estate of the late
Daniel 7. 2arreon in the amount of P000,000.00, and to the estate of .urora =. 2arreon
in the amount of P000,000.00, and to the estate of =osefa M. =eceil in the amount of
P1!0,000.00.
Page | 152
43E 3ONG C3ENG, a*)as FELI> 43E, SAN0RA -O, 43E a.; RA,
S#EVEN 43E 5s. CO$R# OF APPEALS, 3ON. #EOFILO G$A0I:, R#C 147,
MA4A#I CI#, a.; P3ILAM INS$RANCE CO., INC.
G.R. No. 14416+ !!1 Mar "
FAC#S8
Petitioner Ghe Hong 2heng, alias %eli: Ghe, is the owner of Butuan *hipping
#ines. n cto'er F, 1/H!, the Philippine .gricultural Trading 2orporation shipped on
'oard the vessel MMC P@&12< <@&2, owned '+ petitioner Ghe Hong 2heng, 0,F00 'ags
of copra at Mas'ate, Mas'ate, for deliver+ to Dipolog 2it+, Ram'oanga del 1orte. The
said shipment of copra was covered '+ a marine insurance polic+ issued '+ .merican
Home &nsurance 2ompan+ Arespondent PhilamKs assuredB. MMC P@&12< <@&2,
however, san$ somewhere 'etween 1egros &sland and 1ortheastern Mindanao,
resulting in the total loss of the shipment. Because of the loss, the insurer, .merican
Home, paid the amount of P0!F,000.00 Athe value of the copraB to the consignee.
Having 'een su'rogated into the rights of the consignee, .merican Home instituted a
civil case in the @T2 of Ma$ati to recover the mone+ paid to the consignee, 'ased on
'reach of contract of carriage.
,hile the case was still pending, petitioner Ghe Hong 2heng e:ecuted deeds of
donations of parcels of land in favor of his children, herein co6petitioners *andra =o+
and @a+ *teven. The parcel of land with an area of 1,000 s4uare meters was donated to
@a+ *teven. Petitioner Ghe Hong 2heng li$ewise donated in favor of *andra =o+ two
parcels of land located in Butuan 2it+. The trial court rendered (udgment against
petitioner Ghe Hong 2heng in 2ivil 2ase 1o. 100!8 on Decem'er )/, 1//0, four +ears
after the donations were made and the T2Ts were registered in the donees9 names.
.fter the said decision 'ecame final and e:ecutor+, a writ of e:ecution was
forthwith issued, however, it was not served. .n alias writ of e:ecution was, thereafter,
Page | 153
applied for and granted in cto'er 1//". Despite earnest efforts, the sheriff found no
propert+ under the name of Butuan *hipping #ines andMor petitioner Ghe Hong 2heng
to lev+ or garnish for the satisfaction of the trial courtKs decision. ,hen the sheriff,
accompanied '+ counsel of respondent Philam, went to Butuan 2it+ on =anuar+ 18,
1//8, to enforce the alias writ of e:ecution, the+ discovered that petitioner Ghe Hong
2heng no longer had an+ propert+ and that he had conve+ed the su'(ect properties to
his children.
@espondent Philam filed a complaint with the @T2 of Ma$ati 2it+ for the
rescission of the deeds of donation e:ecuted '+ petitioner Ghe Hong 2heng in favor of
his children and for the nullification of their titles. @espondent Philam alleged, inter
alia, that petitioner Ghe Hong 2heng e:ecuted the aforesaid deeds in fraud of his
creditors, including respondent Philam. Petitioners su'se4uentl+ filed their answer to
the complaint a 4uo. The+ moved for its dismissal on the ground that the action had
alread+ prescri'ed. The trial court denied the motion to dismiss. &t held that respondent
PhilamKs complaint had not +et prescri'ed. n appeal '+ petitioners, the 2. affirmed
the trial courtKs decision in favor of respondent Philam.
The 2. declared that the action to rescind the donations had not +et prescri'ed.
2iting .rticles 10H1 and 10H0 of the 2ivil 2ode, the 2. 'asicall+ ruled that the four +ear
period to institute the action for rescission 'egan to run onl+ in =anuar+ 1//8, and not
when the decision in the civil case 'ecame final and e:ecutor+ on Decem'er )/, 1//0.
The 2. rec$oned the accrual of respondent PhilamKs cause of action on =anuar+ 1//8,
the time when it first learned that the (udgment award could not 'e satisfied 'ecause the
(udgment creditor, petitioner Ghe Hong 2heng, had no more properties in his name.
Prior thereto, respondent Philam had not +et e:hausted all legal means for the
satisfaction of the decision in its favor, as prescri'ed under .rticle 10H0 of the The 2ourt
of .ppeals thus denied the petition for certiorari filed 'efore it, and held that the trial
court did not commit an+ error in den+ing petitionersK motion to dismiss. Their motion
for reconsideration was li$ewise dismissed in the appellate courtKs resolution dated =ul+
11, )000.
ISS$E8
,hether or not the remed+ of accion pauliana '+ the respondent is valid.
R$LING8
.rticle 10H/ of the 2ivil 2ode simpl+ provides that, 3The action to claim
rescission must 'e commenced within four +ears.5 *ince this provision of law is silent as
to when the prescriptive period would commence, the general rule, i.e, from the moment
the cause of action accrues, therefore, applies. .rticle 11!0 of the 2ivil 2ode is
particularl+ instructive:
.rt. 11!0. The time for prescription for all $inds of actions, when there is no special
provision which ordains otherwise, shall 'e counted from the da+ the+ ma+ 'e 'rought.
Page | 154
&ndeed, the 2ourt enunciated the principle that it is the legal possi'ilit+ of
'ringing the action which determines the starting point for the computation of the
prescriptive period for the action. .rticle 10H0 of the 2ivil 2ode provides as follows:
.rt. 10H0. .n action for rescission is su'sidiar+J it cannot 'e instituted e:cept when the
part+ suffering damage has no other legal means to o'tain reparation for the same.
&t is thus apparent that an action to rescind or an accion pauliana must 'e of last
resort, availed of onl+ after all other legal remedies have 'een e:hausted and have 'een
proven futile. %or an accion pauliana to accrue, the following re4uisites must concur:
1B That the plaintiff as$ing for rescission has a credit prior to the
alienation, although demanda'le laterJ
)B That the de'tor has made a su'se4uent contract conve+ing a
patrimonial 'enefit to a third personJ
0B That the creditor has no other legal remed+ to satisf+ his claim, 'ut
would 'enefit '+ rescission of the conve+ance to the third personJ
FB That the act 'eing impugned is fraudulentJ
!B That the third person who received the propert+ conve+ed, if '+ onerous
title, has 'een an accomplice in the fraud.
.n accion pauliana accrues onl+ when the creditor discovers that he has no other
legal remed+ for the satisfaction of his claim against the de'tor other than an accion
pauliana. The accion pauliana is an action of a last resort. %or as long as the creditor
still has a remed+ at law for the enforcement of his claim against the de'tor, the creditor
will not have an+ cause of action against the creditor for rescission of the contracts
entered into '+ and 'etween the de'tor and another person or persons. &ndeed, an
accion pauliana presupposes a (udgment and the issuance '+ the trial court of a writ of
e:ecution for the satisfaction of the (udgment and the failure of the *heriff to enforce
and satisf+ the (udgment of the court. &t presupposes that the creditor has e:hausted
the propert+ of the de'tor. The date of the decision of the trial court against the de'tor
is immaterial. ,hat is important is that the credit of the plaintiff antedates that of the
fraudulent alienation '+ the de'tor of his propert+. .fter all, the decision of the trial
court against the de'tor will retroact to the time when the de'tor 'ecame inde'ted to
the creditor.
.n accion pauliana thus presupposes the following:
1B . (udgmentJ
)B the issuance '+ the trial court of a writ of e:ecution for the satisfaction
of the (udgment, and
0B the failure of the sheriff to enforce and satisf+ the (udgment of the court.
&t re4uires that the creditor has e:hausted the propert+ of the de'tor. The date of
the decision of the trial court is immaterial. ,hat is important is that the credit of the
plaintiff antedates that of the fraudulent alienation '+ the de'tor of his propert+. .fter
Page | 155
all, the decision of the trial court against the de'tor will retroact to the time when the
de'tor 'ecame inde'ted to the creditor.
,hile it is necessar+ that the credit of the plaintiff in the accion pauliana must 'e
prior to the fraudulent alienation, the date of the (udgment enforcing it is immaterial.
<ven if the (udgment 'e su'se4uent to the alienation, it is merel+ declarator+ with
retroactive effect to the date when the credit was constituted.
The following successive measures must 'e ta$en '+ a creditor 'efore he ma+
'ring an action for rescission of an allegedl+ fraudulent sale:
A1B e:haust the properties of the de'tor through lev+ing '+ attachment and
e:ecution upon all the propert+ of the de'tor, e:cept such as are e:empt from e:ecutionJ
A)B e:ercise all the rights and actions of the de'tor, save those personal to
him Aaccion su'rogatoriaBJ and
A0B see$ rescission of the contracts e:ecuted '+ the de'tor in fraud of their
rights Aaccion paulianaB.
<ven if respondent Philam was aware, as of Decem'er )8, 1/H/, that petitioner
Ghe Hong 2heng had e:ecuted the deeds of donation in favor of his children, the
complaint against Butuan *hipping #ines andMor petitioner Ghe Hong 2heng was still
pending 'efore the trial court. @espondent Philam had no in$ling, at the time, that the
trial courtKs (udgment would 'e in its favor and further, that such (udgment would not
'e satisfied due to the deeds of donation e:ecuted '+ petitioner Ghe Hong 2heng during
the pendenc+ of the case. Had respondent Philam filed his complaint on Decem'er )8,
1/H/, such complaint would have 'een dismissed for 'eing premature. 1ot onl+ were all
other legal remedies for the enforcement of respondent Philam9s claims not +et
e:hausted at the time the deeds of donation were e:ecuted and registered. @espondent
Philam would also not have 'een a'le to prove then that petitioner Ghe Hong 2hneg had
no more propert+ other than those covered '+ the su'(ect deeds to satisf+ a favora'le
(udgment '+ the trial court.
,H<@<%@<, the petition is D<1&<D for lac$ of merit.
Page | 156
RO%ER#O C. SICAM a.; AGENCIA ;e R.C. SICAM, INC. 5ersus L$L$ V.
-ORGE a.; CESAR -ORGE
G.R. NO. 15+617 Au6us7 ", !!7
FAC#S8
n different dates from *eptem'er to cto'er 1/H8, #ulu C. =orge pawned
several pieces of (ewelr+ with .gencia de @. 2. *icam located at 1o. 18 .guirre .ve., B%
Homes ParaQa4ue, Metro Manila, to secure a loan in the total amount of P!/,!00.00.
n cto'er 1/, 1/H8, two armed men entered the pawnshop and too$ awa+
whatever cash and (ewelr+ were found inside the pawnshop vault. Petitioner *icam sent
respondent #ulu a letter dated cto'er 1/, 1/H8 informing her of the loss of her (ewelr+
due to the ro''er+ incident in the pawnshop. n 1ovem'er ), 1/H8, respondent #ulu
then wrote a letter to petitioner *icam e:pressing dis'elief stating that when the ro''er+
happened, all (ewelr+ pawned were deposited with %ar <ast Ban$ near the pawnshop
since it had 'een the practice that 'efore the+ could withdraw, advance notice must 'e
given to the pawnshop so it could withdraw the (ewelr+ from the 'an$. @espondent #ulu
then re4uested petitioner *icam to prepare the pawned (ewelr+ for withdrawal on
1ovem'er ", 1/H8 'ut petitioner *icam failed to return the (ewelr+.
n *eptem'er )H, 1/HH, respondent #ulu (oined '+ her hus'and, 2esar =orge,
filed a complaint against petitioner *icam with the @egional Trial 2ourt of Ma$ati
see$ing indemnification for the loss of pawned (ewelr+ and pa+ment of actual, moral
and e:emplar+ damages as well as attorne+Ks fees. However, petitioner *icam contends
that he is not the real part+6in6interest as the pawnshop was incorporated on .pril )0,
1/H8 and $nown as .gencia de @.2. *icam, &ncJ that petitioner corporation had
e:ercised due care and diligence in the safe$eeping of the articles pledged with it and
could not 'e made lia'le for an event that is fortuitous.

.fter trial ,the @T2 rendered its Decision dismissing respondents9 complaint as
well as petitioners9 counterclaim. The @T2 held that ro''er+ is a fortuitous event which
e:empts the victim from lia'ilit+ for the loss and under .rt. 118F of the 2ivil 2ode. &t
further held that the corresponding diligence re4uired of a pawnshop is that it should
ta$e steps to secure and protect the pledged items and should ta$e steps to insure itself
against the loss of articles which are entrusted to its custod+ as it derives earnings from
the pawnshop trade which petitioners failed to do and that ro''eries and hold6ups are
foreseea'le ris$s in that those engaged in the pawnshop 'usiness are e:pected to
foresee.
ISS$E8
,hether petitioners are lia'le for the loss of the pawned articles in their
possession.
Page | 157
R$LING8
%ortuitous events '+ definition are e:traordinar+ events not foreseea'le or
avoida'le. &t is therefore, not enough that the event should not have 'een foreseen or
anticipated, as is commonl+ 'elieved 'ut it must 'e one impossi'le to foresee or to
avoid. The mere difficult+ to foresee the happening is not impossi'ilit+ to foresee the
same.
To constitute a fortuitous event, the following elements must concur: AaB the
cause of the unforeseen and une:pected occurrence or of the failure of the de'tor to
compl+ with o'ligations must 'e independent of human willJ A'B it must 'e impossi'le
to foresee the event that constitutes the caso fortuito or, if it can 'e foreseen, it must 'e
impossi'le to avoidJ AcB the occurrence must 'e such as to render it impossi'le for the
de'tor to fulfill o'ligations in a normal mannerJ and, AdB the o'ligor must 'e free from
an+ participation in the aggravation of the in(ur+ or loss.
The 'urden of proving that the loss was due to a fortuitous event rests on him
who invo$es it. .nd, in order for a fortuitous event to e:empt one from lia'ilit+, it is
necessar+ that one has committed no negligence or misconduct that ma+ have
occasioned the loss.
&t has 'een held that an act of 7od cannot 'e invo$ed to protect a person who has
failed to ta$e steps to forestall the possi'le adverse conse4uences of such a loss. neKs
negligence ma+ have concurred with an act of 7od in producing damage and in(ur+ to
anotherJ nonetheless, showing that the immediate or pro:imate cause of the damage or
in(ur+ was a fortuitous event would not e:empt one from lia'ilit+. ,hen the effect is
found to 'e partl+ the result of a personKs participation 66 whether '+ active intervention,
neglect or failure to act 66 the whole occurrence is humani>ed and removed from the
rules applica'le to acts of 7od.
Petitioner *icam had testified that there was a securit+ guard in their pawnshop
at the time of the ro''er+ and that when he started the pawnshop 'usiness in 1/H0, he
thought of opening a vault with the near'+ 'an$ for the purpose of safe$eeping the
valua'les 'ut was discouraged '+ the 2entral Ban$ since pawned articles should onl+ 'e
stored in a vault inside the pawnshop. The ver+ measures which petitioners had
allegedl+ adopted show that to them the possi'ilit+ of ro''er+ was not onl+ foreseea'le,
'ut actuall+ foreseen and anticipated. The testimon+, in effect, contradicts petitioners9
defense of fortuitous event. Moreover, petitioners failed to show that the+ were free
from an+ negligence '+ which the loss of the pawned (ewelr+ ma+ have 'een occasioned.
@o''er+ per se, (ust li$e carnapping, is not a fortuitous event. &t does not
foreclose the possi'ilit+ of negligence on the part of herein petitioners. The presentation
of the police report of the ParaQa4ue Police *tation on the ro''er+ committed 'ased on
the report of petitionersK emplo+ees is not sufficient to esta'lish ro''er+. *uch report
also does not prove that petitioners were not at fault. .lso, the ro''er+ in this case too$
place in 1/H8 when ro''er+ was alread+ prevalent and petitioners in fact had alread+
Page | 158
foreseen it as the+ wanted to deposit the pawn with a near'+ 'an$ for safe$eeping. Thus,
petitioners are negligent in securing their pawnshop.
FLORENCIA #. 3$I%ON3OA 5s. CO$R# OF APPEALS, S(ouses RuE).a G.
L)2 a.; AN#3ON, LIM, LORE#A GO-OCCO C3$A a.; S(ouses
SEVERINO a.; PRISCILLA GO-OCCO
G.R. No. +5"+7 1+++ 0e1 14
FAC#S8
n =une H, 1/H0, %lorencia T. Hui'onhoa entered into a memorandum of
agreement with si'lings @ufina 7o(occo #im, *everino 7o(occo and #oreta 7o(occo
2hua stipulating that %lorencia T. Hui'onhoa would lease from them 0 ad(acent
commercial lots at &la+a *treet, Binondo, Manila, all in their A7o(occosKB names.
n =une 00, 1/H0, pursuant to the said memorandum of agreement, the parties
in$ed a contract of lease of the same three lots for a period of fifteen +ears commencing
on =ul+ 1, 1/H0 and renewa'le upon agreement of the parties. *u'(ect contract was to
ena'le the lessee, %lorencia T. Hui'onhoa, to construct a Lfour6store+ reinforced
concrete 'uilding with concrete roof dec$, according to plans and specifications
approved '+ the 2it+ <ngineerKs ffice.L The parties agreed that the lessee could
letMsu'lease the 'uilding andMor its spaces to interested parties under such terms and
conditions as the lessee would determine and that all amounts collected as rents or
income from the propert+ would 'elong e:clusivel+ to the lessee. The lessee undertoo$
to complete construction of the 'uilding Lwithin eight AHB months from the date of the
e:ecution of the contract of lease.L
Page | 159
The parties also agreed that upon the termination of the lease, the ownership and
title to the 'uilding thus constructed on the said lots would automaticall+ transfer to the
lessor, even without an+ implementing document therefor. @eal estate ta:es on the land
would 'e 'orne '+ the lessor while that on the 'uilding, '+ the lessee, 'ut the latter was
authori>ed to advance the mone+ needed to meet the lessorsK o'ligations such as the
pa+ment of real estate ta:es on their lots. The lessors would deduct from the monthl+
rental due all such advances made '+ the lessee.
.fter the e:ecution of the contract, the 7o(occos e:ecuted a power of attorne+
granting Hui'onhoa the authorit+ to o'tain Lcredit facilitiesL in order that the three lots
could 'e mortgaged for a limited one6+ear period from =ul+ 1/H0. Hence, on *eptem'er
1), 1/H0, Hui'onhoa o'tained from 2hina Ban$ing 2orporation Lcredit facilitiesL not
e:ceeding ne Million Pesos. *imultaneousl+, she mortgaged the three lots to the
creditor 'an$. %ifteen da+s later, Hui'onhoa signed a contract amending the real estate
mortgage in favor of 2hina Ban$ing 2orporation where'+ the Lcredit facilitiesL were
increased to the principal sum of Three Million Pesos.
During the construction of the 'uilding which later 'ecame $nown as Poule:
Merchandise 2enter, former *enator Benigno .4uino, =r. was assassinated. The incident
must have affected the countr+Ks political and economic sta'ilit+. The conse4uent
hoarding of construction materials and increase in interest rates allegedl+ affected
adversel+ the construction of the 'uilding such that Hui'onhoa failed to complete the
same within the stipulated eight6month period. Pro(ected to 'e finished on %e'ruar+ )/,
1/HF, the construction was completed onl+ in *eptem'er 1/HF or seven months later.
Dnder the contract, Hui'onhoa was supposed to start pa+ing rental in March
1/HF 'ut she failed to do so. 2onse4uentl+, the 7o(occos made several ver'al demands
upon Hui'onhoa for the pa+ment of rental arrearages and, for her to vacate the leased
premises. n Decem'er 1/, 1/HF, lessors sent lessee a final letter of demand to pa+ the
rental arrearages and to vacate the leased premises. The former also notified the latter of
their intention to terminate the contract of lease.
However, on =anuar+ 0, 1/H!, Hui'onhoa 'rought an action for reformation of
contract., the 2omplaint alleged that although there was a meeting of the minds 'etween
the parties on the lease contract, their true intention as to when the monthl+ rental
would accrue was not therein e:pressed due to mista$e or accident. Thus, according to
Hui'onhoa, the first rent would have 'een due onl+ in cto'er 1/HF. Moreover, the
assassination of former *enator Benigno .4uino, =r., an unforeseen event, caused the
countr+Ks econom+ to turn from 'ad to worse and as a result, the prices of commodities
li$e construction materials so increased that the 'uilding worth *i: Million pesos
escalated to Lsomething li$e 11 to 1) million pesos.L However, she averred that '+ reason
of mista$e or accident, the lease contract failed to provide that should an unforeseen
event dramaticall+ increase the cost of construction, the monthl+ rental would 'e
reduced and the term of the lease would 'e e:tended for such duration as ma+ 'e fair
and e4uita'le to 'oth the lessors and the lessee.
Page | 160
ISS$E8
,hether or not the 2ourt failed to consider the tragic assassination of former
*enator Benigno .4uino as a fortuitous event or force ma(eure which (ustifies the
ad(ustment of the terms of the contract of lease.
R$LING8
The 2ourt does not find merit in her su'mission that the assassination of the late
*enator Benigno .4uino, =r. was a fortuitous event that (ustified a modification of the
terms of the lease contract.
&n the case, the assassination of *enator .4uino ma+ indeed 'e considered a
fortuitous event. However, the said incident per se could not have caused the dela+ in
the construction of the 'uilding. ,hat might have caused the dela+ was the resulting
escalation of prices of commodities including construction materials. Be that as it ma+,
there is no merit in Hui'onhoaKs argument that the inflation 'orne '+ the %ilipinos in
1/H0 (ustified the dela+ed accrual of monthl+ rental, the reduction of its amount and the
e:tension of the lease '+ three +ears.
&nflation is the sharp increase of mone+ or credit or 'oth without a corresponding
increase in 'usiness transaction. There is inflation when there is an increase in the
volume of mone+ and credit relative to availa'le goods resulting in a su'stantial and
continuing rise in the general price level. ,hile it is of (udicial notice that there has 'een
a decline in the purchasing power of the Philippine peso, this downward fall of the
currenc+ cannot 'e considered unforeseea'le considering that since the 1/80Ks we have
'een e:periencing inflation. &t is simpl+ a universal trend that has not spared our
countr+. 2onforma'l+, the 2ourt upheld the petitionerKs view in ccena v. =a'son that
even a worldwide increase in prices does not constitute a sufficient cause of action for
modification of an instrument.
&t is onl+ when an e:traordinar+ inflation supervenes that the law affords the
parties a relief in contractual o'ligations. .rt. 1)!0 of the 2ivil 2ode provides that LAiBn
case an e:traordinar+ inflation or deflation of the currenc+ stipulated should supervene,
the value of the currenc+ at the time of the esta'lishment of the o'ligation shall 'e the
'asis of the pa+ment, unless there is an agreement to the contrar+.L
<:traordinar+ inflation e:ists when Kthere is a decrease or increase in the
purchasing power of the Philippine currenc+ which is unusual or 'e+ond the common
fluctuation in the value of said currenc+, and such decrease or increase could not have
'een reasona'l+ foreseen or was manifestl+ 'e+ond the contemplation of the parties at
the time of the esta'lishment of the o'ligation.
1o decrease in the peso value of such magnitude having occurred, Hui'onhoa
has no valid ground to as$ this 2ourt to intervene and modif+ the lease agreement to
suit her purpose. .s it is, Hui'onhoa even failed to prove '+ evidence, documentar+ or
testimonial, that there was an e:traordinar+ inflation from =ul+ 1/H0 to %e'ruar+ 1/HF.
Page | 161
.lthough she repeatedl+ alleged that the cost of constructing the 'uilding dou'led from
P" million to P1) million, she failed to show '+ how much, for instance, the price inde:
of goods and services had risen during that intervening period. .n e:traordinar+
inflation cannot 'e assumed. Hence, for Hui'onhoa to claim e:emption from lia'ilit+ '+
reason of fortuitous event under .rt. 118F of the 2ivil 2ode, she must prove that
inflation was the sole and pro:imate cause of the loss or destruction of the contract or,
in this case, of the dela+ in the construction of the 'uilding. Having failed to do so,
Hui'onhoaKs contention is untena'le.
Patheticall+, if indeed a fortuitous event deterred the timel+ fulfillment of
Hui'onhoaKs o'ligation under the lease contract, she chose the wrong remed+ in filing
the case for reformation of the contract. &nstead, she should have availed of the remed+
of recission of contract in order that the court could release her from performing her
o'ligation under .rts. 1)"", the de'tor in o'ligations to do shall also 'e released when
the presentation 'ecomes legall+ or ph+sicall+ impossi'le without the fault of the o'ligor
and 1)"8, when the service has 'ecome so difficult as to 'e manifestl+ 'e+ond the
contemplation of the parties, the o'ligor ma+ also 'e released therefrom, in whole or in
part, so that the parties could 'e restored to their status prior to the e:ecution of the
lease contract.
Page | 162
ACE-AGRO 0EVELOPMEN# CORPORA#ION 5s. CO$R# OF APPEALS a.;
COSMOS %O##LING CORPORA#ION
G.R. No. 11+7+ 1++7 -a. 1
FAC#S8
Private respondent 2osmos Bottling 2orp. is engaged in the manufacture of soft
drin$s. *ince 1/8/ petitioner .ce6.gro Development 2orp. had 'een cleaning soft drin$
'ottles and repairing wooden shells for 2osmos, rendering its services within the
compan+ premises in *an %ernando, Pampanga. The parties entered into service
contracts which the+ renewed ever+ +ear. n =anuar+ 1H, 1//0, the+ signed a contract
covering the period =anuar+ 1, 1//0 to Decem'er 01, 1//0. Private respondent had
earlier contracted the services of .ren <nterprises in view of the fact that petitioner
could handle onl+ from ),000 to ),!00 cases a da+ and could not cope with private
respondentKs dail+ production of H,000 cases. Dnli$e petitioner, .ren <nterprises
rendered service outside private respondentKs plant.
n .pril )!, 1//0, fire 'ro$e out in private respondentKs plant, destro+ing, among
other places, the area where petitioner did its wor$. .s a result, petitionerKs wor$ was
stopped. n Ma+ 1!, 1//0, petitioner as$ed private respondent to allow it to resume its
service, 'ut petitioner was advised that on account of the fire, which had practicall+
'urned all old soft drin$ 'ottles and wooden shells, private respondent was terminating
their contract. Petitioner e:pressed surprise at the termination of the contract and
re4uested private respondent, on =une 10, 1//0, to reconsider its decision and allow
petitioner to resume its wor$. .s it received no repl+ from private respondent,
petitioner, on =une )0, 1//0, informed its emplo+ees of the termination of their
emplo+ment.
&n response, private respondent advised petitioner on .ugust )H, 1//0 that the
latter could resume the repair of wooden shells under terms similar to those contained
in its contract 'ut wor$ had to 'e done outside the compan+ premises. Petitioner
refused the offer, claiming that to do its wor$ outside the compan+Ks premises would
ma$e it incur additional costs for transportation.
n =anuar+ 0, 1//1, petitioner 'rought the case against private respondent for
'reach of contract and damages in the @egional Trial 2ourt of Mala'on. &n its decision,
the @T2 found private respondent guilt+ of 'reach of contract and ordered it to pa+
damages to petitioner. Private respondent appealed to the 2ourt of .ppeals, which on
Decem'er )/, 1//F, reversed the trial courtKs decision and dismissed petitionerKs
Page | 163
complaint. The appellate court found that it was petitioner which had refused to resume
wor$, after failing to secure an e:tension of its contract.
ISS$E8
,hether or not the appellate court erred in ruling that respondent was (ustified
in unilaterall+ terminating the contract on account of a force ma(eure.
R$LING8
'ligations ma+ 'e e:tinguished '+ the happening of unforeseen events, under
whose influence the o'ligation would never have 'een contracted, 'ecause in such cases,
the ver+ 'asis upon which the e:istence of the o'ligation is founded would 'e wanting.
Both parties admitted that the .pril )!, 1//0 fire was a force ma(eure or unforeseen
event and that the same even 'urned practicall+ all the softdrin$ 'ottles and wooden
shells which are the o'(ects of the agreement. However, the court sa+s that there was no
cause for terminating the contract 'ut at most a temporar+ suspension of wor$. Thus, as
a result of the fire, the o'ligation of contract have not 'een e:tinguished.
The agreement 'etween the appellee and the appellant is with a resolutor+
period, 'eginning from =anuar+ 1, 1//0 and ending on Decem'er 01, 1//0. ,hen the
fire 'ro$e out on .pril )!, 1//0, there resulted a suspension of the appelleeKs wor$ as
per agreement. But this suspension of wor$ due to force ma(eure did not merit an
automatic e:tension of the period of the agreement 'etween them.

.ccording to Tolentino, the stipulation that in the event of a fortuitous event or
force ma(eure the contract shall 'e deemed suspended during the said period does not
mean that the happening of an+ of those events stops the running of the period the
contract has 'een agreed upon to run. &t onl+ relieves the parties from the fulfillment of
their respective o'ligations during that time. &f during si: of the thirt+ +ears fi:ed as the
duration of a contract, one of the parties is prevented '+ force ma(eure to perform his
o'ligation during those +ears, he cannot after the e:piration of the thirt+6+ear period, 'e
compelled to perform his o'ligation for si: more +ears to ma$e up for what he failed to
perform during the said si: +ears, 'ecause it would in effect 'e an e:tension of the term
of the contract. The contract is stipulated to run for thirt+ +ears, and the period e:pires
on the thirtieth +earJ the period of si: +ears during which performance '+ one of the
parties is prevented '+ force ma(eure cannot 'e deducted from the period stipulated.
,H<@<%@<, the petition is D<1&<D and the decision of the 2ourt of .ppeals
is .%%&@M<D.
Page | 164
PE0RO 0. 0IO/$INO 5s. FE0ERICO LA$REANO, AI0A 0E LA$REANO
a.; -$ANI#O LA$REANO
G.R. No. L-5+!6 May ", 1+7!
FAC#S8
.ttorne+ Pedro Dio4uino, a practicing law+er of Mas'ate, is the owner of a car.
n March 01, 1/"F, he went to the office of the MC, Mas'ate, to register the same. He
met the defendant %ederico #aureano, a patrol officer of said MC office, who was
waiting for a (eepne+ to ta$e him to the office of the Provincial 2ommander, P2,
Mas'ate. .ttorne+ Dio4uino re4uested the defendant %ederico #aureano to introduce
him to one of the cler$s in the MC ffice, who could facilitate the registration of his car
and the re4uest was graciousl+ attended to.
Defendant #aureano rode on the car of .tt+. Dio4uino on his wa+ to the P.2.
Barrac$s at Mas'ate. ,hile a'out to reach their destination, the car was stoned '+ some
Kmischievous 'o+s,K and its windshield was 'ro$en. Defendant %ederico #aureano chased
the 'o+s and he was a'le to catch one of them. The 'o+ was ta$en to .tt+. Dio4uino and
admitted having thrown the stone that 'ro$e the carKs windshield. The plaintiff and the
defendant %ederico #aureano with the 'o+ returned to the P.2. 'arrac$s and the father
of the 'o+ was called, 'ut no satisfactor+ arrangements were made.
%ederico #aureano refused to file an+ charges against the 'o+ and his parents
'ecause he thought that the stone6throwing was merel+ accidental and that it was due to
Page | 165
force majeure. *o he did not want to ta$e an+ action and after dela+ing the settlement,
the defendant %ederico #aureano refused to pa+ the windshield himself and challenged
that the case 'e 'rought to court for (udicial ad(udication.
ISS$E8
,hether or not the stone6throwing incident can 'e considered as a force ma(eure,
thus respondent can 'e held lia'le.
R$LING8
Dnder the 2ivil 2ode, the rule was well6settled that in the a'sence of a legal
provision or an e:press covenant, Lno one should 'e held to account for fortuitous
cases.L

The error committed '+ the lower court in holding defendant %ederico #aureano
lia'le appears to 'e thus o'vious. &ts own findings of fact repel the motion that he
should 'e made to respond in damages to the plaintiff for the 'ro$en windshield. ,hat
happened was clearl+ unforeseen. &t was a fortuitous event resulting in a loss which
must 'e 'orne '+ the owner of the car.
The trial court was misled, apparentl+, '+ the inclusion of the e:emption from the
operation of such a provision of a part+ assuming the ris$, considering the nature of the
o'ligation underta$en. The ver+ wording of the law dispels an+ dou't that what is
therein contemplated is the resulting lia'ilit+ even if caused '+ a fortuitous event where
the part+ charged ma+ 'e considered as having assumed the ris$ incident in the nature
of the o'ligation to 'e performed. &t would 'e an affront, not onl+ to the logic 'ut to the
realities of the situation, if in the light of what transpired, as found '+ the lower court,
defendant %ederico #aureano could 'e held as 'ound to assume a ris$ of this nature.
There was no such o'ligation on his part.
,H<@<%@<, the decision of the lower court of 1ovem'er ), 1/"! insofar as it
orders defendant %ederico #aureano to pa+ plaintiff the amount of P00,000.00 as
damages plus the pa+ment of costs, is reversed.
%a1<e*or EB(ress 5s CA
GR. NO. "56+1, -u*y '1, 1++!
FAC#S8
n 1 .ugust 1/H0, Bus H00, owned '+ Bachelor <:press, &nc. and driven '+
2resencio @ivera, came from Davao 2it+ on its wa+ to 2aga+an de ro 2it+ passing
Butuan 2it+. ,hile at Ta'on6Ta'on, Butuan 2it+, the 'us pic$ed up a passenger. .'out
1! minutes later, a passenger at the rear portion suddenl+ sta''ed a P2 soldier which
caused commotion and panic among the passengers. ,hen the 'us stopped, passengers
rnominio Beter and 1arcisa @autraut were found l+ing down the road, the former
Page | 166
alread+ dead as a result of head in(uries and the latter also suffering from severe in(uries
which caused her death later. The passenger6assailant alighted from the 'us and ran
toward the 'ushes 'ut was $illed '+ the police.
Thereafter, the heirs of rnomino Beter and 1arcisa @autraut A@icardo Beter and
*ergia Beter are the parents of rnominio while Teofilo @autraut and Rotera @autraut
are the parents of 1arcisaB filed a complaint for 3sum of mone+5 against Bachelor
<:press, its alleged owner *amson -asa+, and the driver @ivera. .fter due trial, the trial
court issued an order dated H .ugust 1/H! dismissing the complaint. The 2. however
reversed the @T2 decision.
ISS$ES8
1. ,hether or not the case at 'ar is within the conte:t of force ma(eure.
). *hould the petitioner 'e a'solved from lia'ilit+ for the death of its passengers;
R$LING8
The sudden act o the passenger who sta''ed another passenger in the 'us is
within the conte:t of force ma(eure. However, in order that a common carrier ma+ 'e
a'solved from lia'ilit+ in case of force ma(eure, it is not enough that the accident was
caused '+ force ma(eure. The common carrier must still proves that it was not negligent
in causing the in(uries resulting from such accident. 2onsidering the factual findings in
this case, it is clear that petitioner has failed to overcome the presumption of fault and
negligence found in the law governing common carriers. The argument that the
petitioners are not insurers of their passengers deserves no merit in view of the failure of
the petitioners to o'serve e:traordinar+ diligence in transporting safel+ the passengers
to their destination as warranted '+ law.
Page | 167
PE0RO VAS/$E:, SOLE0A0 OR#EGA, CLE#O %. %AGAIPO, AG$S#INA
VIR#$0ES, ROMEO VAS/$E: a.; MA>IMINA CAINA, 5s. #3E CO$R#
OF APPEALS a.; FILIPINAS PIONEER LINES, INC.
G.R. No. L-4+61+"5 Se( 1'
FAC#S8
MC KPioneer 2e'uK was owned and operated '+ the defendant and used in the
transportation of goods and passengers in the interisland shipping. &t had a passenger
capacit+ of three hundred twent+6two including the crew. &t undertoo$ the said vo+age
on a special permit issued '+ the 2ollector of 2ustoms inasmuch as, upon inspection, it
was found to 'e without an emergenc+ electrical power s+stem. The special permit
authori>ed the vessel to carr+ onl+ two hundred si:t+ passengers due to the said
deficienc+ and for lac$ of safet+ devices for 0)) passengers. . headcount was made of
the passengers on 'oard, resulting on the tall+ing of 1"H adults and )0 minors, although
the passengers manifest onl+ listed 10" passengers. &t has 'een admitted, however, that
the headcount is not relia'le.
,hen the vessel left Manila, its officers were alread+ aware of the t+phoon
Glaring 'uilding up somewhere in Mindanao. There 'eing no t+phoon signals on the
route from Manila to 2e'u, and the vessel having 'een cleared '+ the 2ustoms
authorities, the MC KPioneer 2e'uK left on its vo+age to 2e'u despite the t+phoon.,hen
it left the Port of Manila in the earl+ morning of Ma+ 1!, 1/"", t had on 'oard the
spouses .lfonso Cas4ue> and %ilipinas Bagaipo and a four6+ear old 'o+, Mario Marlon
Cas4ue>, among her passengers. The MC KPioneer 2e'uK encountered t+phoon KGlaringK
and struc$ a reef on the southern part of Malapascua &sland, located somewhere north
of the island of 2e'u and su'se4uentl+ sun$.
Plaintiffs Pedro Cas4ue> and *oledad rtega are the parents of .lfonso Cas4ue>J
plaintiffs 2leto Bagaipo and .gustina Cirtudes are the parents of %ilipinas BagaipoJ and
plaintiffs @omeo Cas4ue> and Ma:imina 2aina+ are the parents of the child, Mario
Marlon Cas4ue>. The+ see$ the recover+ of damages due to the loss of .lfonso Cas4ue>,
%ilipinas Bagaipo and Mario Marlon Cas4ue> during said vo+age.
The defendant admitted its contract of carriage with .lfonso Cas4ue>, %ilipinas
Bagaipo and Mario Marlon Cas4ue>, and the fact of the sin$ing of the MC KPioneer
2e'uK. The defendant alleged that the sin$ing of the vessel was caused '+ force ma(eure,
and that the defendantKs lia'ilit+ had 'een e:tinguished '+ the total loss of the vessel.
ISS$E8
,hether or not the respondent would 'e e:empt from responsi'ilit+ due to its
defense of fortuitous event.
R$LING8
Page | 168
To constitute a caso fortuito that would e:empt a person from responsi'ilit+, it is
necessar+ that A1B the event must 'e independent of the human willJ A)B the occurrence
must render it impossi'le for the de'tor to fulfill the o'ligation in a normal mannerJ and
that A0B the o'ligor must 'e free of participation in, or aggravation of, the in(ur+ to the
creditor. The event must have 'een impossi'le to foresee, or if it could 'e foreseen,
must have 'een impossi'le to avoid. There must 'e an entire e:clusion of human
agenc+ from the cause of in(ur+ or loss.
Dnder the circumstances, while, indeed, the t+phoon was an inevita'le
occurrence, +et, having 'een $ept posted on the course of the t+phoon '+ weather
'ulletins at intervals of si: hours, the captain and crew were well aware of the ris$ the+
were ta$ing as the+ hopped from island to island from @om'lon up to Tanguingui. The+
held fre4uent conferences, and o'livious of the utmost diligence re4uired of ver+
cautious persons, the+ decided to ta$e a calculated ris$. &n so doing, the+ failed to
o'serve that e:traordinar+ diligence re4uired of them e:plicitl+ '+ law for the safet+ of
the passengers transported '+ them with due regard for all circumstances and
unnecessaril+ e:posed the vessel and passengers to the tragic mishap. The+ failed to
overcome that presumption of fault or negligence that arises in cases of death or in(uries
to passengers.
,ith regard to the contention that the total loss of the vessel e:tinguished its
lia'ilit+ pursuant to .rticle !H8 of the 2ode of 2ommerce, it was held that the lia'ilit+ of
a shipowner is limited to the value of the vessel or to the insurance thereon. Despite the
total loss of the vessel therefore, its insurance answers for the damages that a shipowner
or agent ma+ 'e held lia'le for '+ reason of the death of its passengers.
,H<@<%@<, the appealed (udgment is @<C<@*<D and the (udgment of the then
2ourt of %irst &nstance of Manila is reinstated.
Page | 169
AL%ER#A ,O%I0O a.; CRESENCIO ,O%I0O 5s. CO$R# OF APPEALS,
LEN, #$M%O,, AR0EE #$M%O, a.; -ASMIN #$M%O,
G.R. No. 11'!!' 1++7 O17 17
FAC#S8
n .pril )", 1/HH, spouses Tito and #en+ Tum'o+ and their minor children
named .rdee and =asmin, 'oarded at Mangago+, *urigao del *ur, a -o'ido #iner 'us
'ound for Davao 2it+. .long Picop @oad in Gm. 18, *ta. Maria, .gusan del *ur, the left
front tire of the 'us e:ploded. The 'us fell into a ravine around three A0B feet from the
road and struc$ a tree. The incident resulted in the death of )H6+ear6old Tito Tum'o+,
and ph+sical in(uries to other passengers.
n 1ovem'er )1, 1/HH, a complaint for 'reach of contract of carriage, damages
and attorne+Ks fees was filed '+ #en+ and her children against .l'erta -o'ido, the owner
of the 'us, and 2resencio -o'ido, its driver, 'efore the @egional Trial 2ourt of Davao
2it+. The plaintiffs asserted that violation of the contract of carriage 'etween them and
the defendants was 'rought a'out '+ the driverKs failure to e:ercise the diligence
re4uired of the carrier in transporting passengers safel+ to their place of destination. n
the other hand, the defendants raised the affirmative defense of caso fortuito.
n .ugust )/, 1//1, the lower court rendered a decision dismissing the action for
lac$ of merit. &t ruled that the tire 'lowout was La caso fortuito which is completel+ an
e:traordinar+ circumstance independent of the willL of the defendants who should 'e
relieved of Lwhatever lia'ilit+ the plaintiffs ma+ have suffered '+ reason of the e:plosion
pursuant to .rticle 118F F of the 2ivil 2ode. Dpon appeal of the plaintiffs, the court
Page | 170
reversed the decision of the lower court, ruling that the e:plosion of the tire is not in
itself a fortuitous event.
ISS$E8
,hether or not petitioners should 'e e:empt from lia'ilit+ 'ecause the tire
'lowout was a fortuitous event.
R$LING8
.s a rule, when a passenger 'oards a common carrier, he ta$es the ris$s
incidental to the mode of travel he has ta$en. .fter all, a carrier is not an insurer of the
safet+ of its passengers and is not 'ound a'solutel+ and at all events to carr+ them safel+
and without in(ur+. However, when a passenger is in(ured or dies, while traveling, the
law presumes that the common carrier is negligent.
Thus, the 2ivil 2ode provides under .rticle 18!! that a common carrier is 'ound
to carr+ the passengers safel+ as far as human care and foresight can provide, using the
utmost diligence of ver+ cautious persons, with a due regard for all the circumstances.
.ccordingl+, in culpa contractual, once a passenger dies or is in(ured, the carrier is
presumed to have 'een at fault or to have acted negligentl+. This disputa'le
presumption ma+ onl+ 'e overcome '+ evidence that the carrier had o'served
e:traordinar+ diligence as prescri'ed '+ .rticles 1800, 10 18!! and 18!" of the 2ivil 2ode
or that the death or in(ur+ of the passenger was due to a fortuitous event. 2onse4uentl+,
the court need not ma$e an e:press finding of fault or negligence on the part of the
carrier to hold it responsi'le for damages sought '+ the passenger.
The petitionersK contention that the+ should 'e e:empt from lia'ilit+ 'ecause the
tire 'lowout was no more than a fortuitous event that could not have 'een foreseen,
must fail. Dnder the circumstances of this case, the e:plosion of the new tire ma+ not 'e
considered a fortuitous event. There are human factors involved in the situation. The
fact that the tire was new did not impl+ that it was entirel+ free from manufacturing
defects or that it was properl+ mounted on the vehicle. 1either ma+ the fact that the tire
'ought and used in the vehicle is of a 'rand name noted for 4ualit+, resulting in the
conclusion that it could not e:plode within five da+sK use. &t is settled that an accident
caused either '+ defects in the automo'ile or through the negligence of its driver is not a
caso fortuito that would e:empt the carrier from lia'ilit+ for damages.
Moral damages are generall+ not recovera'le in culpa contractual e:cept when 'ad faith
had 'een proven. However, the same damages ma+ 'e recovered when 'reach of
contract of carriage results in the death of a passenger, as in this case. <:emplar+
damages, awarded '+ wa+ of e:ample or correction for the pu'lic good when moral
damages are awarded, ma+ li$ewise 'e recovered in contractual o'ligations if the
defendant acted in wanton, fraudulent, rec$less, oppressive, or malevolent manner.
Because petitioners failed to e:ercise the e:traordinar+ diligence re4uired of a common
carrier, which resulted in the death of Tito Tum'o+, it is deemed to have acted
rec$lessl+. .s such, private respondents shall 'e entitled to e:emplar+ damages.
Page | 171
,H<@<%@<, the Decision of the 2ourt of .ppeals is .%%&@M<D.
RO%ER#O -$N#ILLA 5s. CLEMEN#E FON#ANAR, FERNAN0O %AN:ON
a.; %ERFOL CAMORO
G.R. No. L-456'7 1+"5 May '1
FAC#S8
Page | 172
Plaintiff was a passenger of the pu'lic utilit+ (eepne+ 'earing plate 1o. PD=68168
on the course of the trip from Danao 2it+ to 2e'u 2it+. The (eepne+ was driven '+
defendant Berfol 2amoro. &t was registered under the franchise of defendant 2lemente
%ontanar 'ut was actuall+ owned '+ defendant %ernando Ban>on. ,hen the (eepne+
reached Mandaue 2it+, the right rear tire e:ploded causing the vehicle to turn turtle. &n
the process, the plaintiff who was sitting at the front seat was thrown out of the vehicle.
Dpon landing on the ground, the plaintiff momentaril+ lost consciousness. ,hen
he came to his senses, he found that he had a lacerated wound on his right palm. .side
from this, he suffered in(uries on his left arm, right thigh and on his 'ac$. Because of his
shoc$ and in(uries, he went 'ac$ to Danao 2it+ 'ut on the wa+, he discovered that his
XmegaK wrist watch was lost. Dpon his arrival in Danao 2it+, he immediatel+ entered
the Danao 2it+ Hospital to attend to his in(uries, and also re4uested his father6in6law to
proceed immediatel+ to the place of the accident and loo$ for the watch. &n spite of the
efforts of his father6in6law, the wrist watch, which he 'ought for PH!).80 could no
longer 'e found.
Petitioner @o'erto =untilla, then filed a civil case for 'reach of contract with
damages 'efore the 2it+ 2ourt of 2e'u 2it+ against 2lemente %ontanar, %ernando
Ban>on and Berfol 2amoro. The respondents alleged that the accident that caused losses
to the petitioner was 'e+ond the control of the respondents ta$ing into account that the
tire that e:ploded was newl+ 'ought and was onl+ slightl+ used at the time it 'lew up.
The 2it+ 2ourt of 2e'u rendered (udgment in favor of the petitioner and against
the respondents. The respondents appealed to the 2ourt of %irst &nstance of 2e'u. The
court reversed the (udgment of the 2it+ 2ourt of 2e'u upon a finding that the accident
in 4uestion was due to a fortuitous event.
ISS$E8
,hether or not the 2ourt of %irst &nstance of 2e'u erred when it a'solved the
carrier from an+ lia'ilit+ upon a finding that the tire 'low out is a fortuitous event.
R$LING8
The 2ourt of %irst &nstance of 2e'u erred when it a'solved the carrier from an+
lia'ilit+ upon a finding that the tire 'low out is a fortuitous event for there are specific
acts of negligence on the part of the respondents. The records show that the passenger
(eepne+ turned turtle and (umped into a ditch immediatel+ after its right rear tire
e:ploded. The evidence shows that the passenger (eepne+ was running at a ver+ fast
speed 'efore the accident. ,e agree with the o'servation of the petitioner that a pu'lic
utilit+ (eep running at a regular and safe speed will not (ump into a ditch when its right
rear tire 'lows up. There is also evidence to show that the passenger (eepne+ was
overloaded at the time of the accident.
The preponderance of authorit+ is in favor of the doctrine that a passenger is
entitled to recover damages from a carrier for an in(ur+ resulting from a defect in an
Page | 173
appliance purchased from a manufacturer, whenever it appears that the defect would
have 'een discovered '+ the carrier if it had e:ercised the degree of care which under
the circumstances was incum'ent upon it, with regard to inspection and application of
the necessar+ tests. %or the purposes of this doctrine, the manufacturer is considered as
'eing in law the agent or servant of the carrier, as far as regards the wor$ of constructing
the appliance. .ccording to this theor+, the good repute of the manufacturer will not
relieve the carrier from lia'ilit+.
The rationale of the carrierKs lia'ilit+ is the fact that the passenger has neither
choice nor control over the carrier in the selection and use of the e4uipment and
appliances in use '+ the carrier. Having no privit+ whatever with the manufacturer or
vendor of the defective e4uipment, the passenger has no remed+ against him, while the
carrier usuall+ has. &t is 'ut logical, therefore, that the carrier, while not an insurer of
the safet+ of his passengers, should nevertheless 'e held to answer for the flaws of his
e4uipment if such flaws were at all discovera'le.
The source of a common carrierKs legal lia'ilit+ is the contract of carriage, and '+
entering into the said contract, it 'inds itself to carr+ the passengers safel+ as far as
human care and foresight can provide, using the utmost diligence of a ver+ cautious
person, with a due regard for all the circumstances. The records show that this
o'ligation was not met '+ the respondents.
,H<@<%@<, the decision of the 2ourt of %irst &nstance of 2e'u is @<C<@*<D
and *<T .*&D<, and the decision of the 2it+ 2ourt of 2e'u is @<&1*T.T<D.
Page | 174
#3E P3ILIPPINE AMERICAN GENERAL INS$RANCE CO., INC. 5s. MGG
MARINE SERVICES, INC. a.; 0ORO#EO GAERLAN
G.R. No. 1'5645 !! Mar "
FAC#S8
n March 1, 1/H8, *an Miguel 2orporation insured several 'eer 'ottle cases with
petitioner Philippine .merican 7eneral &nsurance 2ompan+. The cargo were loaded on
'oard the MMC Peathera+ Patric$67 to 'e transported from Mandaue 2it+ to Bislig,
*urigao del *ur. .fter having 'een cleared '+ the 2oast 7uard *tation in 2e'u the
previous da+, the vessel left the port of Mandaue 2it+ for Bislig, *urigao del *ur on
March ), 1/H8.
The following da+, March 0, 1/H8, MMC Peathera+ Patric$67 listed and
su'se4uentl+ sun$ off 2awit Point, 2ortes, *urigao del *ur. .s a conse4uence thereof,
the cargo 'elonging to *an Miguel 2orporation was lost. *u'se4uentl+, *an Miguel
2orporation claimed the amount of its loss from petitioner.
The Board of Marine &n4uir+ conducted its own investigation of the sin$ing of the
MMC Peathera+ Patric$67 to determine whether or not the captain and crew of the vessel
should 'e held responsi'le for the incident. n Ma+ 11, 1/H/, the Board rendered its
decision e:onerating the captain and crew of the ill6fated vessel for an+ administrative
lia'ilit+. &t found that the cause of the sin$ing of the vessel was the e:istence of strong
winds and enormous waves in *urigao del *ur, a fortuitous event that could not have
'een forseen at the time the MMC Peathera+ Patric$67 left the port of Mandaue 2it+. &t
was further held '+ the Board that said fortuitous event was the pro:imate and onl+
cause of the vessel9s sin$ing.
The @T2 of Ma$ati 2it+ promulgated its Decision finding private respondents
solidaril+ lia'le for the loss of *an Miguel 2orporation9s cargo. Private respondents
appealed the trial court9s decision to the 2ourt of .ppeals. The appellate court reversed
the ruling of the @T2. &t held that private respondents could not 'e held lia'le for the
loss of *an Miguel 2orporation9s cargo 'ecause said loss occurred as a conse4uence of a
Page | 175
fortuitous event, and that such fortuitous event was the pro:imate and onl+ cause of the
loss.
ISS$E8
,hether the cargo was lost due to a fortuitous event and whether respondents
e:ercised due diligence to prevent the loss of the cargo.
R$LING8
2ommon carriers, from the nature of their 'usiness and for reasons of pu'lic
polic+, are mandated to o'serve e:traordinar+ diligence in the vigilance over the goods
and for the safet+ of the passengers transported '+ them. wing to this high degree of
diligence re4uired of them, common carriers, as a general rule, are presumed to have
'een at fault or negligent if the goods transported '+ them are lost, destro+ed or if the
same deteriorated.
However, this presumption of fault or negligence does not arise in the cases
enumerated under .rticle 180F of the 2ivil 2ode:
2ommon carriers are responsi'le for the loss, destruction, or deterioration of the goods,
unless the same is due to an+ of the following causes onl+:
A1B %lood, storm, earth4ua$e, lightning or other natural disaster or calamit+J
A)B .ct of the pu'lic enem+ in war, whether international or civilJ
A0B .ct or omission of the shipper or owner of the goodsJ
AFB The character of the goods or defects in the pac$ing or in the containersJ
A!B rder or act of competent pu'lic authorit+.
&n order that a common carrier ma+ 'e a'solved from lia'ilit+ where the loss,
destruction or deterioration of the goods is due to a natural disaster or calamit+, it must
further 'e shown that the such natural disaster or calamit+ was the pro:imate and onl+
cause of the lossJ there must 'e Lan entire e:clusion of human agenc+ from the cause of
the in(ur+ of the loss.L Moreover, even in cases where a natural disaster is the pro:imate
and onl+ cause of the loss, a common carrier is still re4uired to e:ercise due diligence to
prevent or minimi>e loss 'efore, during and after the occurrence of the natural disaster,
for it to 'e e:empt from lia'ilit+ under the law for the loss of the goods. &f a common
carrier fails to e:ercise due diligence66or that ordinar+ care which the circumstances of
the particular case demand 66to preserve and protect the goods carried '+ it on the
occasion of a natural disaster, it will 'e deemed to have 'een negligent, and the loss will
not 'e considered as having 'een due to a natural disaster under .rticle 180F A1B.
Page | 176
The findings of the Board of Marine &n4uir+ indicate that the attendance of
strong winds and huge waves while the MMC Peathera+ Patric$67 was sailing through
2ortes, *urigao del 1orte on March 0, 1/H8 was indeed fortuitous. Thus, the 2aprain
could not 'e e:pected to have foreseen the unfavora'le weather condition that awaited
the vessel in 2ortes, *urigao del *ur. &t was the presence of the strong winds and
enormous waves which caused the vessel to list, $eel over, and conse4uentl+ lose the
cargo contained therein. The appellate court li$ewise found that there was no negligence
on the part of the crew of the MMC Peathera+ Patric$67. Hence, private respondents
cannot 'e held lia'le for the said loss.
MIN0E> RESO$RCES 0EVELOPMEN# 5s. EP3RAIM MORILLO
G.R. No. 1'"1' !! Mar 1
FAC#S8
n %e'ruar+ 1//1, a ver'al agreement was entered into 'etween <phraim Morillo
and Minde: @esources 2orporation for the lease of the former9s " : " ten6wheeler cargo
truc$ for use in M&1D<V9s mining operations in Bina+'a+, Bigaan, *an Teodoro,
riental Mindoro, at the stipulated rental of TP000.00 per hour for a minimum of eight
hours a da+ or a total of P),F00.00 dail+.9 M&1D<V had 'een pa+ing the rentals until
.pril 10, 1//1.
Page | 177
Dn$nown to Morillo, on .pril 11, 1//1, the truc$ was 'urned '+ unidentified
persons while it was par$ed unattended at *itio .ras, Bigaan, *an Teodoro, riental
Mindoro, due to mechanical trou'le. Dpon learning of the 'urning incident, Morillo
offered to sell the truc$ to M&1D<V 'ut the latter refused. &nstead, it replaced the
vehicle9s 'urned tires and had it towed to a shop for repair and overhauling.
n .pril 1!, 1//1, Morillo sent a letter to Mr. .rni &s'erg, the %inance Manager of
M&1D<V, thru Mr. @amoncito 7o>ar, Pro(ect Manager, proposing that he is entrusting
to M&1D<V the said vehicle in the amount of P)8!,000.00 which is its cost price, in
four monthl+ installments. Morillo then promised to relin4uish all the necessar+
documents upon full pa+ment of said account. n the other hand, M&1D<V e:pressed
thier reservations and made counter offers that it will pa+ the truc$ in the amount of
P8",000, that the repair and overhaul will 'e on their e:pense, and that the+ wll return
it in a good running condition after repair. Morillo replied 1 that he will relin4uish to
M&1D<V the damaged truc$, that he is amena'le to receive the rental in the amount of
P8",000.00, and that M&1D<V will pa+ fift+ thousand pesos monthl+ until the 'alance
of P)8!,000.00 is full+ paid. n .ugust 1//1, Morillo pulled out the truc$ from the
repair shop of M&1D<V and had it repaired elsewhere for which he spent the total
amount of P10),8!0.00.
The @egional Trial 2ourt found petitioner responsi'le for the destruction or loss
of the leased " : " truc$. The appellate court sustained the @T29s finding that petitioner
was not without fault for the loss and destruction of the truc$ and, thus, lia'le therefor.
ISS$E8
,hether or not the 2ourt of .ppeals gravel+ erred in finding that petitioner failed
to overcome the presumption of negligence against it considering that the facts show
that the 'urning of the truc$ was a fortuitous event.
R$LING8
Both the @T2 and the 2. found petitioner negligent and thus lia'le for the loss or
destruction of the leased truc$. Both parties ma+ have suffered from the 'urning of the
truc$J however, as found '+ 'oth lower courts, the negligence of petitioner ma$es it
responsi'le for the loss.
&n order for a fortuitous event to e:empt one from lia'ilit+, it is necessar+ that
one has committed no negligence or misconduct that ma+ have occasioned the loss. .n
act of 7od cannot 'e invo$ed to protect a person who has failed to ta$e steps to forestall
the possi'le adverse conse4uences of such a loss. ne9s negligence ma+ have concurred
with an act of 7od in producing damage and in(ur+ to anotherJ nonetheless, showing
that the immediate or pro:imate cause of the damage or in(ur+ was a fortuitous event
would not e:empt one from lia'ilit+. ,hen the effect is found to 'e partl+ the result of a
person9s participation 66 whether '+ active intervention, neglect or failure to act 66 the
whole occurrence is humani>ed and removed from the rules applica'le to acts of 7od.
Page | 178
To constitute a fortuitous event, the following elements must concur: AaB the
cause of the unforeseen and une:pected occurrence or of the failure of the de'tor to
compl+ with o'ligations must 'e independent of human willJ A'B it must 'e impossi'le
to foresee the event that constitutes the caso fortuito or, if it can 'e foreseen, it must 'e
impossi'le to avoidJ AcB the occurrence must 'e such as to render it impossi'le for the
de'tor to fulfill o'ligations in a normal mannerJ and AdB the o'ligor must 'e free from
an+ participation in the aggravation of the in(ur+ or loss.
The records clearl+ shows that petitioner failed to e:ercise reasona'le care and
caution that an ordinaril+ prudent person would have used in the same situation.
Petitioner fell short of ordinar+ diligence in safeguarding the leased truc$ against the
accident.n Petitioner failed to emplo+ reasona'le foresight, diligence and care that
would have e:empted it from lia'ilit+ resulting from the 'urning of the truc$.
1egligence, as commonl+ understood, is that conduct that naturall+ or reasona'l+
creates undue ris$ or harm to others. &t ma+ 'e a failure to o'serve that degree of care,
precaution or vigilance that the circumstances (ustl+ demandJ or to do an+ other act that
would 'e done '+ a prudent and reasona'le person, who is guided '+ considerations
that ordinaril+ regulate the conduct of human affairs.
Page | 179
NA#IONAL PO9ER CORPORA#ION 5s. P3ILIPP %RO#3ERS OCEANIC,
INC.
G.R. No. 16!4 !!1 No5 !
FAC#S8
n Ma+ 1F, 1/H8, the 1ational Power 2orporation A1.P2@B issued invitations
to 'id for the suppl+ and deliver+ of 1)0,000 metric tons of imported coal for its
Batangas 2oal6%ired Thermal Power Plant in 2alaca, Batangas. The Philipp Brothers
ceanic, &nc. APH&B@B pre4ualified and was allowed to participate as one of the
'idders. .fter the pu'lic 'idding was conducted, PH&B@9s 'id was accepted.
1.P2@9s acceptance was conve+ed in a letter dated =ul+ H, 1/H8, which was received
'+ PH&B@ on =ul+ 1!, 1/H8.
n =ul+ 10, 1/H8, PH&B@ sent word to 1.P2@ that industrial disputes might
soon plague .ustralia, the shipment9s point of origin, which could seriousl+ hamper
PH&B@9s a'ilit+ to suppl+ the needed coal. %rom =ul+ )0 to =ul+ 01, 1/H8, PH&B@
again apprised 1.P2@ of the situation in .ustralia, particularl+ informing the latter
that the ship owners therein are not willing to load cargo unless a 3stri$e6free5 clause is
incorporated in the charter part+ or the contract of carriage. &n order to hasten the
transfer of coal, PH&B@ proposed to 1.P2@ that the+ e4uall+ share the 'urden of a
3stri$e6free5 clause. 1.P2@ refused.
n .ugust ", 1/H8, PH&B@ received from 1.P2@ a confirmed and wor$a'le
letter of credit. &nstead of delivering the coal on or 'efore the thirtieth da+ after receipt
of the #etter of 2redit, as agreed upon '+ the parties in the =ul+ contract, PH&B@
effected its first shipment onl+ on 1ovem'er 18, 1/H8. 2onse4uentl+, in cto'er 1/H8,
1.P2@ once more advertised for the deliver+ of coal to its 2alaca thermal plant.
PH&B@ participated anew in this su'se4uent 'idding. n 1ovem'er )F, 1/H8,
1.P2@ disapproved PH&B@9s application for pre64ualification to 'id for not
meeting the minimum re4uirements. Dpon further in4uir+, PH&B@ found that the real
reason for the disapproval was its purported failure to satisf+ 1.P2@9s demand for
damages due to the dela+ in the deliver+ of the first coal shipment.
PH&B@ then filed an action for damages with application for in(unction against
1.P2@ with the @egional Trial 2ourt of Ma$ati 2it+ alleging that 1.P2@9s act of
dis4ualif+ing it in the cto'er 1/H8 'idding and in all su'se4uent 'iddings was tainted
with malice and 'ad faith. n he other hand, 1.P2@ averred that the stri$es in
.ustralia could not 'e invo$ed as reason for the dela+ in the deliver+ of coal 'ecause
PH&B@ itself admitted that as of =ul+ )H, 1/H8 those stri$es had alread+ ceased. The
Page | 180
trial court rendered a decision in favor of PH&B@. n appeal, the 2ourt of .ppeals
rendered a Decision affirming in toto the Decision of the @egional Trial 2ourt stating
that stri$es are included in the definition of force ma(eure in *ection VC&& of the Bidding
Terms and *pecifications, so Phi'ro is not lia'le for an+ dela+ caused there'+. Phi'ro
was informed of the acceptance of its 'id on =ul+ H, 1/H8. Deliver+ of coal was to 'e
effected thirt+ A00B da+s from 1apocor9s opening of a confirmed and wor$a'le letter of
credit. 1apocor was onl+ a'le to do so on .ugust ", 1/H8.
ISS$E8
,hether or not the 2ourt of .ppeals gravel+ and seriousl+ erred in concluding
and so holding that PH&B@9s dela+ in the deliver+ of imported coal was due to
1.P2@9s alleged dela+ in opening a letter of credit and to force ma(eure, and not to
PH&B@9s own deli'erate acts and faults
R$LING8
The 2ourt of .ppeals is (ustified in sustaining the @egional Trial 2ourt9s decision
e:onerating PH&B@ from an+ lia'ilit+ for damages to 1.P2@ as it was clearl+
esta'lished from the evidence, testimonial and documentar+, that what prevented
PH&B@ from compl+ing with its o'ligation under the =ul+ 1/H8 contract was the
industrial disputes which 'esieged .ustralia during that time. <:tant in our 2ivil 2ode
is the rule that no person shall 'e responsi'le for those events which could not 'e
foreseeen, or which, though foreseen, were inevita'le. This means that when an o'ligor
is una'le to fulfill his o'ligation 'ecause of a fortuitous event or force ma(eure, he
cannot 'e held lia'le for damages for non6performance.
%ortuitous events ma+ 'e produced '+ two general causes: A1B '+ 1ature, such as
earth4ua$es, storms, floods, epidemics, fires, etc., and A)B '+ the act of man, such as an
armed invasion, attac$ '+ 'andits, governmental prohi'itions, ro''er+, etc.
The term generall+ applies, 'roadl+ spea$ing, to natural accidents. &n order that
acts of man such as a stri$e, ma+ constitute fortuitous event, it is necessar+ that the+
have the force of an imposition which the de'tor could not have resisted. Hence, '+ law
and '+ stipulation of the parties, the stri$es which too$ place in .ustralia from the first
wee$ of =ul+ to the third wee$ of *eptem'er, 1/H8, e:empted Phi'ro from the effects of
dela+ of the deliver+ of the shipment of coal.
&n addition, PH&B@ and 1.P2@ e:plicitl+ agreed in *ection VC&& of the
3Bidding Terms and *pecifications5 that 3neither seller APH&B@B nor 'u+er
A1.P2@B shall 'e lia'le for an+ dela+ in or failure of the performance of its
o'ligations, other than the pa+ment of mone+ due, if an+ such dela+ or failure is due to
%orce Ma(eure.5 *pecificall+, the+ defined force ma(eure as 3an+ disa'ling cause 'e+ond
the control of and without fault or negligence of the part+, which causes ma+ include 'ut
are not restricted to .cts of 7od or of the pu'lic enem+J acts of the 7overnment in either
Page | 181
its sovereign or contractual capacit+J governmental restrictionsJ stri$es, fires, floods,
wars, t+phoons, storms, epidemics and 4uarantine restrictions.5
The law is clear and so is the contract 'etween 1.P2@ and PH&B@.
Therefore, the court have no reason to rule otherwise. *ignificantl+, one characteristic of
a fortuitous event, in a legal sense, and conse4uentl+ in relations to contracts, is that
3the concurrence must 'e such as to render it impossi'le for the de'tor to fulfill his
o'ligation in a normal manner.5 %aced with the a'ove circumstance, 1.P2@ is
(ustified in assuming that, ma+ 'e, there was reall+ no fortuitous event or force ma(eure
which could render it impossi'le for PH&B@ to effect the deliver+ of coal.
$NION %AN4 OF #3E P3ILIPPINES 5ersus E0M$N0 SAN#I%A=E: a.;
FLORENCE SAN#I%A=E: ARIOLA
G.R. No. 14++6 !!5 Feb '
FAC#S8
n Ma+ 01, 1/H0, the %irst 2ountr+side 2redit 2orporation A%222B and <fraim
M. *anti'aQe> entered into a loan agreement in the amount of P1)H,000.00. The
amount was intended for the pa+ment of the purchase price of one unit %ord ""00
.gricultural .ll6Purpose Diesel Tractor. &n view thereof, <fraim and his son, <dmund,
e:ecuted a promissor+ note in favor of the %222, the principal sum pa+a'le in five e4ual
annual amorti>ations of PF0,8F!./" due on Ma+ 01, 1/H1 and ever+ Ma+ 01st thereafter
up to Ma+ 01, 1/H!.
n Decem'er 10, 1/H0, the %222 and <fraim entered into another loan
agreement, this time in the amount of P1)0,1!".00. &t was intended to pa+ the 'alance of
the purchase price of another unit of %ord ""00 .gricultural .ll6Purpose Diesel Tractor,
with accessories, and one unit Howard @otamotor Model .@ "0G. .gain, <fraim and his
son, <dmund, e:ecuted a promissor+ note for the said amount in favor of the %222.
Page | 182
.side from such promissor+ note, the+ also signed a 2ontinuing 7uarant+ .greement
for the loan dated Decem'er 10, 1/H0.
*ometime in %e'ruar+ 1/H1, <fraim died, leaving a holographic will.
*u'se4uentl+ in March 1/H1, testate proceedings commenced 'efore the @T2 of &loilo
2it+. n .pril /, 1/H1, <dmund, as one of the heirs, was appointed as the special
administrator of the estate of the decedent. During the pendenc+ of the testate
proceedings, the surviving heirs, <dmund and his sister %lorence *anti'aQe> .riola,
e:ecuted a =oint .greement dated =ul+ )), 1/H1, wherein the+ agreed to divide 'etween
themselves and ta$e possession of the three tractorsJ that is, two tractors for <dmund
and one tractor for %lorence. <ach of them was to assume the inde'tedness of their late
father to %222, corresponding to the tractor respectivel+ ta$en '+ them.
n .ugust )0, 1/H1, a Deed of .ssignment with .ssumption of #ia'ilities was
e:ecuted '+ and 'etween %222 and Dnion *avings and Mortgage Ban$, wherein the
%222 as the assignor, among others, assigned all its assets and lia'ilities to Dnion
*avings and Mortgage Ban$. Demand letters for the settlement of his account were sent
'+ petitioner Dnion Ban$ of the Philippines ADBPB to <dmund, 'ut the latter failed to
heed the same and refused to pa+. Thus, on %e'ruar+ !, 1/HH, the petitioner filed a
2omplaint for sum of mone+ against the heirs of <fraim *anti'aQe>, <dmund and
%lorence, 'efore the @T2 of Ma$ati 2it+.

ISS$E8

1. ,hether in testate succession, there can 'e no valid partition among the heirs.
). ,hether or not the heirs9 assumption of the inde'tedness of the deceased is
'inding.
0. ,hether or not the petitioner can hold the heirs lia'le on the o'ligation of the
deceased.
R$LING8
1. &n testate succession, there can 'e no valid partition among the heirs until after
the will has 'een pro'ated. The law en(oins the pro'ate of a will and the pu'lic re4uires
it, 'ecause unless a will is pro'ated and notice thereof given to the whole world, the
right of a person to dispose of his propert+ '+ will ma+ 'e rendered nugator+. &t
presupposes that the properties to 'e partitioned are the same properties em'raced in
the will.
The court then agrees with the appellate court that the provisions stated in the
will is an all6encompassing provision em'racing all the properties left '+ the decedent
which might have escaped his mind at that time he was ma$ing his will, and other
properties he ma+ ac4uire thereafter. This 'eing so, an+ partition involving the said
tractors among the heirs is not valid. The (oint agreement e:ecuted '+ <dmund and
%lorence, partitioning the tractors among themselves, is invalid, speciall+ so since at the
time of its e:ecution, there was alread+ a pending proceeding for the pro'ate of their
late father9s holographic will covering the said tractors.
Page | 183

). The heirs9 assumption of the inde'tedness is not 'inding. The assumption of
lia'ilit+ was conditioned upon the happening of an event, that is, that each heir shall
ta$e
possession and use of their respective share under the agreement. &t was made
dependent on the validit+ of the partition, and that the+ were to assume the
inde'tedness corresponding to the chattel that the+ were each to receive. The partition
'eing invalid, the heirs in effect did not receive an+ such tractor. &t follows then that the
assumption of lia'ilit+ cannot 'e given an+ force and effect.
0. %lorence *. .riola could not 'e held accounta'le for an+ lia'ilit+ incurred '+
her late father. The documentar+ evidence presented, particularl+ the promissor+ notes
and the continuing guarant+ agreement, were e:ecuted and signed onl+ '+ the late
<fraim *anti'aQe> and his son <dmund. .s the petitioner failed to file its mone+ claim
with the pro'ate court, at most, it ma+ onl+ go after <dmund as co6ma$er of the
decedent under the said promissor+ notes and continuing guarant+, of course, su'(ect to
an+ defenses <dmund ma+ have as against the petitioner. However, the court had not
ac4uired (urisdiction over the person of <dmund. .lso, the petitioner had not
sufficientl+ shown that it is the successor6in6interest of the Dnion *avings and Mortgage
Ban$ to which the %222 assigned its assets and lia'ilities.
,herefore, the petition is D<1&<D, the 2ourt of .ppeals Decision is .%%&@M<D.

Page | 184
-ES$S SAN AG$S#IN 5s. CO$R# OF APPEALS a.; MA>IMO MENE: -R.
G.R. No. 11+4! !!1 0e1 4
FAC#S8
n %e'ruar+ 11, 1/8F, the 7overnment *ervice &nsurance *+stem A7*&*B sold to a
certain Macaria Cda. de 2ai4uep, a parcel of residential land of the 7overnment *ervice
and &nsurance *+stem #ow 2ost Housing Pro(ect A7*&*6#2HPB. The sale is evidenced
'+ a Deed of .'solute *ale. n %e'ruar+ 1/, 1/8F, the @egister of Deeds of @i>al issued
in the name of Macaria Cda. de 2ai4uep, Transfer 2ertificate of Title AT2TB.
. da+ after the issuance of T2T, Cda. de 2ai4uep sold the su'(ect lot to private
respondent, Ma:imo Mene>, =r., as evidenced '+ a Deed of .'solute *ale. However, the
deed was notari>ed 'ut was not registered immediatel+ upon its e:ecution in 1/8F
'ecause 7*&* prohi'ited him from registering the same in view of the five6+ear
prohi'ition to sell during the period ending in 1/8/.
*ometime in 1/8/, for 'eing suspected as a su'versive, an .rrest, *earch and
*ei>ure rder A.**B was issued against private respondent. Militar+ men ransac$ed
his house in 2ainta, @i>al. Dpon learning that he was wanted '+ the militar+, he
voluntaril+ surrendered and was detained for two +ears. ,hen released, another order
for his re6arrest was issued so he hid in Mindanao for another four +ears or until March
1/HF. &n Decem'er of 1//0, he discovered that the su'(ect T2T was missing. He
consulted a law+er 'ut the latter did not act immediatel+ on the matter. Dpon
consulting a new counsel, an .ffidavit of #oss was filed with the @egister of Deeds of
Pasig and a certified cop+ of the T2T was issued.
Private respondent sent notices and searched the registered owner. However,
their search proved futile. n =ul+ H, 1//), private respondent filed a petition for the
issuance of owner9s duplicate cop+ of T2T 1o. F0"F"! to replace the lost one. The trial
court granted his petition.
n cto'er 10, 1//), petitioner, =esus *an .gustin, received a cop+ of the
a'ovecited decision. He claimed this was the first time he 'ecame aware of the case of
her aunt, Macaria Cda. de 2ai4uep who, according to him, died sometime in 1/8F.
2laiming that he was the present occupant of the propert+ and the heir of Macaria, he
filed his 3Motion to @eopen @econstitution Proceedings5, however, @T2 issued an order
den+ing said motion.
ISS$E8
,hether the petitioner have an interest in the propert+.
R$LING8
Page | 185
The petitioner does not appear to have an interest in the propert+ 'ased on the
memorandum of encum'rances annotated at the 'ac$ of the title. His claim that he is
an heir AnephewB of the original owner of the lot covered '+ the disputed lot and the
present occupant thereof is not annotated in the said memorandum of encum'rances.
1either was his claim entered on the 2ertificate of Titles in the name of their
originalMformer owners on file with the @egister of Deeds. .lso, private respondentKs
compliance of the @T29s order of pu'lication of the petition in a newspaper of general
circulation is sufficient notice of the petition to the pu'lic at large.
n the other hand, 7*&* has not filed an+ action for the annulment, nor for the
forfeiture of the lot in 4uestion. Thus, the contract of sale remains valid 'etween the
parties, unless and until annulled in the proper suit filed '+ the rightful part+, the 7*&*.
The said contract of sale is 'inding upon the heirs of Macaria Cda. de 2ai4uep, including
petitioner who alleges to 'e one of her heirs, in line with the rule that heirs are 'ound '+
contracts entered into '+ their predecessors6in6interest.
Moreover, in the social (ustice polic+ of @... H)/1 otherwise $nown as
37overnment *ervice &nsurance .ct of 1//85 in granting housing assistance to the
less6privileged 7*&* mem'ers and their dependents pa+a'le at an afforda'le pa+ment
scheme. This is the same polic+ which the !6+ear restrictive clause in the contract see$s
to implement '+ stating in the encum'rance itself annotated at the 'ac$ of T2T 1o.
F0"F"! that, 3The purpose of the sale is to aid the vendee in ac4uiring a lot for
himselfMthemselves and not to provide himMthem with a means for speculation or profit
'+ a future assignment of hisMtheir right herein ac4uired or the resale of the lot through
rent, lease or su'letting to others of the lot and su'(ect of this deed, ::: within five A!B
+ears from the date final and a'solute ownership thereof 'ecomes vested in the vendee,
e:cept in cases of hereditar+ succession or resale in favor of the vendor.5 However,
a'sent the proper action ta$en '+ the 7*&* as the original vendor referred to, the
contract 'etween petitioner9s predecessor6in6interest and private respondent deserves
to 'e upheld. %or it is protected '+ the 2onstitution under *ection 10, .rticle &&&, of the
Bill of @ights stating that, 31o law impairing the o'ligation of contracts shall 'e passed.5
Thus, that provision of the 2onstitution dul+ calls for compliance.
Page | 186
PRO-EC# %$IL0ERS, INC., GALICANO A. CALAPA#IA, -R., a.; LEAN0RO
ENRI/$E: 5s. #3E CO$R# OF APPEALS a.; IN0$S#RIAL FINANCE
CORPORA#ION
G. R. No. ++4'' !!1 -u. 1+
FAC#S8
n .ugust )1, 1/8!, plaintiff and defendant PB& entered into an agreement
where'+ it was agreed that plaintiff would provide a ma:imum amount of
P),000,000.00 against which said defendant would discount and assign to plaintiff on a
Twith recourse non6collection 'asis9 its accounts receiva'le under the contracts to sell
specified in said agreement. .nd on =une 1!, 1/8", the same parties entered into an
agreement where'+ it was agreed that PB&9s credit line with plaintiff 'e increased to
P!,000,000.00. &t was stipulated that the credit line of P!,000,000.00 granted includes
the amount alread+ assignedMdiscounted. The discounts were on different date accounts
receiva'les with different maturit+ dates from different condominium6unit 'u+ers. .nd
each time a certain account receiva'le was discounted, the covering 2ontract to *ell was
assigned '+ defendant to plaintiff.
The total amount of receiva'les discounted '+ defendant PB& is P8,/H",H1!.0H
and consists of twent+ accounts. f such receiva'les amounting to P8,/H",H1!.0H
plaintiff released to defendant PB& the amount of PF,!F/,10).8) and the difference of
P0,F08,"H)."" represents the discounting fee or finance fee. To secure compliance,
defendants e:ecuted a Deed of @eal <state Mortgage in favor of plaintiff. ,hen
Page | 187
defendants allegedl+ defaulted in the pa+ment of the su'(ect account, plaintiff foreclosed
the mortgage and plaintiff was the highest 'idder in the amount of P0,!00,000.00.
The foreclosed propert+ was redeemed a +ear later, 'ut after application of the
redemption pa+ment, plaintiff claims that there is still a deficienc+ in the amount of
P1,0)0,0!0.0H. The trial court dismissed the complaint. The 2ourt of .ppeals however
overturned the (udgment of the trial court.
ISS$E8
,hether or not the assignment of credit is valid.
R$LING8
.n assignment of credit is an act of transferring, either onerousl+ or gratuitousl+,
the right of an assignor to an assignee who would then 'e capa'le of proceeding against
the de'tor for enforcement or satisfaction of the credit. The transfer of rights ta$es place
upon perfection of the contract, and ownership of the right, including all appurtenant
accessor+ rights, is thereupon ac4uired '+ the assignee. The assignment 'inds the
de'tor onl+ upon ac4uiring $nowledge of the assignment 'ut he is entitled, even then, to
raise against the assignee the same defenses he could set up against the assignor. ,here
the assignment is on account of pure li'eralit+ on the part of the assignor, the rules on
donation would li$ewise 'e pertinentJ where valua'le consideration is involved, the
assignment parta$es of the nature of a contract of sale or purchase.
Dpon an assignment of a contract to sell, the assignee is effectivel+ su'rogated in
place of the assignor and in a position to enforce the contract to sell to the same e:tent
as the assignor could. &n an assignment of credit, the consent of the de'tor is not
essential for its perfection, his $nowledge thereof or lac$ of it affecting onl+ the
efficaciousness or inefficaciousness of an+ pa+ment he might ma$e.
2onsent is not necessar+ in order that assignment ma+ full+ produce legal effects.
Hence, the dut+ to pa+ does not depend on the consent of the de'tor. therwise, all
creditors would 'e prevented from assigning their credits 'ecause of the possi'ilit+ of
the de'tors9 refusal to give consent. ,hat the law re4uires in an assignment of credit is
not the consent of the de'tor 'ut merel+ notice to him. . creditor ma+, therefore, validl+
assign his credit and its accessories without the de'tor9s consent. The purpose of the
notice is onl+ to inform the de'tor that from the date of the assignment, pa+ment should
'e made to the assignee and not to the original creditor.
&n the case, the assignment, was Lwith recourseL, and default in the pa+ment of
installments had 'een dul+ esta'lished when petitioner corporation foreclosed on the
mortgaged parcels of land. The resort to foreclosure of the mortgaged properties did not
preclude private respondent from collecting interest from the assigned 2ontracts To *ell
from the time of foreclosure to the redemption of the foreclosed propert+. The
imposition of interest was a mere enforcement or e:ercise of the right to the ownership
of the credit or receiva'les which the parties stipulated in the 1/8" financing agreement.
Page | 188
,H<@<%@<, the petition is D<1&<D, the decision of the 2ourt of .ppeals
reversing the decision of the trial court is .%%&@M<D.
0%P VS CA
GR No. 11"1"! Se(7e2ber !, 1++6
FAC#S8
Private respondents were the original owners of a parcel of agricultural land
covered '+ T2T 1o. T61F0), situated in Barrio 2apucao, >amis 2it+, with an area of
Page | 189
110,"/! s4uare meters, more or less. n Ma+ 00, 1/88, the+ mortgaged said land to
petitioner DBP. The+ defaulted on their o'ligation and petitioner ac4uired the land '+
'eing the sole 'idder in the ensuing auction. n .pril ", 1/HF, petitioner entered into a
conditional contract with private respondents where private respondents would sell the
land for AP80,800.00B, with a down pa+ment of PH,/00.00 and the 'alance of P"F,H00
shall 'e pa+a'le in si: A"B +ears on e4ual 4uarterl+ amorti>ation plan at 1HE interest per
annum. The first 4uarterl+ amorti>ation of PF,F80.0" shall 'e pa+a'le three months
from the date of the e:ecution of the documents and all su'se4uent amorti>ation shall
'e due and pa+a'le ever+ 4uarter thereafter. Dpon completion of pa+ment, petitioners
refused to turn over the deed of sale citing legal impossi'ilit+ from the implementation
of *ec. " of @ep. .ct ""!8 Athe 2omprehensive .grarian @eform #aw or 2.@#B approved
10 =une 1/HH, and *ec. 1 of <.. F08 issued 10 =une 1//0. Private respondents filed a
case in court and were favored '+ the @T2 and the 2..
ISS$E8
,hen does the ac4uisition of these rights ta$e place;
R$LING8
&n conditional o'ligations, the ac4uisition of rights, as well as the e:tinguishment
or loss of those alread+ ac4uired, shall depend upon the happening of the event which
constitutes the condition.
More specificall+, petitioner cannot invo$e the last paragraph of *ec. " of @ep.
.ct ""!8 to set aside its o'ligations alread+ e:isting prior to its enactment. &n the first
place, said last paragraph clearl+ deals with Lan+ sale, lease, management contract or
transfer or possession of private lands e:ecuted '+ the original land owner.L The
original owner in this case is not the petitioner 'ut the private respondents. Petitioner
ac4uired the land through foreclosure proceedings 'ut agreed thereafter to reconve+ it
to private respondents, al'eit conditionall+.
Page | 190
GON:ALES VS #3E 3EIRS OF #3OMAS AN0 PA$LA CR$:
GR No. 1'17"4 Se(7e2ber 16, 1+++
FAC#S8
n Decem'er 1, 1/H0, Paula .Qo 2ru> together with the plaintiffs heirs of
Thomas and Paula 2ru> entered into a contract of lease with the defendant, %eli: #.
7on>ales of a half portion of a land containing an area of 1) hectares, more or less, and
an accretion of ) hectares, more or less, situated in @odrigue> Town, Province of @i>al9
and covered '+ Transfer 2ertificate of Title 1o. 1)111. .s stipulated therein:
Paragraph / 6 The #<**@* here'+ commit themselves and shall underta$e to o'tain a
separate and distinct T.2.T. over the herein leased portion to the #<**<< within a
reasona'le period of time which shall not in an+ case e:ceed four AFB +ears, after which a
new 2ontract shall 'e e:ecuted '+ the herein parties which shall 'e the same in all
respects with this 2ontract of #easeMPurchase insofar as the terms and conditions are
concerned.
Dnder the contract, 7on>ales paid the rental fees 'ut did not choose to e:ercise
the option of pa+ing the one million purchase price. . letter was issued '+ one of the
heirs to rescind the said contract following 'reach and ordered 7on>ales to vacate the
premises within ten da+s. 7on>ales did no vacate. . few da+s later Paula 2ru> died. .
case was launched in 2ourt '+ the heirs of Paula 2ru>.
ISS$E8
How must paragraph nine of the contract 'e interpreted in enforcing the contract
of lease;
R$LING8
&f a stipulation in a contract admits of several meanings, it shall 'e understood as
'earing that import most ade4uate to render it effectual. .n o'ligation cannot 'e
enforced unless the plaintiff has fulfilled the condition upon which it is premised. The
ninth provision was intended to ensure that respondents would have a valid title over
the specific portion the+ were selling to petitioner. nl+ after the title is assured ma+
the o'ligation to 'u+ the land and to pa+ the sums stated in the 2ontract 'e enforced
within the period stipulated. Ceril+, the petitioner9s o'ligation to purchase has not +et
ripened and cannot 'e enforced until and unless respondents can prove their title to the
propert+ su'(ect of the 2ontract. The ninth clause was the condition precedent of the
contract.
@espondents cannot rescind the contract, 'ecause the+ have not caused the
transfer of the T2T to their names, which is a condition precedent to petitioner9s
o'ligation. This 2ourt has held that 3there can 'e no rescission Aor more properl+,
Page | 191
resolutionB of an o'ligation as +et non6e:istent, 'ecause the suspensive condition has
not happened.5
INS$LAR LIFE VS ,O$NG
GR No. 14!+64. -a.uary 16, !!
FAC#S8
@espondent @o'ert -oung o'tained a short term loan of P180,000,000.00 from
inter'an$ to finance the purchase F!E e4uit+ in &nsular *avings Ban$. He did this under
the assumption that .raneta would purchase //.H)E of the 'an$s outsanding capital
stoc$ and consolidate all shares in -oung9s name. However, .raneta 'ac$ed and -oung
was left with a massive de't. -oung entered into a Memorandum of .greement where
&nsular #ife and its Pension %und where'+ &nsular #ife would purchase shares of stoc$ if
-oung would a'ide '+ certain conditions: one of them 'eing to infuse additional capital
of P!0,000,000.00 into the Ban$.
&t was discovered that -oung was pilfering funds from the 'an$ through chec$
$iting operations and he tendered his resignation. He also defaulted on his o'ligations.
His shares of stoc$ were purchased '+ &nsular #ife in a pu'lic auction. The shares were
then consolidated in its name. n =anuar+ 8, 1//), -oung filed a case for annulment of
notarial sale, specific performance and damages.
ISS$E8
&s &nsular #ife entitled to ownership of ma(orit+ of the Ban$9s shares of stoc$;
R$LING8
The provisions of the M. negate the e:istence of a perfected contract of sale.
The M. is merel+ a contract to sell since the parties therein specificall+ undertoo$ to
enter into a contract of sale if the stipulated conditions are met and the representation
and warranties given '+ -oung prove to 'e true. Here, the M. provides that -oung
shall infuse additional capital of P!0,000,000.00 into the Ban$. -oung failed to infuse
the re4uired additional capital. Moreover, the due diligence audit shows that -oung was
involved in fraudulent schemes li$e chec$ $iting. *ince no sale transpired 'etween the
Page | 192
parties, the 2. erred in concluding that &nsular #ife purchased !!E of the total shares of
the Ban$ under the M..
&t would 'e unfair on the part of -oung to demand compliance '+ &nsular #ife of
its o'ligations when he himself was remiss in his own.
0IREC# F$N0ERS 3OL0ERS ASSOCIA#ION VS LAVIGA
GR No. 141"51. -a.uary 16, !!
FAC#S8
The petitioners assail the decision of the 2. affirming the decision of the @T2 in
issuing a writ of mandator+ preliminar+ in(unction despite the orders of a co6e4ual court
in deciding that the propert+ in 4uestion was in the lawful possession of the petitioner.
ISS$E8
&s petitioner9s contention tena'le;
R$LING8
The conditional sale agreement was the onl+ document that the respondent
presented during the summar+ hearing of the application for a temporar+ restraining
order 'efore the @egional Trial 2ourt, Branch 81, Pasig 2it+. The conditional sale
agreement is officious and ineffectual. %irst, it was not consummated. *econd, it was
not registered and dul+ annotated on the Transfer 2ertificate of Title A1o. 1)0!8B
Page | 193
covering the su'(ect propert+. Third, it was e:ecuted a'out eight AHB +ears after the
e:ecution of the real estate mortgage over the su'(ect propert+.
To emphasi>e, the mortgagee ADnited *avings Ban$B did not give its consent to
the change of de'tor. &t is a fundamental a:iom in the law on contracts that a person
not a part+ to an agreement cannot 'e affected there'+. ,orse, not onl+ was the
conditional sale agreement e:ecuted without the consent of the mortgagee6creditor,
Dnited *avings Ban$, the same was also a material 'reach of the stipulations of the real
estate mortgage over the su'(ect propert+.
The petitioner as opposed to Gam'i+a$ 2han 'ears a T2T, deeds of assignment,
certificates of sale in its favor showing that it has a 'etter right to possession of the
disputed land.
V0A. 0E MIS#ICA VS NAG$IA#
41" SCRA 7' 0e1e2ber 11, !!'
FAC#S8
n .pril !, 1/8/, <ulalio Mistica, predecessor6in6interest of herein NpetitionerO,
entered into a contract to sell with NrespondentO Bernardino 1aguiat over a lot. Pursuant
to said agreement, respondent gave a downpa+ment of P),000.00. He made another
Page | 194
partial pa+ment of P1,000.00 on %e'ruar+ 8, 1/H0. He failed to ma$e an+ pa+ments
thereafter. <ulalio Mistica died sometime in cto'er 1/H". n Decem'er F, 1//1,
petitioner filed a complaint for rescission alleging that the failure and refusal of
respondents to pa+ the 'alance of the purchase price constitutes a violation of the
contract which entitles her to rescind the same.
ISS$E8
&s petitioner entitled to rescission of contract;
R$LING8
The transaction 'etween <ulalio Mistica and respondents, as evidenced '+ the
Gasulatan, was clearl+ a 2ontract of *ale. . deed of sale is considered a'solute in nature
when there is neither a stipulation in the deed that title to the propert+ sold is reserved
to the seller until the full pa+ment of the priceJ nor a stipulation giving the vendor the
right to unilaterall+ resolve the contract the moment the 'u+er fails to pa+ within a fi:ed
period.
&n a contract of sale, the remed+ of an unpaid seller is either specific performance
or rescission. @escission, however, is allowed onl+ where the 'reach is su'stantial and
fundamental to the fulfillment of the o'ligation. &n the present case, the failure of
respondents to pa+ the 'alance of the purchase price within ten +ears from the e:ecution
of the Deed did not amount to a su'stantial 'reach.
Moreover, it is undisputed that during the ten +ear period, petitioner never made
an+ demand for the 'alance of the purchase price. Petitioner even refused the pa+ment
tendered '+ respondents during her hus'and9s funeral, thus showing she was not
e:actl+ 'lameless for the lapse of the ten +ear period.
Page | 195
3ERMOSA VS LONGARA
GR No. L-567, O17ober 7, 1+5'
FAC#S8
This is an appeal '+ wa+ of certiorari against a decision of the 2ourt of .ppeals,
fourth division, approving certain claims presented '+ <pifanio M. #ongara against the
testate estate of %ernando Hermosa, *r. The claims are of three $inds, namel+, P),0F1.F1
representing credit advances made to the intestate from 1/0) to 1/FF, P1),/)F.1) made
to his son %rancisco Hermosa, and P0,88) made to his grandson, %ernando Hermosa,
=r. from 1/F! to 1/F8, after the death of the intestate, which occurred in Decem'er,
1/FF. The claimant presented evidence and the 2ourt of .ppeals found, in accordance
therewith, that the intestate had as$ed for the said credit advances for himself and for
the mem'ers of his famil+ Lon condition that their pa+ment should 'e made '+
%ernando Hermosa, *r. as soon as he receive funds derived from the sale of his propert+
in *pain.L 2laimant had testified without opposition that the credit advances were to 'e
Lpa+a'le as soon as %ernando Hermosa, *r.Ks propert+ in *pain was sold and he receive
mone+ derived from the sale.L The 2ourt of .ppeals held that pa+ment of the advances
did not 'ecome due until the administratri: received the sum of P)0,000 from the
'u+er of the propert+. Dpon authori>ation of the pro'ate court in cto'er, 1/F8, and the
same was paid for su'se4uentl+. The 2laim was filed on cto'er ), 1/FH.
ISS$E8
Does said condition a potestative condition and thusl+ void and unenforcea'le;
R$LING8
. careful consideration of the condition upon which pa+ment of the sums
advanced was made to depend, Las soon as he AintestateB receive funds derived from the
sale of his propert+ in *pain,L discloses the fact that the condition in 4uestion does not
depend e:clusivel+ upon the will of the de'tor, 'ut also upon other circumstances
'e+ond his power or control. 2irumstances show that the intestate had alread+ decided
to sell his house lest he meant to fool his creditors. But in addition of the sale to him Athe
intestate6vendorB, there were still other conditions that had no concur to effect the sale,
mainl+ that of the presence of a 'u+er, read+, a'le and willing to purchase the propert+
under the conditions demanded '+ the intestate. &t is evident, therefore, that the
condition of the o'ligation was not a purel+ protestative one, depending e:clusivel+
upon the will of the intestate, 'ut a mi:ed one, depending partl+ upon the will of
intestate and partl+ upon chance. The *upreme 2ourt upheld the ruling of the lower
courts.
Page | 196
#RILLANA VS /$E:ON COLLEGES
GR No. L-5!!', -u.e 7, 1+5'
FAC#S8
n =une 1, 1/FH, Damasa 2risostomo applied for )00 shares of stoc$ worth
PhP100.00 each at ?ue>on 2olleges, &nc. ,ithin her letter of application, she stipulated,
3-ou will find ABa'a+aran $ong lahat pag$atapos na a$o a+ ma$apag6pahuli ng isdaB
pesos as m+ initial pa+ment and the 'alance pa+a'le in accordance with law and the
rules and regulations of the ?ue>on 2ollege.5 Damasa died on cto'er )", 1/FH. *ince
no pa+ment was rendered on the su'scription made in the foregoing letter, ?ue>on
2ollege presented a claim of PhP)0,000.00 on her intestate proceedings. The petitioner
I administrator of the estate then contests the validit+ of said proceedings;
ISS$E8
&s the condition laid down '+ Damasa 2risostomo valid;
R$LING8
There is nothing in the record to show that the ?ue>on 2ollege, &nc. accepted the
term of pa+ment suggested '+ Damasa 2risostomo, or that if there was an+ acceptance
the same came to her $nowledge during her lifetime. .s the application of Damasa
2risostomo is o'viousl+ at variance with the terms evidenced in the form letter issued '+
the ?ue>on 2ollege, &nc., there was a'solute necessit+ on the part of the 2ollege to
e:press its agreement to DamasaKs offer in order to 'ind the latter. 2onversel+, said
acceptance was essential, 'ecause it would 'e unfair to immediatel+ o'ligate the ?ue>on
2ollege, &nc. under DamasaKs promise to pa+ the price of the su'scription after she had
caused fish to 'e caught. Thus, it cannot 'e said that the letter ripened into a contract.
&ndeed, the need for e:press acceptance on the part of the ?ue>on 2ollege, &nc.
'ecomes the more imperative, in view of the proposal of Damasa 2risostomo to pa+ the
value of the su'scription after she has harvested fish, a condition o'viousl+ dependent
upon her sole will and, therefore, facultative in nature, rendering the o'ligation void.
Dnder the 2ivil 2ode it is provided that if the fulfillment of the condition should depend
upon the e:clusive will of the de'tor, the conditional o'ligation shall 'e void.
Page | 197
VISA,AN SA9MILL VS CA
1+ SCRA '7" Mar1< ', 1++'
FAC#S8
The antecedent facts, summari>ed '+ the pu'lic respondent are as follows:
n Ma+ 1, 1/H0, herein plaintiff6appellee and defendants appellants entered into
a sale involving scrap iron, su'(ect to the condition that plaintiff appellee will open a
letter of credit in the amount of P)!0,00.00 in favor of defendant6appellant corporation
on or 'efore Ma+ 1!, 1/H0. n Ma+ )F, 1/H0, plaintiff6appellee informed defendans6
appellants '+ telegram that the letter of credit was opened Ma+ 1), 1/H0 at the BP& main
office in .+ala, 'ut that transmittal was dela+ed. n Ma+ )", 1/H0, defendants6
appellants received a letter advice from the Dumaguete 2it+ Branch of BP& dated Ma+
)", 1/H0, that a domestic letter of credit had 'een opened in favor of Cisa+an *awmill
2ompan+.
n =ul+ 1/, 1/H0 plaintiffs then demanded that defendants compl+ with the deed
of sale. n =ul+ )0, 1/H0 defendant corporation informed plaintiff9s law+er that it is
unwilling to continue with the sale due to plaintiff9s failure to compl+ with the essential
preconditions of the contract.
Private respondent pra+ed for (udgment ordering the petitioner corporation to
compl+ with the contract '+ delivering to him the scrap iron su'(ect thereof.
ISS$E8
Did petitioner corporation violate the terms and conditions of the contract;
R$LING8
Page | 198
The petitioner corporation9s o'ligation to sell is une4uivocall+ su'(ect to a
positive suspensive condition. The failure of the private respondent to compl+ with the
positive suspensive condition cannot even 'e considered a 'reach I casual or serious I
'ut simpl+ an event that prevented the o'ligation of petitioner corporation to conve+
title from ac4uiring 'inding force.
The letter of credit in favor of petitioner was indisputa'l+ not in accordance with
the stipulation in the contract signed '+ the parties on at three counts: A1B it was not
opened, made or indorsed '+ the private respondent, 'ut '+ a corporation which is not a
part+ to the contractJ A)B it was not opened with the 'an$ agreed upon andJ A0B it is not
irrevoca'le and unconditional, for it is without recourse, it is set to e:pire on a specific
date and it stipulates certain conditions with respect to shipment.
2onse4uentl+, the o'ligation of petitioner to sell did not ariseJ it therefore cannot
'e compelled '+ specific performance to compl+ with its prestation.
LEA=O VS CO$R# OF APPEALS
GR No. 1+!1". No5e2ber 15, !!1
FAC#S8
n 1ovem'er 10, 1/H!, Hermogenes %ernando, as vendor and 2armelita #eaQo,
as vendee e:ecuted a contract to sell involving a piece of land. &n the contract, 2armelita
#eaQo 'ound herself to pa+ Hermogenes %ernando the sum of PhP108,8!0.00 as the
total purchase price of the lot.
The contract also provided for a grace period of one month within which to ma$e
pa+ments, together with the one corresponding to the month of grace. *hould the month
of grace e:pire without the installments for 'oth months having 'een satisfied, an
interest of 1HE per annum will 'e charged on the unpaid installments. *hould a period
of ninet+ da+s elapse from the e:piration of the grace period without the overdue and
unpaid installment paid with proper interests, %ernando, as vendor, was authori>ed to
Page | 199
declare the contract cancelled. The defendant later filed an e(ectment case for failure of
petitioner to pa+ within the terms of contract.
ISS$E8
&s petitioner entitled to rights over the lot;
R$LING8
The transaction 'etween the parties was a conditional sale not an a'solute sale.
The intention of the parties was to reserve the ownership of the land in the seller until
the 'u+er has paid the total purchase price. The ownership of the lot was not transferred
to 2armelita #eaQo. &n a contract to sell real propert+ on installments, the full pa+ment
of the purchase price is a positive suspensive condition, the failure of which is not
considered a 'reach, casual or serious, 'ut simpl+ an event that prevented the o'ligation
of the vendor to conve+ title from ac4uiring an+ o'ligator+ force. &n the case at 'ar,
petitioner9s non6pa+ment of the installments after .pril 1, 1/H/, prevented the
o'ligation of respondent to conve+ the propert+ from arising. &n fact, it 'rought into
effect the provision on cancellation.
However, in view of @. 1o. "!!), that the default committed '+ petitioner in
respect of the o'ligation could 'e compensated '+ the interest and surcharges imposed
upon her under the contract in 4uestion.
3ERIS OF SAN0E-AS VS LINA
GR No. 1416'4. February 5, !!1
Page | 200
FAC#S8
<liodoro *ende(as, *r., served as administrator of the estate of @emedios @.
*ande(as. <liodoro, in his capacit+ as seller, 'ound and o'ligated himself,
administrators, and assigns, to sell forever and a'solutel+ and in their entiret+ parcels of
lands which formed part of the estate of the late @emedios to one Mr. .le: .. #ina for
the consideration of P1 Million. <liodoro died and Mr. .le: #ina served as temporar+
administrator of the estate until he was replaced '+ the heir of <liodoro, *i:to *ande(as.
Mr. #ina filed an mni'us motion to approve the deed of conditional sale e:ecuted
'etween Plaintiff6in6&ntervention .le: .. #ina and <liodoro *ande(as, *r. on =une 8,
1/H). The administrator *i:to filed a motion to dismiss.
ISS$E8
&s Mr. #ina entitled to purchase parcels of lands forming the estate of @emedios;
R$LING8
&n a contract to sell, the pa+ment of the purchase price is a positive suspensive
condition. The vendor9s o'ligation to conve+ the title does not 'ecome effective in case
of failure to pa+. n the other hand, the agreement 'etween <liodoro, *r. and
respondent is su'(ect to a suspensive condition I the procurement of a court approval,
not full pa+ment. There was no reservation of ownership in the agreement. &n
accordance with paragraph 1 of the @eceipt, petitioners were supposed to deed the
disputed lots over to respondent. This the+ could do upon the court9s approval, even
'efore full pa+ment. Hence, their contract was a conditional sale, rather than a contract
to sell as determined '+ the 2..
Because petitioners did not consent to he sale of their ideal shares in the disputed
lots, the 2. correctl+ limited the scope of the @eceipt to the pro6indiviso share of
<liodoro, *r. Thus, it correctl+ modified the intestate court9s ruling '+ e:cluding their
shares from the am'it of the transaction.
The petition was partiall+ granted. The appealed decision and resolution are
affirmed with he modification that respondent is entitled to onl+ a pro6indiviso share
e4uivalent to 11M)0 of the disputed lots.
Page | 201
CIR VS PRIME#O9N
GR No. 16155. Au6us7 ", !!7
FAC#S8
n March 11, 1///, 7il'ert -ap, vice chair of respondent Primetown Propert+
7roup, &nc., applied for the refund or credit of income ta: respondent paid in 1//8.
.ccording to -ap, 'ecause respondent suffered losses, it was not lia'le for income ta:es.
1evertheless, respondent paid its 4uarterl+ corporate income ta: and remitted
credita'le withholding ta: from real estate sales to the B&@ in the total amount of
P)",01H,0/H.0). Therefore, respondent was entitled to ta: refund or ta: credit.
n Ma+ 10, 1///, revenue officer <li>a'eth -. *antos re4uired respondent to
su'mit additional documents to support its claim. @espondent complied 'ut its claim
was not acted upon. Thus, on .pril 1F, )000, it filed a petition for review in the 2ourt of
Ta: .ppeals A2T.B. n Decem'er 1!, )000, the 2T. dismissed the petition as it was
filed 'e+ond the two6+ear prescriptive period for filing a (udicial claim for ta: refund or
ta: credit. @espondents now assail that decision for dismissal of the 2T..
ISS$E8
,hat is the e:piration period for the filing of the action;
R$LING8
Both .rticle 10 of the 2ivil 2ode and *ection 01, 2hapter C&&&, Boo$ & of the
.dministrative 2ode of 1/H8 deal with the same su'(ect matter Z the computation of
legal periods. Dnder the 2ivil 2ode, a +ear is e4uivalent to 0"! da+s whether it 'e a
regular +ear or a leap +ear. Dnder the .dministrative 2ode of 1/H8, however, a +ear is
composed of 1) calendar months. 1eedless to state, under the .dministrative 2ode of
1/H8, the num'er of da+s is irrelevant.
There o'viousl+ e:ists a manifest incompati'ilit+ in the manner of computing
legal periods under the 2ivil 2ode and the .dministrative 2ode of 1/H8. %or this reason,
we hold that *ection 01, 2hapter C&&&, Boo$ & of the .dministrative 2ode of 1/H8, 'eing
the more recent law, governs the computation of legal periods. Lex posteriori derogat
priori.
%ollowing this formula, respondent9s petition Afiled on .pril 1F, )000B was filed
on the last da+ of the )F
th
calendar month from the da+ respondent filed its final
ad(usted return. Hence, it was filed within the reglementar+ period.
Page | 202
NAMARCO 5s #e1so.
GR No. L-+1'1. Au6us7 7, 1+6+
FAC#S8
n a previous court case, the 2%& rendered (udgment:
AaB rdering the defendants Miguel D. Tecson and .lto *uret+ &nsurance 2o.,
&nc. to pa+ (ointl+ and severall+ plaintiff P@.T@. the sum of P8,)00.00 plus 8E interest
from Ma+ )!, 1/"0 until the amount is full+ paid, plus P!00.00 for attorne+Ks fees, and
plus costsJ
A'B ordering defendant Miguel D. Tecson to indemnif+ his co6defendant .lto
*uret+ P &nsurance 2o., &nc. on the cross6claim for all the amounts it would 'e made to
pa+ in this decision, in case defendant .lto *uret+ P &nsurance 2o., &nc. pa+ the amount
ad(udged to plaintiff in this decision. %rom the date of such pa+ment defendant Miguel
D. Tecson would pa+ the .lto *uret+ P &nsurance 2o., &nc., interest at 1)E per annum
until Miguel D. Tecson has full+ reim'ursed plaintiff of the said amount.
Defendant Miguel Tecson see$s the dismissal of the complaint on the ground of
lac$ of (urisdiction and prescription. This case was filed e:actl+ on Decem'er )1, 1/"!
'ut more than ten +ears have passed a +ear is a period of 0"! da+s A.rt. 10, 22PB.
Plaintiff forgot that 1/"0, 1/"F were 'oth leap +ears so that when this present case was
filed it was filed two da+s too late.
ISS$E8
*hould the complaint 'e dismissed on the grounds of prescription;
R$LING8
&n the language of this 2ourt, in People vs. Del Rosario, with the approval of the
2ivil 2ode of the Philippines A@epu'lic .ct 0H"B ... we have reverted to the provisions of
the *panish 2ivil 2ode in accordance with which a month is to 'e considered as the
regular 3-day month ... and not the solar or civil month,L with the particularit+ that,
whereas the *panish 2ode merel+ mentioned Lmonths, da+s or nights,L ours has added
Page | 203
thereto the term !years! and e:plicitl+ ordains that Lit shall 'e understood that +ears are
of three hundred si:t+6five da+s.L
The decision was affirmed.
%ERG VS MAG0ALENA ES#A#ES
GR No. L-'7"4, O17ober 17, 1+5
FAC#S8
The plaintiff <rnest Berg owned 1M0 of the propert+ $nown as 2r+stal .rcade
situated in Manila. The defendant Hermad+ owned the remaining )M0 of said propert+.
Defendant alleges that plaintiff offered to sell his propert+ for the sum of
PHP)00,000.00 which the defendant accepted. However, a +ear later, plaintiff then
un(ustl+ refused to accept pa+ment despite their agreement. Plaintiff then claims that
there is no written evidence suggesting the supposed agreement constituting the statute
of fraud.
ISS$E8
1. ,as there sufficient evidence of the supposed agreement;
). Does the agreement refer to a stipulated condition or period;
R$LING8
1. <:hi'it 0 and F as offered '+ the defendant constitute sufficient evidence as
re4uired '+ the statute of fraud. &n the application e:hi'it L0L, <rnest Berg
appears as the seller and the Magdalena <state &nc. as the purchaser, the formerKs
Page | 204
interest in the 2r+stal .rcade as the su'(ect6matter, and the sum of P)00,000 as
the consideration. The application <:hi'it LFL states specificall+ that a portion of
the sum of PF00,000 which is desired to 'e raised as a loan will 'e used for the
purchase of the one6third interest of <rnest Berg, which portion undou'tedl+
refers to the sum of P)00,000 mentioned in the application <:hi'it L0L.
). &t would seem that the agreement is not a term 'ut a condition. 2onsidering the
first alternative, that is, until defendant shall have o'tained a loan from the
1ational 2it+ Ban$ of 1ew -or$, it is clear that the granting of such loans is not
definite and cannot 'e held to come within the terms Lda+ certainL provided for
in the 2ivil code, for it ma+ or it ma+ not happen. .s a matter of fact, the loan did
not materiali>e. .nd considering that the period given was until such time as
defendant could raise mone+ from other sources, it is to 'e indefinite and
contingent and so it is also a condition and not a term within the meaning of the
law. &n an+ event it is apparent that the fulfillment of the condition contained in
this second alternative is made to depend upon the defendantKs e:clusive will,
and viewed in this light, the 2ourt was of the opinion that plaintiffKs o'ligation to
sell did not arise, for, under .rticle 111! of the old 2ivil 2ode, Lwhen the
fulfillment of the condition depends upon the e:clusive will of the de'tor the
conditional o'ligation shall 'e void.L
LIRAG #E>#ILE MILLS, INC. VS CA
6' SCRA '75 A(r)* 14, 1+75
FAC#S8
n Ma+ /, 1/"0, defendant #irag Te:tile Mills, &nc. wrote a letter to plaintiff
A.lcantaraB advising that, effective Ma+ 11, 1/"0, his temporar+ designation as Technical
.ssistant to the .dministrative fficer was made permanent. The plaintiff9s tenure of
emplo+ment was to 'e Tfor an indefinite period, unless sooner terminated '+ reason of
voluntar+ resignation or '+ virtue of a valid cause or causes. n =ul+ )), 1/"1, the
Page | 205
defendant sent plaintiff a letter advising him of the termination of his emplo+ment
'ecause the compan+ had suffered some serious reverses 'oth in terms of pecuniar+ loss
and in mar$et opportunities. The 2. sentenced petitioners to pa+ respondent .lcantara
'ac$ salaries. The petitioners now assail the decision of the 2..
ISS$E8
&s the termination of .lcantara9s emplo+ment valid;
R$LING8
The contract of emplo+ment was for an indefinite period. &t necessaril+ follows
that if the petitioner6emplo+er #irag Te:tile Mills terminates the emplo+ment without a
valid cause or causes, as it admittedl+ did, it committed a 'reach of the contract of
emplo+ment e:ecuted '+ and 'etween the parties.
The indefinite period of emplo+ment e:pressl+ agreed upon '+ and 'etween the
parties in this case is reall+ a resolutor+ period 'ecause the emplo+ment is 'ound to
terminate on a future Tda+ certain9 such as the emplo+ee9s resignation or emplo+er9s
termination of emplo+ment upon a valid cause or causes, li$e death of the emplo+ee or
termination of emplo+er9s corporate e:istence, although it ma+ not 'e $nown when.
&n this case there was no valid cause for termination of .lcantara9s emplo+ment.
The corporation did not reali>e as 'ig a profit as in the previous +ear, nevertheless, it
reali>ed profits in the amount of P1,180,0/H.00 rather then sustain losses.
Page | 206
0AG$3O, EN#ERPRISES, INC., VS PONCE
GR No. L-6515. O17ober 1", 1+54
FAC#S8
n =une )F, 1/!0, @ita #. Ponce, e:ecuted in favor of plaintiff Daguho+
<nterprises a deed of mortgage over a parcel of land including the improvements
thereon, situated in Manila, to secure the pa+ment of a loan of PhP!,000.00 granted to
her '+ said corporation, pa+a'le within si: +ears with interest at 1) per cent per annum.
@ita and her hus'and Domnigo attempted to register the deeds in the office of the
register of deeds, 'ut the register noted defects and deficiencies and advised the couple
to cure such and furnish the necessar+ data. &nstead of compliance, the couple withdrew
the deeds and mortgaged the same in favor of the @eha'ilitation %inance 2orporation
A@%2B to secure a loan. Potenciano 7apol, a ma(orit+ stoc$holder in the corporation,
discovered the withdrawal of the deeds from the office of the register of deeds, and filed
a case in court to collect the amount of the loan.
ISS$E8
.re said loans immediatel+ demanda'le despite the si: +ear installment for
pa+ments;
R$LING8
.lthough the original loan of PhP!,000.00 including the increase of PhP1,1/0.00
was pa+a'le within si: +ears from =une 1/!0, and so did not 'ecome due and pa+a'le
until 1/!", it was held that under .rticle 11/H of the new 2ivil 2ode, the de'tor lost the
'enefit of the period '+ reason of her failure to give the securit+ in the form of the two
deeds of mortgage and register them including defendants9 act in withdrawing said two
deeds from the office of the register of deeds and then mortgaging the same propert+ in
favor of the @%2J and so the o'ligation 'ecame pure and without an+ condition and
conse4uentl+, the loan 'ecame due and immediatel+ demanda'le.
Page | 207
VIC#ORIAS PLAN#ER ASSN., INC., E# AL. VS VIC#ORIAS MILLING CO.,
INC
GR No. L-664". -u*y 5, 1+55
FAC#S8
.t various dates, from the +ear 1/18 to 1/0F, the petitioners 6 sugar cane planters
e:ecuted identical milling contracts, setting forth the terms and conditions under which
the sugar central 31orth 1egros *ugar 2o. &nc. would mill the sugar produced '+ said
planters. The Cictorias Milling 2o. &nc., was also constructed to accommodate other
planters within its vicinit+. Both centrals had their first millings on 1/1H61/1/ and 1/)16
1/)), respectivel+. *u'se4uent moliendas or millings too$ place ever+ successive crop
+ear thereafter, e:cept the " +ear period, comprising F +ears of the last ,orld ,ar &&
and ) +ears of post6war reconstruction of respondent9s central at Cictorias, 1egros
ccidental.
.fter the li'eration, onl+ the central at Cictorias was reconstructed and e:istent
contracts with 1egros were now to 'e processed at the Cictorias central. Beginning with
the +ear 1/FH, the planters contracted with 1orth 1egros considered the stipulated 00
+ear6period of the contract the+ entered into in 1/1H to have 'een terminated.
Defendant however contends that the contracts call for 00 +ears of milling and not 00
+ears in time. There'+, the contracts actuall+ terminated on 1/!) to account for its
ina'ilit+ to operate during the war and reconstruction.
ISS$E8
,hat is the respective period of the contracts in 4uestion;
R$LING8
The fact that the contracts ma$e reference to 3first milling5 does not ma$e the
period of thirt+ +ears one of thirt+ milling +ears.
<ven if the thirt+ +ear period provided for in the contracts 'e construed as milling
+ears, the deduction or e:tension of si: +ears would not 'e (ustified. ,hile the contract
was deemed suspended during force ma(eure, war, etc., it did not mean that the
happening of an+ of those events stopped the running of the period agreed upon.
The performance of what the law has written off cannot 'e demanded and
re4uired. The pra+er that the plaintiffs 'e compelled to deliver sugar cane to the
appellant for si: more +ears to ma$e up for what the+ failed to deliver during those
Page | 208
tr+ing +ears, the fulfillment of which was impossi'le, if granted, would in effect 'e an
e:tension of the term of the contracts entered into '+ and 'etween the parties.
-ESPA-O VS CA
GR No. 11'66 Se(7e2ber 7, !!
FAC#S8
n %e'ruar+ 1, 1/H!, said corporation, represented '+ its President, =esus #. D+,
entered into separate contracts of lease with Tan Te 7utierre> and 2o Tong. Pursuant to
the contract, Tan Te occupied room 1o. )18 of the su'(ect 'uilding at a monthl+ rent of
PHF8.00 while 2o Teng occupied the Penthouse at a monthl+ rent of P/10.00. The terms
of the contract among others are the following:
3P<@&D % #<.*<6 The lease period shall 'e effective as of %e'ruar+ 1, 1/H! and shall
continue for an indefinite period provided the lessee is up6to6date in the pa+ment of his
monthl+ rentals. The #<**<< ma+, at his option, terminate this contract an+ time '+
giving si:t+ A"0B da+s prior written notice of termination to the #<**@.
However, violation of an+ of the terms and conditions of this contract shall 'e a
sufficient ground for termination thereof '+ the #<**@.5
The private respondents religiousl+ paid the monthl+ rental fees. n =anuar+ ), 1//0,
the lessor corporation sent a written notice to the lessees informing them of the formers9
intention to increase the monthl+ rentals on the occupied premises to P0,!00.00
monthl+ effective %e'ruar+ 1, 1//0. The private respondents refused pa+ment. .n
e(ectment case was filed against them in court.
ISS$E8
&s the stipulation a potestative period and hence void;
R$LING8
Page | 209
The lease contract 'etween petitioner and respondents is with a period su'(ect to
a resolutor+ condition. The wording of the agreement is une4uivocal. The condition
imposed in order that the contract shall remain effective is that the lessee is up6to6date
in his monthl+ pa+ments. &t is undisputed that the lessees 7utierre> and 2o Tong
religiousl+ paid their rent at the increasing rate of )0E annuall+. The agreement
'etween the lessor and the lessees are therefore still su'sisting, with the original terms
and conditions agreed upon, when the petitioner unilaterall+ increased the rental
pa+ment to more than )0E or P0,!00.00 a month.
The petitioner is estopped from 'ac$ing out of their representations in the
contract with respondent, that is, the+ ma+ not renege on their own acts and
representations, to the pre(udice of the respondents who relied on them.
%ORROMEO VS CA
GR No. L-+6. Se(7e2ber ", 1+7
FAC#S8
@espondent =ose . Cillamor was a distri'utor of lum'er 'elonging to Mr. Miller
who was the agent of the &nsular #um'er 2ompan+ in 2e' 2it+. Defendant usuall+
'orrowed from his friend and former classmate6petitioner 2anuto . Borromeo several
amounts of mone+. n one occasion, with some pressing o'ligation to Mr. Miller,
defendant 'orrowed a large sum of mone+ from Borromeo for which he mortgaged his
land and house in 2e'u 2it+. Mr. Miller filed a civil action against the defendant and
attached his properties including those mortgaged to plaintiff, inasmuch as the deed of
mortgage in favor of plaintiff could not 'e registered as it was not properl+ drawn up.
Plaintiff then pressed for settlement of his o'ligation, 'ut defendant instead offered to
e:ecute a document of future pa+ment. #i4uidation was made and defendant was found
to have owed plaintiff the sum of PhP8))0.00, for which defendant signed a promissor+
Page | 210
therefor on 1ovem'er )/, 1/00 with interest at the rate of 1)E per annum, agreeing to
pa+ Tas soon as & have mone+.9 The note further stipulates that the defendant would
waive the right of prescription as prescri'ed in the 2ivil 2ode of Procedure. Plaintiff did
not collect within the 1
st
ten +ears since defendant did not have an+ propert+ attached to
his name. However after the second ,orld ,ar, plaintiff then pressed on his demands.
The @T2 granted his motion 'ut the 2. reversed the ruling claiming that said period
was contrar+ to law;
ISS$E8
&s said period stipulated in the contract valid;
R$LING8
The 2. erred in its decision. &t should 'e noted that the wordings in said
contracts should not instantl+ nullif+ the intent of the parties. The intent of the parties is
clear I that an e:tension of time 'e granted to respondent for pa+ment of his de'ts.
&n effect, the first 10 +ears should not 'e considered in the prescription of the
contract and that the ne:t ten +ears is granted from which the counting of the period
should 'egin.
GON:ALES VS -OSE
GR No. 4'4+. O17ober 4, 1+'"
FAC#S8
Page | 211
The plaintiff Benito 7on>ales filed an action to recover from the defendant the
total amount of Php!F8./! from two promissor+ notes dated =une )), 1/)) and
*eptem'er 10, 1/)). The 2%& granted his petition. The defendant now assails that
decision claiming that the complaint was uncertain inasmuch as the notes did not
specif+ when the inde'tedness was incurred or when it was demanda'le, and that,
granting that plaintiff has an+ cause of action, the same has prescri'ed in accordance
with law.
ISS$E8
Does plaintiff have a cause of action;
R$LING8
.rticle 11)H of the 2ivil 2ode stipulates that if the o'ligation does not specif+ a
term, 'ut it is inferred from its nature and circumstances that it was intended to grant
the de'tor time for its performance, the period of the term shall 'e fi:ed '+ the 2ourt.
The two promissor+ notes are governed '+ .rticle 11)H 'ecause under the terms
thereof, the plaintiff intended to grant the defendant a period within which to pa+ his
de'ts. However, the action to as$ the court to fi: a period has alread+ prescri'ed. The
period of prescription is ten +ears, which has alread+ elapsed from the e:ecution of the
promissor+ notes until the filing of the action on =une 1, 1/0F.
Page | 212
%AL$,$# VS PO%LE#E
GR No. 1444'5. February 6, !!7
FAC#S8
n =ul+ )0, 1/H1, 7uillermina Balu+ut, mortgaged her house to secure a loan in
the amount of PhPH!0,000.00 from the spouses <ulogio and *alud Po'lete. The load
was set to mature in one month. .fter a month had passed, she was una'le to pa+ her
inde'tedness which led the spouses to e:tra(udiciall+ foreclose the mortgage. The
propert+ was then sold on .uction to the Po'lete spouses who as$ed Balu+ut to vacate
the premises. Balu+ut instead filed an action for annulment of mortgage. His claim was
re(ected '+ the @T2 and the 2.. Petitioner claims that 'ased on the testimon+ of .tt+.
<dwina Mendo>a that the maturit+ of the loan which she incurred is onl+ for one +ear.
ISS$E8
&s petitioner9s contention tena'le;
R$LING8
<vidence of a prior or contemporaneous ver'al agreement is generall+ not
admissi'le to var+, contradict or defeat the operation of a valid contract. &n the instant
case, aside from the testimon+ of .tt+. Mendo>a, no other evidence was presented to
prove that the real date of maturit+ is one +ear.
The terms that were thusl+ reduced to writing is deemed to contain all the terms
agreed upon and no evidence of such terms can 'e admitted other than the contents of
the agreement itself. The promissor+ note is the law 'etween petitioner and private
respondents and it clearl+ states that the loan shall mature in one month from date of
the said Promissor+ 1ote.
Page | 213
MALA,AN REAL#, VS $,
GR No. 16'76'. No5e2ber 1!, !!6
FAC#S8
Mala+an @ealt+, &nc. AMala+anB, is the owner of an apartment unit $nown as 0010
&nterior 1o. /0 Athe propert+B, located at 1agtahan *treet, *ampaloc, Manila. &n 1/!H,
Mala+an entered into a ver'al lease contract with D+ Han -ong AD+B over the propert+
at a monthl+ rental of P)").00. The monthl+ rental was increased +earl+ starting 1/H/,
and '+ )001, the monthl+ rental was PF,"81."!.
n =ul+ 18, )001, Mala+an sent D+ a written notice informing him that the lease
contract would no longer 'e renewed or e:tended upon its e:piration on .ugust 01,
)001, and as$ing him to vacate and turn over the possession of the propert+ within five
da+s from .ugust 01, )001, or on *eptem'er !, )001. Despite D+9s receipt of the notice
on =une 1H, )001, he refused to vacate the propert+, prompting Mala+an to file 'efore
the Metropolitan Trial 2ourt AMeT2B of Manila a complaint for e(ectment, doc$eted as
2ivil 2ase 1o. 181)!", and was raffled to Branch 0 thereof. The 2ourt ruled in favor of
D+ and granted an e:tension period of five +ears.
ISS$E8
&s respondent D+ entitled to a grant of e:tension '+ the 2ourt;
R$LING8
The )
nd
paragraph of .rticle 1"H8 provides that in the event that the lessee has
occupied the leased premises for over a +ear, the courts 2ay fi: a longer term for the
lease.
The power of the courts to esta'lish a grace period is potestative or discretionar+,
depending on the particular circumstances of the case. Thus, a longer term ma+ 'e
granted where e4uities come into pla+, and ma+ 'e denied where none appears, alwa+s
with due deference to the parties9 freedom to contract.
Page | 214
&n the present case, respondent has remained in possession of the propert+ from
the time the complaint for e(ectment was filed on *eptem'er 1H, )001 up to the present
time. <ffectivel+, respondent9s lease has 'een e:tended for more than five +ears, which
time is, under the circumstances, deemed sufficient as an e:tension and for him to find
another place to sta+.
4ASAPIAN NG MANGGAGA9A NG COCA-COLA VS CA
GR No. 15+"". A(r)* 1+, !!6
FAC#S8
n =une 1//H, a 2ollective Bargaining .greement which was in effect 'etween
petitioner union and private respondent compan+ e:pired. ,ith the intervention of the
12MB .dministrator, on Decem'er )", 1//H, 'oth parties e:ecuted and signed a M.
providing for salar+ increases and other economic and non6economic 'enefits. .s part of
the M., "1 emplo+ees were regulari>ed. 2onse4uentl+, petitioner demanded the
pa+ment and 'enefits of the newl+ regulari>ed emplo+ees retroactive to Decem'er 1,
1//H. Petitioner then demanded renegotiation of the 2B. which private respondent
refused. n Decem'er /, 1///, despite the pendenc+ of petitioner9s complaint 'efore the
1#@2, private respondent closed its Manila and .ntipolo plants resulting in the
termination of emplo+ment of "F" emplo+ees. The affected emplo+ees were considered
on paid leave from Decem'er /, 1/// to %e'ruar+ )/, )00/ and were paid their
corresponding salaries. The Petitioners amended their complaint to include union
'usting, illegal dismissal, etc.
ISS$E8
Page | 215
&s the closure of the Manila and .ntipolo plants valid;
R$LING8
Dnder .rticle )H0 of the #a'or 2ode, all those who have 'een with the compan+
for one +ear '+ said date must automaticall+ 'e considered regular emplo+ees '+
operation of law. The "1 emplo+ees all 4ualif+ as regular emplo+ees '+ this provision.
The characteri>ation of the emplo+ee9s services as no longer necessar+ or
sustaina'le, and therefore properl+ termina'le, is an e:ercise of 'usiness (udgment on
the part of the emplo+er. The wisdom or soundness of such characteri>ing or decision is
not su'(ect to discretionar+ review on the part of the #a'or .r'iter nor of the 1#@2 so
long, of course, as violation of law or merel+ ar'itrar+ and malicious action is not shown.
.s found '+ the 1#@2, the private respondent9s decision to close the plant was a result
of a stud+ conducted which esta'lished that the most prudent course of action for the
private respondent was to stop operations in said plants and transfer production to
other more modern and technologicall+ advanced plants of private respondent.
SAN#OS VS SAN#OS
GR No. 15'!!4. No5e2ber 5, !!4
FAC#S8
<rnesto C. *antos and *antos Centura Hocorma %oundation, &nc. A*CH%&B were
the plaintiff and defendant, respectivel+, in several civil cases. n cto'er )", 1//0, the
parties e:ecuted a 2ompromise .greement which amica'l+ ended all their pending
litigations. .s stipulated, defendant foundation shall pa+ Plaintiff *antos P1F.! Million
Page | 216
in the following manner: aB P1.! Million immediatel+ upon the e:ecution of the
agreementJ 'B The 'alance of P10 Million shall 'e paid at the discretion of the
%oundation, within a period of not more than two A)B +ears from the e:ecution of the
agreement. Plaintiff *antos shall also cause the dismissal of civil cases pending upon the
e:ecution of the agreement.
.s a result of the 2ompromise .greement, the civil cases were dropped. However,
petitioner *CH%& sold to Development <:change #ivelihood two real properties, which
were previousl+ su'(ects of lis pendens. @espondent then issued a demand letter for the
collection of pa+ment. ,ith no response from petitioner, filed for the issuance of a writ
of e:ecution for which the properties of petitioner were then auctioned off for pa+ment
of the de't. n =une ), 1//!, respondent filed a complaint for declarator+ relief and
damages alleging that he was also entitled to interest for dela+ed pa+ment.
ISS$E8
.re the respondents entitled to legal interest;
R$LING8
The general rule is that a compromise has upon the parties the effect and
authorit+ of res (udicata, with respect to the matter definitel+ started therein, or in
which '+ implication from its terms should 'e deemed to have 'een included therein.
This holds true even if the agreement has not 'een (udiciall+ approved. &n the case at
'ar, the o'ligation was alread+ due and demanda'le after he lapse of the two6+ear
period from the e:ecution of the contract.
Ceril+, the petitioner is lia'le for damages for the dela+ in the performance of its
o'ligation A.rticle 1180 of the 1ew 2ivil 2odeB. ,hen the de'tor $nows the amount and
period when he is to pa+, interest as damages is generall+ allowed as a matter of right. &n
the a'sence of agreement, the legal rate of interest shall prevail. The legal interest for a
loan as fore'earance of mone+ is 1)E per annum to 'e computed from default. Thus
respondent was entitled to legal interest.
Page | 217
ME#OLIN0OS VS #O%IAS
GR No. 14665". O17ober ", !!
FAC#S8
<ight+6seven6+ear old petitioner, .tt+. Manuel D. Melotindos, was the lessee of
the ground floor of a house at 1a$pil *treet in Malate, Manila. He had 'een renting the
place since 1/!0 on a month6to6month 'asis from its owner, respondent Melecio To'ias,
who was then residing in 2anada. n =une 1, 1//H, respondent as$ed petitioner to
restore the premises to him for essential repairs to accommodate housing for his mother
during her regular medical chec$6ups in Manila. Petitioner however refused to vacate
the premises and worse, he neglected pa+ment of his monthl+ dues. Petitioner then filed
a complaint for e(ectment in 2ourt. The courts ruled in favor of defendant. Petitioner
filed a motion for review 'ut was denied on grounds of late filing. Petitioner then filed
the instant petition for review asservating that the order to e(ect him from the leased
premises was illegal 'ecause he was alwa+s up to date in pa+ing the rental feeJ that it
was the o'ligation of the Trial 2ourt to e:tend his lease '+ five A!B more +ears citing
.rticle 1"H8 of the 2ivil 2ode.
ISS$E8
&s the order of e(ectment illegal;
R$LING8
The Decision of the 2ourt of .ppeals was alread+ final and e:ecutor. Petitioner
received the 2. decision on cto'er /, )000 as shown '+ the registr+ return receipt and
that he filed his motion for reconsideration thereof onl+ on cto'er 00, )000. The
motion was o'viousl+ filed 'e+ond the fifteen da+ reglementar+ period.
The evidence on record confirm petitioner9s default in pa+ing the rental fees for
more than three months in 1/// and 1//H prior to the filing of the e(ectment complaint.
&n addition, there is sufficient 'asis to conclude that respondent desperatel+ needed the
propert+ in good faith for his own famil+ and for the repair of the house therein. These
facts represent legal grounds for e(ectment.
#astl+, .rticle 1"H8 does not grant a lessee a'solute right to an e:tension of the
lease term 'ut merel+ gives the courts the discretion to allow additional time for the
lessee to prepare for his eventual e(ection. The petitioner had effectivel+ 'een granted an
e:tension of five +ears when respondent did not assiduousl+ pursue the several demands
made in 1//! and 1//" for him to return possession of the leased premises until in 1///.
He was also onl+ evicted from the premises in accordance with the MeT2 decision onl+
in )00).
Page | 218
LL AN0 COMPAN, 0EVELOPMEN# AN0 AGRO-IN0$S#RIAL
CORPORA#ION VS 3$ANG C3AO C3AN
GR No. 14'7". Mar1< 7, !!
FAC#S8
Petitioner filed a case for unlawful detainer alleging that respondents Huang
2hao 2hun and -ang Tung %a violated their amended lease contract over #ot 1o. 16.61,
when the+ did not pa+ the monthl+ rentals thereon in the total amount of
PF,0)),/00.00. Petitioner also alleged that the amended lease contract had alread+
e:pired on *eptem'er 1", 1/"" 'ut respondents refused to vacate the premises. The
MeT2, @T2, and 2. dismissed the unlawful detainer case. &t was held that in the
interest of (ustice and e4uit+, the contract entered into '+ the parties ma+ 'e e:tended
'+ the lessees. Hence petitioners now raise the issue to the *upreme 2ourt.
ISS$E8
&s the case of unlawful and detainer and e(ectment a valid course of action;
R$LING8
,here no period has 'een fi:ed '+ the parties, the courts, pursuant to .rticle
1"H8, have the potestative authorit+ to set a longer period of lease. &n the case at 'ar, the
2ontract of #ease provided for a fi:ed period of five +ears I specificall+ from *eptem'er
1", 1//1 to *eptem'er 1!, 1//". Thus, it ceased on the da+ fi:ed without need of
demand. The 2ourt could not suppl+ material stipulations to a contract and e:tend to
date of lease. %urthermore, the e:tension of a lease contract must 'e made 'efore the
term of the agreement e:pires, no after. Dpon the lapse of the stipulated period, courts
cannot 'elatedl+ e:tend or ma$e a new lease for the parties, even on the 'asis of e4uit+.
The period of the lease must 'e deemed to have 'een agreed upon for the 'enefit
of 'oth parties. &ts renewal ma+ 'e authori>ed onl+ upon their mutual agreement or at
their (oint will. &ts continuance, effectivit+ or fulfillment cannot 'e made to depend
e:clusivel+ upon the free and uncontrolled choice of (ust one part+. &n the instant case,
there was nothing in the stipulations of the contract of the actuations of the parties to
indicate automatic renewal of the term of the contract.
#astl+, while mere failure to pa+ does not ma$e possession unlawful, 'ut when a
valid demand to vacate the premises is made '+ the lessor, the lessee9s continued
withholding of possession 'ecomes unlawful as what is evident in this case. The
*upreme 2ourt granted the petition.
Page | 219
%REN# SC3OOL VS :AMORA
GR No. L-4"4+4. February 5, 1++!
FAC#S8
Doroteo @. .legre was engaged as athletic director '+ Brent *chool, &nc. The
contract fi:ed a specific term for its e:istence, five A!B +ears, i.e., from =ul+ 1H, 1/81, the
date of e:ecution of the agreement, to =ul+ 18, 1/8".
n .pril )0,1/8", .legre was given a cop+ of the report filed '+ Brent *chool with
the Department of #a'or advising of the termination of his services effective on =ul+ 1",
1/8". The stated ground for the termination was Lcompletion of contract, e:piration of
the definite period of emplo+ment.L .nd a month or so later, on Ma+ )", 1/8", .legre
accepted the amount of P0,188.81, and signed a receipt therefor containing the phrase,
Lin full pa+ment of services for the period Ma+ 1", to =ul+ 18, 1/8" as full pa+ment of
contract.L However, .legre later protested at the termination of his emplo+ment upon
investigation of the la'or conciliator.
ISS$E8
&s .legre entitled to regulari>ed emplo+ment;
R$LING8
*ince the entire purpose 'ehind the development of legislation culminating in the
present .rticle )H0 of the #a'or 2ode clearl+ appears to have 'een to prevent
circumvention of the emplo+eeKs right to 'e secure in his tenure, the clause in said
article indiscriminatel+ and completel+ ruling out all written or oral agreements
conflicting with the concept of regular emplo+ment as defined therein should 'e
construed to refer to the su'stantive evil that the 2ode itself has singled out: agreements
entered into precisel+ to circumvent securit+ of tenure. &t should have no application to
instances where a fi:ed period of emplo+ment was agreed upon $nowingl+ and
Page | 220
voluntaril+ '+ the parties, without an+ force, duress or improper pressure 'eing 'rought
to 'ear upon the emplo+ee and a'sent an+ other circumstances vitiating his consent, or
where it satisfactoril+ appears that the emplo+er and emplo+ee dealt with each other on
more or less e4ual terms with no moral dominance whatever 'eing e:ercised '+ the
former over the latter. Dnless thus limited in its purview, the law would 'e made to
appl+ to purposes other than those e:plicitl+ stated '+ its framersJ it thus 'ecomes
pointless and ar'itrar+, un(ust in its effects and apt to lead to a'surd and unintended
conse4uences.
The *upreme 2ourt thusl+ decided in favor of petitioner.
LIM VS PEOPLE
GR No. L-'4''". No5e2ber 1, 1+"4
FAC#S8
The appellant is a 'usinesswoman. n =anuar+ 10, 1/"", the appellant went to
the house of Maria .+roso and proposed to sell .+rosoKs to'acco. .+roso agreed to the
proposition of the appellant to sell her to'acco consisting of "1! $ilos at P1.00 a $ilo.
The appellant was to receive the overprice for which she could sell the to'acco. This
agreement was made in the presence of plaintiffKs sister, *alud 7. Bantug. *alvador
Bantug drew the document, <:h. ., dated =anuar+ 10, 1/"". %ollowing the transaction
respondent or rather *alud tried to follow up on the pa+ment and forwarded a demand
letter.
Pursuant to this letter, the appellant sent a mone+ order for P100.00 on cto'er
)F, 1/"8, <:h. F, and another for P!0.00 on March H, 1/"8J and she paid P/0.00 on
.pril 1H, 1/"8 as evidenced '+ the receipt <:h. ), dated .pril 1H, 1/"8, or a total of
P)F0.00. .s no further amount was paid, the complainant filed a complaint against the
appellant for estafa. Both the @T2 and 2. convicted petitioner.
Page | 221
ISS$E8
Does the o'ligation solel+ depend on the will of the de'tor, thus leaving onl+ the
courts to impose a period;
R$LING8
&t is clear in the agreement, <:hi'it L.L, that the proceeds of the sale of the
to'acco should 'e turned over to the complainant as soon as the same was sold, or, that
the o'ligation was immediatel+ demanda'le as soon as the to'acco was disposed of.
Hence, .rticle 11/8 of the 1ew 2ivil 2ode, which provides that the courts ma+ fi: the
duration of the o'ligation if it does not fi: a period, does not appl+.
.side from the fact that Maria .+roso testified that the appellant as$ed her to 'e
her agent in selling .+rosoKs to'acco, the appellant herself admitted that there was an
agreement that upon the sale of the to'acco she would 'e given something. The
appellant is a 'usinesswoman, and it is un'elieva'le that she would go to the e:tent of
going to .+rosoKs house and ta$e the to'acco with a (eep which she had 'rought if she
did not intend to ma$e a profit out of the transaction. 2ertainl+, if she was doing a favor
to Maria .+roso and it was .+roso who had re4uested her to sell her to'acco, it would
not have 'een the appellant who would have gone to the house of .+roso, 'ut it would
have 'een .+roso who would have gone to the house of the appellant and deliver the
to'acco to the appellant.
PACIFIC %AN4ING VS CA
GR No. L-45656. May 5, 1+"+
FAC#S8
Hart and 2lar$ins are the ma(or stoc$holders of &nsular %arms. n =ul+ 01, 1/!"
&nsular %arms, owned '+ respondents, &nc. e:ecuted a Promissor+ 1ote of P )!0,000.00
to the 'an$ pa+a'le in five e4ual annual installments, the first installment pa+a'le on or
Page | 222
'efore =ul+ 1/!8. *aid note provided that upon default in the pa+ment of an+ installment
when due, all other installments shall 'ecome due and pa+a'le. The loan was intended
to support &nsular %arms.
Dnfortunatel+, 'usiness continued to decline. Hart agreed to 2lar$inKs proposal
that all &nsular %arms shares of stoc$s 'e pledged to petitioner 'an$ in lieu of additional
collateral and to insure an e:tension of the period to pa+ the =ul+ 1/!8 installment. *aid
pledge was e:ecuted on %e'ruar+ 1/, 1/!H. Barel+ two wee$s after the pledge the 'an$
demanded (udicial foreclosure of the stoc$ and the lots. The @T2 granted the motion 'ut
was reversed '+ the 2..
ISS$E8
Did petitioner 'an$ infringe on the terms and conditions of the pledge;
R$LING8
&n case the period of e:tension is not precise, the provisions of .rticle 11/8 of the
2ivil 2ode should appl+. &n this case, there was an agreement to e:tend the pa+ment of
the loan, including the first installment thereon which was due on or 'efore =ul+ 1/!8.
&n addition, there is ample evidence to support 'ad faith on the part of petitioner.
1o sufficient investigation was conducted after the e:ecution of the pledge regarding the
a'ilit+ of &nsular %arms to pa+ its loan. .lso the dates of demand and filing of the case
for foreclosure seem to cast dou't on the intent of petitioner to offer the pledge to help
respondents.
&n the light of the a'ove discussion and the finding that the foreclosure sale was
premature and done in 'ad faith, petitioners are lia'le for damages arising from a 4uasi6
delict. The *upreme 2ourt upheld the decision of the 2..
Page | 223
AGONCILLO VS -AVIER
GR No. 1611. Au6us7 7, 1+1"
FAC#S8
n %e'ruar+ )8, 1/0F, .nastacio .lano, =ose .lano, and %lorencio .lano,
e:ecuted in favor of the plaintiff, Da. Marcela MariQo a document where'+: A1B The
.lanos would render unto her within one +ear from the date of the document, with
interest at 1)E per annum, the sum of Php),800.!0J A)B The+ would mortgage a house
and lot inherited '+ them from the deceased, one <vangelista, to secure pa+ment andJ
A0B &n case of insolvenc+ on their part, the+ would cede said house and lot to Dr. Marcela
MariQo. &n case its value is insufficient to cover the total amount of inde'tedness,
.nastacio .lano would also mortgage to said lad+ his four parcels of land to secure the
'alance, if an+.
&n 1/1), .nastacio .lano died intestate, and notices were drawn in 'oards and
newspapers for creditors to ma$e their claims. 1o claims were presented to the
committee and the intestate proceeding was terminated '+ order dated 1ovem'er H,
1/1!. n .pril )8, 1/1", petitioner stated that she was a creditor and the intestate
proceedings were reopened. The 2ourt appointed one =avier to 'e administrator of the
estate. 2laims for the house and lot were made as petitioner avers that defendants paid
no part of the inde'tedness ac$nowledged therein, with the e:ception of the PhP)00.00
paid on account '+ .nastacio in 1/0H.
ISS$E8
Does petitioner have a right to the house and lot;
R$LING8
The contract now under consideration is not suscepti'le of the interpretation that
the title to the house and lot in 4uestion was to 'e transferred to the creditor ipso facto
upon the mere failure to pa+ the de't at its maturit+. The o'ligation assumed '+ the
de'tors was alternative, and the+ had the right to elect which o'ligation the+ could
perform. The conduct of the parties involved shows that it was not their understanding
that the right to discharge the o'ligation '+ the pa+ment of mone+ was lost to de'tors '+
their failure to pa+ the de't at its maturit+. The alternative indivisi'le o'ligation also
arises from the fulfillment of the suspensive condition 'efore it can 'e availed of.
&t is unfortunate, 'ut the petition was (udged to have lac$ed merit.
Page | 224
ONG G$AN VS #3E CEN#$R, INS$RANCE COMPAN,, L#0.
GR No. L-!!+6 February 6, 1+4
FAC#S8
.n action was filed '+ the plaintiff ng 7uan 2an to recover from the defendant
an amount due on the polic+ of insurance issued '+ the defendant corporation. n =une
!, 1/)0, onl+ the motion of the plaintiff, The 2ourt (udged in default against the
defendant. The notice of appearance was received on =une 8, 1/)0. The defendant then
asserts that said (udgment should 'e reversed as the letter was carried on 'oard the
steamship Ci>ca+a and was sent on =une ), 1/)0. The ship was however dela+ed due to a
storm at sea.
ISS$E8
*hould the letter of notice 'e given due course;
R$LING8
The Petition 'ore merit.
&t has 'een fre4uentl+ decided that, if pleadings or other papers essential to a
case are entrusted to the mails in due season and under proper precaution and are lost
or miscarried, it will 'e ground for vacating a (udgment '+ default.
. dela+ of mail, such as occurred in the present case, amounts to accident or
surprise for which (udgments '+ default ma+ 'e set aside, especiall+ when the defendant
shows '+ affidavit or otherwise that he has a valid and meritorious defense. The time
fi:ed for filing papers in a cause is generall+ director+ and the court alwa+s has it in its
power, in the e:ercise of a proper discretion, to e:tend the time fi:ed '+ law whenever
the ends of (ustice would seem to demand such an e:tension.
Page | 225
LEGAR0A VS MIAIL3E
GR No. L-'4'5, A(r)* ", 1+51
FAC#S8
n =une 0, 1/FF, plaintiffs filed a complaint against the original defendant
,illiam =.B. Bur$e, alleging defendant9s un(ustified refusal to accept pa+ment in
discharge of a mortgage inde'tedness in his favor, and pra+ing that the latter 'e order
A1B to receive the sum of P8!,/)0.H0J A)B to e:ecute the corresponding deed of release of
mortgage, andJ A0B to pa+ damages in the sum of P1,000. The 2ourt then decided in
favor of plaintiff #egarda. .fter the war and the su'se4uent defeat of the =apanese
occupants, defendant filed a case in court claiming that plaintiff 2lara de #egarda
violated her agreement with defendant, '+ forcing to deposit worthless =apanese
militar+ notes when the+ originall+ agreed that the interest was to 'e condoned until
after the occupation and that pa+ment was rendered either in Philippine or <nglish
currenc+. Defendant was later su'stituted upon death '+ his heir Miailhe and the 2ourts
(udged in defendant9s favor. Plaintiff now assails said decision.
ISS$E8
&s the tender of pa+ment '+ plaintiff valid;
R$LING8
n %e'ruar+ 18, 1/F0, the onl+ currenc+ availa'le was the Philippine currenc+, or
the =apanese Militar+ notes, 'ecause all other currencies, including the <nglish, were
Page | 226
outlawed '+ a proclamation issued '+ the =apanese &mperial 2ommander on =anuar+ 0,
1/F). The right to election ceased to e:ist on the date of plaintiff9s pa+ment 'ecause it
had 'ecome legall+ impossi'le. .nd this is so 'ecause in alternative o'ligations there is
no right to choose underta$ings that are impossi'le or illegal. &n other words, the
o'ligation on the part of the de'tor to pa+ the mortgage inde'tedness has since then
ceased to 'e alternative. &t appears therefore, that the tender of pa+ment in =apanese
Militar+ notes was a valid tender 'ecause it was the onl+ currenc+ permissi'le at the
time and its pa+ment was tantamount to pa+ment in Philippine currenc+.
However, pa+ment with the cler$ of court did not have an+ legal effect 'ecause it
was made in certified chec$, and a chec$ does not meet the re4uirements of legal tender.
Therefore, her consignation did not have the effect of relieving her from her o'ligation
of the defendant.
ES#ANISLAO RE,ES 5s. SE%AS#IANA MAR#INE: E# AL.,
G.R. No. '6 . 0ECEM%ER +, 1+'!.
FAC#S8
<stanislao @e+es filed an action against the Martine> heirs in which the plaintiff
see$s, among others, to recover five parcels of land, containing appro:imatel+ one
thousand coconut trees, and to o'tain a declaration of ownership in his own favor as
against the defendants with respect to said parcels. This cause of action is founded upon
the contract, and the claim '+ the plaintiff is to have the five parcels ad(udged to him in
lieu of another parcel formerl+ supposed to contain one thousand trees and descri'ed in
paragraph H of the contract 'etween him and certain of the Martine> heirs. B+ this
contract @e+es was to 'e given the parcel descri'ed in clause H, 'ut in a proviso to said
Page | 227
clause, the parties contracting with @e+es agreed to assure to him certain other land
containing an e4uivalent num'er of trees in case he should so elect.
ISS$E8
,hether or not @e+es is entitled to the recover+ of ownership of the five parcels
of land su'(ect of this case.
R$LING8
The prior histor+ of the litigation shows that @e+es elected to ta$e and hold the
parcel descri'ed in clause H, and his right thereto has all along 'een recogni>ed in the
dispositions made '+ the court with respect to said land. &n our decision in Martine> vs.
7raQo A!1 Phil., )H8, 001B, it was a 'asal assumption that @e+es would o'tain the
thousand trees referred toJ and we are of the opinion that, from various steps ta$en in
the prior litigation, @e+es must 'e ta$en to have elected to ta$e that particular parcel
and he is now estopped from asserting a contrar+ election to ta$e the five parcels of land
descri'ed in paragraph &V of his complaint.
However, the title to the parcel of land elected '+ @e+es is in the heirs of &nocente
Martine> and it does not appear that the+ have transferred said title to @e+es. &t results
therefore that @e+es now has a claim for damages against the parties signator+ to the
contract of March !, 1/)1, for the value of the aforesaid propert+. ,e therefore reach the
conclusion that @e+es should either have the land originall+ set apart for him under
clauses F and H of the contract, or, in case his right thereto should fail, he should not 'e
re4uired to pa+ the (udgment for PH,000 which was awarded to the Martine> heirs in
Martine> vs. 7raQo A!1 Phil., )H8, 00)B.
/$I:ANA VS RE0$GORIO
GR No. L-66!. May 7, 1+54
FAC#S8
Page | 228
This is an appeal to this 2ourt from a decision rendered '+ the 2ourt of %irst
&nstance of Marindu4ue, wherein the defendants6appellants are ordered to pa+ the
plaintiff6appellee the sum of P!!0, with interest from the time of the filing of the
complaint, and from an order of the same court den+ing a motion of the defendants6
appellants for the reconsideration of the (udgment on the ground that the+ were
deprived of their da+ in court.
ISS$E8
,hat is the nature and effect of the actiona'le document mentioned a'ove;
R$LING8
The decisive 4uestion at issue, therefore, is whether the second part of the written
o'ligation, in which the o'ligors agreed and promised to deliver a mortgage over the
parcel of land descri'ed therein, upon their failure to pa+ the de't on a date specified in
the proceeding paragraph, is valid and 'inding and effective upon the plaintiff6appellee,
the creditor. This second part of the o'ligation in 4uestion is what is $nown in law as a
facultative o'ligation, defined in article 1)0" of 2ivil 2ode of the Philippines, which
provides:
.@T. 1)0". ,hen onl+ one prestation has 'een agreed upon, 'ut the o'ligor ma+
render another in su'stitution, the o'ligation is called facultative.
There is nothing in the agreement which would argue against its enforcement. it is not
contrar+ to law or pu'lic morals or pu'lic polic+, and notwithstanding the a'sence of
an+ legal provision at the time it was entered into government it, as the parties had
freel+ and voluntaril+ entered into it, there is no ground or reason wh+ it should not 'e
given effect. &t is a new right which should 'e declared effective at once.
Page | 229
P$RI#A ALIPIO 5s. CO$R# OF APPEALS
G.R. No. 1'41!!. Se(7e2ber +, !!!
FAC#S8
@espondent @omeo =aring was the lessee of a 1F.! hectare fishpond in Barito,
Ma'uco, Hermosa, Bataan, for a period of five +ears ending on *eptem'er 1), 1//0. n
=une 1/, 1/H8, he su'leased the fishpond, for the remaining period of his lease, to the
spouses Placido and Purita .lipio and the spouses Bienvenido and @emedios Manuel.
The stipulated amount of rent was PFH!,"00.00, pa+a'le in two installments of
P000,000.00 and P1H!,"00.00, with the second installment falling due on =une 00,
1/H/. <ach of the four su'lessees signed the contract.
The first installment was dul+ paid, 'ut of the second installment, the su'lessees
onl+ satisfied a portion thereof, leaving an unpaid 'alance of P!0,"00.00. Despite due
demand, the su'lessees failed to compl+ with their o'ligation, so that, on cto'er 10,
1/H/, private respondent sued the .lipio and Manuel spouses for the collection of the
said amount 'efore the @egional Trial 2ourt. &n the alternative, he pra+ed for the
rescission of the su'lease contract should the defendants fail to pa+ the 'alance.
Petitioner Purita .lipio moved to dismiss the case 'ecause her hus'and had
passed awa+. .nd that an+ action for recover+ of mone+, de't or interest thereon, shall
'e dismissed when the defendant dies 'efore final (udgment.The trial court denied
petitionerKs motion and held that the o'ligation is solidar+. n appeal, the 2ourt of
.ppeals affirmed the decision.
ISS$E8
,hether a creditor can sue the surviving spouse for the collection of a de't which
is owed '+ the con(ugal partnership of gains, or whether such claim must 'e filed in
proceedings for the settlement of the estate of the decedent.
R$LING8
The 2ourt held that the respondent cannot sue the surviving spouse of a decedent in an
ordinar+ proceeding for the collection of a sum of mone+ chargea'le against the
con(ugal partnership. Because when the hus'and died, their con(ugal partnership was
automaticall+ dissolved and de'ts chargea'le against it is to 'e paid in the settlement of
estate proceedings.
Moreover, respondent does not cite an+ provision of law which provides that
when there are two or more lessees, or in this case, su'lessees, the latterKs o'ligation to
pa+ the rent is solidar+.Thus, the lia'ilit+ of the su'lessees is merel+ (oint. *ince the
o'ligation of the Manuel and .lipio spouses is chargea'le against their respective
con(ugal partnerships, the unpaid 'alance of P!0,"00.00 should 'e divided into two so
Page | 230
that each couple is lia'le to pa+ the amount of P)!,000.00. Hence, the petition is
granted.
P3 CRE0I# CORP VS CA
GR No. 1!+64". No5e2ber , !!1
FAC#S8
PH 2redit 2orp., filed a case against Pacific #lo+d 2orp., 2arlos %arrales, Thomas
H. Can *e'ille and %ederico 2. #im, for NaO sum of mone+. The case was doc$eted as
2ivil 2ase 1o. H06188!1 'efore the @egional Trial 2ourt, Branch !1, Manila. .fter
service of summons upon the defendants, the+ failed to file their answer within the
reglementar+ period, hence the+ were declared in default. PH 2redit 2orp., was then
allowed to present its evidence e:6parte. The @T2 (udged in favor of PH 2redit 2orp.
n =ul+ )8, 1//0, a motion for the issuance of a writ of possession was filed and
on cto'er 1), 1//0, the same was granted. The writ of possession itself was issued on
cto'er )", 1//0. *aid order and writ of possession are now the su'(ect of this petition.
Petitioner claims that @espondent =udge erred in appl+ing the presumption of a (oint
o'ligation in the face of the conclusion of fact and law contained in the decision showing
that the o'ligation is solidar+.
ISS$E8
&s the petitioner9s contention tena'le;
R$LING8
The @ules of 2ourt re4uires that all availa'le o'(ections to a (udgment or
proceeding must 'e set up in an mni'us Motion assailing itJ otherwise, the+ are
deemed waived. &n the case at 'ar, the o'(ection of private respondent to his solidary
lia'ilit+ 'ecame availa"le to him, onl+ after his real propert+ was sold at pu'lic auction.
.t the time his personal properties were levied and sold, it was not evident to him that
he was 'eing held solel+ lia'le for the monetar+ (udgment rendered against him and his
co6respondents. That was wh+ his o'(ections then did not include those he asserted
when his solidary lia'ilit+ 'ecame evident.
Page | 231
&n the dispositive portion of the =anuar+ 01, 1/HF Decision of the trial court, the
word solidary neither appears nor can it 'e inferred therefrom. The fallo merel+ stated
that the following respondents were lia'le: Pacific #lo+d 2orporation, Thomas H. Can
*e'ille, 2arlos M. %arrales and %ederico 2. #im. Dnder the circumstances, the lia'ilit+ is
(oint, as provided '+ the 2ivil 2ode.
,e should stress that respondent9s o'ligation is 'ased on the (udgment rendered
'+ the trial court. The dispositive portion or the fallo is its decisive resolution and is
thus the su'(ect of e:ecution. The other parts of the decision ma+ 'e resorted to in
order to determine the ratio decidendi for the disposition. ,here there is a conflict
'etween the dispositive part and the opinion of the court contained in the te:t or 'od+ of
the decision, the former must prevail over the latter on the theor+ that the dispositive
portion is the final order, while the opinion is merel+ a statement ordering nothing.
Hence the e:ecution must conform with that which is ordained or decreed in the
dispositive portion of the decision.
C0CP VS ES#RELLA
GR No. 1477+1. Se(7e2ber ", !!6
FAC#S8
n Decem'er )/, 1/8H, respondents @e'ecca 7. <strella and her granddaughter,
@achel <. %letcher, 'oarded in *an Pa'lo 2it+, a B#TB 'us 'ound for Pasa+ 2it+.
However, the+ never reached their destination 'ecause their 'us was rammed from
'ehind '+ a tractor6truc$ of 2D2P in the *outh <:presswa+. The strong impact pushed
forward their seats and pinned their $nees to the seats in front of them. The+ regained
consciousness onl+ when rescuers created a hole in the 'us and e:tricated their legs
from under the seats. The+ suffered ph+sical in(uries as a result. Thereafter, respondents
filed a 2omplaint for damages against 2D2P, B#TB, <spiridion Pa+unan, =r. and
,ilfredo Datinguinoo 'efore the @egional Trial 2ourt of Manila, Branch 10.
ISS$E8
.re the accused (ointl+ or solidaril+ lia'le;
R$LING8
The case filed '+ respondents against petitioner is an action for culpa
a#uiliana or 4uasi6delict under .rticle )18" of the 2ivil 2ode. The lia'ilit+ for the
negligent conduct of the su'ordinate is direct and primary, 'ut is su'(ect to the defense
Page | 232
of due diligence in the selection and supervision of the emplo+ee. &n the instant case, the
trial court found that petitioner failed to prove that it e:ercised the diligence of a good
father of a famil+ in the selection and supervision of Pa+unan, =r.
&t is well6settled in $a"re% &r. v. Court of 'ppeals, that the owner of the
other vehicle which collided with a common carrier is solidaril+ lia'le to the in(ured
passenger of the same. The Peitition was thusl+ D<1&<D.
REP$%LIC GLASS CORPORA#ION 5. /$A
G.R. No. 1441' -u*y '!, !!4
FAC#S:
Petitioners and respondent were stoc$holders of #adte$, &nc., which o'tained
loans from Metro'an$ and PD2P where the+ stood as sureties. .mong themselves the+
e:ecuted .greements for 2ontri'ution, &ndemnit+ and Pledge of shares of *toc$s,
stating that in case of default in the pa+ment of loans, the parties would reim'urse each
Page | 233
other the proportionate share of an+ sum that an+ might pa+ to creditors. #adte$
defaulted on its loan o'ligations, hence Metro'an$ filed a collection case. During the
pendenc+ thereof, @72 and 7ervel paid Metro'an$ where a waiver and 4uitclaim in
favor of the two was e:ecuted. Dpon ?ua9s refusal to reim'urse, @72 and 7ervel
foreclosed the pledged shares of stoc$s owned '+ ?ua at a pu'lic auction. n appeal,
the 2. issued the assailed decision and held that there was an implied novation of the
agreement and that the pa+ment did not e:tinguish the entire o'ligation and did not
'enefit ?ua. Hence, the petition, where the petitioners claim the following: A1B ?ua is
estopped from claiming that the pa+ment made was not for the entire o'ligation, due to
his (udicial admissionsJ A)B pa+ment of the entire o'ligation is a condition sine #ua non
for the demand of reim'ursement under the indemnit+ agreementsJ and A0B there is no
novation in the instant case.
ISS$ES8
A1B ,hether pa+ment of the entire o'ligation is an essential condition for
reim'ursementJ and A)B ,hether there was no novation.
R$LING8
The petition is denied. .lthough the .greement does not state that pa+ment of
the entire o'ligation is an essential condition for reim'ursement, @72 and 7ervel
cannot automaticall+ claim for indemnit+ from ?ua 'ecause ?ua himself is lia'le
directl+ to Metro'an$ and PD2P. The elements of novation are not esta'lished in the
instant case. 2ontrar+ to @72 and 7ervel9s claim, pa+ment of an+ amount will not
automaticall+ result in reim'ursement. &f a solidar+ de'tor pa+s the o'ligation in part,
he can recover reim'ursement from the co6de'tors onl+ in so far as his pa+ment
e:ceeded his share in the o'ligation. This is precisel+ 'ecause if a solidar+ de'tor pa+s
an amount e4ual to his proportionate share in the o'ligation, then he in effects pa+s
onl+ what is due from him. &f the de'tor pa+s less than his share in the o'ligation, he
cannot demand reim'ursement 'ecause his pa+ment is less than his actual de't.
Page | 234
IN0$S#RIAL MANAGEMEN# VS NLRC
GR No. 1!17'. May 11, !!!
FAC#S8
This is a petition for certiorari assailing the @esolution dated *eptem'er F, 1//1
issued '+ the 1ational #a'or @elations 2ommission in @.B6C&&608116HF on the alleged
ground that it committed a grave a'use of discretion amounting to lac$ of (urisdiction in
upholding the .lias ,rit of <:ecution issued '+ the #a'or .r'iter which deviated from
the dispositive portion of the Decision dated March 10, 1/H8, there'+ holding that the
lia'ilit+ of the si: respondents in a case ad(udicated '+ the 1#@2 is solidar+ despite the
a'sence of the word Lsolidar+L in the dispositive portion of the Decision, when their
lia'ilit+ should merel+ 'e (oint.
ISS$E8
&s the petitioner9s lia'ilit+ pursuant to the Decision of the #a'or .r'iter dated
March 10, 1/H8, solidar+ or not;
R$LING8
&n the dispositive portion of the #a'or .r'iter, the word Lsolidar+L does not
appear. The said fallo e:pressl+ states the following respondents therein as lia'le,
namel+: %ilipinas 2ar'on and Mining 2orporation, 7erardo *icat, .ntonio 7on>ales,
&ndustrial Management Development 2orporation Apetitioner &1&M.2B, 2hiu 2hin
7in, and #o Guan 2hin. 1or can it 'e inferred therefrom that the lia'ilit+ of the si: A"B
respondents in the case 'elow is solidar+, thus their lia'ilit+ should merel+ 'e (oint.
Moreover, it is alread+ a well6settled doctrine in this (urisdiction that, when it is
not provided in a (udgment that the defendants are lia'le to pa+ (ointl+ and severall+ a
certain sum of mone+, none of them ma+ 'e compelled to satisf+ in full said (udgment.
7ranting that the #a'or .r'iter has committed a mista$e in failing to indicate in the
dispositive portion that the lia'ilit+ of respondents therein is solidar+, the correction 66
which is su'stantial 66 can no longer 'e allowed in this case 'ecause the (udgment has
alread+ 'ecome final and e:ecutor+.
Page | 235
ME#RO MANILA #RANSI# CORPORA#ION 5s. #3E CO$R# OF APPEALS
G.R. No. 1!44!" 1++' -u.e 1, 1++'
FAC#S8
n .ugust )H, 1/8/, plaintiff6appellant 1enita 2ustodio 'oarded as a pa+ing
passenger a pu'lic utilit+ (eepne+ with plate 1o. D8 00! PD=, then driven '+ defendant
.gudo 2ale'ag and owned '+ his co6defendant Cictorino #ama+o, 'ound for her wor$ at
D+netics &ncorporated located in Bicutan, Taguig, Metro Manila, where she then wor$ed
as a machine operator earning P1".)! a da+. ,hile the passenger (eepne+ was travelling
at AaB fast clip along DBP .venue, Bicutan, Taguig, Metro Manila another fast moving
vehicle, a Metro Manila Transit 2orp. 'us with plate no. 0R 008 PDB APhilippinesB K8/
driven '+ defendant 7odofredo 2. #eonardo was negotiating Hone+dew @oad, Bicutan,
Taguig, Metro Manila 'ound for its terminal at Bicutan. .s 'oth vehicles approached the
intersection of DBP .venue and Hone+dew @oad the+ failed to slow down and slac$en
their speedJ neither did the+ 'low their horns to warn approaching vehicles. .s a
conse4uence, a collision 'etween them occurred, the passenger (eepne+ ramming the
left side portion of the MMT2 'us. The collision impact caused plaintiff6appellant
1enita 2ustodio to hit the front windshield of the passenger (eepne+ and AsheB was
thrown out therefrom, falling onto the pavement unconscious with serious ph+sical
in(uries. *he was 'rought to the Medical 2it+ Hospital where she regained
consciousness onl+ after one A1B wee$. Thereat, she was confined for twent+6four A)FB
da+s, and as a conse4uence, she was una'le to wor$ for three and one half months A0
1M)B.
. complaint for damages was filed '+ herein private respondent, who 'eing then
a minor was assisted '+ her parents, against all of therein named defendants following
their refusal to pa+ the e:penses incurred '+ the former as a result of the collision.
*aid defendants denied all the material allegations in the complaint and pointed
an accusing finger at each other as 'eing the part+ at fault.
ISS$E8
,hether the evidence presented during the trial with respect to the proof of due
diligence of petitioner MMT2 in the selection and supervision of its emplo+ees,
particularl+ driver #eonardo, is sufficient.
R$LING8
Page | 236
,ith the allegation and su'se4uent proof of negligence against the defendant
driver and of an emplo+er6emplo+ee relation 'etween him and his co6defendant MMT2
in this instance, the case is undou'tedl+ 'ased on a 4uasi6delict under .rticle )1H0.
,hen the emplo+ee causes damage due to his own negligence while performing his own
duties, there arises the (uris tantum presumption that the emplo+er is negligent,
re'utta'le onl+ '+ proof of o'servance of the diligence of a good father of a famil+. %or
failure to re'ut such legal presumption of negligence in the selection and supervision of
emplo+ees, the emplo+er is li$ewise responsi'le for damages, the 'asis of the lia'ilit+
'eing the relationship of pater familias or on the emplo+erKs own negligence.
Hence, the court consistentl+ held that where the in(ur+ is due to the concurrent
negligence of the drivers of the colliding vehicles, the drivers and owners of the said
vehicles shall 'e primaril+, directl+ and solidaril+ lia'le for damages and it is immaterial
that one action is 'ased on 4uasi6delict and the other on culpa contractual, as the
solidarit+ of the o'ligation is (ustified '+ the ver+ nature thereof. Hence, decision of
respondent 2ourt of .ppeals is affirmed.
INCIONG VS. CO$R# OF APPEALS
G.R. No. +64!5, -u.e 6, 1++6
FAC#S8
n %e'ruar+ 0, 1/H0, petitioner Baldomero #. &nciong, =r. together with @ene 2.
1a+'e and 7regorio D. Pantanosas signed a promissor+ note in the amount of P!0,
000.00 holding themselves (ointl+ and severall+ lia'le to private respondent Philippine
Ban$ of 2ommunications. The promissor+ note was due on Ma+ !, 1/H0. *aid due date
e:pired without the promissors having paid their o'ligation.
n 1ovem'er 1F, 1/H0 and on =une H, 1/HF, private respondent sent petitioner
telegrams demanding pa+ment thereof. n Decem'er 11, 1/H0, private respondent also
sent registered mail a final letter of demand to @ene 2. 1a+'e. *ince 'oth o'ligors did
not respond to the demand made, private respondent filed on =anuar+ )F, 1/H" a
complaint for collection of the sum of P!0, 000.00 against the three A0B o'ligors. n
=anuar+ )8, 1/H8, the lower court dismissed the case against defendant Pantanosas as
pra+ed '+ herein private respondent. Meanwhile, onl+ the summons addressed to
petitioner was served for the reason that defendant 1a+'e had gone to *audi .ra'ia.
The lower court rendered its decision holding petitioner solidaril+ lia'le and to
pa+ herein respondent 'an$ the amount of P!0, 000.00 plus interest thereon. Petitioner
appealed the said decision to the 2ourt of .ppeals. The respondent court, however,
affirmed the decision of the lower court. The petitioner moved for reconsideration,
which was later on denied '+ the respondent 2ourt of .ppeals.
ISS$E
Page | 237
,hether or not the dismissal of the complaint against 1a+'e, the principal
de'tor, and against Pantanosas, his co6ma$er, constituted a release of his o'ligation.
3EL0
The dismissal of the complaint against 1a+'e and Pantanosas did not constitute a
release of petitioner9s o'ligation, especiall+ 'ecause the dismissal of the case against
Pantanosas was upon the motion of private respondent itself. Petitioner signed the
promissor+ note as a solidar+ co6ma$er and not as a guarantor. . solidar+ or (oint and
several o'ligation is one in which each de'tor is lia'le for the entire o'ligation, and each
creditor is entitled to demand the whole o'ligation. The promissor+ note involved in this
case e:pressl+ states that the three signatories therein are (ointl+ and severall+ lia'le,
an+ one, some or all of them ma+ 'e proceeded against for the entire o'ligation. The
choice is left to the solidar+ creditor to determine against whom he will enforce
collection
Dnder .rticle 1)08 of the 2ivil 2ode, when there are two or more de'tors in one and the
same o'ligation, the presumption is that the o'ligation is (oint so that each of the
de'tors is lia'le onl+ for a proportionate part of the de't. There is solidar+ lia'ilit+ onl+
when the o'ligation e:pressl+ so states, when the law so provides or when the nature of
the o'ligation so re4uires.
P3ILIPPINE %LOOMING MILLS VS CA
GR No. 14'"1. O17ober 15, !!'
FAC#S8
This is a petition for review on certiorari to annul the Decision dated 1" =ul+ 1///
of the 2ourt of .ppeals in 2.67.@. 2C 1o. 0/"/0, as well as its @esolution dated 18
%e'ruar+ )000 den+ing the motion for reconsideration. The 2ourt of .ppeals affirmed
with modification the Decision dated 01 .ugust 1//) rendered '+ Branch 110 of the
@egional Trial 2ourt of Pasa+ 2it+ ALtrial courtLB. The trial court9s Decision declared
petitioner .lfredo 2hing AL2hingLB lia'le to respondent Traders @o+al Ban$ ALT@BLB for
the pa+ment of the credit accommodations e:tended to Philippine Blooming Mills, &nc.
ALPBMLB. The petition is a thinl+ veiled attempt to ma$e the *upreme 2ourt reconsider
its decision in the prior case of Traders @o+al Ban$ v. 2ourt of .ppeals.
Page | 238
ISS$E8
&s 2hing is lia'le for o'ligations PBM contracted after e:ecution of the Deed of
*uret+ship;
R$LING8
2hing is lia'le for credit o'ligations contracted '+ PBM against T@B 'efore and
after the e:ecution of the )1 =ul+ 1/88 Deed of *uret+ship. This is evident from the tenor
of the deed itself, referring to amounts PBM Lma+ now 'e inde'ted or ma+ hereafter
'ecome inde'tedL to T@B. The law e:pressl+ allows a suret+ship for Lfuture de'ts
A.rticle )0!0B.
2hing would li$e the 2ourt to rule that his lia'ilit+ is limited, at most, to the
amount stated in PBM9s reha'ilitation plan. &n claiming this reduced lia'ilit+, 2hing
invo$es .rticle 1))). &n granting the loan to PBM, T@B re4uired 2hing9s suret+ precisel+
to insure full recover+ of the loan in case PBM 'ecomes insolvent or fails to pa+ in full.
This was the ver+ purpose of the suret+. Thus, 2hing cannot use PBM9s failure to pa+ in
full as (ustification for his own reduced lia'ilit+ to T@B. .s suret+, 2hing agreed to pa+
in full PBM9s loan in case PBM fails to pa+ in full for an+ reason, including its
insolvenc+.
T@B, as creditor, has the right under the suret+ to proceed against 2hing for the
entire amount of PBM9s loan. This is clear from .rticle 1)1" of the 2ivil 2ode where'+
the creditor ma+ proceed against an+ one of the solidar+ de'tors.
EPAR9A SEC$RI#,, 5. LICEO 0E CAGA,AN $NIVERSI#,
G.R. No. 15!4! No5 ", !!6
Page | 239
FAC#S8
n 1 Decem'er 1//8, <parwa and #D2D, entered into a 2ontract for *ecurit+
*ervices. n )1 Decem'er 1//H, 11 securit+ guards A3securit+ guards5B whom <parwa
assigned to #D2D from 1 Decem'er 1//8 to 00 1ovem'er 1//H, filed a complaint 'efore
the 1#@2 @egional .r'itration Branch 1o. 10 in 2aga+an de ro 2it+. The complaint
was filed against 'oth <parwa and #D2D for underpa+ment of salar+, legal holida+ pa+,
10th month pa+, rest da+, service incentive leave, night shift differential, overtime pa+,
and pa+ment for attorne+9s fees.
The #a'or .r'iter found that the securit+ guards are entitled to wage differentials
and premium for holida+ and rest da+ wor$. The #a'or .r'iter held <parwa and #D2D
solidaril+ lia'le pursuant to .rticle 10/ of the #a'or 2ode. #D2D filed an appeal 'efore
the 1#@2. #D2D agreed with the #a'or .r'iter9s decision on the securit+ guards9
entitlement to salar+ differential 'ut challenged the propriet+ of the amount of the
award. #D2D alleged that securit+ guards not similarl+ situated were granted uniform
monetar+ awards and that the decision did not include the 'asis of the computation of
the amount of the award.
<parwa also filed an appeal 'efore the 1#@2. %or its part, <parwa 4uestioned its
lia'ilit+ for the securit+ guards9 claims and the awarded cross6claim amounts. The 1#@2
found that the securit+ guards are entitled to wage differentials and premium for holida+
and rest da+ wor$. .lthough the 1#@2 held <parwa and #D2D solidaril+ lia'le for the
wage differentials and premium for holida+ and rest da+ wor$, the 1#@2 did not re4uire
<parwa to reim'urse #D2D for its pa+ments to the securit+ guards. <parwa and #D2D
again filed separate motions for partial reconsideration. &n its @esolution 1#@2
declared that although <parwa and #D2D are solidaril+ lia'le to the securit+ guards for
the monetar+ award, #D2D alone is ultimatel+ lia'le.
#D2D filed a petition for certiorari 'efore the appellate court assailing the 1#@29s
decision. The appellate court granted #D2D9s petition and reinstated the #a'or
.r'iter9s decision. The appellate court also allowed #D2D to claim reim'ursement from
<parwa.
The appellate court denied <parwa9s motion for reconsideration.Hence, this
petition.
ISS$E8
&s #D2D alone ultimatel+ lia'le to the securit+ guards for the wage differentials
and premium for holida+ and rest da+ pa+;
R$LING8

.rticles 10", 108 and 10/ of the #a'or 2ode read:
.rt. 10". 2ontractor or su'contractor. Z ,henever an emplo+er enters into a
contract with another person for the performance of the former9s wor$, the emplo+ees of
the contractor and of the latter9s su'contractor, if an+, shall 'e paid in accordance with
the provisions of this 2ode..rticle 108. &ndirect emplo+er. Z The provisions of the
immediatel+ preceding .rticle shall li$ewise appl+ to an+ person, partnership,
Page | 240
association or corporation which, not 'eing an emplo+er, contracts with an independent
contractor for the performance of an+ wor$, tas$, (o' or pro(ect.
.rticle 10/. *olidar+ lia'ilit+. Z The provisions of e:isting laws to the contrar+
notwithstanding, ever+ emplo+er or indirect emplo+er shall 'e held responsi'le with his
contractor or su'contractor for an+ violation of an+ provision of this 2ode. %or
purposes of determining the e:tent of their civil lia'ilit+ under this 2hapter, the+ shall
'e considered as direct emplo+ers.
This (oint and several lia'ilit+ of the contractor and the principal is mandated '+
the #a'or 2ode to assure compliance of the provisions therein including the statutor+
minimum wage N.rticle //, #a'or 2odeO. The contractor is made lia'le '+ virtue of his
status as direct emplo+er. The principal, on the other hand, is made the indirect
emplo+er of the contractor9s emplo+ees for purposes of pa+ing the emplo+ees their
wages should the contractor 'e una'le to pa+ them. This (oint and several lia'ilit+
facilitates, if not guarantees, pa+ment of the wor$ers9 performance of an+ wor$, tas$, (o'
or pro(ect, thus giving the wor$ers ample protection as mandated '+ the 1/H8
2onstitution. %or the securit+ guards, the actual source of the pa+ment of their wage
differentials and premium for holida+ and rest da+ wor$ does not matter as long as the+
are paid. This is the import of <parwa and #D2D9s solidar+ lia'ilit+. 2reditors, such as
the securit+ guards, ma+ collect from an+one of the solidar+ de'tors. *olidar+ lia'ilit+
does not mean that, as 'etween themselves, two solidar+ de'tors are lia'le for onl+ half
of the pa+ment.
#D2D9s ultimate lia'ilit+ comes into pla+ 'ecause of the e:piration of the
2ontract for *ecurit+ *ervices. There is no privit+ of contract 'etween the securit+
guards and #D2D, 'ut #D2D9s lia'ilit+ to the securit+ guards remains 'ecause of
.rticles 10", 108 and 10/ of the #a'or 2ode. <parwa is alread+ precluded from as$ing
#D2D for an ad(ustment in the contract price 'ecause of the e:piration of the contract,
'ut <parwa9s lia'ilit+ to the securit+ guards remains 'ecause of their emplo+er6
emplo+ee relationship. &n lieu of an ad(ustment in the contract price, <parwa ma+ claim
reim'ursement from #D2D for an+ pa+ment it ma+ ma$e to the securit+ guards.
However, #D2D cannot claim an+ reim'ursement from <parwa for an+ pa+ment it ma+
ma$e to the securit+ guards. Hence, the petition is granted.

Page | 241
0IMA,$GA 5s. P3ILIPPINE COMMERCIAL @ IN0$S#RIAL %AN4
0)5)s)o. G.R. No. 454 Au6 5, 1++1

FAC#S8
n %e'ruar+ ", 1/"), petitioner 'orrowed from the plaintiff6respondent, the sum
of ten thousand AP10,000.00B pesos as evidenced '+ a promissor+ note e:ecuted and
signed '+ Pedro Tan(uatco and 2arlos Dima+uga. The inde'tedness was to 'e paid on
Ma+ 8, 1/") with interest at the rate of ten percent A10EB per annum in case of non6
pa+ment at maturit+ as evidenced '+ and in accordance with the terms and conditions of
the promissor+ note e:ecuted (ointl+ and severall+ '+ defendants.
&n the aforementioned promissor+ note, 2arlos Dima+uga 'ound himself to pa+
(ointl+ and severall+ with Pedro Tan(uatco interest at the rate of 10E per annum on the
said amount of P10,000.00 until full+ paid. Moreover, 'oth undertoo$ to L(ointl+ and
severall+ authori>e the respondent Philippine 2ommercial and &ndustrial Ban$, at its
option to appl+ to the pa+ment of this note an+ and all funds, securities or other real or
personal propert+ of value which hands AsicB on deposit or otherwise 'elonging to
an+one or all of us. Dpon the default of the promissors to pa+, a complaint was filed on
=ul+ 11, 1/"/ '+ the P2&B for some of mone+.
Defendant 2arlos Dima+uga, however, had remitted to the plaintiff 6respondent
the amount totalling PF,000.00 '+ wa+ of partial pa+ments made from .ugust 1, 1/"/ to
Ma+ 8, 1/80 as evidenced '+ corresponding receipts thereto. These pa+ments were
nevertheless applied to past interests, charges and partl+ on the principal. n Ma+ )H,
1/8F, the trial court rendered a decision holding defendants (ointl+ and severall+ lia'le
to pa+ the plaintiff the sum of P/,10/."0 with interest at 10E per annum until full+ paid
plus P/10./" as attorne+sK fees.
Page | 242
n =ul+ 11, 1/8F, petitioner filed a motion alleging that since Pedro Tan(uatco
died on Decem'er )0, 1/80, the mone+ claim of the respondents should 'e dismissed
and prosecuted against the estate of the late Pedro Tan(uatco. n =une )), 1/8F, the
trial court denied the motion for lac$ of merit.1ot satisfied, the petitioner appealed to
the respondent court. The 2ourt of .ppeals dismissed the appeal. Hence, this petition.
ISS$E8
,hether the position of the petitioner that Pedro Tan(uatco having died on
Decem'er )0, 1/80, the mone+ claim of P2&B should 'e dismissed and prosecuted
against the estate of the late Tan(uatco.
R$LING8
%rom the evidence presented, there can 'e no dispute that 2arlos Dima+uga
'ound himself (ointl+ and severall+ with Pedro 2. Tan(uatco, now deceased, to pa+ the
o'ligation with P2&B in the amount of P10,000.00 plus 10E interest per annum. &n
addition, as a'ove stated, in case of non6pa+ment, the+ undertoo$ among others to
(ointl+ and severall+ authori>e respondent 'an$, at its option to appl+ to the pa+ment of
this note, an+ and all funds, securities, real or personal properties, etc. 'elonging to
an+one or all of them. therwise stated, the promissor+ note in 4uestion provides in
unmista$a'le language that the o'ligation of petitioner Dima+uga is (oint and several
with Pedro 2. Tan(uatco.
&t is well settled under the law and (urisprudence that when the o'ligation is
solidar+, the creditor ma+ 'ring his action in toto against the de'tors o'ligated in
solidum. .s e:pressl+ allowed '+ .rticle 1)1" of the 2ivil 2ode, the creditor ma+ proceed
against an+ one of the solidar+ de'tors or some or all of them simultaneousl+. LHence,
there is nothing improper in the creditorKs filing of an action against the surviving
solidar+ de'tors alone, instead of instituting a proceeding for the settlement of the
estate of the deceased de'tor wherein his claim could 'e filed.L The notice is
undou'tedl+ left to the solidar+ creditor to determine against whom he will enforce
collection. Thus, the appeal interposed '+ petitioner6appellant is dismissed for lac$ of
merit and the decision of the 2ourt of %irst &nstance is .ffirmed in toto.
CERNA VS CA
GR No. L-4"'5+. Mar1< '!, 1++'
FAC#S8
n or a'out cto'er 1", 1/8), 2elerino Delgado ADelgadoB and 2onrad #eviste
A#evisteB entered into a loan agreement which was evidenced '+ a promissor+ note
worded as follows:
%@ C.#D< @<2<&C<D, &, 2<#<@&1 D<#7.D, with postal address at
/H G611 *t., Gamias @d., ?ue>on 2it+, promise to pa+ to the order of
21@.D 2. #<C&*T<, 1&1<T- A/0B D.-* after date, at his office at )1!
Buendia .ve., Ma$ati, @i>al, the total sum of *<C<1T<<1 THD*.1D
%&C< HD1D@<D AP18,!00.00B P<**, Philippine 2urrenc+, without
necessit+ of demand, with interest at the rate of T,<#C< A1)EB P<@2<1T
per annum
n the same date, Delgado e:ecuted a chattel mortgage over a ,ill+Ks (eep owned
'+ him. .nd acting as the attorne+6in6fact of herein petitioner, Manolo P. 2erna
ApetitionerB, he also mortgaged a LTaunusL car owned '+ the latter. The period lapsed
Page | 243
without Delgado pa+ing the loan. This prompted #eviste to file a collection suit doc$eted
as 2ivil 2ase 1o. 18!08 with the 2ourt of %irst &nstance of @i>al, Branch VV&& against
Delgado and petitioner as solidar+ de'tors. The 2ourt of .ppeals held that petitioner
and Delgado were solidar+ de'tors.
ISS$E8
.re petitioner and Delgado solidar+ de'tors;
R$LING8
nl+ Delgado signed the promissor+ note and accordingl+, he was the onl+ one
'ound '+ the contract of loan. 1owhere did it appear in the promissor+ note that
petitioner was a co6de'tor. The law is clear that LAcBontracts ta$e effect onl+ 'etween the
parties. But '+ some stretch of the imagination, petitioner was held solidaril+ lia'le for
the de't allegedl+ 'ecause he was a co6mortgagor of the principal de'tor, Delgado. This
ignores the 'asic precept that LAtBhere is a solidar+ lia'ilit+ onl+ when the o'ligation
e:pressl+ so states, or when the law or the nature of the o'ligation re4uires solidarit+.L
,e have alread+ stated that the contract of loan, as evidenced '+ the promissor+ note,
was signed '+ Delgado onl+. Petitioner had no part in the said contract. Thus, nowhere
could it 'e seen from the agreement that petitioner was solidaril+ 'ound with Delgado
for the pa+ment of the loan.
NA:ARENO VS. CO$R# OF APPEALS
G.R. No. 1'1641, February ', !!!
FAC#S8
Ma:imino 1a>areno, *r. and .urea Po'lete were hus'and and wife. .urea died on
.pril 1!, 1/80, while Ma:imino, *r. died on Decem'er 1H, 1/H0. .fter the death of
Ma:imino, *r., @omeo filed an intestate case in the 2ourt of %irst &nstance of 2avite,
Page | 244
Branch VC, where the case was doc$eted as *p. Proc. 1o. 126)H. Dpon the
reorgani>ation of the courts in 1/H0, the case was transferred to the @egional Trial 2ourt
of 1aic, 2avite. @omeo was appointed administrator of his father9s estate. &n the course
of the intestate proceedings, @omeo discovered that his parents had e:ecuted several
deeds of sale conve+ing a num'er of real properties in favor of his sister, 1atividad. ne
of the deeds involved si: lots in ?ue>on 2it+ which were allegedl+ sold '+ Ma:imino, *r.,
with the consent of .urea, to 1atividad on =anuar+ )/, 1/80 for the total amount of
PF8,H00.00.
ISS$E8
,hether or not the Deed of .'solute of *ale can 'e e4uated as a divisi'le
o'ligation.
3EL08
The *upreme court held that the Deed of .'solute *ale is an indivisi'le contract
founded on an indivisi'le o'ligation. .s such, it 'eing indivisi'le, it can not 'e annulled
'+ onl+ one of them. .nd since this suit was filed onl+ '+ the estate of Ma:imino ..
1a>areno, *r. without including the estate of .urea Po'lete, the present suit must fail.
The estate of Ma:imino .. 1a>areno, *r. can not cause its annulment while its validit+ is
sustained '+ the estate of .urea Po'lete. .n o'ligation is indivisi'le when it cannot 'e
validl+ performed in parts, whatever ma+ 'e the nature of the thing which is the o'(ect
thereof. The indivisi'ilit+ refers to the prestation and not to the o'(ect. The Deed of *ale
of =anuar+ )/, 1/80 supposedl+ conve+ed the si: lots to 1atividad. The o'ligation is
clearl+ indivisi'le 'ecause the performance of the contract cannot 'e done in parts,
otherwise the value of what is transferred is diminished. Petitioners are mista$en in
'asing the indivisi'ilit+ of a contract on the num'er of o'ligors. &n an+ case, if
petitioners9 onl+ point is that the estate of Ma:imino, *r. alone cannot contest the
validit+ of the Deed of *ale 'ecause the estate of .urea has not +et 'een settled, the
argument would nonetheless 'e without merit. The validit+ of the contract can 'e
4uestioned '+ an+one affected '+ it. . void contract is ine:istent from the 'eginning.
Hence, even if the estate of Ma:imino, *r. alone contests the validit+ of the sale, the
outcome of the suit will 'ind the estate of .urea as if no sale too$ place at all.
Page | 245
ALON:O VS SAN -$AN
GR No. 1'754+. February 11, !!5
FAC#S8
. complaint for recover+ of possession was filed '+ .urelio P. .lon>o and
Teresita .. *ison against =aime and Perlita *an =uan doc$eted as 2ivil 2ase 1o. ?6/"6
)/F1! 'efore the @egional Trial 2ourt A@T2B of ?ue>on 2it+, Branch 88. &n their
2omplaint, plaintiffs alleged that the+ are the registered owners of a parcel of land. .t
around =une of 1//", plaintiffs discovered that a portion on the left side of the said
parcel of land with an area of one hundred twent+6five A1)!B s4uare meters, more or
less, was occupied '+ the defendants for more than a +ear, without their prior
$nowledge or consent. . demand letter was sent to the defendants in .ugust of 1//"
re4uiring them to vacate the propert+ 'ut the+ refused to compl+J hence, the filing of the
2omplaint. During the pendenc+ of the case, the parties agreed to enter into a
2ompromise .greement which the trial court approved in a =udgment.
.lleging that the+ failed to a'ide '+ the provisions of the 2ompromise .greement
'+ their failure to pa+ the amounts due thereon, plaintiffs sent a letter demanding that
the defendants vacate the premises. Plaintiffs su'se4uentl+ filed an .mended Motion
for <:ecution. .cting on the motion, the trial court issued its rder dated 11 .ugust
1//H den+ing the motion.
ISS$E8
&s the @T2 decision correct;
R$LING8
&n herein case, the respondents failed to discharge their 'urden of proving
pa+ment. <ven assuming that pa+ments were made, it has not 'een shown to the full
satisfaction of this 2ourt whether the pa+ments were made specificall+ to satisf+
respondents9 o'ligation under the 2ompromise .greement, nor were the circumstances
under which the pa+ments were made e:plained, ta$ing into consideration the
conditions of the 2ompromise .greement.
@espondents9 contract with the petitioners have the force of law 'etween them.
@espondents are thus 'ound to fulfill what has 'een e:pressl+ stipulated therein. &tems
11 and 1) of the 2ompromise .greement provided, in clear terms, that in case of failure
to pa+ on the part of the respondents, the+ shall vacate and surrender possession of the
land that the+ are occup+ing and the petitioners shall 'e entitled to o'tain immediatel+
from the trial court the corresponding writ of e:ecution for the e(ectment of the
respondents. This provision must 'e upheld, 'ecause the .greement supplanted the
2omplaint itself. ,hen the parties entered into a 2ompromise .greement, the original
action for recover+ of possession was set aside and the action was changed to a
monetar+ o'ligation. nce approved (udiciall+, the 2ompromise .greement can not
and must not 'e distur'ed e:cept for vices of consent or forger+.
Page | 246
0AVI0 VS CA
GR No. 115"1. O17ober 1', 1+++
FAC#S8
The @egional Trial 2ourt of Manila, Branch )8, with =udge @icardo Dia>, then
presiding, issued a writ of attachment over real properties covered '+ T2T 1os. H081H
and 10)H/ of private respondents. &n his Decision dated cto'er 01, 1/8/, =udge Dia>
ordered private respondent .fa'le to pa+ petitioner P"",!00.00 plus interest from =ul+
)F, 1/8F, until full+ paid, plus P!,000.00 as attorne+Ks fees, and to pa+ the costs of suit.
n =une )0, 1/H0, however, =udge Dia> issued an rder amending said Decision,
so that the legal rate of interest should 'e computed from =anuar+ F, 1/"", instead of
from =ul+ )F, 1/8F. The amended Decision in the decretal portion reads:
,H<@<%@<, (udgment is here'+ rendered against the defendant,
Calentin .fa'le =r., ordering him to pa+ to the plaintiff the sum of
P"",!00.00 plus the legal rate of interest thereon from =anuar+ F, 1/""
up to the time the same is full+ paid plus the amount of P!,000.00 as and
for attorne+Ks fees and to pa+ the costs of the suit.L ordering the private
respondent .fa'le to pa+ the petitioner the sum of P"",!00.00 plus the
legal rate of interest thereon from =ul+ )F, 1/8F, plus the amount of
P!,000.00 as attorne+Ks fees and to pa+ the costs of suit.
The 2. affirmed the (udgment. The affirmation now comes to review 'efore the
*2.
ISS$E8
*hould the pa+ment of interest 'e simple or compound;
R$LING8
.s therein held, .rticle ))1) contemplates the presence of stipulated or
conventional interest which has accrued when demand was (udiciall+ made. &n cases
where no interest had 'een stipulated '+ the parties, as in the case of Philippine
.merican .ccident &nsurance, no accrued conventional interest could further earn
interest upon (udicial demand.
,hen the (udgment sought to 'e e:ecuted ordered the pa+ment of simple Llegal
interestL onl+ and said nothing a'out pa+ment of compound interest, 'ut the
Page | 247
respondent (udge orders pa+ment of compound interest, then, he goes 'e+ond the
confines of a (udgment which had 'ecome final.
#3ERESA MACALALAG 5s. PEOPLE OF #3E P3ILIPPINES
G.R. No. 164'5" 0e1e2ber !, !!6
FAC#S:
n two separate occasions, particularl+ on 00 =ul+ 1//! and 1" cto'er 1//!,
petitioner Theresa Macalalag o'tained loans from 7race <strella A<strellaB, each in the
amount of P100,000.00, each 'earing an interest of 10E per month. Macalalag
consistentl+ paid the interests. %inding the interest rates so 'urdensome, Macalalag
re4uested <strella for a reduction of the same to which the latter agreed. n 1" .pril
1//" and 1 Ma+ 1//", Macalalag e:ecuted .c$nowledgmentM.ffirmation @eceipts
promising to pa+ <strella the face value of the loans in the total amount of P)00,000.00
within two months from the date of its e:ecution plus "E interest per month for each
loan. Dnder the two .c$nowledgmentM.ffirmation @eceipts, she further o'ligated
herself to pa+ for the two A)B loans the total sum of P100,000.00 as li4uidated damages
and attorne+Ks fees in the total sum of PF0,000.00 as stipulated '+ the parties the
moment she 'reaches the terms and conditions thereof.
.s securit+ for the pa+ment of the aforesaid loans, Macalalag issued two
Philippine 1ational Ban$ AP1BB 2hec$s on 00 =une 1//", each in the amount of
P100,000.00, in favor of <strella. However, the said chec$s were dishonored for the
reason that the account against which the same was drawn was alread+ closed. <strella
sent a notice of dishonor and demand to ma$e good the said chec$s to Macalalag, 'ut
the latter failed to do so. Hence, <strella filed two criminal complaints for Ciolation of
Batas Pam'ansa Blg. )) 'efore the Municipal Trial 2ourt in 2ities AMT22B of Bacolod
2it+.The MT22 found the accused Theresa Macalalag guilt+ 'e+ond reasona'le dou't of
the crime charged and is li$ewise ordered to pa+ as civil indemnit+ the total amount of
Page | 248
P)00,000.00 with interest at the legal rate from the time of the filing of the
informations until the amount is full+ paidJ less whatever amount was thus far paid and
validl+ deducted from the principal sum originall+ claimed. n appealed, the 2ourt of
.ppeals, affirmed the @T2 and the MT22 decisions with modification to the effect that
accused was convicted onl+ of one A1B count of Ciolation of Batas Pam'ansa Blg. )).
ISS$E:
,hether petitionerXs pa+ments over and a'ove the value of the said chec$s
would free her from criminal lia'ilit+.
R$LING:
The 2ourt argued that, 3<ven if we agree with petitioner Macalalag that the
interests on her loans should not 'e imputed to the face value of the chec$s she issued,
petitioner Macalalag is still lia'le for Ciolation of Batas Pam'ansa Blg. )). Petitioner
Macalalag herself declares that 'efore the institution of the two cases against her, she
has made a total pa+ment of P1!",000.00. .ppl+ing this amount to the first chec$ A1o.
26HH/H0!B, what will 'e left is P!",000.00, an amount insufficient to cover her
o'ligation with respect to the second chec$. .s stated a'ove, when <strella presented
the chec$s for pa+ment, the same were dishonored on the ground that the+ were drawn
against a closed account. Despite notice of dishonor, petitioner Macalalag failed to pa+
the full face value of the second chec$ issued.
nl+ a full pa+ment of the face value of the second chec$ at the time of its presentment
or during the five6da+ grace period1! could have e:onerated her from criminal lia'ilit+.
. contrar+ interpretation would defeat the purpose of Batas Pam'ansa Blg. )), that of
safeguarding the interest of the 'an$ing s+stem and the legitimate pu'lic chec$ing
account user,1" as the drawer could ver+ well have himself e:onerated '+ the mere
e:pedienc+ of pa+ing a minimal fraction of the face value of the chec$. Hence, the
Petition is denied.
AN#ONIO #AN 5s. CO$R# OF APPEALS, E# AL.
G.R. No. 116"5 O17ober 1+, !!1
FAC#S:
n Ma+ 1F, 1/8H and =ul+ ", 1/8H, petitioner Tan o'tained two A)B loans each in
the principal amount of Two Million Pesos AP),000,000.00B, or in the total principal
amount of %our Million Pesos APF,000,000.00B from respondent 2ultural 2enter of the
PhilippinesA22PB evidenced '+ two A)B promissor+ notes with maturit+ dates on Ma+ 1F,
1/8/ and =ul+ ", 1/8/, respectivel+. Petitioner defaulted 'ut after a few partial pa+ments
he had the loans restructured '+ respondent 22P, and petitioner accordingl+ e:ecuted a
promissor+ note on .ugust 01, 1/8/ in the amount of Three Million %our Hundred
<leven Thousand %our Hundred Twent+6ne Pesos and Thirt+6Two 2entavos
AP0,F11,F)1.0)B pa+a'le in five A!B installments. Petitioner Tan failed to pa+ an+
installment on the said restructured loan. The last installment falling due on Decem'er
Page | 249
01, 1/H0. &n a letter dated =anuar+ )", 1/H), petitioner re4uested and proposed to
respondent 22P a mode of pa+ing the restructured loan pa+a'le in thirt+6si: A0"B e4ual
monthl+ installments until full+ paid. n cto'er )0, 1/H0, petitioner again sent a letter
to respondent 22P re4uesting for a moratorium on his loan o'ligation until the
following +ear allegedl+ due to a su'stantial deduction in the volume of his 'usiness and
on account of the peso devaluation. 1o favora'le response was made to said letters.
&nstead, respondent 22P, through counsel, wrote a letter dated Ma+ 00, 1/HF to the
petitioner demanding full pa+ment, within ten A10B da+s from receipt of said letter, of
the petitionerXs restructured loan which as of .pril 00, 1/HF amounted to *i: Million
<ight+6<ight Thousand *even Hundred Thirt+6%ive Pesos and Three 2entavos
AP",0HH,80!.00B.
n .ugust )/, 1/HF, respondent 22P filed in the @T2 of Manila a complaint for
collection of a sum of mone+, against the petitioner after the latter failed to settle his
said restructured loan o'ligation. The petitioner interposed the defense that he merel+
accommodated a friend, ,ilson #ucmen, who allegedl+ as$ed for his help to o'tain a
loan from respondent 22P. Petitioner claimed that he has not 'een a'le to locate ,ilson
#ucmen. ,hile the case was pending in the trial court, the petitioner filed a
Manifestation wherein he proposed to settle his inde'tedness to respondent 22P '+
proposing to ma$e a down pa+ment of ne Hundred %ort+ Thousand Pesos
AP1F0,000.00B and to issue twelve A1)B chec$s ever+ 'eginning of the +ear to cover
installment pa+ments for one +ear, and ever+ +ear thereafter until the 'alance is full+
paid. However, respondent 22P did not agree to the petitionerXs proposals and so the
trial of the case ensued.
The trial court rendered a decision in favor of Defendant6respondent 22P. The
appellate court denied the petitionerXs motion for reconsideration of the said decision.
&
ISS$E:
,hether there are contractual and legal 'ases for the imposition of the penalt+,
interest on the penalt+ and attorne+Xs fees.
3EL0:
The 2ourt found no merit in the petitionerXs contention. .rticle 1))" of the 1ew
2ivil 2ode provides that: &n o'ligations with a penal clause, the penalt+ shall su'stitute
the indemnit+ for damages and the pa+ment of interests in case of non6compliance, if
there is no stipulation to the contrar+. 1evertheless, damages shall 'e paid if the o'ligor
refuses to pa+ the penalt+ or is guilt+ of fraud in the fulfillment of the o'ligation. The
penalt+ ma+ 'e enforced onl+ when it is demanda'le in accordance with the provisions
of this 2ode.
&n the case at 'ar, the promissor+ note e:pressl+ provides for the imposition of
'oth interest and penalties in case of default on the part of the petitioner in the pa+ment
of the su'(ect restructured loan. &f the o'ligation consists in the pa+ment of a sum of
mone+, and the de'tor incurs in dela+, the indemnit+ for damages, there 'eing no
stipulation to the contrar+, shall 'e the pa+ment of the interest agreed upon, and in the
a'sence of stipulation, the legal interest, which is si: per cent per annum.
The penalt+ charge of two percent A)EB per month in the case at 'ar 'egan to
accrue from the time of default '+ the petitioner. There is no dou't that the petitioner is
lia'le for 'oth the stipulated monetar+ interest and the stipulated penalt+ charge.
Page | 250
,ithout pre(udice to the provisions of .rticle ))1), interest due and unpaid shall not
earn interest. However, the contracting parties ma+ '+ stipulation capitali>e the interest
due and unpaid, which as added principal, shall earn new interest.
&nasmuch as the said stipulation on the compounding of interest has the force of
law 'etween the parties and does not appear to 'e ine4uita'le or un(ust, the said written
stipulation should 'e respected.
n the issue of attorne+Xs fees, the appellate court ruled correctl+ and (ustl+ in
reducing the trial court;s award of twent+6five percent A)!EB attorne+;s fees to five
percent A!EB of the total amount due.
Hence, the assailed Decision of the 2ourt of .ppeals is here'+ affirmed with
modification in that the penalt+ charge of two percent A)EB per month on the total
amount due, compounded monthl+, is here'+ reduced to a straight twelve percent A1)EB
per annum starting from .ugust )H, 1/H".
Page | 251
EAS#ERN S3IPPING INES, INC 5s. 3ON. CO$R# OF APPEALS
G.R. No. +741 -u* 1, 1++4
FAC#S:
n Decem'er F, 1/H1, two fi'er drums of ri'oflavin were shipped from
-o$ohama, =apan for deliver+ vessel X** <.*T<@1 2M<TK owned '+ defendant
<astern *hipping #ines under Bill of #ading 1o. -M.6H AThe shipment was insured
under plaintiffKs Marine &nsurance Polic+ 1o. H1M01188 for P0",0H),F"".0H.
Dpon arrival of the shipment in Manila on Decem'er 1), 1/H1, it was discharged
unto the custod+ of defendant Metro Port *ervices, &nc. The latter e:cepted to one drum,
said to 'e in 'ad order, which damage was un$nown to plaintiff. n =anuar+ 8, 1/H)
defendant .llied Bro$erage 2orporation received the shipment from defendant Metro
Port *ervice, &nc., one drum opened and without. n =anuar+ H and 1F, 1/H), defendant
.llied Bro$erage 2orporation made deliveries of the shipment to the consigneesK
warehouse. The latter e:cepted to one drum which contained spillages, while the rest of
the contents was adulteratedMfa$e Plaintiff contended that due to the lossesMdamage
sustained '+ said drum, the consignee suffered losses totaling P1/,00)./!, due to the
fault and negligence of defendants. 2laims were presented against defendants who
failed and refused to pa+ the same L.s a conse4uence of the losses sustained, plaintiff
was compelled to pa+ the consignee P1/,00)./! under the aforestated marine insurance
polic+, so that it 'ecame su'rogated to all the rights of action of said consignee against
defendants.
ISS$E8
a.B,hether the pa+ment of legal interest on an award for loss or damage is to 'e
computed from the time the complaint is filed or form the date the decision appealed
from is renderedJ and 'B,hether the applica'le rate of interest is twelve percent or si:
percent.
3EL08
,hen an o'ligation, regardless of its source, i.e., law, contracts, 4uasi6contracts,
delicts or 4uasi6delicts is 'reached, the contravenor can 'e held lia'le for damages.
,ith regard particularl+ to an award of interest in the concept of actual and
compensator+ damages, the rate of interest, as well as the accrual thereof, is imposed, as
follows:
1. ,hen the o'ligation is 'reached, and it consists in the pa+ment of a sum of mone+,
i.e., a loan or for'earance of mone+, the interest due should 'e that which ma+ have
'een stipulated in writing. %urthermore, the interest due shall itself earn legal interest
from the time it is (udiciall+ demanded. &n the a'sence of stipulation, the rate of interest
Page | 252
shall 'e 1)E per annum to 'e computed from default, i.e., from (udicial or e:tra(udicial
demand under and su'(ect to the provisions of .rticle 11"/ )0 of the 2ivil 2ode.
). ,hen a o'ligation, not constituting a loan or for'earance of mone+, is 'reached, an
interest on the amount of damages awarded ma+ 'e imposed at the discretion of the
court at the rate of "E per annum. 1o interest, however, shall 'e ad(udged on
unli4uidated claims or damages e:cept when or until the demand can 'e esta'lished
with reasona'le certaint+. .ccordingl+, where the demand is esta'lished with
reasona'le certaint+, the interest shall 'egin to run from the time the claim is made
(udiciall+ or e:tra(udiciall+ A.rt. 11"/, 2ivil 2odeB 'ut when such certaint+ cannot 'e so
reasona'l+ esta'lished at the time the demand is made, the interest shall 'egin to run
onl+ from the date of the (udgment of the court is made Aat which time the
4uantification of damages ma+ 'e deemed to have 'een reasona'l+ ascertainedB.
0. ,hen the (udgment of the court awarding a sum of mone+ 'ecomes final and
e:ecutor+, the rate of legal interest, whether the case falls under paragraph 1 or
paragraph ), a'ove, shall 'e 1)E per annum from such finalit+ until its satisfaction, this
interim period 'eing deemed to 'e '+ then an e4uivalent to a for'earance of credit.

PCI 5s N6 S<ue.6 N6or
A.M. No. P-!5-1+7'. Mar1< 1", !!5
FAC#S8
2omplainant <P2&B is the defendant in 2ivil 2ase 1o. 2<B6)"/H0 'efore the
@egional Trial 2ourt A@T2B, Branch 1", 2e'u 2it+, entitled, 31g *heung 1gor, doing
'usiness under the name and st+le TGen Mar$eting,9 Gen .ppliance Division, &nc. and
Ben(amin 7o, Plaintiffs, vs. <4uita'le P2& Ban$, .imee -u and Ben .pas, Defendants5
for .nnulment andMor @eformation of Documents and 2ontracts.
@espondents .ntonio .. Bellones and 7eneroso B. @egalado are the sheriffs in
Branches / and 1", respectivel+, of the @T2 of 2e'u 2it+.
%or garnishing accounts maintained '+ <4uita'le P2& Ban$, &nc. A<P2&BB at
2iti'an$, 1..., and Hong$ong and *hanghai Ban$ 2orporation AH*B2B, allegedl+ in
violation of *ection /A'B of @ule 0/ of the @ules of 2ourt, a complaint for grave a'use of
authorit+ was filed '+ .tt+. Paulino #. -usi against *heriffs .ntonio .. Bellones and
7eneroso B. @egalado. There was an offer of other real propert+ '+ petitioner.
ISS$E8
Did respondents violate the @ules of 2ourt;
R$LING8
B+ serving notices of garnishment on 2iti'an$, 1..., H*B2 and P1B, *heriff
@egalado violated <P2&B9s right to choose which propert+ ma+ 'e levied upon to 'e sold
at auction for the satisfaction of the (udgment de't. Thus, it is clear that when <P2&B
offered its real properties, it e:ercised its option 'ecause it cannot immediatel+ pa+ the
full amount stated in the writ of e:ecution and all lawful fees in cash, certified 'an$
chec$ or an+ other mode of pa+ment accepta'le to the (udgment o'ligee.
&n the case at 'ar, <P2&B cannot immediatel+ pa+ '+ wa+ of Manager9s 2hec$ so
it e:ercised its option to choose and offered its real properties. ,ith the e:ercise of the
Page | 253
option, *heriff @egalado should have ceased serving notices of garnishment and
discontinued their implementation. This is not true in the instant case. *heriff
@egalado was adamant in his posture even if real properties have 'een offered which
were sufficient to satisf+ the (udgment de't.
POLO#AN VS CA
GR No. 11+'7+. Se(7e2ber 5, 1++"
FAC#S8
Private respondent *ecurit+ Diners &nternational 2orporation ADiners 2lu'B, a
credit card compan+, e:tends credit accomodations to its cardholders for the purchase
of goods and other services from mem'er esta'lishments. *aid goods and services are
reim'ursed later on '+ cardholders upon proper 'illing. Petitioner @odelo 7. Polotan,
*r. applied for mem'ership and credit accmodations with Diners 2lu' in cto'er 1/H!.
The application form contained terms and conditions governing the use and availment
of the Diners 2lu' card, among which is for the cardholder to pa+ all charges made
through the use of said card within the period indicated in the statement of account and
an+ remaining unpaid 'alance to earn 0E interest per annum plus prime rate of *ecurit+
Ban$ P Trust 2ompan+. 1ota'l+, in the application form su'mitted '+ petitioner,
fricano 2anlas o'ligated himself to pa+ (ointl+ and severall+ with petitioner the latter9s
o'ligation to private respondent.
Dpon acceptance of his application, petitioner was issued Diners 2lu' card 1o.
0"!16)1)8""6000!. .s of Ma+ H, 1/H8, petitioner incurred credit charges plus
appropriate interest and service charges in the aggregate amount of P00,H1/.HF which
Page | 254
had 'ecome due and demanda'le. Demands for pa+ment made against petitioner
proved futile. Hence, private respondent filed a 2omplaint for 2ollection of *um of
Mone+ against petitioner 'efore the lower court.
ISS$E8
&s petitioner lia'le for pa+ment of credit charges plus interest and service
charges;
R$LING8
. contract of adhesion is one in which one of the contracting parties imposes a
read+6made form of contract which the other part+ ma+ accept or re(ect, 'ut cannot
modif+. ne part+ prepares the stipulation in the contract, while the other part+ merel+
affi:es his signature or his 3adhesion5 thereto, giving no room for negotiation and
depriving the latter of the opportunit+ to 'argain on e4ual footing. 1evertheless, these
t+pes of contracts have 'een declared as 'inding as ordinar+ contracts, the reason 'eing
that the part+ who adheres to the contract is free to re(ect it entirel+.
&n this case, petitioner, in effect, claims that the su'(ect contract is one6sided in
that the contract allows for the escalation of interests, 'ut does not provide for a
downward ad(ustment of the same in violation of 2entral Ban$ 2ircular /0!.
.dmittedl+, the second paragraph of the 4uestioned proviso which provides that 3the
2ardholder here'+ authori>es *ecurit+ Diners to correspondingl+ increase the rate of
such interest in the event of changes in prevailing mar$et rates : : :5 is an escalation
clause. However, it cannot 'e said to 'e dependent solel+ on the will of private
respondent as it is also dependent on the prevailing mar$et rates.
<scalation clauses are not 'asicall+ wrong or legall+ o'(ectiona'le as long as the+ are
.o7 so*e*y (o7es7a7)5e bu7 base; o. reaso.ab*e a.; 5a*); 6rou.;s. 'viousl+,
the fluctuation in the mar$et rates is 'e+ond the control of private respondent.
NE9 SAMPAG$I#A %$IL0ERS CONS#R$C#ION, INC. ?NS%CIH V.
P3ILIPPINE NA#IONAL %AN4
G.R. No. 14"75' !!4 -u* '!
FAC#S8
n %e'ruar+ 11, 1/H/, Board @esolution 1o. 0!, *eries of 1/H/ was approved '+
Petitioner 1*B2& authori>ing the compan+ to : : : appl+ for or secure a commercial
Page | 255
loan with the P1B in an aggregate amount of PH.0M, under such terms agreed '+ the
Ban$ and the 1*B2&, using or mortgaging the real estate properties registered in the
name of its President and 2hairman of the Board Petitioner <duardo @. Dee as
collateralJ and authori>ing petitioner6spouses to secure the loan and to sign an+ and all
documents which ma+ 'e re4uired '+ @espondent P1B, and that petitioner6spouses
shall act as sureties or co6o'ligors who shall 'e (ointl+ and severall+ lia'le with
Petitioner 1*B2& for the pa+ment of an+ Nand allO o'ligations.
n .ugust 1!, 1/H/, @esolution 1o. 88 was approved '+ granting the re4uest of
@espondent P1B thru its Board 1*B2& for an PH Million loan 'ro$en down into a
revolving credit line of P8.8M and an unadvised line of P0.0M for additional operating
and wor$ing capital to mo'ili>e its various construction pro(ects.
The loan of Petitioner 1*B2& was secured '+ a first mortgage on the following: aB
three A0B parcels of residential land located at Mangaldan, PangasinanJ 'B si: A"B parcels
of residential land situated at *an %a'ian, PangasinanJ and cB a residential lot and
improvements thereon located at Mangaldan. The loan was further secured '+ the (oint
and several signatures of Petitioners <duardo Dee and .rcelita Mar4ue> Dee, who
signed as accommodation6mortgagors since all the collaterals were owned '+ them and
registered in their names. Moreover Petitioner 1*B2& e:ecuted three promissor+ notes.
&n addition, petitioner corporation also signed the 2redit .greement dated .ugust 01,
1/H/ relating to the Trevolving credit line9 of P8.8 Million : : : and the 2redit .greement
dated *eptem'er !, 1/H/ to support the Tunadvised line9 of P000,000.00.
n .ugust 01, 1/H/, petitioner6spouses e:ecuted a T=oint and *olidar+
.greement9 A=*.B in favor of @espondent P1B Tunconditionall+ and irrevoca'l+ 'inding
themselves to 'e (ointl+ and severall+ lia'le with the 'orrower for the pa+ment of all
sums due and pa+a'le to the Ban$ under the 2redit Document. #ater on, Petitioner
1*B2& failed to compl+ with its o'ligations under the promissor+ notes.
n =une 1H, 1//1, Petitioner <duardo @. Dee on 'ehalf of Petitioner 1*B2& sent a
letter to the Branch Manager of the P1B Dagupan Branch re4uesting for a /06da+
e:tension for the pa+ment of interests and restructuring of its loan for another term.
*u'se4uentl+, 1*B2& tendered pa+ment to @espondent P1B of three A0B chec$s
aggregating P1,000,000.00.
&n a meeting held on .ugust 1), 1//1, @espondent P1B9s representative, Mr.
@oll+ 2ru>a'ra, was informed '+ NPetitionerO <duardo Dee of his intention to remit to
@espondent P1B post6dated chec$s covering interests, penalties and part of the loan
principals of his due account.
n .ugust )), 1//1, @espondent 'an$9s 2rispin 2arcamo wrote Petitioner
<duardo Dee, informing him that Petitioner 1*B2&9s proposal was accepta'le, provided
the total pa+ment should 'e PF,1)H,/"H.)/ that would cover the amount of
P1,01/,)01.00 as principal, P0,0!",0!H.00 as interests and penalties, and P!0,"8H./0 for
insuranceN,O with the issuance of post6dated chec$s to 'e dated not later than 1ovem'er
)/, 1//1.
n *eptem'er ", 1//1, Petitioner <duardo Dee wrote the P1B Branch Manager
reiterating his proposals for the settlement of Petitioner 1*B2&9s past due loan account
amounting to P8,01/,)01.00. Petitioner <duardo Dee later tendered four AFB post6dated
&nter'an$ chec$s aggregating P1,111,00"."8 in favor of @espondent P1B
Page | 256
Dpon presentment, however, : : : chec$ nos. 00!000H8 and 00!000HH dated
*eptem'er )/ and cto'er )/, 1//1 were dishonored '+ the drawee 'an$ and returned
due to a Tstop pa+ment9 order from petitioners.
n 1ovem'er 1), 1//1, P1B9s Mr. 2arcamo wrote Petitioner <duardo Dee
informing him that unless the dishonored chec$s were made good, said P1B 'ranch
Tshall recall its recommendation to the Head ffice for the restructuring of the loan
account and refer the matter to its legal counsel for legal action. Petitioners did not heed
respondent9s warning and as a result, the P1B Dagupan Branch sent demand letters to
Petitioner 1*B2& at its office address at 1"11 <@D2 Building, <. @odrigue> *r. .venue,
?ue>on 2it+, as$ing it to settle its past due loan account.
Petitioners nevertheless failed to pa+ their loan o'ligations within the time frame
given them and as a result, @espondent P1B filed with the Provincial *heriff of
Pangasinan at #inga+en a Petition for *ale
The sheriff foreclosed the real estate mortgage and sold at pu'lic auction the
mortgaged properties of petitioner6spouses, with @espondent P1B 'eing declared the
highest 'idder for the amount of P10,00F,000.00.
2opies of the *heriff9s 2ertificate of *ale were sent '+ registered mail to petitioner
corporation9s address petitioner6spouses9 address.
n .pril ", 1//), the P1B Dagupan Branch Manager sent a letter to petitioners at
their address informing them that the properties securing their loan account had 'een
sold at pu'lic auction, that the *heriff9s 2ertificate of *ale had 'een registered with the
@egistr+ of Deeds of Pangasinan and that a period of one A1B +ear therefrom was granted
to them within which to redeem their properties.
Petitioners failed to redeem their properties within the one6+ear redemption
period and so @espondent P1B e:ecuted a Deed of .'solute *ale consolidating title to
the properties in its name.
@espondent P1B informed Petitioner 1*B2& that the proceeds of the sale
conducted on %e'ruar+ )", 1//) were not sufficient to cover its total claim amounting to
P1),!0",F8".F0 and thus demanded from the latter the deficienc+ of P),18),F8".F0 plus
interest and other charges until the amount was full+ paid.
Petitioners refused to pa+ the a'ove deficienc+ claim which compelled
@espondent P1B to institute the instant 2omplaint for the collection of its deficienc+
claim.
ISS$E8
,hether or not the escalation clause is valid and whether or not it is violative of
the principle of mutualit+ of contracts.
R$LING8
&n each drawdown, the Promissor+ 1otes specified the interest rate to 'e
charged: 1/.! percent in the first, and )1.! percent in the second and again in the third.
However, a uniform clause therein permitted respondent to increase the rate 3within the
limits allowed '+ law at an+ time depending on whatever polic+ it ma+ adopt in the
future : : :,5 without even giving prior notice to petitioners. The 2ourt holds that
petitioners9 accessor+ dut+ to pa+ interest did not give respondent unrestrained freedom
to charge an+ rate other than that which was agreed upon. 1o interest shall 'e due,
Page | 257
unless e:pressl+ stipulated in writing. &t would 'e the >enith of farcicalit+ to specif+ and
agree upon rates that could 'e su'se4uentl+ upgraded at whim '+ onl+ one part+ to the
agreement.

The 3unilateral determination and imposition5 of increased rates is 3violative of
the principle of mutualit+ of contracts ordained in .rticle 100H of the 2ivil 2ode.5 ne6
sided impositions do not have the force of law 'etween the parties, 'ecause such
impositions are not 'ased on the parties9 essential e4ualit+.
.lthough escalation clauses are valid in maintaining fiscal sta'ilit+ and retaining
the value of mone+ on long6term contracts, giving respondent an un'ridled right to
ad(ust the interest independentl+ and upwardl+ would completel+ ta$e awa+ from
petitioners the 3right to assent to an important modification in their agreement5 and
would also negate the element of mutualit+ in their contracts. The clause cited earlier
made the fulfillment of the contracts 3dependent e:clusivel+ upon the uncontrolled will5
of respondent and was therefore void. Besides, the pro forma promissor+ notes have the
character of a contract d9adh[sion, 3where the parties do not 'argain on e4ual footing,
the wea$er part+9s the de'tor9s participation 'eing reduced to the alternative Tto ta$e it
or leave it.95
Page | 258
PN% VS ENCINA
GR 174!55. February 1, !!"
FAC#S8
The Philippine 1ational Ban$ AP1BB assails the Decision of the 2ourt of .ppeals
dated 1! Ma+ )00!, rendered in 2.67.@. 2C 1o. 8/0/F which, among others, declared
null and void the interest rate imposed '+ P1B on the loan o'tained from it '+
respondents and the conse4uent e:tra(udicial foreclosure of the properties offered as
securit+ for the loan.
@espondents <ncina spouses ac4uired several loans from P1B from which it
failed to pa+ within due time. <ncina avers that there ought to 'e longer gestation
periods on its part 'eing engaged in a 'usiness of agricultural character.
ISS$E8
,as there a violation of the Dsur+ #aw;
R$LING8
.s 'orne '+ the records, the <ncina spouses never challenged the validit+ of their
loan and the accessor+ contracts with P1B on the ground that the+ violated the principle
of mutualit+ of contracts in view of the provision therein that the interest rate shall 'e
set '+ management. Their onl+ contention concerning the interest rate was that the
Page | 259
charges imposed '+ the 'an$ violated the Dsur+ #aw. This was the essence of the second
cause of action alleged in the complaint.
&t should 'e definitivel+ ruled in this regard that the Dsur+ #aw had 'een
rendered legall+ ineffective '+ @esolution 1o. ))F dated 0 Decem'er 1/H) of the
Monetar+ Board of the 2entral Ban$, and later '+ 2entral Ban$ 2ircular 1o. /0! which
too$ effect on 1 =anuar+ 1/H0 and removed the ceiling on interest rates for secured and
unsecured loans regardless of maturit+. The effect of these circulars is to allow the
parties to agree on an+ interest that ma+ 'e charged on a loan. The virtual repeal of the
Dsur+ #aw is within the range of (udicial notice which courts are 'ound to ta$e into
account. .fter all, the fundamental tenet is that the law is deemed part of the contract.
Thus, the trial court was correct in ruling that the second cause of action was without
'asis.
IMPERIAL VS. -A$CIAN
47 SCRA 517
!!4 A(r 14
FAC#S8
The present controvers+ arose from a case for collection of mone+, filed '+ .le: ..
=aucian against @estituta &mperial, on cto'er )", 1/H/. The complaint alleges,
inter alia, that defendant o'tained from plaintiff si: A"B separate loans for which the
former e:ecuted in favor of the latter si: A"B separate promissor+ notes and issued
several chec$s as guarantee for pa+ment. ,hen the said loans 'ecame overdue and
Page | 260
unpaid, especiall+ when the defendant9s chec$s were dishonored, plaintiff made
repeated oral and written demands for pa+ment.
The loans were covered '+ si: A"B separate promissor+ notes e:ecuted '+
defendant. The face value of each promissor+ notes is 'igger NthanO the amount released
to defendant 'ecause said face value alread+ included the interest from date of note to
date of maturit+. *aid promissor+ notes indicate the interest of 1"E per month, date of
issue, due date, the corresponding guarantee chec$s issued '+ defendant, penalties and
attorne+9s fees. The trial court9s clear and detailed computation of petitioner9s
outstanding o'ligation to respondent was affirmed '+ the 2. for 'eing convincing and
satisfactor+. However, the 2. held that without (udicial in4uir+, it was improper for the
@T2 to rule on the constitutionalit+ of *ection 1, 2entral Ban$ 2ircular 1o. /0!, *eries
of 1/H).
ISS$ES8
,hether or not the penalties charged per month is in the guise of hidden interest.
,hether or not the reduction of attorne+9s fees '+ the @T2 is reasona'le.
R$LING8
&ni4uitous and unconsciona'le stipulations on interest rates, penalties and
attorne+9s fees are contrar+ to morals. 2onse4uentl+, courts are granted authorit+ to
reduce them e4uita'l+. &f reasona'l+ e:ercised, such authorit+ shall not 'e distur'ed '+
appellate courts.
.rticle 1))/ of the 2ivil 2ode states thus:
3The (udge shall e4uita'l+ reduce the penalt+ when the principal o'ligation has 'een
partl+ or irregularl+ complied with '+ the de'tor. <ven if there has 'een no
performance, the penalt+ ma+ also 'e reduced '+ the courts if it is ini4uitous or
unconsciona'le.5
&n e:ercising this power to determine what is ini4uitous and unconsciona'le,
courts must consider the circumstances of each case. ,hat ma+ 'e ini4uitous and
unconsciona'le in one ma+ 'e totall+ (ust and e4uita'le in another. &n the present case,
ini4uitous and unconsciona'le was the parties9 stipulated penalt+ charge of ! percent
per month or "0 percent per annum, in addition to regular interests and attorne+9s fees.
.lso, there was partial performance '+ petitioner when she remitted P11",!F0 as partial
pa+ment of her principal o'ligation of P0)0,000. Dnder the circumstances, the trial
court was (ustified in reducing the stipulated penalt+ charge to the more e4uita'le rate
of 1F percent per annum.
The Promissor+ 1ote carried a stipulation for attorne+9s fees of )! percent of the
principal amount and accrued interests. *trictl+ spea$ing, this covenant on attorne+9s
fees is different from that mentioned in and regulated '+ the @ules of 2ourt. 3@ather,
the attorne+9s fees here are in the nature of li4uidated damages and the stipulation
therefor is aptl+ called a penal clause.5 *o long as the stipulation does not contravene
Page | 261
the law, morals, pu'lic order or pu'lic polic+, it is 'inding upon the o'ligor. &t is the
litigant, not the counsel, who is the (udgment creditor entitled to enforce the (udgment
'+ e:ecution.
1evertheless, it appears that petitioner9s failure to compl+ full+ with her
o'ligation was not motivated '+ ill will or malice. The twent+6nine partial pa+ments she
made were a manifestation of her good faith. .gain, .rticle 1))/ of the 2ivil 2ode
specificall+ empowers the (udge to reduce the civil penalt+ e4uita'l+, when the principal
o'ligation has 'een partl+ or irregularl+ complied with. Dpon this premise, we hold that
the @T29s reduction of attorne+9s fees 66 from )! percent to 10 percent of the total
amount due and pa+a'le 66 is reasona'le.
Page | 262
#E00, G. PA%$GAIS 5. 0AVE P. SA3I-9ANI
G.R. No. 156"46, February ', !!4
FAC#S:
Tedd+ 7. Pa'ugais, agreed to sell to Dave P. *ahi(wani a lot located at 1orth
%or'es Par$, Ma$ati. Dave paid Tedd+ the amount of P"00,000.00 as
optionMreservation fee and the 'alance of P1F,HH8,!00.00 to 'e paid within "0 da+s
from the e:ecution of the contract, simultaneous with deliver+ of the owner9s duplicate
T2T in Dave9s name and other re4uired documents. Tedd+ failed to deliver the re4uired
documents, and returned to Dave the optionMreservation fee '+ wa+ of chec$, which was,
however, dishonored. n .ugust11, 1//F, Tedd+ wrote to Dave sa+ing that he is
consigning the mount tendered with the @T2 of Ma$ati 2it+. n .ugust 1!, 1//F, Tedd+
filed a complaint for consignation, alleging that he twice rendered to Dave, through his
counsel, the amount of P"8),/00.00 in the form of manager9s chec$, 'ut was refused.
Dave9s counsel, on the other hand, admitted that his office received petitioner9s letter,
'ut claimed that no chec$ was appended thereto. He averred that there was no valid
tender of pa+ment 'ecause no chec$ was tendered and the computation of the amount
to 'e tendered was insufficient. The trial court declared the consignation invalid for
failure to prove that there was a prior tender of pa+ment and was refused '+ Dave.
Tedd+ appealed the decision to the 2ourt of .ppeals. Thereafter, he filed an <: Parte
Motion to ,ithdraw 2onsigned Mone+, which was denied '+ the 2.. n a motion for
reconsideration, the 2. declared the consignation as valid, and thus held that Tedd+
cannot withdraw his consignation. Dnfa>ed, Tedd+ filed the present petition upon the
contention that he can withdraw the amount deposited with the trial court as a matter of
right since at the time he moved for the withdrawal, the 2. has +et to rule on its validit+
and Dave had not +et accepted the same.
ISS$ES:
A1B ,hether or not there was a valid consignationJ and A)B ,hether or not
petitioner can withdraw the amount consigned as a matter of right;
R$LING:
The petition for review is denied. Petitioner9s tender of pa+ment is valid. The
amount consigned however can no longer 'e withdrawn 'ecause respondent9s pra+er in
his answer that the amount consigned 'e awarded to him is e4uivalent to an acceptance
of the consignation, which has the effect of e:tinguishing petitioner9s o'ligation. The
Page | 263
amount consigned with the trial court can no longer 'e withdrawn '+ petitioner 'ecause
respondent9s pra+er in his answer that the amount consigned 'e awarded to him is
e4uivalent to an acceptance of the consignation, which has the effect of e:tinguishing
petitioner9s o'ligation. Moreover, petitioner failed to manifest his intention to compl+
with the 3.greement .nd Dnderta$ing5 '+ delivering the necessar+ documents and the
lot su'(ect of the sale to respondent in e:change for the amount deposited. ,ithdrawal
of the mone+ consigned would enrich petitioner and un(ustl+ pre(udice respondent.
AN#ONIO LO V. CO$R# OF APPEALS
FAC#S8
.t the core of the present controvers+ are two parcels of land measuring a total of
),1F8 s4uare meters, with an office 'uilding constructed thereon. Petitioner ac4uired
the su'(ect parcels of land in an auction sale on 1ovem'er /, 1//! for P)0,180,000 from
the #and Ban$ of the Philippines A#and Ban$B. Private respondent 1ational nion
7rowers 2ooperative Mar$eting .ssociation, &nc., an agricultural cooperative, was the
occupant of the disputed parcels of land under a su'sisting contract of lease with #and
Ban$. The lease was valid until Decem'er 01, 1//!. Dpon the e:piration of the lease
contract, petitioner demanded that private respondent vacate the leased premises and
surrender its possession to him. Private respondent refused on the ground that it was,
at the time, contesting petitioner9s ac4uisition of the parcels of land in 4uestion in an
action for annulment of sale, redemption and damages.
Petitioner filed an action for e(ectment 'efore the MT2. He as$ed, inter alia, for
the imposition of the contractuall+ stipulated penalt+ of P!,000 per da+ of dela+ in
surrendering the possession of the propert+ to him. n *eptem'er 0, 1//", the trial
court decided the case in favor of petitioner. n appeal to the @T2, the MT2 decision
was affirmed in toto. The 2. rendered its assailed decision affirming the decision of the
trial court, with the modification that the penalt+ imposed upon private respondent for
the dela+ in turning over the leased propert+ to petitioner was reduced from P !,000 to
P 1000 per da+.
ISS$E8
Page | 264
,hether or not the 2ourt of .ppeals erred in reducing the penalt+ awarded '+
the trial court, the same having 'een stipulated '+ the parties.
R$LING8
1o. 7enerall+, courts are not at li'ert+ to ignore the freedom of the parties to
agree on such terms and conditions as the+ see fit as long as the+ are not contrar+ to law,
morals, good customs, pu'lic order or pu'lic polic+. 1evertheless, courts ma+ e4uita'l+
reduce a stipulated penalt+ in the contract if it is ini4uitous or unconsciona'le, or if the
principal o'ligation has 'een partl+ or irregularl+ complied with. This power of the
courts is e:plicitl+ sanctioned '+ .rticle 1))/ of the 2ivil 2ode which provides:
.rticle 1))/. The (udge shall e4uita'l+ reduce the penalt+ when the principal o'ligation
has 'een partl+ or irregularl+ complied with '+ the de'tor. <ven if there has 'een no
performance, the penalt+ ma+ also 'e reduced '+ the courts if it is ini4uitous or
unconsciona'le.
The 4uestion of whether a penalt+ is reasona'le or ini4uitous is addressed to the
sound discretion of the court and depends on several factors, including, 'ut not limited
to, the following: the t+pe, e:tent and purpose of the penalt+, the nature of the
o'ligation, the mode of 'reach and its conse4uences, the supervening realities, the
standing and relationship of the parties.
&n this case, the stipulated penalt+ was reduced '+ the appellate court for 'eing
unconsciona'le and ini4uitous. Petition deniedJ 2. decision affirmed.
LIG$#AN VS. CO$R# OF APPEALS
'76 SCRA 561 FE%R$AR, 1, !!
FAC#S8
Petitioners Tolomeo #igutan and #eonidas dela #lana o'tained on Ma+ 11, 1/H1 a
loan in the amount of P1)0,000.00 from respondent *ecurit+ Ban$ and Trust 2ompan+.
Petitioners e:ecuted a promissor+ note 'inding themselves, (ointl+ and severall+, to pa+
the sum 'orrowed with an interest of 1!.1H/E per annum upon maturit+ and to pa+ a
penalt+ of !E ever+ month on the outstanding principal and interest in case of default.
&n addition, petitioners agreed to pa+ 10E of the total amount due '+ wa+ of attorne+9s
fees if the matter were indorsed to a law+er for collection or if a suit were instituted to
enforce pa+ment. The o'ligation matured on *eptem'er H, 1/H1J the 'an$, however,
granted an e:tension 'ut onl+ until Decem'er )/, 1/H1. ,hen petitioners defaulted on
their o'ligation, the 'an$ filed on 1ovem'er 0, 1/H) with the @T2 a complaint for
recover+ of the due amount. n *eptem'er !, 1/HH, the trial court ruled in favor of the
Page | 265
'an$. &t ordered the petitioners to pa+, (ointl+ and severall+, the sum of P11F,F1".00
with interest thereon at the rate of 1!.1H/E per annum, )E service charge and !E per
month penalt+ charge, commencing on Ma+ )0, 1/H) until full+ paid.
The 2. affirmed it 'ut deleted the )E service charge pursuant to 2entral Ban$
2ircular 1o. 8H0. 1ot full+ satisfied with the decision, 'oth parties moved for
reconsideration. Petitioners pra+ed for the reduction of the !E penalt+ for 'eing
unconsciona'le. The 'an$ as$ed that the pa+ment of interest and penalt+ 'e
commenced not from the date of filing of complaint 'ut from the time of default as so
stipulated in the contract of the parties. n cto'er )H, 1//H, the 2. resolved the two
A)B motions granting the pra+er of the 'an$ that the pa+ment of interest and penalt+ 'e
commenced on the date when the o'ligation 'ecame due and on the other hand held
that a penalt+ of 0E per month or 0"E per annum would suffice.
The petitioner, 'efore the 2ourt, contended, among others that the 1!.1H/E
interest and the penalt+ of 0E per month or 0"E per annum imposed '+ private
respondent 'an$ on petitioner9s loan o'ligation are still manifestl+ exor"itant%
ini#uitous and unconsciona"le. @espondent 'an$, which did not ta$e an appeal, would,
however, have it that the penalt+ sought to 'e deleted '+ petitioners was even
insufficient to full+ cover and compensate for the cost of mone+ 'rought a'out '+ the
radical devaluation and decrease in the purchasing power of the peso.
ISS$E8
,hether or not the penalt+ is reasona'le and not ini4uitous.
R$LING8
1, the penalt+ is not unreasona'le. The 2ourt held that the 4uestion of whether
a penalt+ is reasona'le or ini4uitous can 'e partl+ su'(ective and partl+ o'(ective. &ts
resolution would depend on such factors as, 'ut not necessaril+ confide to, the t+pe,
e:tent and purpose of the penalt+, the nature of the o'ligation, the mode of 'reach and
its conse4uences, the supervening realities, the standing and relationship of the parties,
and the li$e, the application of which, '+ and large, is addressed to the sound discretion
of the court. &n Ri(al Commercial )an*ing Corp. v. Court of 'ppeals, for e:ample, the
2ourt has tempered the penalt+ charges after ta$ing into account the de'tor9s pitiful
situation and its offer to settle the entire o'ligation with the creditor 'an$. The
stipulated penalt+ might li$ewise 'e reduced when a partial or irregular pa+ment is
made '+ the pa+ment. The stipulated penalt+ might even 'e deleted such as when there
has 'een su'stantial performance in good faith '+ the o'ligor, when the penalt+ clause
itself suffers from fatal infirmit+, and when e:ceptional circumstances so e:ist as to
warrant it. &n the case at 'ar, given the circumstances, not to mention the repeated acts
of 'reach '+ petitioners of their contractual o'ligation, this 2ourt sees no cogent ground
to change the ruling of the appellate court.
FIRS# ME#RO INVES#MEN# V. ES#E 0EL SOL MO$N#AIN RESERVE, INC
'6+ SCRA ++
FAC#S8
Page | 266
Petitioner %M&2 granted respondent <ste del *ol a loan of *even Million Three
Hundred <ight+6%ive Thousand %ive Hundred Pesos AP8,0H!,!00.00B to finance the
construction and development of the <ste del *ol Mountain @eserve, a sportsMresort
comple: pro(ect. Dnder the terms of the #oan .greement, the proceeds of the loan were
to 'e released on staggered 'asis. &nterest on the loan was pegged at si:teen A1"EB
percent per annum 'ased on the diminishing 'alance. The loan was pa+a'le in thirt+6
si: A0"B e4ual and consecutive monthl+ amorti>ations to commence at the 'eginning of
the thirteenth month from the date of the first release in accordance with the *chedule
of .morti>ation. &n case of default, an acceleration clause was, among others, provided
and the amount due was made su'(ect to a twent+ A)0EB percent one6time penalt+ on
the amount due and such amount shall 'ear interest at the highest rate permitted '+ law
from the date of default until full pa+ment thereof plus li4uidated damages at the rate of
two A)EB percent per month compounded 4uarterl+ on the unpaid 'alance and accrued
interests together with all the penalties, fees, e:penses or charges thereon until the
unpaid 'alance is full+ paid, plus attorne+9s fees e4uivalent to twent+6five A)!EB percent
of the sum sought to 'e recovered, which in no case shall 'e less than Twent+ Thousand
Pesos AP)0,000.00B if the services of a law+er were hired. &n accordance with the terms
of the #oan .greement, respondent <ste del *ol e:ecuted several documents as securit+
for pa+ment, among them, AaB a @eal <state Mortgage and A'B individual 2ontinuing
*uret+ship agreements '+ co6respondents Calentin *. Dae>, =r., et al. @espondent <ste
del *ol also e:ecuted, as provided for '+ the #oan .greement, an Dnderwriting
.greement where'+ petitioner %M&2 shall underwrite on a 'est6efforts 'asis the pu'lic
offering of 1)0,000 common shares of respondent <ste del *ol9s capital stoc$ for a one6
time underwriting fee of P)00,000.00.
The Dnderwriting .greement also provided that for supervising the pu'lic
offering of the shares, respondent <ste del *ol shall pa+ petitioner %M&2 an annual
supervision fee of )00,000.00 per annum for a period of four consecutive +ears. The
Dnderwriting .greement also stipulated for the pa+ment '+ respondent <ste del *ol to
petitioner %M&2 a consultanc+ fee of P00),!00.00 per annum for a period of four
consecutive +ears. *imultaneous with the e:ecution of and in accordance with the terms
of the Dnderwriting .greement, a 2onsultanc+ .greement was also e:ecuted on =anuar+
01, 1/8H where'+ respondent <ste del *ol engaged the services of petitioner %M&2 for a
fee as consultant to render general consultanc+ services. *ince respondent <ste del *ol
failed to meet the schedule of repa+ment in accordance with a revised *chedule of
.morti>ation, it appeared to have incurred a total o'ligation of P1),"8/,"00./H per the
petitioner9s *tatement of .ccount dated =une )0, 1/H0. .ccordingl+, petitioner %M&2
caused the e:tra(udicial foreclosure of the real estate mortgage on =une )0, 1/H0. .t the
pu'lic auction, petitioner %M&2 was the highest 'idder of the mortgaged properties for
P/,000,000.00. %ailing to secure from the individual respondents, the pa+ment of the
alleged deficienc+ 'alance, petitioner instituted the instant collection suit to collect the
alleged deficienc+ 'alance of P",H"0,)/8.80 plus interest thereon at )1E percent per
annum from =une )F, 1/H0 until full+ paid, and )!E percent thereof as and for
attorne+9s fees and costs.
The trial court rendered its decision in favor of petitioner %M&2. 2. reversed the
challenged decision of the trial court.
Page | 267
ISS$E8
,hether or not the appellate court erred in reversing the decision of the trial
court as regards to the pa+ment of penalties.
R$LING8
1o. %irst, 2entral Ban$ 2ircular 1o. /0! did not repeal nor in an+ wa+ amend
the Dsur+ #aw 'ut simpl+ suspended the latter9s effectivit+. Thus, retroactive
application of a 2entral Ban$ 2ircular cannot, and should not, 'e presumed. *econd,
several facts and circumstances ta$en altogether show that the Dnderwriting and
2onsultanc+ .greements were simpl+ cloa$s or devices to cover an illegal scheme
emplo+ed '+ petitioner %M&2 to conceal and collect e:cessivel+ usurious interest. The
Dnderwriting and 2onsultanc+ .greements which were e:ecuted and delivered
contemporaneousl+ with the #oan .greement on =anuar+ 01, 1/8H were e:acted '+
petitioner %M&2 as essential conditions for the grant of the loan. .n apparentl+ lawful
loan is usurious when it is intended that additional compensation for the loan 'e
disguised '+ an ostensi'l+ unrelated contract providing for pa+ment '+
the 'orrower for the lender9s services which are of little value or which are not in fact to
'e rendered, such as in the instant case. &n this connection, .rticle 1/!8 of the 1ew 2ivil
2ode clearl+ provides that: 3.rt. 1/!8. 2ontracts and stipulations, under an+ cloa$ or
device whatever, intended to circumvent the laws against usur+ shall 'e void. The
'orrower ma+ recover in accordance with the laws on usur+.5 &n usurious loans, the
entire o'ligation does not 'ecome void 'ecause of an agreement for usurious interestJ
the unpaid principal de't still stands and remains valid 'ut the stipulation as to the
usurious interest is void, conse4uentl+, the de't is to 'e considered without stipulation
as to the interest.
Thus, the 2ourt agrees with the factual findings and conclusion of the appellate
court, wherein it held that the stipulated penalties, li4uidated damages and attorne+9s
fees, e:cessive, ini4uitous and unconsciona'le. .ccordingl+, the )0E penalt+ on the
amount due and 10E of the proceeds of the foreclosure sale as attorne+9s fees would
suffice to compensate the appellee, especiall+ so 'ecause there is no clear showing that
the appellee hired the services of counsel to effect the foreclosureJ it engaged counsel
onl+ when it was see$ing the recover+ of the alleged deficienc+.
.ttorne+9s fees as provided in penal clauses are in the nature of li4uidated
damages. *o long as such stipulation does not contravene an+ law, morals, or pu'lic
order, it is 'inding upon the parties. 1onetheless, courts are empowered to reduce the
amount of attorne+9s fees if the same is 3ini4uitous or unconsciona'le.5NF"O .rticles
1))/ and )))8 of the 1ew 2ivil 2ode provide that: .rt. 1))/. The (udge shall e4uita'l+
reduce the penalt+ when the principal o'ligation has 'een partl+ or irregularl+ complied
with '+ the de'tor. <ven if there has 'een no performance, the penalt+ ma+ also 'e
reduced '+ the courts if it is ini4uitous or unconsciona'le. .rt. )))8. #i4uidated
damages, whether intended as an indemnit+ or a penalt+, shall 'e e4uita'l+ reduced if
the+ are ini4uitous or unconsciona'le.
Page | 268
&n the case at 'ar, the amount of Three Million ne Hundred <ight+6<ight
Thousand *i: Hundred Thirt+ Pesos and *event+6%ive 2entavos AP0,1HH,"00.8!B for the
stipulated attorne+9s fees e4uivalent to twent+6five A)!EB percent of the alleged amount
due, as of the date of the auction sale on =une )0, 1/H0, is manifestl+ e:or'itant and
unconsciona'le. .ccordingl+, we agree with the appellate court that a reduction of the
attorne+9s fees to ten A10EB percent is appropriate and reasona'le under the facts and
circumstances of this case.
0OMEL #RA0ING CORPORA#ION V. CO$R# OF APPEALS a.;
G.R. No. "4"1', Se(7e2ber , 1+++
FAC#S8
n =une 0, 1/H1, private respondent 1D261.2&D. @aw Materials 2orporation
A11@M2B ordered from petitioner Domel Trading 2orporation ADM<#B )),000
'undles of 'uri midri's at P1".00 per 'undle to 'e delivered within 00 wor$ing da+s
from the date of the opening of a letter of credit. n =une F, 1/H1, private respondent
again ordered 000,000 pieces of rattan poles at P/."! per piece for a total price of
P),H/!,000.00, also to 'e delivered within "0 da+s from the date of the opening of a
letter of credit. The specifications and provisions of 'oth transactions, which served as
their agreement, were printed in two separate purchase orders.
&n accordance with their agreement, 11@M2, on =ul+ /, 1/H1, opened a letter of credit
with Philippine 1ational Ban$ AP1BB in favor of DM<# in the amount of
P1,//8,000.00 to cover its order for )0",/F0 pieces of rattan poles. n =ul+ 10, 1/H1,
11@M2 opened another letter of credit in favor of DM<# in the amount of
P1,)0",000.00 to cover the price of /0,0!8 pieces of rattan poles and )),000 'undles of
'uri midri's.
&n violation of their agreement, DM<# failed to deliver the 'uri midri's and rattan
poles within the stipulated period. Thus, on *eptem'er )0, 1/H1, DM<# and 11@M2
agreed to restructure the latter9s purchase orders in a Memorandum of .greement.
Dnder the agreement, 11@M2 e:tended the e:pir+ date of its two letters of credit to
1ovem'er !, 1/H1. &t also reduced the 4uantit+ of the rattan poles from 000,000 to onl+
100,000 pieces while the 4uantit+ of 'uri midri's remained at )),000 'undles.
%urther, DM<# undertoo$ to deliver the goods on or 'efore cto'er 01, 1/H1.
However, no deliveries were again made on the said date. 2onse4uentl+, demands were
made '+ 11@M2 on =anuar+ 1/, 1/H) for the pa+ment of damages, which demands
were ignored '+ DM<#. Hence, 11@M2 filed a complaint for damages 'efore the
Page | 269
@egional Trial 2ourt of Pasig. .fter trial, (udgment was rendered in favor of plaintiff
and against defendant.
Both DM<# and 11@M2 assail the a'ove64uoted decision in separate petitions which
have 'een consolidated 'efore this 2ourt. Based on the pleadings su'mitted '+ the
parties, this 2ourt has resolved to give due course to the petition and decides the same.
DM<# su'mits it has not 'reached its contractual o'ligation to 11@M2 inasmuch as
it was the fault of the latter for not inspecting and e:amining the rattan poles as well as
the 'uri midri's alread+ shipped '+ the suppliers and stored in the former9s warehouse.
&n short, DM<# claims that 11@M2 must first inspect the ordered items 'efore
deliver+ could 'e made.
ISS$E8
,hether or not the decision of the 2ourt of .ppeals in 2.67.@. 2C 1o. 0H/!)
which modified the decision of the lower court granting private respondent9s pra+er for
damages, was correct.
R$LING8
,hile the *upreme 2ourt did not agree with the 2ourt of .ppeals that the failure
of 11@M2 to conduct the inspection mitigated DM<#9s lia'ilit+ for li4uidated
damages, nevertheless, it agreed in the reduction of the amount of li4uidated damages
to onl+ P1!0,000.00. The amount of P),000.00 as penalt+ for ever+ da+ of dela+ is
e:cessive and unconsciona'le.
.rticle 1))/ of the 2ivil 2ode states, thus:3The (udge shall e4uita'l+ reduce the penalt+
when the principal o'ligation has 'een partl+ or irregularl+ complied with '+ the de'tor.
<ven if there has 'een no performance, the penalt+ ma+ also 'e reduced '+ the courts if
it is ini4uitous or unconsciona'le.5
.rticle )))8 of the 2ivil 2ode li$ewise states, thus: 3#i4uidated damages, whether
intended as an indemnit+ or a penalt+, shall 'e e4uita'l+ reduced if the+ are ini4uitous
or unconsciona'le.5
&n determining whether a penalt+ clause is 3ini4uitous and unconsciona'le,5 a court
ma+ ver+ well ta$e into account the actual damages sustained '+ a creditor who was
compelled to sue the defaulting de'tor, which actual damages would include the interest
and penalties the creditor ma+ have had to pa+ on its own from its funding source. &n
this case, 11@M2 was onl+ a'le to prove that it incurred the amounts of P!,//!.H0 as
opening charges on the two #etters of 2redit and an additional P1,/11.H! as amendment
charges on the same #etters of 2redit. ther than that, 11@M2 failed to prove it had
suffered actual damages resulting from the nondeliver+ of the specified 'uri midri's and
rattan poles. &n fact, what it allegedl+ suffered are what it calls 3%oregone &nterest
&ncome5 and 3%oregone Profit5 from the two #etters of 2redit. *uch could not 'e
considered as actual damages.
Page | 270
ME0EL VS CA
G.R. No. 1'16 No5e2ber 7, 1++"
FAC#S8
The Medel spouses o'tained several loans of which the+ were una'le to pa+ in full. n
=ul+ )0, 1/H", *ervando and #eticia with the latterKs hus'and, Dr. @afael Medel,
consolidated all their previous unpaid loans totaling PFF0,000.00, and sought from
Ceronica another loan in the amount of P"0,000.00, 'ringing their inde'tedness to a
Page | 271
total of P!00,000.00, pa+a'le on .ugust )0, 1/H". The+ e:ecuted a promissor+ note
indicating pa+ment for the 'alance.
n maturit+ of the loan, the 'orrowers failed to pa+ the inde'tedness of
P!00,000.00, plus interests and penalties, evidenced '+ the a'ove64uoted promissor+
note. n %e'ruar+ )0, 1//0, Ceronica @. 7on>ales, (oined '+ her hus'and Danilo 7.
7on>ales, filed with the @egional Trial 2ourt of Bulacan, Branch 1", at Malolos, Bulacan,
a complaint for collection of the full amount of the loan including interests and other
charges.
ISS$E8
,hat is the interest that must 'e collected on the instant case;
R$LING8
Basicall+, the issue revolves on the validit+ of the interest rate stipulated upon.
Thus, the 4uestion presented is whether or not the stipulated rate of interest at !.!E per
month on the loan in the sum of P!00,000.00, that plaintiffs e:tended to the
defendants is usurious. &n other words, is the Dsur+ #aw still effective, or has it 'een
repealed '+ 2entral Ban$ 2ircular 1o. /0!, adopted on Decem'er )), 1/H), pursuant to
its powers under P.D. 1o. 11", as amended '+ P.D. 1o. 1"HF;
,e agree with petitioners that the stipulated rate of interest at !.!E per month
on the P!00,000.00 loan is e:cessive, ini4uitous, unconsciona'le and e:or'itant.
However, we can not consider the rate LusuriousL 'ecause this 2ourt has consistentl+
held that 2ircular 1o. /0! of the 2entral Ban$, adopted on Decem'er )), 1/H), has
e:pressl+ removed the interest ceilings prescri'ed '+ the Dsur+ #aw and that the Dsur+
#aw is now Llegall+ ine:istentL.
1evertheless, we find the interest at !.!E per month, or ""E per annum,
stipulated upon '+ the parties in the promissor+ note ini4uitous or unconsciona'le, and,
hence, contrar+ to morals ALcontra 'onos moresLB, if not against the law.
!
The
stipulation is void. The courts shall reduce e4uita'l+ li4uidated damages, whether
intended as an indemnit+ or a penalt+ if the+ are ini4uitous or unconsciona'le.
2onse4uentl+, the 2ourt of .ppeals erred in upholding the stipulation of
the parties. @ather, we agree with the trial court that, under the circumstances, interest
at 1)E per annum, and an additional 1E a month penalt+ charge as li4uidated damages
ma+ 'e more reasona'le.
Page | 272
PACI#A REFORMINA 5 #OMOL, -R.
NO. L-5+!+6 O17ober 11, 1+"5
FAC#S8
.n action for @ecover+ of Damages for &n(ur+ to Person and #oss of
Propert+ was filed. @T2 rendered (udgment in favor of the plaintiffs and against the
defendants, ordering the latter to pa+ (ointl+ and severall+ the former. n appeal, the
decision was modified. &n the computation of the legal interest decreed sought to 'e
e:ecuted, petitioners claimed that it should 'e at 1)E per annum invo$ing 2entral 'an$
2ircular. The respondents, however, insist that said legal interest should 'e at the rate of
"E per annum pursuant to .rticle ))0/ of the 1ew 2ivil code
ISS$E8
How much '+ wa+ of legal interest, should a (udgment de'tor pa+ the (udgment
creditor;
R$LING8
The (udgment spo$en of and referred to are (udgments in litigations
involving loans or for'earances of an+ mone+, goods or credits. .n+ other $ind of
monetar+ (udgment does not fall within the coverage of the said law for it is not within
the am'it of authorit+ granted to the 2entral Ban$. The Monetar+ Board ma+ not tread
on for'idden grounds. To ma$e 2entral Ban$ 2ircular 1o. F1" applica'le to an+ case
other than those specificall+ provided for '+ the Dsur+ #aw will ma$e the same of
dou'tful constitutionalit+ since the Monetar+ Board will 'e e:ercising legislative
functions which are 'e+ond the intendment of PD 1o. 11".
The petition is without merit, the same is dismissed with costs against
petitioners.
Page | 273
SONN, LO 5. 4-S ECO-FORM9OR4 S,S#EM
G.R. No. 14+4! O17ober ", !!'
FAC#S8
G=* is engaged in the sale of steel scaffoldings while #o is a 'uilding
contractor. n %e'ruar+ )), 1//0, petitioner ordered scaffolding e4uipments from
respondent worth P!F0,F)!.H0. He paid a downpa+ment in the amount of P1!0,000.
The 'alance was made pa+a'le in 10 monthl+ installments. @espondent delivered the
e4uipments. Petitioner was a'le to pa+ the first two monthl+ installments. His 'usiness
suffered financial difficulties and he was una'le to settle his o'ligations despite
demands. n cto'er 11, 1//0, the parties e:ecuted a Deed of .ssignment where'+
petitioner assigned to respondent his receiva'les from =onero @ealt+. However, =onero
refused to honor the Dees of .ssign,nt 'ecause it claimed that petitioner was inde'ted to
it. Petitioner refused to pa+ claiming that that his o'ligation had 'een e:tinguished
when the+ e:ecuted the deed of assign,ent. @T2 dismissed the complaint on the ground
that the assignment of credit e:tinguished the o'ligation. 2ourt of appeals reversed the
decision and ordered #o to pa+ the plaintiff G=* with legal interests of "E per annum
until full+ paid.
ISS$E8
,hether or not the Deed of .ssignment e:tinguished the o'ligation
R$LING8
.n assignment of credit, '+ virtue of which the owner of the credit, the assignor,
'+ a legal cause, such as sale, dacion en pago, e:change or donation and without the
consent of the de'tor transfers his credit and accessor+ rights to another, the assignee,
who ac4uires the power to enforce it against the de'tor. Petitioner, as assignor, is 'ound
to warrant the e:istence and legalit+ of the credit at the tim of the sale or assignment.
,hen =onero claimed that it was no longer inde'ted to petitioner since the latter had
also as unpaid o'ligation to it, it essentiall+ meant that its o'ligation to the petitioner
has 'een e:tinguished '+ compensation. Petitioner was found in 'reach of his o'ligation
under the Deed of assignment. 2ourt of .ppeals decision is affirmed.
Page | 274
P3ILPPINE NA#IONAL %AN4 5.CA a.; LORE#O #AN
G.R. No. 1!"6'! A(r)* , 1++6
FAC#S8
Private respondent #oreto Tan is the owner of a parcel of land a'utting the
national highwa+. <:propriaton proceedings were instituted '+ the government. Tan
filed a motion re4uesting the issuance of an order for the release to him of the
e:propriation price of P0),FH0.00. P1B was re4uired '+ the trial court to release to tan
the amount and deposited it '+ the government. Petitioner, through its .ssistant
Manager Tagamolila, issued a chec$ and delivered the same to *onia 7on>aga on the
strength of the *P., without tan9s $nowledge, consent and authorit+. @T2 ordered
petitioner and Tagamolila to pa+ private respondent (ointl+ and severall+ the amount
worth legal interests, damages and attorne+9s fees. 2a affirmed the decision.
ISS$E8
,hether the *pecial Power of .ttorne+ authori>ed *onia 7on>aga to receive
pa+ment intended for private respondent
R$LING8
There is no 4uestion that no pa+ment had ever 'een made to private respondent
as to the chec$ was never delivered to him. Dnder .rticle 1)00 of the 2ivil 2ode, a de't
shall not 'e understood to have 'een paid unless the thing or service in which the
Page | 275
o'ligation consists has 'een completel+ delivered or rendered, as the case ma+ 'e. The
'urden of proof of sad pa+ment lies with the de'tor.
The decision of the court of appeals is affirmed with the modification that the
award '+ the @T2 of P!,000 as attorne+9s fees is reinstated.
CA#3A, PACIFIC AIR9A,S 5.S(ouses VaIJueI
G.R. No. 15!"4' Mar1< 14, !!'
FAC#S8
2atha+ is a common carrier engaged in transporting passenger and goods '+ air.
*pouses Ca>4ue> are 7old 2ard Mem'ers of its Marc Polo 2lu'. The *pouses, with two
friends and a maid went to HongGong for 'usiness. *pouses have the Business class
'oarding passes and econom+ class for the maid. ,hen 'oarding, the ground
stewardess declared a seat change from Business class to %irst 2lass for the Ca>4ue>.
The *pouses refused 'ut after insistence '+ the stewardess, the spouses gave in. ,hen
the arrived in Manila, spouses demanded to 'e indemnified in the amount of one
million 3 for the humiliation and em'arrassment5 caused '+ the emplo+ee. @T2 ruled
Page | 276
for the Ca>4ue> ordering 2atha+ .irwa+s to pa+ the spouses, stating further that there
was a 'reach of contract not 'ecause of over'oo$ing 'ut 'ecause the latter pushed
through with the upgrading despite o'(ections of the spouses.
ISS$E8
&s an involuntar+ upgrading of an airline9s accommodation at no e:tra costs cause
a 'reach of contract of carriage;
R$LING8
The Ca>4ue>es are aware of the privileges, 'ut such privileges ma+ 'e waived.
*pouses should have 'een consulted first. &t should not have 'een imposed on them over
their vehement o'(ection. B+ insisting of the upgrade, Pacific .irwa+s 'reached its
contract of carriage with the Ca>4ue>es. 1ominal damages are ad(udicated in order that
the right of the plaintiff, which have 'een violated ma+ 'e vindicated or recogni>ed and
not for indemnif+ing the plaintiff for an+ loss suffered '+ him.
Petition is partl+ granted. 2ourt of .ppeals9 decision is modified. Moral damages
deleted, nominal damages reduced to P!,000.
CI#I%AN4 5.SA%ENIANO
G.R.No. 1561', O17ober 16, !!6
Page | 277
FAC#S8
Petitioner 2iti'an$ is a 'an$ing corporation dul+ authori>ed under the
laws of the D*. to do commercial 'an$ing activities n the Philippines. *a'eniano
was a client of 'oth Petitioners 2iti'an$ and %12B %inance. @espondent filed a
complaint against petitioners claiming to have su'stantial deposits, the proceeds
of which were supposedl+ deposited automaticall+ and directl+ to respondent9s
account with the petitioner 2iti'an$ and that allegedl+ petitioner refused to
despite repeated demands. Petitioner alleged that respondent o'tained several
loans from the former and in default, 2iti'an$ e:ercised its right to set6off
respondent9s outstanding loans with her deposits and mone+. @T2 declared the
act illegal, null and void and ordered the petitioner to refund the amount plus
interest, ordering *a'eniano, on the other hand to pa+ 2iti'an$ her inde'tedness.
2. affirmed the decision entirel+ in favor of the respondent.
ISS$E8
,hether petitioner ma+ e:ercise its right to set6off respondent9s loans with her
deposits and mone+ in 2iti'an$67eneva
R$LING8
Petition is partl+ granted with modification.
1. 2iti'an$ is ordered to return to respondent the principal amount of
P01H,H/8.0F and P)00,1!0.00 plus 1F.!E per annum
). The remittance of D* U1F/,"0).// from respondent9s 2iti'an$67eneva
account is declared illegal, null and void, thus 2iti'an$ is ordered to refund
said amount in Philippine currenc+ or its e4uivalent using e:change rate at
the time of pa+ment.
0. 2iti'an$ to pa+ respondent moral damages of P000,000, e:emplar+ damages
for P)!0,000, attorne+9s fees of P)00,000.
F. @espondent to pa+ petitioner the 'alance of her outstanding loans of
P1,0"/,HF8.F0 inclusive off interest.
Page | 278
#ELENG#AN %RO#3ERS a.; SONS 5.$NI#E0 S#A#ES LINES G.R.No.
1'"4,February ",!!6
FAC#S8
Petitioner is a domestic corporation while D* #ines is a foreign corporation
engaged in overseas shipping. &t was made applica'le that consignees who fail to ta$e
deliver+ of their containeri>ed cargo within the 106da+ free period are lia'le to pa+
demurrage charges. n =une )), 1/H1, D* #ines filed a suit against petitioner see$ing
pa+ment of demurrage charges plus interest and damages. Petitioner incurred P/F,000
which the latter refused to pa+ despite repeated demands. Petitioner disclaims lia'ilit+
alleging that it has never entered into a contract nor signed an agreement to 'e 'ound
'+ it. @T2 ruled that petitioner is lia'le to respondent and all 'e computed as of the date
of pa+ment in accordance with .rticle 1)!0 of the 2ivil 2ode. 2. affirmed the decision.
ISS$E8
,hether the re6computation of the (udgment award in accordance with .rticle
1)!0 of the 2ivil 2ode proper
R$LING8
The *upreme 2ourt found as erroneous the trial court9s decision as affirmed + the
2ourt of .ppeals. The 2ourt holds that there has 'een an e:traordinar+ inflation within
the meaning of .rticle 1)!0 of the 2ivil 2ode. There is no reason for ordering the
pa+ment of an o'ligation in an amount different from what has 'een agreed upon
'ecause of the purported supervention of an e:traordinar+ inflation.
The assailed decision is affirmed with modification that the order for re6
computation as of the date of pa+ment in accordance with the provisions of .rticle 1)!0
of 1ew 2ivil 2ode is deleted.
Page | 279
C. F. S3ARP 5. NOR#39ES# AIRLINES
G.R. No. 1''4+", A(r)* 1",!!
FAC#S8
n Ma+ /, 1/8F, respondent entered into an &nternational Passengers
*ales .genc+ .greement with petitioner, authori>ing the latter to sell its air
transport tic$ets. Petitioner failed to remit the proceeds of the tic$et sales, for
which reason, respondent filed a 2ollection suit against petitioner 'efore the
To$+o District 2ourt, which ordered petitioner to pa+ respondent H),1!H,1/! -en
and damages for the dela+ at the rate of "E per annum fro .ugust )H,1/H0 up to
and until pa+ment is completed. Dna'le to e:ecute the decision in =apan,
respondent filed a case with the @T2.
@T2 issued writ of e:ecution ordering defendant to pa+ plaintiff
H0,1!H,1/! -en at the e:change rate on the date of foreign (udgment plus "E
interest. n appeal, petitioner contended that it had alread+ paid partial
pa+ments hence, was not lia'le to pa+ additional "E interest imposed in the
foreign (udgment.
ISS$E8
,hether or not the petitioner is lia'le to pa+ additional "E per annum for
the dela+

R$LING8
The petition is denied. 2. decision is affirmed with modification.
Petitioner is directed to pa+ respondent "1,80F -en plus damages for the dela+ at
"E per annum from .ugust )H,1/H0 until pa+ment is completed, with interest at
the rate of 1)E per annum counted from the date of filing until full+ satisfied.
Page | 280
Petitioner9s lia'ilit+ ma+ 'e paid in Philippine currenc+ computed at the
e:change rate prevailing at the time of pa+ment.
AL%ER# PA0ILLA 5. SPO$SES PARE0ES a.; CO$R# OF
APPEALS
G.R. NO. 14"74,Mar1< 17, !!!
FAC#S8
n cto'er )0, 1/HH, petitioner Padilla and private respondent entered
into a contract to sell involving a parcel of land. The was untitled 'ut private
respondent was pa+ing ta:es thereon. Dnder the contract, petitioner undertoo$
to secure title to the propert+ in private respondent9s names of the P01),HF0
purchase pri>e, petitioner was to pa+ downpa+ment of P!0,000 upon signing and
the 'alance was to 'e paid within 10 da+s from the issuance of the court order
directing issuance of the decree of registration. %or failure to pa+ some of the
amount, respondent offered to sell to petitioner one6half of the propert+ for all
the pa+ment, lest respondent rescinds the contract. Petitioner refused and
instituted action for specific performance alleging that the+ have su'stantiall+
complied with the o'ligation. @T2 ruled for the petitioners stating a casual or
slight 'reach that did not warrant rescission. 2. reversed the decision and
confirmed the respondent9s rescission.
Page | 281
ISS$E8
,hether or not the private respondents are entitled to rescind the contract
to sell the land to petitioner
R$LING8
The *upreme 2ourt sustained the ruling of 2. that private respondent
ma+ validl+ rescind the contract to sell, however, the reason for this is not that
respondents have the power to rescind 'ut 'ecause their o'ligation thereunder
did not arise. The 2. is correct in ordering the return to petitioner of the
amounts received from him '+ private respondents, on the precept that no one
shall 'e un(ustl+ enriched himself at the e:pense of another.
SPO$SES #I%A-IA 5. CO$R# OF APPEALS a.; E0EN #AN
G. R. No. 1!!+!, -u.e 4, 1++'
FAC#S8
. suit of collection of sum of mone+ was filed '+ <den Tan against the spouses. .
writ of attachment was issued, the Deput+ *heriff filed a return stating that a deposit
made '+ Ti'a(ia in the amount of PFF),8!0 in another case, had 'een garnished '+ him.
@T2 ruled in favor of <den Tan and ordered the spouses to pa+ her an amount in e:cess
of P0,000,000. 2ourt of .ppeals modified the decision '+ reducing the amount for
Page | 282
damages. Ti'a(ia *pouses delivered to *heriff Bolima the total mone+ (udgment of
P0/HFH0.80. Tan refused to accept the pa+ment and insisted that the garnished funds
'e withdrawn to satisf+ the (udgment o'ligation.
ISS$E8
,hether or not pa+ment '+ means of chec$ is considered pa+ment in legal tender
R$LING8
The ruling applies the statutor+ provisions which la+ down the rule that a chec$ is
not legal tender and that a creditor ma+ validl+ refuse pa+ment '+ chec$, whether it 'e a
manager9s chec$, cashier9s or personal chec$. The decision of the court of .ppeals is
affirmed.
Page | 283
0EVELOPMEN# %AN4 OF #3E P3ILIPPINES 5. CO$R# OF APEEALS
G.R.No. 1'"7!',-u.e '!, !!6
FAC#S8
&n March 1/"H, DBP granted to private respondents an industrial loan in the
amount of P),!00,000 I P!00,000 n cash and P),000,000 in DBP Progress Ban$. &t
was evidenced '+ a promissor+ note and secured '+ a mortgage e:ecuted '+ respondents
over their present and future properties. .nother loan was granted '+ DBP in the for of
a !6+ear revolving guarantee to P1,800,000. &n 1/8!, the outstanding accounts wth DBP
was restructured in view of failure to pa+. .mounting to PF,"!!,//).0! were
consolidated into a single account. n the other hand, all accrued interest and charges
due amounting to P0,08F,"8).)1 were denominated as 3 1otes Ta$en for &nterests5 and
evidenced '+ a separate promissor+ note. %or failure to compl+ with its o'ligation, DBP
initiated foreclosure proceedings upon its computation that respondent9s loans were
arrears '+ P"),/!F,F80."H. @espondents contended that the collection was
unconsciona'le if not unlawful or usurious . @T2, as affirmed '+ the 2., ruled in favor
of the respondents.
ISS$E8
,hether the prestation to collect '+ the DBP is unconsciona'le or usurious
R$LING8
&t cannot 'e determined whether DBP in fact applied an interest rate higher than
what is prescri'ed under the law. .ssuming it did e:ceed 1)E in addition to the other
penalties stipulated in the note, this should 'e stric$en out for 'eing usurious.
The petition is partl+ granted. Decision of the court of .ppeals is reversed and
set aside. The case is remanded o the trial court for the determination of the total
amount of the respondent9s o'ligation 'ased on the promissor+ notes, according to the
interest rate agreed upon '+ the parties on the interest rate of 1)E per annum,
whichever is lower.
Page | 284
ME#RO%AN4 5. CA%L:O
G.R. No. 15446+ 0e1e2ber 6, !!6
FAC#S8
@espondent 2a'il>o was one of the Metro'an$9s client who maintained a current
account. n 1ovem'er 1), 1//, 2a'il>o issued a Metro'an$ chec$ pa+a'le to cash in the
amount of P1,000 and was paid to a certain Mr. Mar4ue>. The chec$ was oresented to
,estmont Ban$ or pa+ment and in turn indorsed to etro'an$ for appropriate clearing.
&t was discovered that the amount withdrawn wa P/1,000, thus, the chec$ was altered.
2a'il>o re6credit the amount of P/1,000 to his account 'ut Metro'an$ refused to
compl+ despite demands. @T2 ordered Metro'an$ to pa+ the sum of P/0,000 to
2a'il>o. 2ourt of .ppeals affirmed the decision with modification.
ISS$E8
,hether holding Metro'an$, as drawee 'an$, lia'le for the alternations on the
su'(ect chec$ 'earing the authentic signature of the drawer thereof
R$LING8
The degree of diligence in the e:ercise of his tas$s and the performance of his
duties have 'een faithfull+ complied with '+ 2a'il>o. &t is o'vious that Metro'an$ was
remiss in the dut+ and violated that fiduciar+ relationship with its clients as it appeared
that there are material alterations on the chec$ that are vis'le to the na$ed e+e 'ut the
'an$ failed to detect such.
Petition is denied. 2ourt of .ppeals decision is affirmed with modification that
e:emplar+ damages in the amount of P!0,000 'e awarded.
Page | 285
E$FEMIA a.; ROMEL ALME0A 5. %A#3ALA MAR4E#ING
G.R.No. 15!"!6, -a.uary ", !!"
FAC#S8
&n Ma+ 1//8, Bathala Mar$etng, renewed its 2ontract of #ease with
Ponciano .lmeda. Dnder the contract, Ponciano agreed to lease a porton of .lmeda
2ompound for a monthl+ rental of P1,108,0FH."/ for four +ears. n =anuar+ )", 1//H,
petitioner informed respondent that its monthl+ rental 'e increased '+ 80E pursuant to
the condition 1o. 8 of the contract and .rticle 1)!0. @espondent refused the demand
and insisted that there was no e:traordinar+ inflation to warrant such application.
@espondent refused to pa+ the C.T and ad(usted rentals as demanded '+ the
petitioners 'ut continuall+ paid the stipulated amount. @T2 ruled in favor of the
respondent and declared that plaintiff is not lia'le for the pa+ment of C.T and the
ad(ustment rental, there 'eing no e:traordinar+ inflation or devaluation. 2.
affirmed the decision deleting the amounts representing 10E C.T and rental
ad(ustment.
ISS$E8
,hether the amount of rentals due the petitioners should 'e ad(usted '+ reason
of e:traordinar+ inflation or devaluation
R$LING8
Page | 286
Petitioners are stopped from shifting to respondent the 'urden of pa+ing the
C.T. "th 2ondition states that respondent can onl+ 'e held lia'le for new ta:es imposed
after the effectivit+ of the contract of lease, after 1/88, C.T cannot 'e considered a 3new
ta:5. 1either can petitioners legitimatel+ demand rental ad(ustment 'ecause of
e:traordinar+ inflation or devaluation. .'sent an official pronouncement or declaration
'+ competent authorities of its e:istence, its effects are not to 'e applied.
Petition is denied. 2. decision is affirmed.
E/$I#A%LE PCI %AN4, ,$ a.; APAS 5. NG S3E$NG NGOR
G.R.NO. 171545, 0e1e2ber 1+, !!7
FAC#S8
n cto'er 8, )001, respondents 1gor and 7o filed an action for
amendment andMor reformation of documents and contracts against <4uita'le and its
emplo+ees. The+ claimed that the+ were induced '+ the 'an$ to avail of its peso and
dollar credit facilities '+ offering low interests so the+ accepted and signed <4uita'le9s
proposal. The+ alleged that the+ were unaware that the documents contained escalation
clauses granting <4uita'le authorit+ to increase interest without their consent. These
were re'utted '+ the 'an$. @T2 ordered the use of the 1//" dollar e:change rate in
computing respondent9s dollar6denominated loans. 2. granted the Ban$9s application
for in(unction 'ut the properties were sold to pu'lic auction.
Page | 287
ISS$E8
,hether or not there was an e:traordinar+ deflation
R$LING8
<:traordinar+ inflation e:ists when there is an unusual decrease in the
purchasing power of currenc+ and such decrease could not 'e reasona'l+ foreseen or
was 'e+ond the contemplation of the parties at the time of the o'ligation. Deflation is an
inverse situation.
Despite the devaluation of the peso, B*P never declared a situation of
e:traordinar+ inflation. @espondents should pa+ their dollar denominated loans at the
e:change rate fi:ed '+ the B*P on the date of maturit+.
Decision of lower courts are reversed and set aside.
SIMPLICIO PALANCA 5.$L,SI$S G$I0ES a.; LOREN:O G$I0ES
G.R. No. 146'65 February ", !!5
FAC#S8
Page | 288
&n .ugust 1/H0, petitioner Palanca e:ecuted a contract to sell a parcel of land on
installment with =opson for P11,)!0. =opson paid petitioner P1,"!0 as downpa+ment,
leaving a 'alance of P/"00. &n Decem'er 1/H0, =opson assigned ad transferred all her
rights and interests over the propert+ to respondent 7uides. Believing that she had full+
paid the purchase pri>e, respondent found out when she verified with the @egister of
Deeds that the propert+ in 4uestion was still in the name of de #eon. Petitioner stated
that she refused to e:ecute the document of sale in favor of the respondent since the
latter failed with the said o'ligation6 that he was not paid the complete amount in the
contract. @T2 ruled in favor of the plaintiff and against Palanca, ordering him to e:ecute
a Deed of .'solute *ale and the issuance of T2T, reim'urse plaintiff the amount paid n
e:cess and for damages.
ISS$E8
,hether the petitioner9s claim of unpaid charges from the respondent proper
R$LING8
Petitioner was deemed to have waived his right to present evidence and thus was
una'le to adduce evidence of such inflation or fluctuation. <ven if there were such,
petitioner did not ma$e a demand on respondent for the satisfaction of the claim.
,hen petitioner accepted respondent9s installment pa+ments despite the alleged
charges, and without an+ showing that he protested the irregularit+ of such pa+ment,
nor demanded the pa+ment of the alleged charges, respondent9s lia'ilit+, if an+ for said
charges is deemed full+ satisfied.
Page | 289
PCI% 5. CO$R# OF APPEALS
G.R. NO. 11+"+ -a.uary '1, !!6
FAC#S8
P2&B and MB2 were (oint 'idders in a foreclosure sale held of assorted mining
machiner+ and e4uipment previousl+ mortgaged to them '+ Philippine &ron Mines.
.tlas agreed to purchase some of these properties and the sale was evidenced '+ a Deed
of *ale with a downpa+ment of P1),000,000 and the 'alance of P1H,000,000 pa+a'le in
" monthl+ installments. &n compliance with the contract, .tlas issued HongGong and
shanghai Ban$ chec$ amounting to P1),000,000. .tlas paid to 1.M.,D the amount
of PF,)/H,008.88 in compliance with the writ of garnishment issued against .tlas to
satisf+ the (udgment in favor of 1.M.,D. .tlas alleged that there was overpa+ment,
hence the suit against P2&B to o'tain reim'ursement. P2&B contended that .tlas still
owed P/0H,0/H.8! 'ecause 1..,D had 'een partiall+ paid in the amount of
P"01,)"0.00. @T2 ruled against .tlas to pa+ P/0H,0/H.8! to P2&B. 2. reversed the
decision.
ISS$E8
,hether atlas had complied with its o'ligation to P2&B
R$LING8
,hile the original amount sought to 'e garnished was PF,)/H,008,88, the partial
pa+ment of P"01,)"0 naturall+ reduced it to P0,"/8,0F8.88 .tlas overpaid 1.M.,D,
thus the remed+ if .tlas would 'e to proceed against 1..,D nut not against P2&B in
relation to article 1)0" of the 2ivil 2ode
The petition is partl+ granted.2. decision is reversed and set aside and in lieu
thereof .tlas is ordered to pa+ P2&B the sum of P1F",0!H./", with the legal interest
commencing from the time of first demand on .ugust )), 1/H!.
Page | 290
-OSE LAGON5. 3OOVEN COMALCO IN0$S#RIES
G.R. No. 1'5657 -a.uary 17, !!1
FAC#S8
Petitioner is the owner of a commercial 'uilding while respondent is a domestic
corporation $nown to 'e the 'iggest manufacturer and installer of aluminum materials
in the countr+. Parties entered into ) contracts where'+ for a total consideration of
P10F,H80. Hooven agreed to sell and install various aluminum materials in #agon9s
'uilding. Dpon e:ecution of contracts, #agon paid Hooven PFH,000 in advance. n
%e'ruar+ )F, 1/H8, Hooven commenced an action for sum of mone+. &t was alleged that
materials were delvered and installed 'ut P"/,0)/ remained unpaid even after the
completion of the pro(ect and despite repeated demands. @T2 held partl+ on the 'asis of
the ocular inspection finding that the total actual deliveries cost PH8,1F0 deducting
therefrom PFH,000. 2. set aside the decision and held in favor of Hooven.
ISS$E8
,hether all the materials specified in the contracts had 'een delivered and
installed '+ respondent in petitioner9s commercial 'uilding
R$LING8
<ssentiall+, respondent has the 'urden of esta'lishing its affirmative allegations
of complete deliver+ and installation of the materials and petitioner9s failure to pa+
therefor. The evidence on its discharge is grossl+ anemic. The 2. decision is modified.
#agon is ordered to pa+ respondent P",088."" representing the value unpaid. n the
other hand, respondent is ordered to pa+ petitioner P!0,000 as moral damages,
P00,000 attorne+9s fees and PF",!!F.!0 as actual damages.
Page | 291
%AN4 OF #3E P3ILIPPINE ISLAN0S 5. EAS#ERN PL,9OO0 a.;
%ENIGNO LIM
G.R. No. 1!461, May 1!, 1++4
FAC#S8
Private respondent , <astern and #im, an officer and stoc$ holder of
<astern held at least one (oint 'an$ account with the 2BT2, the predecessor6in I
interest of the petitioner BP&. &n March 1/8!, chec$ing account with #im in the
amount of P1)0,000 was opened '+ Celasco with funds withdrawn fro the
account of <astern and #im. Celasco died and at the time of his death, the
outstanding 'alance of the account stood at P""),!)).H8. Thereafter, <asrtern
o'tained a loan of P80,000 fro 2BT2 in addition, <astern and #im and 2BT2
signed another document entitled 3 Holdout agreement5.
&n the settlement proceeding of Celasco9s estate, the whole 'alance of
P001,)"1.FF in the (oint account of Celasco and #im was claimed as part of
Celasco9s estate. The interstate court granted the urgent motion of heirs of
Celasco to withdraw the deposit and authori>e them to divide among themselves
the amount. BP& filed a complaint against #in and <astern demanding pa+ment
Page | 292
of promissor+ not for P80,000. @T2 ruled that the promissor+ note is su'(ect to
the holdout agreement. 2. affirmed the division.
ISS$E8
,hether BP& is still lia'le to the private respondent on the account su'(ect
to the holdout agreement after it is withdrawn '+ the heirs of
Celasco
R$LING8
The account was proved to 'elong to <astern even if it was in the names of
#im and Celasco. .s the real creditor of the 'an$, <astern has the right to
withdraw it or demand pa+ment thereof. BP& can not 'e relieved of its dut+ to pa+
<astern simpl+ 'ecause it alread+ allowed the heirs of Celasco to withdraw the
whole 'alance of the account. Pa+ment made '+ the de'tor to the wrong part+
does not e:tinguish the o'ligation as to the creditor who is without fault or
negligence.
A$0ION ELEC#RIC COMPAN, 5. NLRC
G.R. NO. 1!664", -u.e 17,1+++
FAC#S8
2omplainant 1icolas Madolid was emplo+ed '+ .udion as a fa'ricator. He
continuousl+ rendered service, assigned in different offices or pro(ects for 10
+ears with a clean record. The complainant was surprised to received an
information stating that he will 'e considered terminated after the turnover of
materials. 2omplainant claims that he was dismissed without (ustifia'le cause.
Page | 293
%or this reason, he claims that he is entitled to reinstatement with full 'ac$wages,
pa+ment of overtime pa+, pro(ect allowances, increase ad(ustments, 10
th
month
pa+ and attorne+9s fees. #ocal
.r'iter ruled in favor of Madolid and ordered .udion to pa+ the former, which
was affirmed '+ the 1#@2.
ISS$E8
,hether the respondent 1#@2 committed grave a'use of discretion when
it ruled that private respondent was a regular emplo+ee and not a pro(ect
emplo+ee
R$LING8
Private respondent9s emplo+ment status was esta'lished '+ the
certification of emplo+ment issued '+ the petitioner. The rule is that findings of
facts of the 1#@2 affirming those of the #a'or .r'iter are entitled to a great
weight and will not 'e distur'ed if the+ were supported '+ su'stantial evidence.
There was no grave a'use of discretion committed '+ 1#@2 in finding that
respondent was not a pro(ect emplo+ee. Decision of 1#@2 is affirmed with
modification deleting the awards of damages and attorne+9s fees.
Page | 294
P3ILPPINE NA#IONAL %AN4 5. CO$R# OF APPEALS a.; LORE#O
#AN
G.R. No. 1!"6'!,A(r)* , 1++6
FAC#S8
Private respondent #oreto Tan is the owner of a parcel of land a'utting the
national highwa+. <:propriaton proceedings were instituted '+ the government. Tan
filed a motion re4uesting the issuance of an order for the release to him of the
e:propriation price of P0),FH0.00. P1B was re4uired '+ the trial court to release to tan
the amount and deposited it '+ the government. Petitioner, through its .ssistant
Manager Tagamolila, issued a chec$ and delivered the same to *onia 7on>aga on the
strength of the *P., without tan9s $nowledge, consent and authorit+. @T2 ordered
petitioner and Tagamolila to pa+ private respondent (ointl+ and severall+ the amount
worth legal interests, damages and attorne+9s fees. 2a affirmed the decision.
ISS$E8
,hether the *pecial Power of .ttorne+ authori>ed *onia 7on>aga to receive
pa+ment intended for private respondent
R$LING8
There is no 4uestion that no pa+ment had ever 'een made to private respondent
as to the chec$ was never delivered to him. Dnder .rticle 1)00 of the 2ivil 2ode, a de't
shall not 'e understood to have 'een paid unless the thing or service in which the
o'ligation consists has 'een completel+ delivered or rendered, as the case ma+ 'e. The
'urden of proof of sad pa+ment lies with the de'tor.
The decision of the court of appeals is affirmed with the modification that the
award '+ the @T2 of P!,000 as attorne+9s fees is reinstated.
Page | 295
LOREN:O S3IPPING COMPAN, 5. %- MAR#3EL IN#ERNA#IONAL
G.R. No. 1454"', No5e2ber 1+, !!4
FAC#S8
Petitioner #oren>o *hipping is engaged in coastwise shipping and
owns the cargo MMC Dadiangas <:press. B= Marthel is engaged in trading,
mar$eting an dselling various industrial commodities. #oren>o *hipping ordered
for the second time c+linder lines from the respondent stating the term of
pa+ment to 'e )!E upon deliver+, the 'alance pa+a'le in ! 'i6monthl+ e4ual
installments, no again stating the date of the c+linder9s deliver+. &t was allegedl+
paid through post dated chec$s 'ut the same was dishonored due to insufficienc+
of funds. Despite due demands '+ the respondent, petitioner falied contending
that time was of the essence in the deliver+ of the c+linders and that there was a
dela+ since the respondent committed said items 3 within two months after
receipt of fir order5. @T2 held respondents 'ound to the 4uotation with respect to
the term of pa+ment, which was reversed '+ the 2ourt of appeals ordering
appellee to pa+ appellant P/!F,000 plus interest. There was no dela+ since there
was no demand.
ISS$E8
,hether or not respondent incurred dela+ in performing its o'ligation
under the contract of sale
R$LING8
B+ accepting the c+linders when the+ were delivered to the warehouse,
petitioner waived the claimed dela+ in the deliver+ of said items. *upreme 2ourt
geld that time was not of the essence. There having 'een no failure on the part of
the respondent to perform its o'ligations, the power to rescind the contract is
unavailing to the petitioner.
Petition is denied. 2ourt of appeals decision is affirmed.
Page | 296
SPO$SES RAFAEL ES#ANISLAO 5. EAS#9ES# %AN4ING
CORPORA#ION
G.R. No. 17"5'7,February 11, !!"
FAC#S8
n =ul+ )F,1//8, petitioner o'tained a loan fro the respondent in the
amount of P0,/)!,000 evidenced '+ a promissor+ note and secured '+ two deeds
of chattel mortgage covering two dump truc$s and a 'ull do>er . Petitioner
defaulted entire o'ligation 'ecame due and demanda'le. . deed of assignment
was drafted '+ the respondent on cto'er ", )000 and March H, )001
respectivel+. Petitioners completed the deliver+ of heav+ e4uipment mentioned in
the deed of assignment to respondent which accepted the same without protest or
o'(ection. @espondent manifested to admit an amended complaint for the
sei>ure and deliver+ of two more heav+ e4uipment which are covered under the
second deed of the chattel mortgage. @T2 ruled that the deed of assignment and
the petitioner9s deliver+ of the heav+ e4uipment effectivel+ e:tinguished the
petitioner9s o'ligation and respondent as stopped. 2. reversed the decision
ordering the petitioner the outstanding de't of PF,)8!,/1/."/ plus interests.
ISS$E8
Did the Deed of .ssignment operate to e:tinguish petitioner9s de't to the
respondent such that the replevin suit could no longer prosper;
R$LING8
Page | 297
The deed of assignment was a perfected agreement which e:tinguished
petitioner9s total outstanding o'ligation to the respondent. The nature of the
assignment was a dacion en pago where'+ propert+ is alienated to the creditor in
the satisfaction of a de't in mone+. *ince the agreement was consummated '+ the
deliver+ of the last unit of heav+ e4uipment under the deed, petitioner9s are
deemed to have 'een released from all their o'ligations from the respondents.
A/$IN#E,5. SPO$SES #I%ONG
G.R. No. 1667!4,0e1e2ber !, !!6
FAC#S8
n Ma+ ", 1///, petitioner .4uinte+ filed 'efore @T2 Baguio, a complaint
for sum of mone+ and damages against respondents. .grifina alleged that
%elicidad secured loans from her on several occasions at monthl+ interest rates of
"E to 8E. Despite demands, spouses Ti'ong failed to pa+ their outstanding loans
of P880,000,00 e:clusive of interests. However, spouses Tiong alleged that the+
had e:ecuted deeds of assignment in favor of .grifina amounting to P!F",F!/
and that their de'tors had e:ecuted promissor+ notes in favor of .grifina.
*pouses insisted that '+ virtue of these documents, .grifina 'ecame the new
collector of their de'ts. .grifina was a'le to collect the total amount of P001,000
from %elicdad9s de'tors. *he tried to collect the 'alance of %elicidad and when the
latter reneged on her promise, .grifina filed a complaint in the office of the
'aranga+ for the collection of P880,000.00. There was no settlement. @T2
Page | 298
favored .grifina. 2ourt of .ppeals affirmed the decision with modification
ordering defendant to pa+ the 'alance of total inde'tedness in the amount of
P!1,0F1,00 plus "E per month.
ISS$E8
,hether or not the deeds of assignment in favor of petitioner has the
effect of pa+ment of the original o'ligation that would partiall+
e:tinguish the same
R$LING8
*u'stitution of the person of the de'tor a+ 'e affected '+ delegacion.
Meaning, the de'tor offers, the creditor accepts a third person who consent of the
su'stitution and assumes the o'ligation. &t is necessar+ that the old de'tor 'e
released fro the o'ligation and the third person or new de'tor ta$es his place in
the relation . ,ithout such release, there is no novation. 2ourt of .ppeals
correctl+ found that the respondent9s o'ligation to pa+ the 'alance of their
account with petitioner was e:tinguished pro tanto '+ the deeds of credit. 2.
decision is affirmed with the modification that the principal amount of the
respondents is P00,HF1.
MAMEN#A V;a. 0e -A,ME 5. CO$R# OF APPEALS
G.R.N o. 1"66+,O17ober 4, !!
FAC#S8
Page | 299
n =anuar+ H, 1/80, spouses =a+me entered into a contract of lease with
7eorge 1eri, President of .sian 2ars covering one6half of #ot )800 for )0 +ears.
Dnder the contract, .sian 2ars used the leased premises as a collateral to secure
pa+ment of loan which .sian 2ars ma+ o'tain from an+ 'an$, provided, the
proceeds of the loans shall 'e used solel+ for the construction of the 'uilding
which upon the termination of lease shall automaticall+ 'ecome the propert+ of
the =a+me spouses. &n cto'er1/88, .sian 2ars o'tained a loan of si: million
from Metro'an$. The entire lot )800 was offered as one of the several properties
given as collateral for the loan. Due to financial difficulties, .sian 2ars conve+ed
ownership of the 'uilding on the leased premises to MBT2 '+ wa+ of dacion en
pago. <ventuall+, MBT2 e:tra(udiciall+ foreclosed the mortgage and MBT2 was
the highest 'idder in a pu'lic auction. Heirs of 7raciano =a+me filed an action
for annulment of contract with damages and issuance of preliminar+ in(unction
against .sian 2ars. @T2 declared that the @<M e:ecuted '+ =a+me in favor of
Metro'an$ as valid and 'inding. VVV 2. affirmed the decision declaring valid
also the foreclosure of the mortgage and the foreclosure sale.
ISS$E8
,hether or not the dacion en pago '+ .sian 2ars in favor of MBT2 is valid
and 'inding despite the stipulation in the lease contract
R$LING8
2ourt of .ppeal did not err in considering MBT2 as a purchase in good
faith, MBT2 had no $nowledge of the stipulation in the lease contract. There was
no annotation on the title of an+ encum'rance. Thus, the transfer of the 'uilding
in favor of MBT2 was properl+ held valid and 'inding '+ respondent 2..
2. decision is affirmed with modification ordering that private respondent
MBT2 pa+ petitioner9s rentals amounting to P"0),0H0.00. with " E interest per
annum until full+ paid.
Page | 300
CAL#E> 5.IN#ERE0IA#E APPELLA#E CO$R# a.; ASIA PACIFC
G.R. No. 77!', No5e2ber 1', 1++
FAC#S8
n =anuar+ 1), 1/8!, .sia Pacific entered into an agreement with 2alte:
where'+ petitioner agreed to suppl+ private respondent9s aviation fuel for ) +ears.
.s of =une 00, 1/H0, asia Pacific had an outstanding o'ligation n the total
amount of P F,08),"H).10. 2alte: e:ecuted a Ded of .ssignment wherein it
assigned to petitioner its receiva'les from the 1ational treasur+ of the
Philippines. Pursuant to the Deed of assignment, 1ational Treasur+ warrant the
amount of P!,F8!,)/F representing the refund. 2alte: refused to return the
e:cess amount of P!10,!!0."0 'ecause it represented the interest and service
charges and the rate of 1HE per annum on the unpaid and overdue account of
respondent. @T2 dismissed the case. &.2 reversed the decision and ordered
petitioner to return the amount of P!10,!!0."0 to private respondent.
ISS$E8
,hether or not the Deed of .ssignment entered into '+ the parties
constituted dacion en pago, such that the o'ligation is totall+
e:tinguished, hence, no interest and service charges could an+more
'e imposed
R$LING8
The Deed of .ssignment e:ecuted '+ the parties is not a dation in pa+ment
in pa+ment and did not totall+ e:tinguish respondent9s o'ligation. &t is clear that
in this case, dation in pa+ment does not necessaril+ mean total e:tinguishment of
the o'ligation. The o'ligation is totall+ e:tinguished onl+ when the parties, '+
agreement, e:press or implied, or '+ their silence, consider the thing a e4uivalent
to the o'ligation.
Decision of &ntermediate .ppellate 2ourt is set aside.
Page | 301
SONN, LO 5. 4-S ECO-FORM9OR4 S,S#EM
G.R. No. 14+4!,O17ober ", !!'
FAC#S8
G=* is engaged in the sale of steel scaffoldings while #o is a 'uilding
contractor. n %e'ruar+ )), 1//0, petitioner ordered scaffolding e4uipments from
respondent worth P!F0,F)!.H0. He paid a downpa+ment in the amount of P1!0,000.
The 'alance was made pa+a'le in 10 monthl+ installments. @espondent delivered the
e4uipments. Petitioner was a'le to pa+ the first two monthl+ installments. His 'usiness
suffered financial difficulties and he was una'le to settle his o'ligations despite
demands. n cto'er 11, 1//0, the parties e:ecuted a Deed of .ssignment where'+
petitioner assigned to respondent his receiva'les from =onero @ealt+. However, =onero
refused to honor the Dees of .ssign,nt 'ecause it claimed that petitioner was inde'ted to
it. Petitioner refused to pa+ claiming that that his o'ligation had 'een e:tinguished
when the+ e:ecuted the deed of assign,ent. @T2 dismissed the complaint on the ground
that the assignment of credit e:tinguished the o'ligation. 2ourt of appeals reversed the
decision and ordered #o to pa+ the plaintiff G=* with legal interests of "E per annum
until full+ paid.
ISS$E8
,hether or not the Deed of .ssignment e:tinguished the o'ligation
R$LING8
.n assignment of credit, '+ virtue of which the owner of the credit, the
assignor, '+ a legal cause, such as sale, dacion en pago, e:change or donation and
without the consent of the de'tor transfers his credit and accessor+ rights to another,
the assignee, who ac4uires the power to enforce it against the de'tor. Petitioner, as
assignor, is 'ound to warrant the e:istence and legalit+ of the credit at the tim of the sale
or assignment. ,hen =onero claimed that it was no longer inde'ted to petitioner since
the latter had also as unpaid o'ligation to it, it essentiall+ meant that its o'ligation to
Page | 302
the petitioner has 'een e:tinguished '+ compensation. Petitioner was found in 'reach of
his o'ligation under the Deed of assignment. 2ourt of .ppeals decision is affirmed.
ASI CORP a.; AN#ONIO SAN -$AN 5. SPO$SES EFREN
EVANGELIS#A
FAC#S8
@espondents are engaged in the large6scale 'usiness of 'u+ing 'roiler
eggs, hatching and selling them and egg '+6products. %or incu'ation and hatchings,
respondents availed of the hatching services of .*= 2orp. The+ agreed o service fees of
H0 centavos per egg. *ervice fees were paid upon release. %ro consecutive times the
respondents failed to pa+ the fee until such time that .*= retained the chic$s demanding
full pa+ment from the respondent. .*= received P1!,000 for partial pa+ment 'ut the
chic$s were still not released. @T2 ruling, which was affirmed '+ the 2ourt of .ppeals
holding that .*= 2orp and .ntonio *an =uan 'e solidaril+ lia'le to the respondents.
ISS$E8
,as petitioner9s retention of the chic$s and '+6products, on account of
respondent9s failure to pa+ the corresponding fees un(ustified;
R$LING8
@espondents9 offer to partiall+ satisf+ their accounts is not enough to
e:tinguish their o'ligation. @espondents cannot su'stitute or appl+ as their pa+ment the
Page | 303
value of the chic$s and '+6products the+ e:pect to derive 'ecause it is necessar+ that all
the de'ts 'e paid for the same $ind. The petition is partl+ granted. The 2ourt of .ppeals
decision is modified.
NEREO PAC$L0O 5. %ONIFACIO REGALA0O
G. R. No. 1'"55,No5e2ber !, !!!
FAC#S8
n Decem'er )8, 1//0, petitioner Paculdo and respondent @egalado
entered into a contract of lease over a parcel of land for )! +ears. %or the first !
+ears, Paculdo would pa+ monthl+ rental of PF!0,000 pa+a'le within ! da+s of
each month, with )E penalt+ for ver+ month of dela+. .side from the a'ove lease,
petitioner leased 11 other propert+ from respondent. Petitioner failed to pa+.
,ithout the $nowledge of petitioner, respondent ortgaged the land su'(ect of the
Page | 304
lease contract including the improvements to Monte de Piedad. n .ugust 1),
1//!, and on su'se4uent dates thereafter, respondent refused to accepr
petitioner9s dail+ rental pa+ments. Petitioner filed an action for in(unction to
en(oin respondent from distur'ing his possession while respondent filed a
complaint for e(ectment attaching the demand letters. MT2 held in favor of the
plaintiff which was affired '+ the @T2. 2. found that the petitioner impliedl+
consented to respondent9s application of pa+ment to his o'ligations, thus,
dismissed the petition for lac$ of merit.
ISS$E8
,hether petitioner was trul+ in arrears in the pa+ment of rentals on
the su'(ect propert+ at the time of the filing of the complaint of
e(ectment
R$LING8
The lease over the %airview wet mar$et propert+ is the most onerous
among all the o'ligations of petitioner to respondent. &t was esta'lished that the
wet mar$et is a going concern and that petitioner has invested a'out
P0!,000,000 in form of improvements, over the propert+. Hence, petitioner
would stand to lose more if the lease would not proceed. 2. decision was 'ased
on a misapprehension of the facts and the law on the application of pa+ment.
Hence, the e(ectment case must 'e dismissed. 2. decision is set aside.
C3INA %AN4ING CORPORA#ION 5. CO$R# OF APPEALS
G.R. No. 1115", 0e1e2ber 5, 1++6
Page | 305
FAC#S8
2hina Ban$ing 2orporation e:tended several loans to 1ative ,est and so 2hing,
1ative ,est9s President. 1ative west e:ecuted a promissor+ note in favor of 2hina Ban$.
*o 2hing, with the marital consent of his wife additionall+ e:ecuted two real estate
mortgages over their properties. The promissor+ notes matured and despite due
demands, neither private respondents paid. 2hina Ban$ filed petition for the
e:tra(udicial foreclosure of the mortgaged properties. Dpon receipt of the foreclosure,
private respondents filed a complaint 'efore @T2 for accounting with damages and with
temporar+ restraining order.
ISS$E8
,hether or not the su'(ect additional mortgaged properties of the spouses
are not included in the notice of foreclosure
R$LING8
&t is well6settled that mortgages given to secure future advancements or
loans are valid and legal contracts, and that the amounts named as
considerations in said contracts do not limit the amount for which the
mortgage ma+ stand as securit+ if from the four corners of the instrument
the intent to secure future and their inde'tedness can 'e gathered.
*upreme 2ourt found that petitioners are entitled to foreclose the
mortgages.
Page | 306
MO%IL OIL P3ILIPPINES a.; CAL#E> 5. CO$R# OF APPEALS a.;
CON#INEN#AL CEMEN#
G.R.No. 1!'!5,May ', 1++7
FAC#S8
&n Ma+ 1/H), petitioner Mo'il il entered into a suppl+ agreement with private
respondent 2ontinental 2ement, under which the former would suppl+ the latter9s
industrial fuel oil or 'un$er fuel oil re4uirements. MP e:tended to 222 an unsecured
credit line of P),000,000 against which 2229s purchases of oil could initiall+ 'e
charged. MP made a total of "8 deliveries of B%, each deliver+ consisting of )0,000
liters to 2229s factor+. 222 discovered that, the supposed B% was in fact, pure water. .
(oint underta$ing was initiated. n .ugust )0, 1/H0, 2alte: informed 222 that it would
'e the new owner of Mop effective *eptem'er 1, 1/H0 and that 2alte: would assume all
rights and o'ligations of MP under all its e:isting contracts. 2. upheld the findings of
the trial court that the water6contaminated B% delivered '+ MP caused damages to
2229s rotar+ $in.
ISS$E8
,hether or not petitioners can 'e held lia'le for the contaminated B
delivered on the ground that 2%*, as carrier6hauler, was an agent of Mo'il

R$LING8
2ourt of .ppeals correctl+ ruled that MP could 'e held lia'le for the acts of 2%*.
The hauling contract e:ecuted '+ and 'etween MP and 2%* laid out the
responsi'ilities of 2%*. The presumption #.&D D,1 &1 .rticle 1!)0 of the 2ivil 2ode
is not applica'le. The 4uestioned decision of the court of .ppeals is affirmed in toto.
Page | 307
SPO$SES -AIME %ENOS 5. SPO$SES GREGORIO LA9ILAO
G.R. No. 175+, 0e1e2ber 5, !!6
FAC#S8
n %e'ruar+ 11,1///, petitioner6spouses Benos and respondent
#awilao e:ecuted a Pacto de @etro *ale where Benos sold their lot and the
'uilding erected thereon for P000,000, one6half of which to 'e paid in cash to the
Benos and the other half to 'e paid to the 'an$ to pa+ off the loans of the Benos
which was secured '+ the same lot and 'uilding. Dnder the contract, Benos could
redeem the propert+ within 1H months from the date of e:ecution '+ returning
the contract price, otherwise, the sale would 'ecome irrevoca'le. .fter pa+ing the
P1!0,000, #awilao too$ possession of the propert+, restructured it twicw,
eventuall+ the loan 'ecome due and demanda'le. n .ugust 1F, )000, a son of
Benos and #awilao paid the 'an$l 'ut the 'an$ refused. #awilao filed for
consignation against the 'an$ and deposited the amount of P1!/,000.00. @T2
declared #awilao of the ownership of the su'(ect propert+, which was affirmed '+
the 2ourt of .ppeals.
ISS$E8
,hether or not the contract of Pacto de @etro *ale 'e rescinded '+
the petitioner
R$LING8
&n the instant case, records show that #awilao filed the petition for
consignation against the 'an$ in 2ivil 2ase without notif+ing the Benos. Hence,
Page | 308
#awilao failed to prove their offer to pa+ the 'alance, even 'efore the filing of the
consignation case. #awilao never notified the Benos. Thus, as far as the Benos
are concerned, there was no full and complete pa+ment of the contract price
which gives them the right to rescind.
Petition is granted. 2ourt of .ppeals decision is reversed and set
aside, that the Pacto de @etro *ale is rescinded and petitioner are ordered to
return the amount of P1!0,000 to respondents.
PEOPLE&S IN0$S#RIAL AN0 COMERCIAL 5. CO$R# OF APPEALS a.;
MAR-IC4 INVES#EN#
G.R. No. 117'', O17ober 4, 1++7
FAC#S8
Private respondent is the registered owner of Mar6ic$ *u'division which
entered into " agreements with petitioner, where'+ to sell " su'division lots.
<:cept for lot no. H. .ll the lots measure )F0 s4 each. #ot nos. 0,F,!," and 8
similarl+ stipulate that petitioner agreed to pa+ for each lot P8,000.)0, PFH0 as
down pa+ment. The 'alance shall 'e pa+a'le n 1)0 e4ual monthl+ installments of
P!8.11 ever+ 00
th
of the month, for 10 +ears. ,ith lot no. H, the+ agreed to the
purchase price of P8,800 with a down pa+ment of P!0" and e4ual installments of
P"0.)0. Petitioner failed to perform its o'ligation. .fter series of negotiations,
the parties agreed to enter into a new contract to sell H lots. 2hec$s issued in
favor of the private respondent were received 'ut not encashed. Private
respondent filed a suit against the petitioner. @T2 directed petitioner to return
the lots, which was affirmed in toto '+ the 2..
ISS$E8
Page | 309
,hether or not there was a perfected and enforcea'le contracts of
sale on cto'er 11,1/H0 which modified the earlier contracts to sell
which had not 'een validl+ rescinded
R$LING8
&t is apropos to stress that the agreements are contracts to sell and not
contract of sale, hence, rescission either '+ (udicial action or notarial act is not
applica'le. Private respondent9s act of cancelling the contract to sell was not done
ar'itraril+. Because the contracts to sell had long 'een cancelled when private
respondent fled the accion pu'liciana de possession, there was no more
installment 'u+er and seller relationship to spea$ of. &t had 'een reduced to a
mere case of an owner claiming possession of its propert+ that had long 'een
illegall+ withheld from it '+ another.
E#ERNAL GAR0ENS 5. CO$R# OF APPEALS a.; 7
#3
0A, A0VEN#IS#
G.R. No. 14554, 0e1e2ber +, 1++7
FAC#S8
Petitioner <ternal 7ardens and private 1PDM entered into a #and
Development .greement. Dnder the agreement, <7 was to develop a parcel of
land owned '+ 1PDM into a memorial par$. The P1.! million initial installment
mentioned in the Deed of .'solute *ale, shall 'e deducted out of the proceeds
from the %irst Part+9s F0E at the end of the !
th
+ear. *u'se4uent pa+ment should
Page | 310
'e changed against what is due to the first Part+ under the #and Development
agreement. #ater, ) claimants of the land surfaced 'ut were dismissed. The case
was remanded to the 2. for proper determination and dispositions. 2. re4uired
<7 to produce documents necessar+ for accounting 'ut failed to do so, hence, the
right is waived. 2. directed <7 to pa+ private respondent the amounts of
P1"8,0"!,1/!.00 as principal and P1"8,)0!,F!1.00 interest.
ISS$E8
,hether or not the petitioner is lia'le for interest despite the land dispute
R$LING8
<ven during the pendenc+ of the land dispute cases, <7 was re4uired to
deposit the accruing interests with a reputa'le commercial 'an$ 3 to avoid
possi'le wastage of funds5 when the case was given due course. -et, <7 hedged in
depositor+ the amounts due and made o'vious attempts to sta+ pa+ment '+ filing
sundr+ motions and pleadings. 2. correctl+ held <7 lia'le for interest of 1)E. &t
is tantamount to a for'earance of mone+.
RA,OS V RE,ES
Page | 311
G.R.No. 15!1+' February !, !!'
FAC#S8
Three parcels were formerl+ owned '+ the spouses %rancisco and .suncion Ta>al
who on 1 *eptem'er 1/!8 sold them for P8)F.00 to respondents9 predecessor6in6
interest, one Mamerto @e+es, with right to repurchase within two A)B +ears from date
thereof '+ pa+ing to the vendee the purchase price and all e:penses incident to their
reconve+ance. .fter the sale the vendee a retro too$ ph+sical possession of the
properties and paid the ta:es thereon.
The otherwise inconse4uential sale 'ecame controversial when two A)B of the
three A0B parcels were again sold on )F Decem'er 1/!H '+ %rancisco Ta>al for PF)0.00
in favor of petitioners9 predecessor6in6interest Blas @a+os without first availing of his
right to repurchase the properties.
ISS$E8
,as there a valid consignation and tender of pa+ment made in the instant case;
R$LING8
&n order that consignation ma+ 'e effective the de'tor must show that AaB there
was a de't dueJ A'B the consignation of the o'ligation had 'een made 'ecause the
creditor to whom a valid tender of pa+ment was made refused to accept itJ AcB previous
notice of the consignation had 'een given to the person interested in the performance of
the o'ligationJ AdB the amount due was placed at the disposal of the courtJ and, AeB after
the consignation had 'een made the person interested was notified thereof.
&n the instant case, petitioners failed, first, to offer a valid and unconditional
tender of pa+mentJ second, to notif+ respondents of the intention to deposit the amount
with the courtJ and third, to show the acceptance '+ the creditor of the amount
deposited as full settlement of the o'ligation, or in the alternative, a declaration '+ the
court of the validit+ of the consignation. The failure of petitioners to compl+ with an+ of
these re4uirements rendered the consignation ineffective.
2onsignation and tender of pa+ment must not 'e encum'ered '+ conditions if
the+ are to produce the intended result of fulfilling the o'ligation. &n the instant case,
the tender of pa+ment of P8)F.00 was conditional and void as it was predicated upon
the argument of %rancisco Ta>al that he was pa+ing a de't which he could do at an+ time
allegedl+ 'ecause the 1 *eptem'er 1/!8 transaction was a contract of e4uita'le mortgage
and not a deed of sale with right to repurchase
Page | 312
CE%$ IN#ERNA#IONAL V CA
G.R.No. 1'!'1 O17ober 1, 1+++
FAC#S8
n .pril )!, 1//1, private respondent, Cicente .legre, invested with 2&%2,
P!00,000.00 pesos, in cash. Petitioner issued a promissor+ note to mature on Ma+ )8,
1//1. The note for P!1",)0H."8 covered private respondentKs placement plus interest at
twent+ and a half percent for thirt+6two da+s. n Ma+ )8, 1//1, 2&%2 issued BP& 2hec$
1o. !100/8 P!1F,0/0./F in favor of the private respondent as proceeds of his matured
investment plus interest. The 2H<2G was drawn from petitionerKs current account
num'er 001160H006!/, maintained with BP&, main 'ranch at Ma$ati 2it+. n =une 18,
1//1, private respondentKs wife deposited the 2H<2G with @2B2, in Puerto Princesa,
Palawan. BP& dishonored the 2H<2G with the annotation, that the L2hec$ AisB *u'(ect
of an &nvestigation.L BP& too$ custod+ of the 2H<2G pending an investigation of several
counterfeit chec$s drawn against 2&%2Ks aforestated chec$ing account. BP& used the
chec$ to trace the perpetrators of the forger+. &mmediatel+, private respondent notified
2&%2 of the dishonored 2H<2G and demanded, on several occasions, that he 'e paid in
cash. 2&%2 refused the re4uest, and instead instructed private respondent to wait for its
ongoing 'an$ reconciliation with BP&.
ISS$E8
,hether or not there was valid tender of pa+ment in the instant case;
R$LING8
. chec$ is not a legal tender, and therefore cannot constitute valid tender of
pa+ment. L*ince a negotia'le instrument is onl+ a su'stitute for mone+ and not mone+,
the deliver+ of such an instrument does not, '+ itself, operate as pa+ment. . chec$,
whether a managerKs chec$ or ordinar+ chec$, is not legal tender, and an offer of a chec$
in pa+ment of a de't is not a valid tender of pa+ment and ma+ 'e refused receipt '+ the
o'ligee or creditor. Mere deliver+ of chec$s does not discharge the o'ligation under a
(udgment. The o'ligation is not e:tinguished and remains suspended until the pa+ment
'+ commercial document is actuall+ reali>ed
The deliver+ of promissor+ notes pa+a'le to order, or 'ills of e:change or other
mercantile documents shall produce the effect of pa+ment onl+ when the+ have 'een
cashed, or when through the fault of the creditor the+ have 'een impaired.
Page | 313
0E MESA V CA
G.R.No. 1!6467-6" O17ober 1+,1+++
FAC#S8
Petitioner Dolores #iga+a de Mesa owns several parcels of land in Ma$ati, Pasa+
2it+, 2avite, and 7eneral *antos 2it+0 &. Two A)B parcels of land situated in Ma$ati,
Metro Manila, with T2T no. A)0)0F!B *6"0008 containing an area of 1HH s4uare meters
and T2T 1o. A)0)0FFB *6!000" containing an area of )0" s4uare meters.
Two parcels of land situated in Ma$an, 7eneral *antos 2it+, with T2T 1o. T6110"8
containing an area of H08 s4uare meters. which were mortgaged to the Development
Ban$ of the Philippines ADBPB as securit+ for a loan she o'tained from the 'an$. %ailing
to pa+ her mortgage de't, all her mortgaged properties were foreclosed and sold at
pu'lic auction held on different da+s. n .pril 00, 1/88, the Ma$ar propert+ was sold
and the corresponding certificate of sale inscri'ed on March 10, 1/8H. n .ugust )!,
1/88, the 1aic, 2avite propert+ was sold and the certificate of sale registered on the same
da+. n .ugust 00, 1/88, the two A)B parcels of land in Ma$ati were sold at pu'lic
auction and the certificate of sale was inscri'ed on 1ovem'er )!, 1/88. .nd on =anuar+
1), 1/8H, the three A0B parcels of land in Pasa+ 2it+ were also sold and the certificate of
sale was recorded on the same date. &n all the said auction sales, DBP was the winning
'idder.
ISS$E8
,hether or not the 2ourt can supplant its own reading of an am'iguous contract
for the actual intention of the contracting parties as testified to in open court and under
oath.
R$LING8
Page | 314
.rt. 1080. &f the terms of a contract are clear and leave no dou't upon the
intention of the contracting parties, the literal meaning of its stipulation shall control.
,hen the words of a contract are plain and readil+ understood, there is no room
for construction. .s the agreement of the parties are reduced to writing, such agreement
is considered as containing all its terms and there can 'e, 'etween the parties and their
successors6in6interest, no evidence of the terms of the written agreement other than the
contents of the writing.
&n the case under consideration, the terms of the LDeed of *ale with .ssumption of
Mortgage De'tL are clear and leave no dou't as to what were sold thereunder.
The contract under scrutin+ is so e:plicit and unam'iguous that it does not (ustif+
an+ attempt to read into it an+ supposed intention of the parties, as the said contract is
to 'e understood literall+, (ust as the+ appear on its face.
OCCENA V CA
G.R.No. 44'4+ O17ober +, 1+76
FAC#S
n %e'ruar+ )!, 1/8! private respondent Tropical Homes, &nc. filed a complaint
for modification of the terms and conditions of its su'division contract with petitioners
Alandowners of a !!,000 s4uare meter parcel of land in Davao 2it+B, ma$ing the
following allegations:
LThat due to the increase in price of oil and its derivatives and the concomitant
worldwide spiralling of prices, which are not within the control of plaintiff, of all
commodities including 'asis raw materials re4uired for such development wor$, the
cost of development has risen to levels which are unanticipated, unimagined and not
within the remotest contemplation of the parties at the time said agreement was entered
into and to such a degree that the conditions and factors which formed the original 'asis
of said contract, .nne: K.K, have 'een totall+ changedJ
Page | 315
LThat further performance '+ the plaintiff under the contract, .nne: K.K, will
result in situation where defendants would 'e un(ustl+ enriched at the e:pense of the
plaintiffJ will cause an ine4uitous distri'ution of proceeds from the sales of su'divided
lots in manifest contravention of the original essence of the agreementJ and will actuall+
result in the un(ust and intolera'le e:posure of plaintiff to implaca'le losses.
ISS$E
,hether or not provisions of art 1)"8 of the new civil code is applica'le in the
case at a 'ar;
R$LING
.@T. 1)"8. ,hen the service has 'ecome so difficult as to 'e manifestl+ 'e+ond
the contemplation of the parties, the o'ligor ma+ also 'e released therefrom, in whole or
in part.L
@espondentKs complaint see$s not release from the su'division contract 'ut that
the court Lrender (udgment modif+ing the terms and conditions of the contract . . . '+
fi:ing the proper shares that should pertain to the herein parties out of the gross
proceeds from the sales of su'divided lots of su'(ect su'divisionL. The cited article does
not grant the courts this authorit+ to rema$e, modif+ or revise the contract or to fi: the
division of shares 'etween the parties as contractuall+ stipulated with the force of law
'etween the parties, so as to su'stitute its own terms for those covenanted '+ the parties
themselves. @espondentKs complaints for modification of contract manifestl+ has no
'asis in law and therefore states no cause of action. Dnder the particular allegations of
respondentKs complaint and the circumstances therein averred, the courts cannot even
in e4uit+ grant the relief sought.
OR#IGAS V FEA#I %AN4
G.R.No. 467! 0e1e2ber 14, 1+7+
FAC#S
Page | 316
n March F, 1/!), plaintiff, as vendor, and .ugusto Padilla + .ngeles and
1atividad .ngeles, as vendees, entered into separate agreements of sale on installments
over two parcels of land, $nown as #ots 1os. ! and ", Bloc$ 01, of the Highwa+ Hills
*u'division, situated at Mandalu+ong, @i>al. n =ul+ 1/, 1/"), the said vendees
transferred their rights and interests over the aforesaid lots in favor of one <mma
2have>. Dpon completion of pa+ment of the purchase price, the plaintiff e:ecuted the
corresponding deeds of sale in favor of <mma 2have>.
n or a'out Ma+ !, 1/"0, defendant6appellee 'egan la+ing the foundation and
commenced the construction of a 'uilding on #ots 1os. ! and ", to 'e devoted to
'an$ing purposes, 'ut which defendant6appellee claims could also 'e devoted to, and
used e:clusivel+ for, residential purposes. The following da+, plaintiff6appellant
demanded in writing that defendant6appellee stop the construction of the commercial
'uilding on the said lots. The latter refused to compl+ with the demand, contending that
the 'uilding was 'eing constructed in accordance with the >oning regulations,
defendant6appellee having filed 'uilding and planning permit applications with the
Municipalit+ of Mandalu+ong, and it had accordingl+ o'tained 'uilding and planning
permits to proceed with the construction.
ISS$E
,hether the @esolution 1o. )8 s61/"0 can nullif+ or supersede the contractual
o'ligations assumed '+ defendant6appellee.
R$LING
&t should 'e stressed, that while non6impairment of contracts is constitutionall+
guaranteed, the rule is not a'solute, since it has to 'e reconciled with the legitimate
e:ercise of police power.
@esolution 1o. )8, s61/"0 declaring the western part of Highwa+ !F, <D*. from
*haw Boulevard to the Pasig @iver as an industrial and commercial >one, was o'viousl+
passed '+ the Municipal 2ouncil of Mandalu+ong, @i>al in the e:ercise of police power
to safeguard or promote the health, safet+, peace, good order and general welfare of the
people in the localit+. =udicial notice ma+ 'e ta$en of the conditions prevailing in the
area, especiall+ where #ots 1os. ! and " are located. The lots themselves not onl+ front
the highwa+J industrial and commercial comple:es have flourished a'out the place.
<D*., a main traffic arter+ which runs through several cities and municipalities in the
Metro Manila area, supports an endless stream of traffic and the resulting activit+, noise
and pollution are hardl+ conducive to the health, safet+ or welfare of the residents in its
route. Having 'een e:pressl+ granted the power to adopt >oning and su'division
ordinances or regulations, the municipalit+ of Mandalu+ong, through its Municipal
2ouncil, was reasona'l+, if not perfectl+, (ustified under the circumstances, in passing
the su'(ect resolution.
Page | 317
MAGA# V CA
G.R.No. 141 Au6us7 4, !!!
FAC#S
Private respondent *antiago .. 7uerrero Ahereinafter referred to as L7uerreroLB
was President and 2hairman ofNFO L7uerrero Transport *ervicesL, a single
proprietorship.
*ometime in 1/8), 7uerrero Transport *ervices won a 'id for the operation of a fleet of
ta:ica's within the *u'ic 1aval Base, in longapo. .s highest 'idder, 7uerrero was to
Lprovide radio6controlled ta:i service within the D. *. 1aval Base, *u'ic Ba+, utili>ing as
demand re4uires... 1"0 operational ta:is consisting of four wheel, four6door, four
passenger, radio controlled, meter controlled, sedans, not more than one +ear.
n *eptem'er )), 1/8), with the advent of martial law, President %erdinand <. Marcos
issued #etter of &nstruction 1o. 1. *<&RD@< .1D 21T@# % .## P@&C.T<#-
,1<D 1<,*P.P<@*, M.7.R&1<*, @.D& .1D T<#<C&*&1 %.2&#&T&<* .1D
.## TH<@M<D&. % 2MMD1&2.T&1.
ISS$E
,hether the contract 'etween Cictorino and 7uerrero for the purchase of radio
transceivers was void.
R$LING
The contract was not void a' initio. 1owhere in the #& and .dmin. 2ircular is
there an e:press 'an on the importation of transceivers.
The #& and .dministrative 2ircular did not render Lradios and transceiversL
illegal per se. The .dministrative 2ircular merel+ ordered the @adio 2ontrol ffice to
suspend the Lacceptance and processing .... of applications... for permits to possess,
own, transfer, purchase and sell radio transmitters and transceivers...LNF1O Therefore,
possession and importation of the radio transmitters and transceivers was legal
provided one had the necessar+ license for it.NF)O Transceivers were not prohi'ited 'ut
merel+ regulated goods. The #& and .dministrative 2ircular did not render the
transceivers outside the commerce of man. The+ were valid o'(ects of the contract.
Page | 318
PNCC V CA
G.R.No. 11"6+6 May 5, 1++7
FAC#S
n 8 =anuar+ 1/H", petitioner o'tained from the Ministr+ of Human *ettlements
a Temporar+ Dse Permit ) for the proposed roc$ crushing pro(ect. The permit was to 'e
valid for two +ears unless sooner revo$ed '+ the Ministr+. n 1" =anuar+ 1/H", private
respondents wrote petitioner re4uesting pa+ment of the first annual rental in the
amount of P)F0,000 which was due and pa+a'le upon the e:ecution of the contract.
The+ also assured the latter that the+ had alread+ stopped considering the
proposals of other aggregates plants to lease the propert+ 'ecause of the e:isting
contract with petitioner. &n its repl+6letter, petitioner argued that under paragraph 1 of
the lease contract, pa+ment of rental would commence on the date of the issuance of an
industrial clearance '+ the Ministr+ of Human *ettlements, and not from the date of
signing of the contract. &t then e:pressed its intention to terminate the contract, as it
had decided to cancel or discontinue with the roc$ crushing pro(ect Ldue to financial, as
well as technical, difficulties.L Private respondents refused to accede to petitionerKs
re4uest for the pretermination of the lease contract. The+ insisted on the performance of
petitionerKs o'ligation and reiterated their demand for the pa+ment of the first annual
rental.
ISS$E
,hether provisions of .rticle 1)"" and the principle of re'us sic stanti'us is
applica'le in the case at 'ar;
R$LING
.rticle 1)"" of the 2ivil 2ode, which reads: LThe de'tor in o'ligations to do shall
also 'e released when the prestation 'ecomes legall+ or ph+sicall+ impossi'le without
Page | 319
the fault of the o'ligor.L Petitioner cannot, however, successfull+ ta$e refuge in the said
article, since it is applica'le onl+ to o'ligations Lto do,L and not to o'ligations Lto give.L
.n o'ligation Lto doL includes all $inds of wor$ or serviceJ while an o'ligation Lto giveL
is a prestation which consists in the deliver+ of a mova'le or an immova'le thing in
order to create a real right, or for the use of the recipient, or for its simple possession, or
in order to return it to its owner.
The o'ligation to pa+ rentals or deliver the thing in a contract oflease falls within
the prestation Lto giveLJ hence, it is not covered within the scope of .rticle 1)"". .t an+
rate, the unforeseen event and causes mentioned '+ petitioner are not the legal or
ph+sical impossi'ilities contemplated in the said article. Besides, petitioner failed to
state specificall+ the circumstances 'rought a'out '+ Lthe a'rupt change in the political
climate in the countr+L e:cept the alleged prevailing uncertainties in government
policies on infrastructure pro(ects. The principle of re'us sic stanti'us neither fits in
with the facts of the case. Dnder this theor+, the parties stipulate in the light of certain
prevailing conditions, and once these conditions cease to e:ist, the contract also ceases
to e:ist.
NA#ELCO V CA
G.R.No. 1!711 February 4, 1++4
FAC#S
Petitioner 1aga Telephone 2o., &nc. A1.T<#2B is a telephone compan+
rendering local as well as long distance service in 1aga 2it+ while private respondent
2amarines *ur && <lectric 2ooperative, &nc. A2.*D@<2 &&B is a private corporation
esta'lished for the purpose of operating an electric power service in the same cit+. n
1ovem'er 1, 1/88, the parties entered into a contract A<:h. L.LB for the use '+
petitioners in the operation of its telephone service the electric light posts of private
respondent in 1aga 2it+. &n consideration therefor, petitioners agreed to install, free of
charge, ten A10B telephone connections for the use '+ private respondent
.fter the contract had 'een enforced for over ten A10B +ears, private respondent
filed on =anuar+ ), 1/H/ with the @egional Trial 2ourt of 1aga 2it+ ABr. )HB 2.2. 1o. H/6
1"F) against petitioners for reformation of the contract with damages, on the ground
that it is too one6sided in favor of petitionersJ that it is not in conformit+ with the
guidelines of the 1ational <lectrification .dministration A1<.B which direct that the
Page | 320
reasona'le compensation for the use of the posts is P10.00 per post, per monthJ that
after eleven A11B +ears of petitionersK use of the posts, the telephone ca'les strung '+
them thereon have 'ecome much heavier with the increase in the volume of their
su'scri'ers, worsened '+ the fact that their linemen 'ore holes through the posts at
which points those posts were 'ro$en during t+phoons.
IS$$E
,hether respondent court erred in ma$ing a contract for the parties '+ invo$ing
.rticle 1)"8 of the 1ew 2ivil 2ode.
R$LING
.rticle 1)"8 spea$s of LserviceL which has 'ecome so difficult. Ta$ing into
consideration the rationale 'ehind this provision, / the term LserviceL should 'e
understood as referring to the LperformanceL of the o'ligation. &n the present case, the
o'ligation of private respondent consists in allowing petitioners to use its posts in 1aga
2it+, which is the service contemplated in said article. %urthermore, a 'are reading of
this article reveals that it is not a re4uirement thereunder that the contract 'e for future
service with future unusual change. .ccording to *enator .rturo M. Tolentino, 10
.rticle 1)"8 states in our law the doctrine of unforseen events. This is said to 'e 'ased
on the discredited theor+ of re'us sic stanti'us in pu'lic international lawJ under this
theor+, the parties stipulate in the light of certain prevailing conditions, and once these
conditions cease to e:ist the contract also ceases to e:ist. 2onsidering practical needs
and the demands of e4uit+ and good faith, the disappearance of the 'asis of a contract
gives rise to a right to relief in favor of the part+ pre(udiced.
#RANS PACIFIC V CA
G.R.No. 1!+17 Au6us7 1+, 1++4
FAC#S
*ometime in 1/8/, petitioner applied for and was granted several financial
accommodations amounting to P1,000,000.00 '+ respondent .ssociated Ban$. The
loans were evidence and secured '+ four AFB promissor+ notes, a real estate mortgage
Page | 321
covering three parcels of land and a chattel mortgage over petitionerKs stoc$ and
inventories.
Dna'le to settle its o'ligation in full, petitioner re4uested for, and was granted '+
respondent 'an$, a restructuring of the remaining inde'tedness which then amounted
to P1,0!8,!00.00, as all the previous pa+ments made were applied to penalties and
interests.
The mortgaged parcels of land were su'stituted '+ another mortgage covering
two other parcels of land and a chattel mortgage on petitionerKs stoc$ inventor+. The
released parcels of land were then sold and the proceeds amounting to P1,0H","1F.)0,
according to petitioner, were turned over to the 'an$ and applied to Trans6PacificKs
restructured loan. *u'se4uentl+, respondent 'an$ returned the duplicate original copies
of the three promissor+ notes to Trans6Pacific with the word LP.&DL stamped thereon.
Despite the return of the notes, or on Decem'er 1), 1/H!, .ssociated Ban$ demanded
from Trans6Pacific pa+ment of the amount of PF/),100.00 representing accrued
interest on P1 1o. T#6/0886H). .ccording to the 'an$, the promissor+ notes were
erroneousl+ released.
ISS$E
,hether or not petitioner has indeed paid in full its o'ligation to respondent
'an$.
R$LING
.rt. 1)81. The deliver+ of a private document evidencing a credit, made
voluntaril+ '+ the creditor to the de'tor, implies the renunciation of the action which
the former had against the latter.L
The surrender and return to plaintiffs of the promissor+ notes evidencing the
consolidated o'ligation as restructured, produces a legal presumption that .ssociated
had there'+ renounced its actiona'le claim against plaintiffs A.rt. 1)81, 122B. The
presumption is fortified '+ a showing that said promissor+ notes all 'ear the stamp
LP.&DL, and has not 'een otherwise overcome. Dpon a clear perception that
.ssociatedKs record $eeping has 'een less than e:emplar+ . . . , a proffer of 'an$ copies
of the promissor+ notes without the LP.&DL stamps thereon does not impress the 2ourt
as sufficient to overcome presumed remission of the o'ligation vis6a6vis the return of
said promissor+ notes. &ndeed, applica'le law is supportive of a finding that in interest
'earing o'ligations6as is the case here, pa+ment of principal AsicB shall not 'e deemed to
have 'een made until the interests have 'een covered A.rt. 1)!0, 122B. 2onversel+,
competent showing that the principal has 'een paid, militates against postured
entitlement to unpaid interests.
Page | 322
0AL$PAN V 3AR0EN
G.R.No. L-'+75 No5e2ber 7, 1+51
FAC#S
n .ugust )", 1/FH, plaintiff filed an action against the defendant for the
collection of P110,H08.18, with interest thereon from the filing of the complaint, which
represents !0 per cent of the reduction plaintiff was a'le to secure from the 2ollector of
&nternal @evenue in the amount of unpaid ta:es claimed to 'e due from the defendant.
Defendant ac$nowledged this claim and pra+ed that (udgment 'e rendered accordingl+.
&n the meantime, the receiver in the li4uidation case 1o. @6!/"0F and the wife of the
defendant, <speran>a P. de Harden, filed an answer in intervention claiming that the
amount sought '+ the plaintiff was e:or'itant and pra+ed that it 'e reduced to 10 per
cent of the re'ate. B+ reason of the ac4uiescence of the defendant to the claim on one
hand, and the opposition of the receiver and of the wife on the other, an amica'le
settlement was concluded '+ the plaintiff and the intervenor where'+ it was agreed that
the sum of P)),8"8.F0 'e paid to the plaintiff from the funds under the control of the
receiver Land the 'alance of P/1,0"/.8F shall 'e charged e:clusivel+ against the
defendant %red M. Harden from whatever share he ma+ still have in the con(ugal
partnership 'etween him and <speran>a P. de Harden.
ISS$E
,hether or not the writ of e:ecution as$ed for '+ the plaintiff on the two chec$s
is premature.
R$LING
<:amining the terms the court finds that the stipulation limits the right of the
plaintiff to as$ for the e:ecution of the (udgment to whatever share %red M. Harden ma+
still have in the con(ugal partnership 'etween him and his wife after the final li4uidation
and partition thereof. The e:ecution of the (udgment is premised upon a condition
precedent, which is the final li4uidation and partition of the con(ugal partnership. 1ote
that the condition does not refer to the li4uidation of a particular propert+ of the
partnership. &t refers to the over6all and final li4uidation of the partnership. *uch 'eing
the stipulation of the parties which was sanctioned and em'odied '+ the 2ourt in its
decision, it is clear that the writ of e:ecution as$ed for '+ the plaintiff on the two chec$s
is premature.
Page | 323
LOPE: V #AM%$N#ING
G.R.No. +"!6 -a.uary 1+, 1+16
FAC#S
These proceedings were 'rought to recover from the defendant the sum of
P),000, amount of the fees, which, according to the complaint, are owing for
professional medical services rendered '+ the plaintiff to a daughter of the defendant
from March 10 to =ul+ 1!, 1/10, which fees the defendant refused to pa+,
notwithstanding the demands therefor made upon him '+ the plaintiff.
The defendant denied the allegations of the complaint, and furthermore alleged
that the o'ligation which the plaintiff endeavored to compel him to fulfill was alread+
e:tinguished.
ISS$E
,hether or not implied condonation can 'e legall+ pressumed in the instant
case;
R$LING
&t is true that num'er H of section 00F of the 2ode of 2ivil Procedure provides as
a legal presumption Lthat an o'ligation delivered up to the de'tor has 'een paid.L
.rticle 11HH of the 2ivil 2ode also provides that the voluntar+ surrender '+ a creditor to
his de'tor, of a private instrument proving a credit, implies the renunciation of the right
of action against the de'torJ and article 11H/ prescri'es that whenever the private
instrument which evidences the de't is in the possession of the de'tor, it will 'e
presumed that the creditor delivered it of his own free will, unless the contrar+ is
proven.
But the legal presumption esta'lished '+ the foregoing provisions of law cannot
stand if sufficient proof is adduced against it. &n the case at 'ar the trial court correctl+
held that there was sufficient evidence to the contrar+, in view of the preponderance
Page | 324
thereof in favor of the plaintiff and of the circumstances connected with the defendantKs
possession of said receipt <:hi'it 1. %urthermore, in order that such a presumption ma+
'e ta$en into account, it is necessar+, as stated in the laws cited, that the evidence of the
o'ligation 'e delivered up to the de'tor and that the deliver+ of the instrument proving
the credit 'e made voluntaril+ '+ the creditor to the de'tor. &n the present case, it
cannot 'e said that these circumstances concurred, inasmuch as when the plaintiff sent
the receipt to the defendant for the purpose of collecting his fee, it was not his intention
that that document should remain in the possession of the defendant if the latter did not
forthwith pa+ the amount specified therein.
ES#A#E OF MO#A V SERRA
G.R.No. "5 February 14, 1+5
FAC#S
n %e'ruar+ 1, 1/1/, plaintiffs and defendant entered into a contract of
partnership, mar$ed <:hi'it ., for the construction and e:ploitation of a railroad line
from the L*an &sidroL and LPalmaL centrals to the place $nown as L1andongL. The
original capital stipulated was P1!0,000. &t was covenanted that the parties should pa+
this amount in e4ual parts and the plaintiffs were entrusted with the administration of
the partnership.
=anuar+ )/, 1/)0, the defendant entered into a contract of sale with Cenancio
2oncepcion, Phil. 2. ,hita$er, and <use'io @. de #u>uriaga, where'+ he sold to the
latter the estate and central $nown as LPalmaL with its running 'usiness, as well as all
the improvements, machineries and 'uildings, real and personal properties, rights,
choses in action and interests, including the sugar plantation of the harvest +ear of 1/)0
to 1/)1, covering all the propert+ of the vendor. Before the deliver+ to the purchasers of
the hacienda thus sold, <use'io @. de #u>uriaga renounced all his rights under the
contract of =anuar+ )/, 1/)0, in favor of Messrs. Cenancio 2oncepcion and Phil. 2.
,hita$er.
Page | 325
.fterwards, on =anuar+ H, 1/)1, Cenancio 2oncepcion and Phil. 2. ,hita$er 'ought
from the plaintiffs the one half of the railroad line pertaining to the latter e:ecuting
therefor the document <:hi'it !. The price of this sale was P)08,8)).1!, e:cluding an+
amount which the defendant might 'e owing to the plaintiffs.
ISS$E
,hether or not there was confusion of the rights of the creditor and de'tor
R$LING
The purchasers, Phil. 2. ,hita$er and Cenancio 2oncepcion, to secure the
pa+ment of the price, e:ecuted a mortgage in favor of the plaintiffs on the same rights
and titles that the+ had 'ought and also upon what the+ had purchased from Mr.
*alvador *erra. &n other words, Phil 2. ,hita$er and Cenancio 2oncepcion mortgaged
unto the plaintiffs what the+ had 'ought from the plaintiffs and also what the+ had
'ought from *alvador *erra. &f Messrs. Phil. 2. ,hita$er and Cenancio 2oncepcion had
purchased something from Mr. *alvador *erra, the herein defendant, regarding the
railroad line, it was undou'tedl+ the one6half thereof pertaining to Mr. *alvador *erra.
This clearl+ shows that the rights and titles transferred '+ the plaintiffs to Phil. 2.
,hitat$er and Cenancio 2oncepcion were onl+ those the+ had over the other half of the
railroad line. Therefore, as alread+ stated, since there was no novation of the contract
'etween the plaintiffs and the defendant, as regards the o'ligation of the latter to pa+
the former one6half of the cost of the construction of the said railroad line, and since the
plaintiffs did not include in the sale, evidenced '+ <:hi'it !, the credit that the+ had
against the defendant, the allegation that the o'ligation of the defendant 'ecame
e:tinguished '+ the merger of the rights of creditor and de'tor '+ the purchase of
Messrs. Phil. 2. ,hita$er and Cenancio 2oncepcion is wholl+ untena'le.
,E4 #ON LIN V ,$SINGCO
G.R.No. 4'6!" -u*y !, 1+'7
FAC#S
Defendant Pelagio -usingco was the owner of the steamship -usingco and, as
such, he e:ecuted, on 1ovem'er 1/, 1/)8, a power of attorne+ in favor of -u *eguioc to
administer, lease, mortgage and sell his properties, including his vessels or steamship.
-u *eguioc mortgaged to the plaintiff -e$ Tong #in %ire P Marine &nsurance 2o., #td.,
Page | 326
with the approval of the Bureau of 2ustoms, the steamship -usingco 'elonging to the
defendant. ne +ear and some months later, the steamship -usingco needed some
repairs which were made '+ the <arnshaw Doc$s P Honolulu &ron ,or$s. The repairs
were made upon the guarant+ of the defendant and appellant Cicente Madrigal at a cost
of PH,)FF."". ,hen neither .. -usingco Hermanos nor Pelagio -usingco could pa+ said
sum to the <arnshaw Doc$s P Honolulu &ron ,or$s, the defendant and appellant
Cicente Madrigal had to ma$e pa+ment thereof with the stipulated interest thereon,
which was at the rate of / per cent per annum, on March /, 1/0), 'ecause he was 'ound
thereto '+ reason of the 'ond filed '+ him, the pa+ment then made '+ him having
amounted to PH,888."0. ,hen said defendant discovered that he was not to 'e
reim'ursed for the repairs made on the steamship -usingco, he 'rought an action
against his codefendant Pelagio -usingco and .. -usingco Hermanos to compel them to
reim'urse, there'+ giving rise to civil case 1o. F1"!F of the 2ourt of %irst &nstance of
Manila, entitled LCicente Madrigal, plaintiff, vs. Pelagio -usingco and .. -usingco
Hermanos, defendantsL which resulted in a (udgment favora'le to him and adverse to
the -usingcos.
ISS$E
,hether or not o'ligations were e:tinguished '+ reason of the merger of the
rights of the de't or and creditor;
R$LING
.fter the steamship -usingco had 'een sold '+ virtue of the (udicial writ issued in
civil case 1o. F1"!F for the e:ecution of the (udgment rendered in favor of Cicente
Madrigal, the onl+ right left to the plaintiff was to collect its mortgage credit from the
purchaser thereof at pu'lic auction, inasmuch as the rule is that a mortgage directl+ and
immediatel+ su'(ects the propert+ on which it is imposed, whoever its possessor ma+ 'e,
to the fulfillment of the o'ligation for the securit+ of which it was created Aarticle 1H8",
2ivil codeBJ 'ut it so happens that it can not ta$e such steps now 'ecause it was the
purchaser of the steamship -usingco at pu'lic auction, and it was so with full $nowledge
that it had a mortgage credit on said vessel. 'ligations are e:tinguished '+ the merger
of the rights of the creditor and de'tor Aarticles 11!" and 11/), 2ivil 2odeB.
Page | 327
E.G.V. REAL#, V CA
G.R.No. 1!'6 -u*y !, 1+++
FAC#S
Petitioner <.7.C. @ealt+ Development 2orporation is the ownerMdeveloper of a
seven6store+ condominium 'uilding $nown as 2ristina 2ondominium. 2ristina
2ondominium 2orporation holds title to all common areas of 2ristina 2ondominium
and is in charge of managing, maintaining and administering the condominium9s
common areas and providing for the 'uilding9s securit+. @espondent Dnisphere
&nternational, &nc. Ahereinafter referred to as DnisphereB is the ownerMoccupant of Dnit
001 of said condominium. n 1ovem'er )H, 1/H1, respondent Dnisphere9s Dnit 001 was
allegedl+ ro''ed of various items valued at P",1"!.00. The incident was reported to
petitioner 222. n =ul+ )!, 1/H), another ro''er+ allegedl+ occurred at Dnit 001 where
the items carted awa+ were valued at P",100.00, 'ringing the total value of items lost to
P1),)/!.00. This incident was li$ewise reported to petitioner 222. n cto'er !, 1/H),
respondent Dnisphere demanded compensation and reim'ursement from petitioner
222 for the losses incurred as a result of the ro''er+. n =anuar+ )H, 1/H8, petitioners
<.7.C. @ealt+ and 222 (ointl+ filed a petition with the *ecurities and <:change
2ommission A*<2B for the collection of the unpaid monthl+ dues in the amount of
P10,1F)."8 against respondent Dnisphere.
ISS$E
,hether or not set6off or compensation has ta$en place in the instant case.
R$LING
2ompensation or offset under the 1ew 2ivil 2ode ta$es place onl+ when two
persons or entities in their own rights, are creditors and de'tors of each other. A.rt.
1)8HB.
. distinction must 'e made 'etween a de't and a mere claim. . de't is an
amount actuall+ ascertained. &t is a claim which has 'een formall+ passed upon '+ the
courts or 4uasi6(udicial 'odies to which it can in law 'e su'mitted and has 'een declared
to 'e a de't. . claim, on the other hand, is a de't in em'r+o. &t is mere evidence of a
de't and must pass thru the process prescri'ed '+ law 'efore it develops into what is
properl+ called a de't. .'sent, however, an+ such categorical admission '+ an o'ligor or
final ad(udication, no compensation or off6set can ta$e place. Dnless admitted '+ a
de'tor himself, the conclusion that he is in truth inde'ted to another cannot 'e
definitel+ and finall+ pronounced, no matter how convinced he ma+ 'e from the
e:amination of the pertinent records of the validit+ of that conclusion the inde'tedness
must 'e one that is admitted '+ the alleged de'tor or pronounced '+ final (udgment of a
competent court or in this case '+ the 2ommission.
Page | 328
There can 'e no dou't that Dnisphere is inde'ted to the 2orporation for its
unpaid monthl+ dues in the amount of P10,1F)."8. This is admitted.
AEROSPACE C3EMICAL V CA
6.r..o. 1!"1+ se(7e2ber ', 1+++
FAC#S
n =une )8, 1/H", petitioner .erospace &ndustries, &nc. A.erospaceB purchased
five hundred A!00B metric tons of sulfuric acid from private respondent Philippine
Phosphate %ertili>er 2orporation APhilphosB. &nitiall+ set 'eginning =ul+ 1/H", the
agreement provided that the 'u+er shall pa+ its purchases in e4uivalent Philippine
currenc+ value, five da+s prior to the shipment date. Petitioner as 'u+er committed to
secure the means of transport to pic$6up the purchases from private respondentKs
loadports. Per agreement, one hundred metric tons A100 MTB of sulfuric acid should 'e
ta$en from Basa+, 1egros riental storage tan$, while the remaining four hundred
metric tons AF00 MTB should 'e retrieved from *angi, 2e'u. n Decem'er 1H, 1/H",
MMT *ultan Ga+umanggi doc$ed at *angi, 2e'u, 'ut withdrew onl+ 1!8.!1 MT of sulfuric
acid. .gain, the vessel tilted. %urther loading was a'orted. Two surve+ reports
conducted '+ the *ociete 7enerale de *urveillance A*7*B %ar <ast #imited, dated
Decem'er 18, 1/H" and =anuar+ ), 1/H8, attested to these occurrences. #ater, on a date
not specified in the record, MMT *ultan Ga+umanggi san$ with a total of ))8.!1 MT of
sulfuric acid on 'oard. Petitioner chartered another vessel, MMT Don Cictor, with a
capacit+ of appro:imatel+ !00 MT." NT*1, *eptem'er 1, 1/H/, pp. )H6)/.O n =anuar+
)" and March )0, 1/H8, Melecio Hernande>, acting for the petitioner, addressed letters
to private respondent, concerning additional orders of sulfuric acid to replace its sun$en
purchases.
ISS$E
*hould e:penses for the storage and preservation of the purchased fungi'le
goods, namel+ sulfuric acid, 'e on sellerKs account pursuant to .rticle 1!0F of the 2ivil
2ode;
R$LING
Petitioner tries to e:empt itself from pa+ing rental e:penses and other damages
'+ arguing that e:penses for the preservation of fungi'le goods must 'e assumed '+ the
Page | 329
seller. @ental e:penses of storing sulfuric acid should 'e at private respondentKs account
until ownership is transferred, according to petitioner. However, the general rule that
'efore deliver+, the ris$ of loss is 'orne '+ the seller who is still the owner, is not
applica'le in this case 'ecause petitioner had incurred dela+ in the performance of its
o'ligation. .rticle 1!0F of the 2ivil 2ode clearl+ states: LDnless otherwise agreed, the
goods remain at the sellerKs ris$ until the ownership therein is transferred to the 'u+er,
'ut when the ownership therein is transferred to the 'u+er the goods are at the 'u+erKs
ris$ whether actual deliver+ has 'een made or not, e:cept that: A)B ,here actual deliver+
has 'een dela+ed through the fault of either the 'u+er or seller the goods are at the ris$
of the part+ at fault.L
n this score, we 4uote with approval the findings of the appellate court, thus:
The defendant Nherein private respondentO was not remiss in reminding the plaintiff
that it would have to 'ear the said e:penses for failure to lift the commodit+ for an
unreasona'le length of time.But even assuming that the plaintiff did not consent to 'e
so 'ound, the provisions of 2ivil 2ode come in to ma$e it lia'le for the damages sought
'+ the defendant.
APO0ACA V NLRC
G.R.No. "!!'+ A(r)*1 ", 1+"+
FAC#S
Petitioner was emplo+ed in respondent corporation. n .ugust )H, 1/H!,
respondent =ose M. Mirasol persuaded petitioner to su'scri'e to P1,!00 shares of
respondent corporation it P100.00 per share or a total of P1!0,000.00. He made an
initial pa+ment of P08,!00.00. n *eptem'er 1, 1/8!, petitioner was appointed
President and 7eneral Manager of the respondent corporation. However, on =anuar+ ),
1/H", he resigned.
n Decem'er 1/, 1/H", petitioner instituted with the 1#@2 a complaint against private
respondents for the pa+ment of his unpaid wages, his cost of living allowance, the
'alance of his gasoline and representation e:penses and his 'onus compensation for
1/H". Petitioner and private respondents su'mitted their position papers to the la'or
ar'iter. Private respondents admitted that there is due to petitioner the amount of
P18,0"0.08 'ut this was applied to the unpaid 'alance of his su'script in the amount of
P/!,F0/./0. Petitioner 4uestioned the set6off alleging that there was no call or notice for
the pa+ment of unpaid su'scription and that, accordingl+, the alleged o'ligation is not
enforcea'le.
Page | 330
ISS$E
Does the 1ational #a'or @elations 2ommission A1#@2B have (urisdiction to
resolve a claim for non6pa+ment of stoc$ su'scriptions to a corporation; .ssuming that
it has, can an o'ligation arising therefrom 'e offset against a mone+ claim of an
emplo+ee against the emplo+er;
R$LING
%irstl+, the 1#@2 has no (urisdiction to determine such intra6corporate dispute
'etween the stoc$holder and the corporation as in the matter of unpaid su'scriptions.
This controvers+ is within the e:clusive (urisdiction of the *ecurities and <:change
2ommission.
*econdl+, assuming arguendo that the 1#@2 ma+ e:ercise (urisdiction over the
said su'(ect matter under the circumstances of this case, the unpaid su'scriptions are
not due and pa+a'le until a call is made '+ the corporation for pa+ment. Private
respondents have not presented a resolution of the 'oard of directors of respondent
corporation calling for the pa+ment of the unpaid su'scriptions. &t does not even appear
that a notice of such call has 'een sent to petitioner '+ the respondent corporation.
PN% MANAGEMEN# V R@R ME#AL
G.R.No. 1'45 -a.uary 1, !!
FAC#S
&t appears that on 1ovem'er 1/, 1//0, respondent @P@ Metal 2asting and
%a'ricating, &nc. A@P@B o'tained a (udgment in its favor against Pantranco 1orth
<:press, &nc. AP1<&B. P1<& was ordered to pa+ respondent P)10,0!0 plus interest as
actual damages, P!0,000 as e:emplar+ damages, )! percent of the total amount pa+a'le
as attorne+9s fees, and the costs of suit. However, the writ of e:ecution was returned
unsatisfied since the sheriff did not find an+ propert+ of P1<& recorded at the @egistries
Page | 331
of Deeds of the different cities of Metro Manila. 1either did the sheriff receive a repl+ to
the notice of garnishment he sent to P1B6<scolta.n March )8, 1//!, respondent filed
with the trial court a motion for the issuance of su'poenae duces tecum and ad
testificandum re4uiring petitioner P1B Management and Development 2orp. AP1B
M.D<2@B to produce and testif+ on certain documents pertaining to transactions
'etween petitioner and P1<& from 1/H1 to 1//!.
ISS$E
,hether or not legal compensation have occured in the instant case;
R$LING
#egal compensation could not have occurred 'ecause of the a'sence of one
re4uisite in this case: that 'oth de'ts must 'e due and demanda'le.
Petitioner9s o'ligation to P1<& appears to 'e pa+a'le on demand, following the a'ove
o'servation made '+ the 2. and the assertion made '+ petitioner. Petitioner is
o'ligated to pa+ the amount stated in the promissor+ note upon receipt of a notice to
pa+ from P1<&. &f petitioner fails to pa+ after such notice, the o'ligation will earn an
interest of 1H percent per annum.
*ince petitioner9s o'ligation to P1<& is pa+a'le on demand, and there 'eing no
demand made, it follows that the o'ligation is not +et due. Therefore, this o'ligation
ma+ not 'e su'(ect to compensation for lac$ of a re4uisite under the law. ,ithout
compensation having ta$en place, petitioner remains o'ligated to P1<& to the e:tent
stated in the promissor+ note. This o'ligation ma+ undou'tedl+ 'e garnished in favor of
respondent to satisf+ P1<&9s (udgment de't.
Page | 332
SILA3IS V IAC
G.R.No. 74!7 0e1e2ber 7, 1+"+
FAC#S
Petitioner *ilahis Mar$eting 2orporation see$s in this petition for review on
certiorari a reversal of the decision of the then &ntermediate .ppellate 2ourt A&.2B in
.267.@. 2C 1o. "81") entitled LDe #eon, etc. v. *ilahis Mar$eting 2orporationL,
disallowing petitionerKs counterclaim for commission to partiall+ offset the claim against
it of private respondent 7regorio de #eon for the purchase price of certain merchandise.
. review of the record shows that on various dates in cto'er, 1ovem'er and
Decem'er, 1/8!, 7regorio de #eon doing 'usiness under the name and st+le of Mar$
&ndustrial *ales sold and delivered to *ilahis Mar$eting 2orporation various items of
merchandise covered '+ several invoices in the aggregate amount of P)),)10.8! pa+a'le
within thirt+ A00B da+s from date of the covering invoices..llegedl+ due to *ilahisK failure
to pa+ its account upon maturit+ despite repeated demands, de #eon filed 'efore the
then 2ourt of %irst &nstance of Manila a complaint for the collection of the said accounts
including accrued interest thereon in the amount of P""1.00 and attorne+Ks fees of
P!,000.00 plus costs of litigation.
ISS$E
,hether or not private respondent is lia'le to the petitioner for the commission
or margin for the direct sale which the former concluded and consummated with Dole
Philippines, &ncorporated without coursing the same through herein petitioner.
R$LING
&t must 'e remem'ered that compensation ta$es place when two persons, in their
own right, are creditors and de'tors to each other. .rticle 1)8/ of the 2ivil 2ode
provides that: L&n order that compensation ma+ 'e proper, it is necessar+: N1O that each
one of the o'ligors 'e 'ound principall+, and that he 'e at the same time a principal
creditor of the otherJ N)O that 'oth de'ts consist in a sum of mone+, or if the things due
are consuma'le, the+ 'e of the same $ind, and also of the same 4ualit+ if the latter has
'een statedJ N0O that the two de'ts 'e dueJ NFO that the+ 'e li4uidated and demanda'leJ
N!O that over neither of them there 'e an+ retention or controvers+, commenced '+ third
persons and communicated in due time to the de'tor.L
,hen all the re4uisites mentioned in .rt. 1)8/ of the 2ivil 2ode are present,
compensation ta$es effect '+ operation of law, even without the consent or $nowledge of
the creditors and de'tors. ! .rticle 1)8/ re4uires, among others, that in order that legal
compensation shall ta$e place, Lthe two de'ts 'e dueL and Lthe+ 'e li4uidated and
demanda'le.L 2ompensation is not proper where the claim of the person asserting the
set6off against the other is not clear nor li4uidatedJ compensation cannot e:tend to
unli4uidated, disputed claim e:isting from 'reach of contract. Dndou'tedl+, petitioner
admits the validit+ of its outstanding accounts with private respondent in the amount of
P)),)10.8! as contained in its answer. But whether private respondent is lia'le to pa+
the petitioner a )0E margin or commission on the su'(ect sale to Dole Philippines, &nc.
is vigorousl+ disputed. This circumstance prevents legal compensation from ta$ing
place.
Page | 333
FRANCIA V CA
G.R.No. 6764+ -u.e ", 1++"
FAC#S
<ngracio %rancia is the registered owner of a residential lot and a two6stor+ house
'uilt upon it situated at Barrio *an &sidro, now District of *ta. 2lara, Pasa+ 2it+, Metro
Manila. n cto'er 1!, 1/88, a 1)! s4uare meter portion of %ranciaKs propert+ was
e:propriated '+ the @epu'lic of the Philippines for the sum of PF,11".00 representing
the estimated amount e4uivalent to the assessed value of the aforesaid portion.*ince
1/"0 up to 1/88 inclusive, %rancia failed to pa+ his real estate ta:es. Thus, on Decem'er
!, 1/88, his propert+ was sold at pu'lic auction '+ the 2it+ Treasurer of Pasa+ 2it+
pursuant to *ection 80 of Presidential Decree 1o. F"F $nown as the @eal Propert+ Ta:
2ode in order to satisf+ a ta: delin4uenc+ of P),F00.00. Ho %ernande> was the highest
'idder for the propert+. %rancia was not present during the auction sale since he was in
&ligan 2it+ at that time helping his uncle ship 'ananas. n March 0, 1/8/, %rancia
received a notice of hearing of #@2 2ase 1o. 1!/06P L&n re: Petition for <ntr+ of 1ew
2ertificate of TitleL filed '+ Ho %ernande>, see$ing the cancellation of T2T 1o. F80/
A088/!B and the issuance in his name of a new certificate of title. n March )0, 1/8/,
%rancia filed a complaint to annul the auction sale. He later amended his complaint on
=anuar+ )F, 1/H0.
ISS$E
,hether or not francia9s ta: delin4uenc+ of P),F00.00 has 'een e:tinguished '+
legal compensation.
R$LING
There is no legal 'asis for the contention. B+ legal compensation, o'ligations of
persons, who in their own right are reciprocall+ de'tors and creditors of each other, are
e:tinguished A.rt. 1)8H, 2ivil 2odeB. The circumstances of the case do not satisf+ the
re4uirements provided '+ .rticle 1)8/, to wit:
LA1B that each one of the o'ligors 'e 'ound principall+ and that he 'e at the same time a
principal creditor of the otherJ
,e have consistentl+ ruled that there can 'e no off6setting of ta:es against the claims
that the ta:pa+er ma+ have against the government. . person cannot refuse to pa+ a ta:
on the ground that the government owes him an amount e4ual to or greater than the ta:
Page | 334
'eing collected. The collection of a ta: cannot await the results of a lawsuit against the
government.
. claim for ta:es is not such a de't, demand, contract or (udgment as is allowed
to 'e set6off under the statutes of set6off, which are construed uniforml+, in the light of
pu'lic polic+, to e:clude the remed+ in an action or an+ inde'tedness of the state or
municipalit+ to one who is lia'le to the state or municipalit+ for ta:es. 1either are the+ a
proper su'(ect of recoupment since the+ do not arise out of the contract or transaction
sued on. LThe general rule 'ased on grounds of pu'lic polic+ is well6settled that no set6
off admissi'le against demands for ta:es levied for general or local governmental
purposes. The reason on which the general rule is 'ased, is that ta:es are not in the
nature of contracts 'etween the part+ and part+ 'ut grow out of dut+ to, and are the
positive acts of the government to the ma$ing and enforcing of which, the personal
consent of individual ta:pa+ers is not re4uired
#RINI0A0 V ACAP$LCO
G.R.No. 147477 -u.e 7, !!6
FAC#S
n Ma+ ", 1//1, respondent <strella .capulco filed a 2omplaint 'efore the @T2
see$ing the nullification of a sale she made in favor of petitioner Hermenegildo M.
Trinidad. *he alleged: *ometime in %e'ruar+ 1//1, a certain Primitivo 2aQete re4uested
her to sell a Mercedes Ben> for P!H0,000.00. 2aQete also said that if respondent herself
will 'u+ the car, 2aQete was willing to sell it for P!00,000.00. Petitioner 'orrowed the
car from respondent for two da+s 'ut instead of returning the car as promised,
petitioner told respondent to 'u+ the car from 2aQete for P!00,000.00 and that
petitioner would pa+ respondent after petitioner returns from Davao. %ollowing
petitioner9s instructions, respondent re4uested 2aQete to e:ecute a deed of sale covering
the car in respondent9s favor for P!00,000.00 for which respondent issued three chec$s
in favor of 2aQete. @espondent thereafter e:ecuted a deed of sale in favor of petitioner
even though petitioner did not pa+ her an+ consideration for the sale. ,hen petitioner
returned from Davao, he refused to pa+ respondent the amount of P!00,000.00 sa+ing
that said amount would (ust 'e deducted from whatever outstanding o'ligation
respondent had with petitioner. Due to petitioner9s failure to pa+ respondent, the
chec$s that respondent issued in favor of 2aQete 'ounced, thus criminal charges were
filed against her.N0O @espondent then pra+ed that the deed of sale 'etween her and
petitioner 'e declared null and voidJ that the car 'e returned to herJ and that petitioner
'e ordered to pa+ damages.
Page | 335
ISS$E
,hether or not petitioner9s claim for legal compensation was alread+ too late
R$LING
The court ruled in favor of the petitioner. 2ompensation ta$es effect '+ operation
of law even without the consent or $nowledge of the parties concerned when all the
re4uisites mentioned in .rticle 1)8/ of the 2ivil 2ode are present.N)"O This is in
consonance with .rticle 1)/0 of the 2ivil 2ode which provides that: .rticle 1)/0. ,hen
all the re4uisites mentioned in article 1)8/ are present, compensation ta$es effect '+
operation of law, and e:tinguishes 'oth de'ts to the concurrent amount, even though
the creditors and de'tors are not aware of the compensation. *ince it ta$es place ipso
(ure,N)8O when used as a defense, it retroacts to the date when all its re4uisites are
fulfilled.
Petitioner9s stance is that legal compensation has ta$en place and operates even
against the will of the parties 'ecause: AaB respondent and petitioner were personall+
'oth creditor and de'tor of each otherJ A'B the monetar+ o'ligation of respondent was
P!"",000.00 and that of the petitioner was P!00,000.00 showing that 'oth
inde'tedness were monetar+ o'ligations the amount of which were also 'oth $nown and
li4uidatedJ AcB 'oth monetar+ o'ligations had 'ecome due and demanda'leZ
petitioner9s o'ligation as shown in the deed of sale and respondent9s inde'tedness as
shown in the dishonored chec$sJ and AdB neither of the de'ts or o'ligations are su'(ect
of a controvers+ commenced '+ a third person.
A/$IN#E, V. #I%ONG
G.R. No. 1667!4 0e1e2ber !, !!6
FAC#S
n Ma+ ", 1///, petitioner .grifina .4uinte+ filed 'efore the @T2 of Baguio 2it+,
a complaint for sum of mone+ and damages against the respondents, spouses %elicidad
and @ico Ti'ong. .grifina alleged that %elicidad had secured loans from her on several
occasions, at monthl+ interest rates of "E to 8E. Despite demands, the spouses Ti'ong
failed to pa+ their outstanding loan, amounting to P880,000.00 e:clusive of interests.
&n their .nswer with 2ounterclaim, spouses Ti'ong admitted that the+ had
secured loans from .grifina. The proceeds of the loan were then re6lent to other
'orrowers at higher interest rates. The+, li$ewise, alleged that the+ had e:ecuted deeds
Page | 336
of assignment in favor of .grifina, and that their de'tors had e:ecuted promissor+ notes
in .grifina9s favor. .ccording to the spouses Ti'ong, this resulted in a novation of the
original o'ligation to .grifina. The+ insisted that '+ virtue of these documents, .grifina
'ecame the new collector of their de'torsJ and the o'ligation to pa+ the 'alance of their
loans had 'een e:tinguished.
ISS$E
,hether or not there is valid novation in the instant case;
R$LING
1ovation which consists in su'stituting a new de'tor in the place of the original
one ma+ 'e made even without the $nowledge or against the will of the latter 'ut not
without the consent of the creditor. *u'stitution of the person of the de'tor ma+ 'e
effected '+ delegacion, meaning, the de'tor offers, and the creditor, accepts a third
person who consents to the su'stitution and assumes the o'ligation. Thus, the consent
of those three persons is necessar+. &n this $ind of novation, it is not enough to e:tend
the (uridical relation to a third personJ it is necessar+ that the old de'tor 'e released
from the o'ligation, and the third person or new de'tor ta$e his place in the relation.
,ithout such release, there is no novationJ the third person who has assumed the
o'ligation of the de'tor merel+ 'ecomes a co6de'tor or a suret+. &f there is no agreement
as to solidarit+, the first and the new de'tor are considered o'ligated (ointl+.
&n the case at 'ar, the court found that respondents9 o'ligation to pa+ the 'alance
of their account with petitioner was e:tinguished, pro tanto, '+ the deeds of assignment
of credit e:ecuted '+ respondent %elicidad in favor of petitioner. .s gleaned from the
deeds e:ecuted '+ respondent %elicidad relative to the accounts of her other de'tors,
petitioner was authori>ed to collect the amounts of P",000.00 from 2a'ang, and
P"0,"00.00 from 2irilo. The+ o'liged themselves to pa+ petitioner. @espondent
%elicidad, li$ewise,une4uivoca'l+ declared that 2a'ang and 2irilo no longer had an+
o'ligation to her.
S9AGMAN V CA
G.R.No. 1611'5 A(r)* ", !!5
FAC#S
Page | 337
*ometime in 1//" and 1//8, petitioner *wagman Hotels and Travel, &nc., through .tt+.
#eonor #. &nfante and @odne+ David Hegert+, its president and vice6president,
respectivel+, o'tained from private respondent 1eal B. 2hristian loans evidenced '+
three promissor+ notes dated 8 .ugust 1//", 1F March 1//8, and 1F =ul+ 1//8. <ach of
the promissor+ notes is in the amount of D*U!0,000 pa+a'le after three +ears from its
date with an interest of 1!E per annum pa+a'le ever+ three months. &n a letter dated 1"
Decem'er 1//H, 2hristian informed the petitioner corporation that he was terminating
the loans and demanded from the latter pa+ment in the total amount of D*U1!0,000
plus unpaid interests in the total amount of D*U10,!00. n ) %e'ruar+ 1///, private
respondent 2hristian filed with the @egional Trial 2ourt of Baguio 2it+, Branch !/, a
complaint for a sum of mone+ and damages against the petitioner corporation, Hegert+,
and .tt+. &nfante. The petitioner corporation, together with its president and vice6
president, filed an .nswer raising as defenses lac$ of cause of action and novation of the
principal o'ligations. .ccording to them, 2hristian had no cause of action 'ecause the
three promissor+ notes were not +et due and demanda'le.
ISS$E
,here there is a valid novation, ma+ the original terms of contract which has 'een
novated still prevail;
3EL0
The receipts, as well as private respondent9s summar+ of pa+ments, lend credence to
petitioner9s claim that the pa+ments were for the principal loans and that the interests
on the three consolidated loans were waived '+ the private respondent during the
undisputed renegotiation of the loans on account of the 'usiness reverses suffered '+
the petitioner at the time.
There was therefore a novation of the terms of the three promissor+ notes in that the
interest was waived and the principal was pa+a'le in monthl+ installments of D*U8!0.
.lterations of the terms and conditions of the o'ligation would generall+ result onl+ in
modificator+ novation unless such terms and conditions are considered to 'e the
essence of the o'ligation itself.N)!O The resulting novation in this case was, therefore, of
the modificator+ t+pe, not the e:tinctive t+pe, since the o'ligation to pa+ a sum of mone+
remains in force.
Thus, since the petitioner did not renege on its o'ligation to pa+ the monthl+
installments conforma'l+ with their new agreement and even continued pa+ing during
the pendenc+ of the case, the private respondent had no cause of action to file the
complaint. &t is onl+ upon petitioner9s default in the pa+ment of the monthl+
amorti>ations that a cause of action would arise and give the private respondent a right
to maintain an action against the petitioner.
Page | 338
A:OLLA FARMS V CA
G.R.No. 1'"!"5 No5e2ber 11, !!4
FAC#S
Petitioner %rancis @. -useco, =r., is the 2hairman, President and 2hief perating
fficer of petitioner .>olla %arms &nternational Philippines. &n 1/H), .>olla %arms
undertoo$ to participate in the 1ational .>olla Production Program wherein it will
purchase all the .>olla produced '+ the .>olla 'eneficiaries in the amount not e:ceeding
the peso value of all the inputs provided to them. The pro(ect also involves the then
Ministr+ of .griculture, the Gilusang Ga'uha+an at Gaunlaran, and the Giwanis. To
finance its participation, petitioners applied for a loan with 2redit Manila, &nc., which
the latter endorsed to its sister compan+, respondent *avings Ban$ of Manila A*avings
Ban$B. The Board of Directors of .>olla %arms, meanwhile, passed a 'oard resolution on
.ugust 01, 1/H), authori>ing -useco to 'orrow from *avings Ban$ in an amount not
e:ceeding P),)00,000.00.
The loan having 'een approved, -useco e:ecuted a promissor+ note on
*eptem'er 10, 1/H), promising to pa+ *avings Ban$ the sum of P1,F00,000.00 on or
'efore *eptem'er 10, 1/H0. the .>olla %arms pro(ect collapsed. Blaming *avings Ban$,
petitioners -useco and .>olla %arms filed on cto'er 0, 1/H0 with the @egional Trial
2ourt of Manila ABranch )!B, a complaint for damages. &n essence, their complaint
alleges that *avings Ban$ un(ustifia'l+ refused to promptl+ release the remaining
P000,000.00 which impaired the timeta'le of the pro(ect and inevita'l+ affected the
via'ilit+ of the pro(ect resulting in its collapse, and resulted in their failure to pa+ off the
loan. Thus, petitioners pra+ for P1,000,000.00 as actual damages, among others.
ISS$E
,hether the trial court erred in admitting petitioners9 amended complaint
R$LING
*<2. !. .mendment to conform to or authori>e presentation of evidence .Z,hen
issues not raised '+ the pleadings are tried '+ e:press or implied consent of the parties,
the+ shall 'e treated in all respects, as if the+ had 'een raised in the pleadings. *uch
amendment of the pleadings as ma+ 'e necessar+ to cause them to conform to the
evidence and to raise these issues ma+ 'e made upon motion of an+ part+ at an+ time,
even after (udgmentJ 'ut failure so to amend does not affect the result of the trial of
these issues. &f evidence is o'(ected to at the trial on the ground that it is not within the
issues made '+ the pleadings, the court ma+ allow the pleadings to 'e amended and
shall do so freel+ when the presentation of the merits of the action will 'e su'served
there'+ and the o'(ecting part+ fails to satisf+ the court that the admission of such
evidence would pre(udice him in maintaining his action or defense upon the merits.
Page | 339
.s can 'e gleaned from the records, it was petitioners9 'elief that respondent9s
evidence (ustified the amendment of their complaint. The trial court agreed thereto and
admitted the amended complaint. n this score, it should 'e noted that courts are given
the discretion to allow amendments of pleadings to conform to the evidence presented
during the trial.
CALIFORNIA %$S LINES V S#A#E INVESMEN#S
G.R.No. 147+5! 0e1e2ber 11, !!'
FAC#S
*ometime in 1/8/, Delta Motors 2orporationZM...1. Division ADeltaB applied
for financial assistance from respondent *tate &nvestment House, &nc.
*&H& agreed to e:tend a credit line to Delta for P)!,000,000.00 in three separate credit
agreements dated Ma+ 11, =une 1/, and .ugust )), 1/8/. Delta eventuall+ 'ecame
inde'ted to *&H& to the tune of P)F,010,)"/.0)
%rom .pril 1/8/ to Ma+ 1/H0, petitioner 2alifornia Bus #ines, &nc. Ahereafter
2B#&B, purchased on installment 'asis 0! units of M...1. Diesel Buses and two A)B units
of M...1. Diesel 2onversion <ngines from Delta. To secure the pa+ment of the
purchase price of the 0! 'uses, 2B#& and its president, Mr. Dionisio . #lamas, e:ecuted
si:teen A1"B promissor+ notes in favor of Delta on =anuar+ )0 and .pril )!, 1/H0.N!O &n
each promissor+ note, 2B#& promised to pa+ Delta or order, P),01F,000 pa+a'le in "0
monthl+ installments starting .ugust 01, 1/H0, with interest at 1FE per annum. 2B#&
further promised to pa+ the holder of the said notes )!E of the amount due on the same
as attorne+9s fees and e:penses of collection, whether actuall+ incurred or not, in case of
(udicial proceedings to enforce collection. &n addition to the notes, 2B#& e:ecuted
chattel mortgages over the 0! 'uses in Delta9s favor. ,hen 2B#& defaulted on all
pa+ments due, it entered into a restructuring agreement with Delta on cto'er 8, 1/H1,
to cover its overdue o'ligations under the promissor+ notes.2B#& continued having
trou'le meeting its o'ligations to Delta. This prompted Delta to threaten 2B#& with the
enforcement of the management ta$eover clause.
ISS$E
,hether the @estructuring .greement dated cto'er 8, 1/H1, 'etween petitioner
2B#& and Delta Motors, 2orp. novated the five promissor+ notes Delta Motors, 2orp.
assigned to respondent *&H&.
R$LING
Page | 340
1ovation has 'een defined as the e:tinguishment of an o'ligation '+ the
su'stitution or change of the o'ligation '+ a su'se4uent one which terminates the first,
either '+ changing the o'(ect or principal conditions, or '+ su'stituting the person of the
de'tor, or su'rogating a third person in the rights of the creditor.%or novation to ta$e
place, four essential re4uisites have to 'e met, namel+, A1B a previous valid o'ligationJ
A)B an agreement of all parties concerned to a new contractJ A0B the e:tinguishment of
the old o'ligationJ and AFB the 'irth of a valid new o'ligation.
&n this case, the attendant facts do not ma$e out a case of novation. The
restructuring agreement 'etween Delta and 2B#& e:ecuted on cto'er 8, 1/H1, shows
that the parties did not e:pressl+ stipulate that the restructuring agreement novated the
promissor+ notes. .'sent an une4uivocal declaration of e:tinguishment of the pre6
e:isting o'ligation, onl+ a showing of complete incompati'ilit+ 'etween the old and the
new o'ligation would sustain a finding of novation '+ implication.
OCAMPO-PA$LE V CA
G.R.No. 145"7 February 4, !!
FAC#S
During the period .ugust, 1//1 to .pril, 1//0, petitioner received from private
complainant %elicitas M. 2alilung several pieces of (ewelr+ with a total value of ne
hundred *i:t+ Three Thousand ne hundred *i:t+ *even Pesos and 1inet+ %ive
2entavos AP1"0,1"8./!B. The agreement 'etween private complainant and petitioner was
that the latter would sell the same and thereafter turn over and account for the proceeds
of the sale, or otherwise return to private complainant the unsold pieces of (ewelr+
within two months from receipt thereof. *ince private complainant and petitioner are
relatives, the former no longer re4uired petitioner to issue a receipt ac$nowledging her
receipt of the (ewelr+.,hen petitioner failed to remit the proceeds of the sale of the
(ewelr+ or to return the unsold pieces to private complainant, the latter sent petitioner a
demand letter. 1otwithstanding receipt of the demand letter, petitioner failed to turn
over the proceeds of the sale or to return the unsold pieces of (ewelr+. Private
complainant was constrained to refer the matter to the 'aranga+ captain of *ta. Monica,
#u'ao, Pampanga.
ISS$E
Page | 341
,hether or not there was a novation of petitioner9s criminal lia'ilit+ when she
and private complainant e:ecuted the Gasunduan sa Ba+aran.
R$LING
&t is well6settled that the following re4uisites must 'e present for novation to ta$e
place: A1B a previous valid o'ligationJ A)B agreement of all the parties to the new
contractJ A0B e:tinguishment of the old contractJ and AFB validit+ of the new one.
1ovation, in its 'road concept, ma+ either 'e e:tinctive or modificator+. &t is e:tinctive
when an old o'ligation is terminated '+ the creation of a new o'ligation that ta$es the
place of the formerJ it is merel+ modificator+ when the old o'ligation su'sists to the
e:tent it remains compati'le with the amendator+ agreement.
The e:ecution of the Gasunduan sa Ba+aran does not constitute a novation of the
original agreement 'etween petitioner and private complainant. *aid Gasunduan did
not change the o'(ect or principal conditions of the contract 'etween them. The change
in manner of pa+ment of petitioner9s o'ligation did not render the Gasunduan
incompati'le with the original agreement, and hence, did not e:tinguish petitioner9s
lia'ilit+ to remit the proceeds of the sale of the (ewelr+ or to return the same to private
complainant.
.n o'ligation to pa+ a sum of mone+ is not novated, in a new instrument wherein
the old is ratified, '+ changing onl+ the terms of pa+ment and adding other o'ligations
not incompati'le with the old one, or wherein the old contract is merel+ supplemented
'+ the new one.
&n an+ case, novation is not one of the grounds prescri'ed '+ the @evised Penal
2ode for the e:tinguishment of criminal lia'ilit+.
RE,ES V CA
6.r..o. 14775" Ku.e 6, !!
FAC#S
This petition arose from a civil case for collection of a sum of mone+ with
preliminar+ attachment filed '+ respondent Pa'lo C. @e+es against his first cousin
petitioner .rsenio @. @e+es and spouse 1ieves *. @e+es. .ccording to private
Page | 342
respondent, petitioner6spouses 'orrowed from him P"00,000.00 with interest at five
percent A!EB per month, which totalled P1,8)",)!0.00 at the time of filing of the
2omplaint. The loan was to 'e used supposedl+ to 'u+ a lot in ParaQa4ue. &t was
evidenced '+ an ac$nowledgment receipt dated 1! =ul+ 1//0 signed '+ the petitioner6
spouses .rsenio @. @e+es and 1ieves *. @e+es and witness @omeo @ueda.
&n their .nswer petitioners admitted their loan from respondent 'ut averred that there
was a novation so that the amount loaned was actuall+ converted into respondentKs
contri'ution to a partnership formed 'etween them on )0 March 1//0.
ISS$E
,hether or not there was novation in the instant case;
R$LING
%or novation to ta$e place, the following re4uisites must concur: AaB there must
'e a previous valid o'ligationJ A'B there must 'e an agreement of the parties concerned
to a new contractJ AcB there must 'e the e:tinguishment of the old contractJ and, AdB
there must 'e the validit+ of the new contract.
&n the case at 'ar, the third re4uisite is not present. The parties did agree that the
amount loaned would 'e converted into respondentKs contri'ution to the partnership,
'ut this conversion did not e:tinguish the loan o'ligation. The date when the
ac$nowledgment receiptMpromissor+ note was made negates the claim that the loan
agreement was e:tinguished through novation since the note was made while the
partnership was in e:istence.
*ignificantl+, novation is never presumed. &t must appear '+ e:press agreement
of the parties, or '+ their acts that are too clear and une4uivocal to 'e mista$en for
an+thing else. .n o'ligation to pa+ a sum of mone+ is not novated in a new instrument
wherein the old is ratified '+ changing onl+ the terms of pa+ment and adding other
o'ligations not incompati'le with the old one, or wherein the old contract is merel+
supplemented '+ the new one.
Page | 343
%A$#IS#A V PILAR 0EVELOPMEN#
6.r..o. 1'5!46 au6us7 17, 1+++
FAC#S
&n 1/8H, petitioner spouses %lorante and #aarni Bautista purchased a house and
lot in Pilar Cillage, #as Pinas, Metro Manila. To partiall+ finance the purchase, the+
o'tained from the .pe: Mortgage P #oan 2orporation a loan in the amount of
P100,1H0.00. The+ e:ecuted a promissor+ note on Decem'er )), 1/8H o'ligating
themselves, (ointl+ and severall+, to pa+ the Lprincipal sum of P100,1H0.00 with interest
rate of 1)E and service charge of 0EL for a period of )F0 months, or twent+ +ears, from
date, in monthl+ installments of P1,08H.H0. #ate pa+ments were to 'e charged a penalt+
of one and one6half per cent A1 1M)EB of the amount due. &n the same promissor+ note,
petitioners authori>ed .pe: to Lincrease the rate of interest andMor service chargesL
without notice to them in the event that a law, Presidential Decree or an+ 2entral Ban$
regulation should 'e enacted increasing the lawful rate of interest and service charges
on the loan. Pa+ment of the promissor+ note was secured '+ a second mortgage on the
house and lot purchased '+ petitioners.Petitioner spouses failed to pa+ several
installments. n *eptem'er )0, 1/H), the+ e:ecuted another promissor+ note in favor
of .pe:. This note was in the amount of P1F),0)".F0 at the increased interest rate of
twent+6one per cent A)1EB per annum with no provision for service charge 'ut with
penalt+ charge of 1 1M)E for late pa+ments.
ISS$E
,hether or not there was valid novation in the case at 'ar;
R$LING
1ovation has four AFB essential re4uisites: A1B the e:istence of a previous valid
o'ligationJ A)B the agreement of all parties to the new contractJ A0B the e:tinguishment
of the old contractJ and AFB the validit+ of the new one. &n the instant case, all four
re4uisites have 'een complied with. The first promissor+ note was a valid and
su'sisting contract when petitioner spouses and .pe: e:ecuted the second promissor+
note. The second promissor+ note a'sor'ed the unpaid principal and interest of
P1F),0)".F0 in the first note which amount 'ecame the principal de't therein, pa+a'le
at a higher interest rate of )1E per annum. Thus, the terms of the second promissor+
note provided for a higher principal, a higher interest rate, and a higher monthl+
amorti>ation, all to 'e paid within a shorter period of 1".00 +ears. These changes are
su'stantial and constitute the principal conditions of the o'ligation. Both parties
voluntaril+ accepted the terms of the second noteJ and also in the same note, the+
une4uivocall+ stipulated to e:tinguish the first note. 2learl+, there was animus novandi,
an e:press intention to novate. The first promissor+ note was cancelled and replaced '+
the second note. This second note 'ecame the new contract governing the partiesK
o'ligations.
Page | 344
EVA0EL REAL#, V SORIANO
G.R.No. 144+1 A(r)* !, !!1
FAC#S
n .pril 1), 1//", the spouses .ntero and Cirginia *oriano Arespondent spousesB,
as sellers, entered into a L2ontract to *ell L with <vadel @ealt+ and Development
2orporation ApetitionerB, as 'u+er, over a parcel of land denominated as #ot !!0"62 of
the *u'division Plan of #ot !!0" covered '+ Transfer 2ertificate of Title 1o. 1)!0")
which was part of a huge tract of land $nown as the &mus <state. Dpon pa+ment of the
first installment, petitioner introduced improvements thereon and fenced off the
propert+ with concrete walls. #ater, respondent spouses discovered that the area fenced
off '+ petitioner e:ceeded the area su'(ect of the contract to sell '+ ),F!0 s4uare meters.
Dpon verification '+ representatives of 'oth parties, the area encroached upon was
denominated as #ot !!0"6D61 of the su'division plan of #ot !!0"6D of Psd60F60/)F1/
and was later on segregated from the mother title and issued a new transfer certificate of
title, T2T 1o. 8"/1"", in the name of respondent spouses. @espondent spouses
successivel+ sent demand letters to petitioner on %e'ruar+ 1F, March 8, and .pril )F,
1//8, to vacate the encroached area. Petitioner admitted receiving the demand letters
'ut refused to vacate the said area.
ISS$E
,hether or not there was novation of contract;
R$LING
PetitionerKs claim that there was a novation of contract 'ecause there was a
LsecondL agreement 'etween the parties due to the encroachment made '+ the national
road on the propert+ su'(ect of the contract '+ 1,"F8 s4uare meters, is unavailing.
1ovation, one of the modes of e:tinguishing an o'ligation, re4uires the concurrence of
the following: A1B there is a valid previous o'ligationJ A)B the parties concerned agree to a
new contractJ A0B the old contract is e:tinguishedJ and AFB there is valid new contract.
1ovation ma+ 'e e:press or implied. &n order that an o'ligation ma+ 'e e:tinguished '+
another which su'stitutes the same, it is imperative that it 'e so declared in une4uivocal
terms Ae:press novationB or that the old and the new o'ligations 'e on ever+ point
incompati'le with each other Aimplied novationB.
Page | 345
&n the instant case, there was no e:press novation 'ecause the LsecondL
agreement was not even put in writing. 1either was there implied novation since it was
not shown that the two agreements were materiall+ and su'stantiall+ incompati'le with
each other. ,e 4uote with approval the following findings of the trial court: *ince the
alleged agreement 'etween the plaintiffs Nherein respondentsO and defendant Nherein
petitionerO is not in writing and the alleged agreement pertains to the novation of the
conditions of the contract to sell of the parcel of land su'(ect of the instant litigation,
ipso facto, novation is not applica'le in this case since, as stated a'ove, novation must
'e clearl+ proven '+ the proponent thereof and the defendant in this case is clearl+
'arred '+ the *tatute of %rauds from proving its claim.
% @ I REAL#, V. CASPE
G.R. No. 146+7 -a.uary +, !!"
FAC#S
2onsorcia #. Cenegas was the owner of a parcel of land located in Barrio Bagong6
&log in Pasig, @i>al and covered '+ T2T 1o. )F8F0F. *he delivered said title to, and
e:ecuted a simulated deed of sale in favor of, Datuin for purposes of o'taining a loan
with the @2B2. Datuin claimed that he had connections with the management of @2B2
and offered his assistance to Cenegas in o'taining a loan from the 'an$. He issued a
receipt to the Cenegases, ac$nowledging that the lot was to 'e used as a collateral for
'an$ financing and that the deed of sale was e:ecuted onl+ as a device to o'tain the
loan. However, Datuin prepared a deed of a'solute sale and, through forger+, made it
appear that the spouses Cenegas e:ecuted the document in his favor. Cenegas learned of
DatuinKs fraudulent scheme when she sold the lot to herein respondents for P1"0,000 in
a deed of conditional sale. *he, along with her hus'and, instituted a complaint against
Datuin in the then 2ourt of %irst &nstance 2%& of @i>al, Branch 11, doc$eted as 2ivil 2ase
1o. 1HHH/0, for recover+ of propert+ and nullification of T2T 1o. 08880F, with damages.
However, when the case was called for pre6trial, the CenegasesK counsel failed to appear
and the complaint was eventuall+ dismissed without pre(udice.
ISS$E
,hether or not filing of 2ivil 2ase 1o. 0"H!) '+ the Cenegases had the effect of
interrupting the prescriptive period for the filing of the complaint for (udicial
foreclosure of mortgage;
Page | 346
R$LING
,e agree with the 2.Ks ruling that 2ivil 2ase 1o. 0"H!) did not have the effect of
interrupting the prescription of the action for foreclosure of mortgage as it was not an
action for foreclosure 'ut one for annulment of title and nullification of the deed of
mortgage and the deed of sale. &t was not at all the action contemplated in .rticle 11!! of
the 2ivil 2ode which e:plicitl+ provides that the prescription of an action is interrupted
onl+ when the action itself is filed in court. Petitioner could have protected its right over
the propert+ '+ filing a cross6claim for (udicial foreclosure of mortgage against
respondents in 2ivil 2ase 1o. 0"H!). The filing of a cross6claim would have 'een proper
there. .ll the issues pertaining to the mortgage validit+ of the mortgage and the
propriet+ of foreclosure would have 'een passed upon concurrentl+ and not on a
piecemeal 'asis. This should 'e the case as the issue of foreclosure of the su'(ect
mortgage was connected with, or dependent on, the su'(ect of annulment of mortgage in
2ivil 2ase 1o. 0"H!). The actuations clearl+ manifested that petitioner $new its rights
under the law 'ut chose to sleep on the same.
MESINA V. GARCIA
G.R. No. 16"!'5 No5e2ber '!, !!6
FAC#S
.tt+. Honorio Calisno 7arcia and %elicisima Mesina, during their lifetime,
enstered into a 2ontract to *ell over a lot consisting of )0! s4uare meters, situated at
Diversion @oad, *angitan, 2a'anatuan 2it+, covered and em'raced '+ T2T 1o. T601"F0
in the name of %elicisima Mesina which title was eventuall+ cancelled and T2T 1o. T6
8HHH1 was issued in the name of herein petitioners. The 2ontract to *ell provides that
the cost of the lot is P80.00 per s4uare meter for a total amount of P1",F!0.00J pa+a'le
within a period not to e:ceed 8 +ears at an interest rate of 1)E per annum, in successive
monthl+ installments of P)"0.H! per month, starting Ma+ 1/88. Thereafter, the
succeeding monthl+ installments are to 'e paid within the first wee$ of ever+ month, at
the residence of the vendor at ?ue>on 2it+, with all unpaid monthl+ installments
Page | 347
earning an interest of 1E per month. &nstituting this case at 'ar, respondent asserts
that despite the full pa+ment made on 8 %e'ruar+ 1/HF for the consideration of the
su'(ect lot, petitioners refused to issue the necessar+ Deed of *ale to effect the transfer
of the propert+ to her.
ISS$E
,hether or not respondent9s cause of action had alread+ prescri'ed;
R$LING
.rticle 11!! of the 2ivil 2ode is e:plicit that the prescriptive period is interrupted
when an action has 'een filed in courtJ when there is a written e:tra(udicial demand
made '+ the creditorsJ and when there is an+ written ac$nowledgment of the de't '+ the
de'tor.
The records reveal that starting 1/ .pril 1/H" until ) =anuar+ 1//8 respondent
continuousl+ demanded from the petitioners the e:ecution of the said Deed of .'solute
*ale 'ut the latter con(ured man+ reasons and e:cuses not to e:ecute the same.
@espondent even filed a 2omplaint 'efore the Housing and #and Dse @egulator+ Board
wa+ 'ac$ in =une, 1/H", to enforce her rights and to compel the mother of herein
petitioners, who was still alive at that time, to e:ecute the necessar+ Deed of .'solute
*ale for the transfer of title in her name. n ) =anuar+ 1//8, respondent, through her
counsel, sent a final demand letter to the petitioners for the e:ecution of the Deed of
.'solute *ale, 'ut still to no avail. 2onse4uentl+, 'ecause of utter frustration of the
respondent, she finall+ lodged a formal 2omplaint for *pecific Performance with
Damages 'efore the trial court on )0 =anuar+ 1//8.
Hence, from the series of written e:tra(udicial demands made '+ respondent to
have the e:ecution of the Deed of .'solute *ale in her favor, the prescriptive period of
10 +ears has 'een interrupted. Therefore, it cannot 'e said that the cause of action of
the respondent has alread+ 'een prescri'ed.
3EIRS OF GA$0IANE V CA
G.R.No. 11+"7+ Mar1< 11, !!4
FAC#S
Page | 348
The lot in controvers+ is #ot F0H/ located at Dumaguete 2it+ and covered '+
riginal 2ertificate of Title 1o. )/H"6. A2T )/H"6.B in the names of co6owners %eli:
and =uana 7audiane. %eli: died in 1/F0 while his sister =uana died in 1/0/. Herein
respondents are the descendants of %eli: while petitioners are the descendants of =uana.
n 1ovem'er F, 1/)8, %eli: e:ecuted a document entitled <scritura de 2ompra6Centa
A<scritura, for 'revit+B where'+ he sold to his sister =uana his one6half share in #ot 1o.
F1!" covered '+ Transfer 2ertificate of Title 1o. 00186..
Petitioners9 predecessors6in6interest, 7eronimo and &nes &so Athe &sosB, 'elieved
that the sale '+ %eli: to their mother =uana in 1/)8 included not onl+ #ot F1!" 'ut also
#ot F0H/. &n 1/8F, the+ filed a pleading in the trial court see$ing to direct the @egister of
Deeds of Dumaguete 2it+ to cancel 2T )/H"6. covering #ot F0H/ and to issue a new
title in favor of the &sos. This was later withdrawn after respondents9 predecessors6in6
interest, Procopio 7audiane and *egundo 7audiane, opposed it on the ground that the
&sos falsified their cop+ of the <scritura '+ erasing 3#ot F1!"5 and intercalating in its
place 3#ot F0H/.5
ISS$E
,hether the court gravel+ erred in not giving due course to the claim of
petitioners and legal effect of prescription and laches adverted '+ defendants6appellants
in their answer and affirmative defenses proven during the hearing '+ documentar+ and
testimonial evidence.
R$LING
.s a general rule, ownership over titled propert+ cannot 'e lost through
prescription.N1)O Petitioners, however, invo$e our ruling in Tam'ot vs. 2ourt of
.ppealsN10O which held that titled propert+ ma+ 'e ac4uired through prescription '+ a
person who possessed the same for 0" +ears without an+ o'(ection from the registered
owner who was o'viousl+ guilt+ of laches.
Petitioners9 claim is alread+ rendered moot '+ our ruling 'arring petitioners from
raising the defense of e:clusive ownership due to res (udicata. <ven assuming arguendo
that petitioners are not so 'arred, their contention is erroneous. .s correctl+ o'served
'+ the appellate court.
.s e:plained earlier, onl+ #ot 1o. F1!" was sold. &t was through this
misrepresentation that appellees9 predecessor6in6interest succeeded in withholding
possession of appellees9 share in #ot 1o. F0H/. .ppellees cannot, '+ their own
fraudulent act, 'enefit therefrom '+ alleging prescription and laches.
Page | 349
LA$REANO V CA
G.R.No. 114776 February , !!!
FAC#SL
Petitioner was emplo+ed in the singapore airlines limited as the pilot captain of
B6808. *ometime in 1/H), defendant, hit '+ a recession, initiated cost6cutting measures.
*eventeen e:patriate captains in the .ir'us fleet were found in e:cess of the defendantKs
re4uirement. 2onse4uentl+, defendant informed its e:patriate pilots including plaintiff
of the situation and advised them to ta$e advance leaves. @eali>ing that the recession
would not 'e for a short time, defendant decided to terminate its e:cess personnel. &t
did not, however, immediatel+ terminate itKs .6000 pilots. &t reviewed their
4ualifications for possi'le promotion to the B68F8 fleet. .mong the 18 e:cess .ir'us
pilots reviewed, twelve were found 4ualified. Dnfortunatel+, plaintiff was not one of the
twelve. .ggrieved, plaintiff on =une )/, 1/H0, instituted a case for illegal dismissal
'efore the #a'or .r'iter. Defendant moved to dismiss on (urisdictional grounds. Before
said motion was resolved, the complaint was withdrawn.
ISS$E L
,hat is the prescriptive period for mone+ claims arising from emplo+er6
emplo+ee relationship;
R$LINGL
.rticle )/1. Mone+ claims. 6 .ll mone+ claims arising from emplo+ee6emplo+er
relations accruing during the effectivit+ of this 2ode shall 'e filed within three A0B +ears
from the time the cause of action accruedJ otherwise the+ shall 'e forever 'arred.
&t should 'e noted further that .rticle )/1 of the #a'or 2ode is a special law
applica'le to mone+ claims arising from emplo+er6emplo+ee relationsJ thus, it
necessaril+ prevails over .rticle 11FF of the 2ivil 2ode, a general law. Basic is the rule in
statutor+ construction that Kwhere two statutes are of e4ual theoretical application to a
particular case, the one designed therefore should prevail.K
&n the instant case, the action for damages due to illegal termination was filed '+
plaintiff6appellee onl+ on =anuar+ H, 1/H8 or more than four AFB +ears after the
effectivit+ date of his dismissal on 1ovem'er 1, 1/H). 2learl+, plaintiff6appelleeKs action
has alread+ prescri'ed.
Page | 350
%ANCO FILIPINO 5s. CO$R# OF APPEALS
'' SCRA 41
FAC#S8
<lsa .rcilla and her hus'and, 2alvin .rcilla secured on three occasions, loans
from the Banco %ilipino *avings and Mortgage 'an$ in the amount of Php.108,/F".00 as
evidenced '+ the 3Promissor+ 1ote5 e:ecuted '+ the spouses in favor of the said 'an$.
To secure pa+ment of said loans, the spouses e:ecuted 3@eal <state Mortgages5 in favor
of the appellants ABanco %ilipinoB over their parcels of land. The appellee spouses failed
to pa+ their monthl+ amorti>ation to appellant. n *eptem'er ), 1/H! the appellee9s
filed a complaint for 3.nnulment of the #oan 2ontracts, %oreclosure *ale with
Prohi'itor+ and &n(unction5 which was granted '+ the @T2. Petitioners appealed to the
2ourt of .ppeals, 'ut the 2. affirmed the decision of the @T2.
ISS$E8
,hether or not the 2. erred when it held that the cause of action of the private
respondents accrued on cto'er 00, 1/8H and the filing of their complaint for
annulment of their contracts in 10H! was not +et 'arred '+ the prescriptionM
R$LING8
The court held that the petition is unmeritorious. Petitioner9s claim that the
action of the private respondents have prescri'ed is 'ereft of merit. Dnder .rticle 11!0
of the 2ivil 2ode, the time for prescription of all $inds of action where there is no special
provision which ordains otherwise shall 'e counted from the da+ the+ ma+ 'e 'rought.
Thus the period of prescription of an+ cause of action is rec$oned onl+ from the date of
the cause of action accrued. The period should not 'e made to retroact to the date of the
e:ecution of the contract, 'ut from the date the+ received the statement of account
Page | 351
showing the increased rate of interest, for it was onl+ from the moment that the+
discovered the petitioner9s unilateral increase thereof.
V0A. 0E 0EL GA0O 5s. CO$R# OF APPEALS
'6' SCRA 5"
FAC#S8
2arlos Delgado was the a'solute owner of a parcel of land with an area of "/),!F/
s4uare meter situated in the Municipalit+ of 2atarman *amar. 2arlos Delgado granted
and conve+ed '+ wa+ of donation with 4uitclaim all rights, title, interest claim and
demand over a portion of land with an area of 1"!,000 s4uare meter in favor of the
2ommonwealth of the Philippines. The acceptance was then made to President ?ue>on
in his capacit+ as 2ommander6in62hief. The Deed of Donation was e:ecuted with a
condition that the said land will 'e used for the formation of the 1ational Defense of the
Philippines. The said parcel of land then covered '+ the Torrens *+stem of the
Philippines and was registered in the name of 2ommonwealth of the Philippines for a
period of F0 +ears. The land was registered under T2T 06)!0/61"0 in favor of the
2ommonwealth however without an+ annotation.
Dpon declaration of independence, the 2ommonwealth was replaced '+ @epu'lic
of the Philippines which too$ over the su'(ect land and turned over to 2ivil .eronautics
Page | 352
.dministration, later named Bureau of .ir Transportation ffice. The said agenc+
utili>es the said land a domestic airport.
=ose Delgado filed a petition for reconve+ance for a violation of the condition.
The @T2 ruled in favor of the plaintiff Delgado. But the 2. reversed the said decision
'ecause of prescription. The petitioner filed onl+ 'efore )F +ears o discover+ which the
law onl+ re4uires 10 +ears of filing.
ISS$E8
,hether or not the petitioner9s action for reconve+ance is alread+ 'arred '+
prescription.
R$LING8
The *upreme 2ourt denied the petition and affirmed the decision of the 2ourt of
.ppeals 'ecause the time of filing has 'een prescri'ed. Dnder .rticle 11FF of the 2ivil
2ode on Prescription 'ased on written contracts, the filing of action for reconve+ance is
within 10 +ears from the time the condition in the Deed of Donation was violated. The
petitioner herein filed onl+ )F +ears in the first action and F0 +ears in the second filing
of the )
nd
action.
The action for reconve+ance on the alleged e:cess of 00, "08 s4uare meter
mista$enl+ included in the title was also prescri'ed .rticle 1F!" of the 2ivil 2ode states,
if propert+ is ac4uired through mista$e or fraud, the person o'taining it is, '+ force of
law, considered a trustee of an implied trust for the 'enefits of the person from whom
the propert+ comes, if within 10 +ears such action for reconve+ance has not 'een
e:ecuted.
MAES#RA0O 5s. CO$R# OF APPEALS
'7 SCRA 67"
FAC#S8
These consolidated cases involve #ot 1o. !H8) and the rights of the contending
parties thereto. The lot has an area of !8."01 s4.m. and is registered in the name of the
deceased spouses @amon and @osario 2haves. The spouses died intestate in 1/F0 and
Page | 353
1/FF, respectivel+. The+ were survived '+ si: heirs. To settle the estate of said spouse,
.ngel 2haves, one of the heirs, initiated intestate proceedings and was appointed
administrator of said estates in the process. .n inventor+ of the estates was made and
thereafter, the heirs agreed on a pro(ect partition. The court approved the partition 'ut a
cop+ of said decision was missing. 1onetheless, the estate was divided among the heirs.
*u'se4uentl+, in 1/!", the partition case effected and the respective shares of the heirs
were delivered to them.
*ignificantl+, #ot 1o.!H8) was not included in a num'er of documents. Parties
offered different e:planations as to the omission of said lot in the documents.
Petitioners maintain the e:istence of an oral partition agreement entered into '+ all
heirs after the death of their parents. To set things right, petitioners then prepared a
4uitclaim to confirm the alleged oral agreement. @espondents dispute voluntariness of
their consent to the 4uitclaims.
*i: +ears after the e:ecution of the 4uitclaims, respondents discovered that indeed
su'(ect lot was still a common propert+ in the name of the deceased spouses. <ventuall+,
an action for ?uieting of Title was filed '+ petitioners on Decem'er )), 1/H0.
The trial court considered #ot 1o. !H8) as still a common propert+ and therefore
must 'e divided into si: parts, there 'eing si: heirs. Petitioners appealed to the 2ourt of
.ppeals which sustained the decision of the trial court.
ISS$E8
,hether or not the action for 4uieting of title had alread+ prescri'ed.
R$LING8
The *upreme 2ourt ruled that an action for 4uieting of title is imprescripti'le
especiall+ if the plaintiff is in possession of the propert+ 'eing litigated. ne who is in
actual possession of a land, claiming to 'e the owner thereof ma+ wait until his
possession is distur'ed or his title is attac$ed 'efore ma$ing steps to vindicate his right
'ecause his undistur'ed possession gives him a continuing right to see$ the aid of the
courts to ascertain the nature of the adverse claim and its effect on his title. Moreover,
the 2ourt held that laches is inapplica'le in this case. This is 'ecause, as mentioned
earlier, petitioners9 possession of the su'(ect lot has rendered their right to 'ring an
action for 4uieting of title imprescripti'le.
Page | 354
#ANA, RECREA#ION CEN#ER AN0 0EVELOPMEN# CORP.
5s. CA#ALINA MA#IEN:O FA$S#O
A(r)* 1, !!5
FAC#S8
Petitioner Tana+ @ecreation 2enter and Development 2orp. AT@2D2B is the
lessee of a 0,0/06s4uare meter propert+ located in *itio 7a+as, Tana+, @i>al, owned '+
2atalina Matien>o %austo, under a 2ontract of #ease. n this propert+ stands the Tana+
2oliseum 2oc$pit operated '+ petitioner. The lease contract provided for a )06+ear
term, su'(ect to renewal within si:t+ da+s prior to its e:piration. The contract also
provided that should %austo decide to sell the propert+, petitioner shall have the
3priorit+ right5 to purchase the same.
n =une 18, 1//1, petitioner wrote %austo informing her of its intention to renew
the lease. However, it was %austo9s daughter, respondent .nunciacion %. Pacuna+en,
who replied, as$ing that petitioner remove the improvements 'uilt thereon, as she is
now the a'solute owner of the propert+. &t appears that %austo had earlier sold the
propert+ to Pacuna+en and title has alread+ 'een transferred in her name. Petitioner
filed an .mended 2omplaint for .nnulment of Deed of *ale, *pecific Performance with
Damages, and &n(unction
&n her .nswer, respondent claimed that petitioner is estopped from assailing the
validit+ of the deed of sale as the latter ac$nowledged her ownership when it merel+
as$ed for a renewal of the lease. .ccording to respondent, when the+ met to discuss the
matter, petitioner did not demand for the e:ercise of its option to purchase the propert+,
and it even as$ed for grace period to vacate the premises.
ISS$E8
The contention in this case refers to petitioner9s priorit+ right to purchase, also
referred to as the right of first refusal.
R$LING8
,hen a lease contract contains a right of first refusal, the lessor is under a legal
dut+ to the lessee not to sell to an+'od+ at an+ price until after he has made an offer to
sell to the latter at a certain price and the lessee has failed to accept it. The lessee has a
right that the lessorKs first offer shall 'e in his favor. Petitioner9s right of first refusal is
an integral and indivisi'le part of the contract of lease and is insepara'le from the whole
contract. The consideration for the lease includes the consideration for the right of first
refusal and is 'uilt into the reciprocal o'ligations of the parties.
&t was erroneous for the 2. to rule that the right of first refusal does not appl+
when the propert+ is sold to %austo9s relative. ,hen the terms of an agreement have
Page | 355
'een reduced to writing, it is considered as containing all the terms agreed upon. .s
such, there can 'e, 'etween the parties and their successors in interest, no evidence of
such terms other than the contents of the written agreement, e:cept when it fails to
e:press the true intent and agreement of the parties. &n this case, the wording of the
stipulation giving petitioner the right of first refusal is plain and unam'iguous, and
leaves no room for interpretation. &t simpl+ means that should %austo decide to sell the
leased propert+ during the term of the lease, such sale should first 'e offered to
petitioner. The stipulation does not provide for the 4ualification that such right ma+ 'e
e:ercised onl+ when the sale is made to strangers or persons other than %austo9s $in.
Thus, under the terms of petitioner9s right of first refusal, %austo has the legal dut+ to
petitioner not to sell the propert+ to an+'od+, even her relatives, at an+ price until after
she has made an offer to sell to petitioner at a certain price and said offer was re(ected
'+ petitioner.
ROMEO MEN0O:A 5s. CO$R# OF APPEALS
February 1", !!5
FAC#S8
Manoto$ was the administrator of a parcel of land which it leased to Ben(amin
Mendo>aJ that the contract of lease e:pired on Decem'er 01, 1/HHJ that even after the
e:piration of the lease contract, Ben(amin Mendo>a, and after his demise, his son,
@omeo, continued to occup+ the premises and thus incurred a total of PFF,011.)! as
unpaid rentals from =anuar+ 1, 1/H/ to =ul+ 01, 1//"J that on =ul+ 1", 1//", Manoto$
made a demand on Ben(amin Mendo>a to pa+ the rental arrears and to vacate the
premises within fifteen A1!B da+s from receipt of the demand letterJ that despite receipt
of the letter and after the e:piration of the 1!6da+ period, the Mendo>as refused to
vacate the propert+ and to pa+ the rentals. The complaint pra+ed that the court order
Mendo>a and those claiming rights under him to vacate the premises and deliver
possession thereof to Manoto$, and to pa+ the unpaid rentals from =anuar+ 1, 1/H/ to
=ul+ 01, 1//" plus PH8!.8! per month starting .ugust 1, 1//", su'(ect to such increase
allowed '+ law, until he finall+ vacates the premise.
ISS$E8
,hether or not the Honora'le 2ourt of .ppeals committed error in giving
efficac+ to a lease contract signed in 1/HH when the alleged signator+ was alread+ dead
since 1/H".
R$LING8
This is a case for unlawful detainer. &t appears that respondent corporation leased
the propert+ su'(ect of this case to petitioner9s father. .fter e:piration of the lease,
petitioner continued to occup+ the propert+ 'ut failed to pa+ the rentals. n =ul+ 1",
1//", respondent corporation made a demand on petitioner to vacate the premises and
to pa+ their arrears.
Page | 356
.n action for unlawful detainer ma+ 'e filed when possession '+ a landlord,
vendor, vendee or other person of an+ land or 'uilding is unlawfull+ withheld after the
e:piration or termination of the right to hold possession '+ virtue of a contract, e:press
or implied. The onl+ issue to 'e resolved in an unlawful detainer case is ph+sical or
material possession of the propert+ involved, independent of an+ claim of ownership '+
an+ of the parties involved. &n the case at 'ar, petitioner lost his right to possess the
propert+ upon demand '+ respondent corporation to vacate the rented lot. Petitioner
cannot now refute the e:istence of the lease contract 'ecause of his prior admissions in
his pleadings regarding his status as tenant on the su'(ect propert+.
-EFFERSON LIM 5s. /$EENSLAN0 #O4,O COMMO0I#IES, INC.
-a.uary 4, !!
FAC#S8
*ometime in 1//), Ben(amin *hia, a mar$et anal+st and trader of ?ueensland,
was introduced to petitioner =efferson #im '+ Marissa Bontia, one of his emplo+ees.
Marissa9s father was a former emplo+ee of #im9s father. *hia suggested that #im invest
in the %oreign <:change Mar$et, trading D.*. dollar against the =apanese +en, British
pound, Deutsche Mar$ and *wiss %ranc.
Before investing, #im re4uested *hia for proof that the foreign e:change was
reall+ lucrative. The+ conducted moc$ tradings without mone+ involved. .s the moc$
trading showed profita'ilit+, #im decided to invest with a marginal deposit of D*U!,000
in manager9s chec$. The marginal deposit represented the advance capital for his future
tradings. &t was made to appl+ to an+ authori>ed future transactions, and answered for
an+ trading account against which the deposit was made, for an+ loss of whatever
nature, and for all o'ligations, which the investor would incur with the 'ro$er.
Petitioner #im was then allowed to trade with respondent compan+ which was
coursed through *hia '+ virtue of 'lan$ order forms all signed '+ #im. @espondent
furnished #im with the dail+ mar$et report and statements of transactions as evidenced
'+ the receiving forms, some of which were received '+ #im.
Page | 357
Meanwhile, on cto'er )), 1//), respondent learned that it would ta$e seventeen
A18B da+s to clear the manager9s chec$ given '+ petitioner. *hia returned the chec$ to
petitioner who informed *hia that petitioner would rather replace the manager9s chec$
with a traveler9s chec$. *hia noticed that the traveler9s chec$ was not indorsed 'ut #im
told *hia that ?ueensland could sign the endorsee portion. Because *hia trusted the
latter9s good credit rating, and out of ignorance, he 'rought the chec$ 'ac$ to the office
unsigned. &nasmuch as that was a 'us+ %rida+, the chec$ was $ept in the drawer of
respondent9s consultant. #ater, the traveler9s chec$ was deposited with 2iti'an$.
n cto'er )8, 1//), 2iti'an$ informed respondent that the traveler9s chec$
could not 'e cleared unless it was dul+ signed '+ #im, the original purchaser of the
traveler9s chec$. . Miss .ra(o, from the accounting staff of ?ueensland, returned the
chec$ to #im for his signature, 'ut the latter, aware of his PFF,F"! loss, demanded for a
li4uidation of his account and said he would get 'ac$ what was left of his investment.
ISS$E8
,hether or not the 2. erred in reversing the decision of the @T2 which
dismissed the respondent9s complaint
R$LING8
The essential elements of estoppel are: A1B conduct of a part+ amounting to false
representation or concealment of material facts or at least calculated to conve+ the
impression that the facts are otherwise than, and inconsistent with, those which the
part+ su'se4uentl+ attempts to assertJ A)B intent, or at least e:pectation, that this
conduct shall 'e acted upon '+, or at least influence, the other part+J and A0B $nowledge,
actual or constructive, of the real facts. ere, it is uncontested that petitioner had in fact
signed the 2ustomer9s .greement in the morning of cto'er )), 1//), $nowing full+
well the nature of the contract he was entering into. The 2ustomer9s .greement was dul+
notari>ed and as a pu'lic document it is evidence of the fact, which gave rise to its
e:ecution and of the date of the latter.
1e:t, petitioner paid his investment deposit to respondent in the form of a
manager9s chec$ in the amount of D*U!,000 as evidenced '+ P2& Ban$ Manager9s 2hec$
1o. "/008, dated cto'er )), 1//). .ll these are indicia that petitioner treated the
2ustomer9s .greement as a valid and 'inding contract.
Page | 358
PLACE9ELL IN#ERNA#IONAL SERVICES CORP. 5s. CAMO#E
7.@. 1o. 1"//80, =une )", )00"
FAC#S8
Page | 359
Petitioner Placewell &nternational *ervices 2orporation AP&*2B deplo+ed
respondent &reneo B. 2amote to wor$ as 'uilding carpenter for *..D Trading and
2ontracting 2o. A*..DB at the Gingdom of *audi .ra'ia AG*.B for a contract duration of
two +ears, with a corresponding salar+ of D*U080.00 per month. .t the (o' site,
respondent was allegedl+ found incompetent '+ his foreign emplo+erJ thus the latter
decided to terminate his services. However, respondent pleaded for his retention and
consented to accept a lower salar+ of *@ H00.00 per month. Thus, *..D retained
respondent until his return to the Philippines two +ears after.
n 1ovem'er )8, )001, respondent filed a sworn 2omplaint for monetar+ claims
against petitioner alleging that when he arrived at the (o' site, he and his fellow %ilipino
wor$ers were re4uired to sign another emplo+ment contract written in .ra'ic under the
constraints of losing their (o's if the+ refusedJ that for the entire duration of the new
contract, he received onl+ *@ !/0.00 per monthJ that he was not given his overtime pa+
despite rendering nine hours of wor$ ever+da+J that he and his co6wor$ers sought
assistance from the Philippine <m'ass+ 'ut the+ did not succeed in pursuing their cause
of action 'ecause of difficulties in communication.
ISS$E8
,hether there is estoppel '+ laches
3EL08
@... 1o. H0F) e:plicitl+ prohi'its the su'stitution or alteration to the pre(udice
of the wor$er, of emplo+ment contracts alread+ approved and verified '+ the
Department of #a'or and <mplo+ment AD#<B from the time of actual signing thereof
'+ the parties up to and including the period of the e:piration of the same without the
approval of the D#<. The su'se4uentl+ e:ecuted side agreement of an overseas
contract wor$er with her foreign emplo+er which reduced her salar+ 'elow the amount
approved '+ the P<. is void 'ecause it is against our e:isting laws, morals and pu'lic
polic+. The said side agreement cannot supersede her standard emplo+ment contract
approved '+ the P<..
Petitioner9s contention that respondent is guilt+ of laches is without 'asis.
#aches has 'een defined as the failure of or neglect for an unreasona'le and
une:plained length of time to do that which '+ e:ercising due diligence, could or should
have 'een done earlier, or to assert a right within reasona'le time, warranting a
presumption that the part+ entitled thereto has either a'andoned it or declined to assert
it. Thus, the doctrine of laches presumes that the part+ guilt+ of negligence had the
opportunit+ to do what should have 'een done, 'ut failed to do so. 2onversel+, if the
said part+ did not have the occasion to assert the right, then, he can not 'e ad(udged
guilt+ of laches. #aches is not concerned with the mere lapse of timeJ rather, the part+
must have 'een afforded an opportunit+ to pursue his claim in order that the dela+ ma+
sufficientl+ constitute laches.
Page | 360
&n the instant case, respondent filed his claim within the three6+ear prescriptive
period for the filing of mone+ claims set forth in .rticle )/1 of the #a'or 2ode from the
time the cause of action accrued. Thus, we find that the doctrine of laches finds no
application in this case.

3EIRS OF RAG$A 5s. CO$R# OF APPEALS
7.@. 1os. HH!)16))
FAC#S8
These consolidated cases involve a prime lot consisting of F,0//,0)) s4uare
meters, $nown as the Diliman <state, situated in ?ue>on 2it+. n this F0/ hectares of
prime land now stand the following: the ?ue>on 2it+ Hall, Philippine *cience High
*chool, ?ue>on Memorial 2ircle, Cisa+as .venue, 1ino+ .4uino Par$s and ,ildlife,
portions of DP Cillage and <ast Triangle, the entire Pro(ect " and Casha Cillage,
Ceterans Memorial Hospital and golf course, Department of .griculture, Department of
<nvironment and 1atural @esources, *ugar @egulator+ .dministration, Philippine
To'acco .dministration, #and @egistration .uthorit+, Philcoa Building, Bureau of
Telecommunications, .gricultural Training &nstitute 'uilding, Pagasa Cillage, *an
%rancisco *chool, ?ue>on 2it+ Hospital, portions of Pro(ect 8, Mindanao .venue
su'division, part of Bago Banta+ resettlement pro(ect, *M 2it+ 1orth <D*., part of
Phil6.m #ife Homes compound and four6fifths of 1orth Triangle. This large estate was
the su'(ect of a petition for (udicial reconstitution originall+ filed '+ <ulalio @agua in
1/"F, which gave rise to protracted legal 'attles 'etween the affected parties, lasting
more than thirt+6five A0!B +ears.
ISS$E8
,hether estoppel '+ laches e:ists on the part of petitioner
3EL08
Petitioners filed the petition for reconstitution of 2T "0) nineteen A1/B +ears
after the title was allegedl+ lost or destro+ed. ,e thus consider petitioners guilt+ of
laches. #aches is negligence or omission to assert a right within a reasona'le time,
warranting the presumption that the part+ entitled to assert it either has a'andoned or
declined to assert it.
Page | 361
ME#ROPOLI#AN %AN4 @ #R$S# COMPAN, 5s. CO$R# OF APPEALS
-u.e ", !!!
FAC#S8
Mr. 2hia offered the su'(ect propert+ for sale to private respondent 7.T.P.
Development 2orporation Ahereafter, 7TPB, with assumption of the mortgage
inde'tedness in favor of petitioner M<T@B.1G secured '+ the su'(ect propert+.
Pending negotiations for the proposed sale, .tt+. Bernardo .tien>a, acting in 'ehalf of
respondent 7TP, went to M<T@B.1G to in4uire on Mr. 2hiaKs remaining 'alance on
the real estate mortgage. M<T@B.1G o'liged with a statement of account of Mr. 2hia
amounting to a'out P11!,000.00 as of .ugust ,1/H0. The deed of sale and the
memorandum of agreement 'etween Mr. 2hia and respondent 7TP were eventuall+
e:ecuted and signed. .tt+. .tien>a went to M<T@B.1G ?uiapo Branch and paid one
hundred si:teen thousand four hundred si:teen pesos and sevent+6one centavos
AP11",F1".81B for which M<T@B.1G issued an official receipt ac$nowledging
pa+ment. This notwithstanding, petitioner M<T@B.1G refused to release the real
estate mortgage on the su'(ect propert+ despite repeated re4uests from .tt+. .tien>a,
thus prompting respondent 7TP to file an action for specific performance against
petitioner M<T@B.1G and Mr. 2hia.
ISS$E8
,hether or not the 2. erred in reversing the decision of the lower court.
R$LING8
The 2ourt found no compelling reasons to distur' the assailed decision. .ll
things studiedl+ viewed in proper perspective, the 2ourt are of the opinion, and so rule,
Page | 362
that whatever de'ts or loans mortgagor 2hia contracted with Metro'an$ after
*eptem'er F, 1/H0, without the conformit+ of plaintiff6appellee, could not 'e ad(udged
as part of the mortgage de't the latter so assumed. ,e are persuaded that the contrar+
ruling on this point in ur cto'er )F, 1//F decision would 'e unfair and un(ust to
plaintiff6appellee 'ecause, 'efore 'u+ing su'(ect propert+ and assuming the mortgage
de't thereon, the latter in4uired from Metro'an$ a'out the e:act amount of the
mortgage de't involved.
Petitioner M<T@B.1G is estopped from refusing the discharge of the real
estate mortgage on the claim that the su'(ect propert+ still secures Lother unli4uidated
past due loans.L
SPO$SES 0EL CAMPO 5s. CO$R# OF APPEALS
February 1, !!1
FAC#S8
*alome, 2onsorcia, .lfredo, Maria, @osalia, =ose, ?uirico and =ulita, all
surnamed Bornales, were the original co6owners of the lot in 4uestion.
n =ul+ 1F, 1/F0, *alome sold part of her FM1" share to *oledad Da+nolo.
Thereafter, *oledad Da+nolo immediatel+ too$ possession of the land descri'ed a'ove
and 'uilt a house thereon. . few +ears later, *oledad and her hus'and, *implicio
Dista(o, mortgaged the su'(ect portion of the lot as securit+ for a de't to =ose @egalado,
*r. This transaction was evidenced '+ a Deed of Mortgage.
n .pril 1F, 1/FH, three of the eight co6owners of #ot 1"), specificall+, *alome,
2onsorcia and .lfredo, sold )F,//0 s4uare meters of said lot to =ose @egalado, *r. n
Ma+ F, 1/!1, *implicio Dista(o, heir of *oledad Da+nolo who had since died, paid the
mortgage de't and redeemed the mortgaged portion of #ot 1") from =ose @egalado, *r.
Page | 363
The latter, in turn, e:ecuted a Deed of Discharge of Mortgage in favor of *oledad9s heirs,
namel+: *implicio Dista(o, @afael Dista(o and Teresita Dista(o6@egalado. n same date,
the said heirs sold the redeemed portion of #ot 1") for P1,!00.00 to herein petitioners,
the spouses Manuel Del 2ampo and *alvacion ?uiachon.
ISS$E8
,hether or not the sale of the su'(ect portion constitutes a sale of a concrete or
definite portion of land owned in common does not a'solutel+ deprive herein
petitioners of an+ right or title thereto.
R$LING8
There can 'e no dou't that the transaction entered into '+ *alome and *oledad
could 'e legall+ recogni>ed in its entiret+ since the o'(ect of the sale did not even e:ceed
the ideal shares held '+ the former in the co6ownership. .s a matter of fact, the deed of
sale e:ecuted 'etween the parties e:pressl+ stipulated that the portion of #ot 1") sold to
*oledad would 'e ta$en from *alome9s FM1" undivided interest in said lot, which the
latter could validl+ transfer in whole or in part even without the consent of the other co6
owners. *alome9s right to sell part of her undivided interest in the co6owned propert+ is
a'solute in accordance with the well6settled doctrine that a co6owner has full ownership
of his pro6indiviso share and has the right to alienate, assign or mortgage it, and
su'stitute another person in its en(o+ment.
C$ENCO 5s. C$ENCO
G.R. No. 14+"44, O17ober 1', !!4
FAC#S8
n *eptem'er 1/, 1/80, the NrespondentO filed the initiator+ complaint herein for
specific performance against her uncle NPetitionerO Miguel 2uenco which averred, inter
alia that her father, the late Don Mariano =esus 2uenco Awho 'ecame *enatorB and said
Page | 364
NpetitionerO formed the T2uenco and 2uenco #aw ffices9J that on or around .ugust F,
1/01, the 2uenco and 2uenco #aw ffices served as law+ers in two A)B cases entitled
TCaleriano *olon versus Roilo *olon9 A2ivil 2ase /008B and TCaleriano *olon versus
.polonia *olon9 A2ivil 2ase /0F0B involving a dispute among relatives over ownership of
lot /00 of the Banilad <state which is near the 2e'u Provincial 2apitolJ that records of
said cases indicate the name of the NpetitionerO alone as counsel of record, 'ut in truth
and in fact, the real law+er 'ehind the success of said cases was the influential Don
Mariano =esus 2uencoJ that after winning said cases, the awardees of #ot /00
su'divided said lot into three A0B parts as follows:
#ot /006.: !,000 Ns4uare metersO: Mariano 2uenco9s attorne+9s fees
#ot /006B: !,000 Ns4uare metersO: Miguel 2uenco9s attorne+9s fees
#ot /0062: !F,000 Ns4uare metersO: *olon9s retention
Petitioner later claimed the propert+ after the death of his 'rother.
ISS$ES8
,hether Petitioner is in is estoppel
,hether laches 'arred the right of action of respondent
3EL08
%rom the time #ot /006. was su'divided and Mariano9s si: children 66 including
2oncepcion 66 too$ possession as owners of their respective portions, no whimper of
protest from petitioner was heard until 1/"0. B+ his acts as well as '+ his omissions,
Miguel led Mariano and the latter9s heirs, including 2oncepcion, to 'elieve that
Petitioner 2uenco respected the ownership rights of respondent over #ot /006.6". That
Mariano acted and relied on Miguel9s tacit recognition of his ownership thereof is
evident from his will, e:ecuted in 1/"0. &ndeed, as earl+ as 1/F8, long 'efore Mariano
made his will in 1/"0, #ot /006. 66 situated along =uana smeQa <:tension,
Gamputhaw, 2e'u 2it+, near the 2e'u Provincial 2apitol 66 had 'een su'divided and
distri'uted to his si: children in his first marriage. Having induced him and his heirs to
'elieve that #ot /006.6" had alread+ 'een distri'uted to 2oncepcion as her own,
petitioner is estopped from asserting the contrar+ and claiming ownership thereof. The
principle of estoppel in pais applies when 66 '+ one9s acts, representations, admissions,
or silence when there is a need to spea$ out 66 one, intentionall+ or through culpa'le
negligence, induces another to 'elieve certain facts to e:istJ and the latter rightfull+
relies and acts on such 'elief, so as to 'e pre(udiced if the former is permitted to den+
the e:istence of those facts.
Petitioner claims that respondent9s action is alread+ 'arred '+ laches. #aches is
negligence or omission to assert a right within a reasona'le time, warranting a
presumption that the part+ entitled to it has either a'andoned or declined to assert it.
Page | 365
NF0O &n the present case, respondent has persistentl+ asserted her right to #ot /006.6"
against petitioner. 2oncepcion was in possession as owner of the propert+ from 1/F/ to
1/"/. ,hen Miguel too$ steps to have it separatel+ titled in his name, despite the fact
that she had the owner9s duplicate cop+ of T2T 1o. @T6"/// 66 the title covering the
entire #ot /006. 66 she had her adverse claim annotated on the title in 1/"8. ,hen
petitioner ousted her from her possession of the lot '+ tearing down her wire fence in
1/"/, she commenced the present action on *eptem'er 1/, 1/80, to protect and assert
her rights to the propert+. ,e find that she cannot 'e held guilt+ of laches, as she did
not sleep on her rights.
Page | 366
LA$REL 5s. 3ON. ANIANO A. 0ESIER#O
-u*y 1, !!
FAC#S8
Petitioner *alvador H. #aurel moves for a reconsideration of this 2ourt9s decision
declaring him, as 2hair of the 1ational 2entennial 2ommission A122B, a pu'lic officer.
Petitioner also pra+s that the case 'e referred to the 2ourt <n Banc.
ISS$E8
,hether or not #aurel is a pu'lic officer as 2hair of the 122
R$LING8
The issue in this case is whether petitioner, as 2hair of the 122, is a pu'lic officer
under the (urisdiction of the m'udsman. .ssuming, as petitioner proposes, that the
designation of other mem'ers to the 122 runs counter to the 2onstitution, it does not
ma$e petitioner, as 122 2hair, less a pu'lic officer. *uch 3serious constitutional
repercussions5 do not reduce the force of the rationale 'ehind this 2ourt9s decision.
*econd, petitioner invo$es estoppel. He claims that the official acts of the President,
the *enate President, the *pea$er of the House of @epresentatives, and the *upreme
2ourt, in designating 2a'inet mem'ers, *enators, 2ongressmen and =ustices to the
122, led him to 'elieve that the 122 is not a pu'lic office.
The contention has no merit. &n estoppel, the part+ representing material facts must
have the intention that the other part+ would act upon the representation. &t is
preposterous to suppose that the President, the *enate President, the *pea$er and the
*upreme 2ourt, '+ the designation of such officials to the 122, intended to mislead
petitioner (ust so he would accept the position of 122 2hair. <stoppel must 'e
une4uivocal and intentional. Moreover, petitioner himself admits that the principle of
estoppel does not operate against the 7overnment in the e:ercise of its sovereign
powers.
Page | 367
Third, as ground for the referral of the case to the 2ourt E. %a.1, petitioner
su'mits that our decision in this case modified or reversed doctrines rendered '+ this
2ourt, which can onl+ 'e done '+ the 2ourt E. %a.1.&t is argued that '+ designating
three of its then incum'ent mem'ers to the 122, the 2ourt too$ the position that the
122 was not a pu'lic office. The argument is a 'it of a stretch. *ection F A0B, .rticle C&&&
of the 2onstitution provides that 3no doctrine or principle of law laid down '+ the court
in a decision rendered en 'anc or in division ma+ 'e modified or reversed e:cept '+ the
court sitting en 'anc.5 &n designating three of its incum'ent mem'ers to the 122, the
2ourt did not render a 3decision,5 in the conte:t of said constitutional provision, which
contemplates an actual case. Much less did the 2ourt, '+ such designation, articulate
an+ 3doctrine or principle of law.5 &nvo$ing the same provision, petitioner asserts that
the decision in this case reversed or modified Macalino vs. *andigan'a+an, holding that
the .ssistant Manager of the Treasur+ Division and the Head of the #oans
.dministration P &nsurance *ection of the Philippine 1ational 2onstruction
2orporation AP122B is not a pu'lic officer under @epu'lic .ct 1o. 001/. This contention
also has no merit. The rationale for the ruling in Macalino is that 3the P122 has no
original charter as it was incorporated under the general law on corporations.5 However,
as we pointed out in our decision, a conclusion that <VP2@P is a government6owned
or controlled corporation would not alter the outcome of this case 'ecause petitioner9s
position and functions as 2hief <:ecutive fficer of <VP2@P are '+ virtue of his
'eing 2hairman of the 122. The other issues raised '+ petitioner are mere reiterations
of his earlier arguments. The 2ourt, however, remains unswa+ed there'+.
SPO$SES 3ANOPOL 5s. S3OEMAR# INCORPORA#E0
O17ober 4, !!
FAC#S8
*hoemart, &nc., is a corporation dul+ organi>ed and e:isting under the laws of the
Philippines engaged in the operation of department stores. n Decem'er F, 1/H!,
*hoemart, through its <:ecutive Cice6President, *enen T. Mendiola, and spouses
Manuel @. Hanopol and Beatri> T. Hanopol e:ecuted a 2ontract of Purchase on 2redit.
Dnder the terms of the contract, *hoemart e:tended credit accommodations, in
the amount of Three Hundred Thousand Pesos AP000,000.00B, for purchases on credit
made '+ holders of *M 2redit 2ard issued '+ spouses Hanopol for one +ear, renewa'le
+earl+ thereafter. *pouses Hanopol were given a five percent A!EB discount on all
purchases made '+ their cardholders, deducti'le from the semi6monthl+ pa+ments to 'e
made to *hoemart '+ spouses Hanopol.
%or failure of spouses Hanopol to pa+ the principal amount of ne Hundred
Twent+6%our Thousand %ive Hundred *event+6ne Pesos and <ight+61ine 2entavos
AP1)F,!81.H/B as of cto'er ", 1/H8, *hoemart instituted e:tra(udicial foreclosure
proceedings against the mortgaged properties.
*pouses Hanopol alleged that *hoemart 'reached the contract when the latter
failed to furnish the former with the re4uisite documents '+ which the former9s lia'ilit+
Page | 368
shall 'e determined, namel+: charge invoices, purchase 'oo$lets and purchase (ournal,
as provided in their contractJ that without the re4uisite documents, spouses Hanopol
had no wa+ of $nowing that, in fact, the+ had alread+ paid, even overpaid, whatever the+
owed to *hoemartJ that despite said 'reach, *hoemart even had the audacit+ to appl+ for
e:tra(udicial foreclosure with the *heriff.
ISS$E8
,hether or not *hoemart acted with manifest 'ad faith in pursuing with the
foreclosure and auction sale of the propert+ of spouses Hanopol, and, accordingl+,
should 'e held lia'le for damages.
R$LING8
.ll the three A0B elements for litis pendentia as a ground for dismissal of an action
are present, namel+: AaB identit+ of parties, or at least such parties who represent the
same interest in 'oth actionsJ A'B identit+ of rights asserted and relief pra+ed for, the
relief 'eing founded on the same factsJ and AcB the identit+, with respect to the two A)B
preceding particulars in the two A)B cases, in such that an+ (udgment that ma+ 'e
rendered in the pending case, regardless of which part+ is successful, would amount to
res (udicata in the other.
&n the case at 'ench, the parties are the sameJ the relief sought in the case 'efore
the 2ourt of .ppeals and the trial court are the same, that is, to permanentl+ en(oin the
foreclosure of the real estate mortgage e:ecuted '+ spouses Hanopol in favor of
*hoemartJ and, 'oth are premised on the same facts. The (udgment of the 2ourt of
.ppeals would constitute a 'ar to the suit 'efore the trial court.
#ERMINAL FACILI#IES 5s. PPA
'7" SCRA "

FAC#S8
Before us are two A)B consolidated petitions for review, one filed '+ the Terminal
%acilities and *ervices 2orporation AT<%.*2B and the other '+ the Philippine Ports
.uthorit+ APP.B. T<%.*2 is a domestic corporation organi>ed and e:isting under the
laws of the Philippines with principal place of 'usiness at Barrio &lang, Davao 2it+. &t is
engaged in the 'usiness of providing port and terminal facilities as well as arrastre,
stevedoring and other port6related services at its own private port at Barrio &lang.
Page | 369
*ometime in 1/8! T<%.*2 su'mitted to PP. a proposal for the construction of
a speciali>ed terminal comple: with port facilities and a provision for port services in
Davao 2it+. To ease the acute congestion in the government ports at *asa and *ta. .na,
Davao 2it+, PP. welcomed the proposal and organi>ed an inter6agenc+ committee to
stud+ the plan. The committee recommended approval.
n .pril )1, 1/8" the PP. Board of Directors passed @esolution 1o. 8 accepting
and approving T<%.*2Ks pro(ect proposal.
#ong after T<%.*2 'ro$e round with massive infrastructure wor$, the PP.
Board curiousl+ passed on cto'er 1, 1/8" @esolution 1o. !0 under which T<%.*2,
without as$ing for one, was compelled to su'mit an application for construction permit.
,ithout the consent of T<%.*2, the application imposed additional significant
conditions.
The series of PP. impositions did not stop there. Two A)B +ears after the
completion of the port facilities and the commencement of T<%.*2Ks port operations,
or on =une 10, 1/8H, PP. again issued to T<%.*2 another permit, under which more
onerous conditions were foisted on T<%.*2Ks port operations. &n the purported permit
appeared for the first time the contentious provisions for ten percent A10EB government
share out of arrastre and stevedoring gross income and one hundred percent A100EB
wharfage and 'erthing charges.
n %e'ruar+ 10, 1/HF T<%.*2 and PP. e:ecuted a Memorandum of
.greement AM.B providing among others for AaB ac$nowledgment of T<%.*2Ks
arrears in government share at Three Million <ight Hundred *even Thousand %ive
Hundred *i:t+6Three Pesos and *event+6%ive 2entavos AP0,H08,!"0.8!B pa+a'le
monthl+, with default penali>ed '+ automatic withdrawal of its commercial private port
permit and permit to operate cargo handling servicesJ A'B reduction of government
share from ten percent A10EB to si: percent A"EB on all cargo handling and related
revenue Aor arrastre and stevedoring gross incomeBJ AcB opening of its pier facilities to all
commercial and third6part+ cargoes and vessels for a period coterminous with its
foreshore lease contract with the 1ational 7overnmentJ and, AdB tenure of five A!B +ears
e:tendi'le '+ five A!B more +ears for T<%.*2Ks permit to operate cargo handling in its
private port facilities. &n return PP. promised to issue the necessar+ permits for
T<%.*2Ks port activities. T<%.*2 complied with the M. and paid the accrued and
current government share.
n .ugust 00, 1/HH T<%.*2 sued PP. and PP. Port Manager, and Port fficer
in Davao 2it+ for refund of government share it had paid and for damages as a result of
alleged illegal e:action from its clients of one hundred percent A100EB 'erthing and
wharfage fees. The complaint also sought to nullif+ the %e'ruar+ 10, 1/HF M. and all
other PP. issuances modif+ing the terms and conditions of the .pril )1, 1/8" @esolution
1o. 8 a'ove6mentioned.
PP. appealed the decision of the trial court to the 2ourt of .ppeals. The appellate
court in its original decision recogni>ed the validit+ of the impositions and reversed in
Page | 370
toto the decision of the trial court. T<%.*2 moved for reconsideration which the 2ourt
of .ppeals found partl+ meritorious. Thus the 2ourt of .ppeals in its .mended Decision
partiall+ affirmed the @T2 decision onl+ in the sense that PP. was directed to pa+
T<%.*2 A1B the amounts of %ifteen Million <ight Hundred Ten Thousand Thirt+6Two
Pesos and *even 2entavos AP1!,H10,00).08B representing fift+ percent A!0EB wharfage
fees and Three Million 1ine Hundred *i:t+6ne Thousand 1ine Hundred *i:t+6%our
Pesos and *i: 2entavos AP0,/"1,/"F.0"B representing thirt+ percent A00EB 'erthing fees
which T<%.*2 could have earned as private port usage fee from 1/88 to 1//1. The
2ourt of .ppeals held that the one hundred percent A100EB 'erthing and wharfage fees
were unenforcea'le 'ecause the+ had not 'een approved '+ the President under P.D.
1o. H!8, and discriminator+ since much lower rates were charged in other private ports
as shown '+ PP. issuances effective 1//! to 1//8. Both PP. and T<%.*2 were
unsatisfied with this disposition hence these petitions.
ISS$E8
,hether or not the collection '+ PP. of one hundred percent A100EB wharfage
fees and 'erthing chargesJ AcB the propriet+ of the award of fift+ percent A!0EB wharfage
fees and thirt+ percent A00EB 'erthing charges as actual damages in favor of T<%.*2
for the period from 1/88 to 1//1 is valid.
R$LING8
The imposition '+ PP. of ten percent A10EB, later reduced to si: percent A"EB,
government share out of arrastre and stevedoring gross income of T<%.*2 is void.
This e:action was never mentioned in the contract, much less is it a 'inding prestation,
'etween T<%.*2 and PP.. ,hat was clearl+ stated in the terms and conditions
appended to PP. @esolution 1o. 8 was for T<%.*2 to pa+ andMor secure from the
proper authorities Lall fees andMor permits pertinent to the construction and operation
of the proposed pro(ect.L The government share demanded and collected from the gross
income of T<%.*2 from its arrastre and stevedoring activities in T<%.*2Ks wholl+
owned port is certainl+ not a fee or in an+ event a proper condition in a regulator+
permit. @ather it is an onerous Lcontractual stipulationL which finds no root or 'asis or
reference even in the contract aforementioned.
Page | 371
MEN0O:A 5s. CO$R# OF APPEALS
-u.e 5, !!1

FAC#S8
Petitioner Danilo D. Mendo>a is engaged in the domestic and international
trading of raw materials and chemicals. He operates under the 'usiness name .tlantic
<:change Philippines A.tlanticB, a single proprietorship registered with the Department
of Trade and &ndustr+ ADT&B. *ometime in 1/8H he was granted '+ respondent
Philippine 1ational Ban$ AP1BB a %ive Hundred Thousand Pesos AP!00,000.00B credit
line and a ne Million Pesos AP1,000,000.00B #etter of 2reditMTrust @eceipt A#2MT@B
line.
.s securit+ for the credit accommodations and for those which ma+ thereinafter
'e granted, petitioner mortgaged to respondent P1B the following: 1B three A0B parcels
of land with improvements in %. Pasco .venue, *antolan, PasigJ )B his house and lot in
?ue>on 2it+J and 0B several pieces of machiner+ and e4uipment in his Pasig coco6
chemical plant.
Petitioner e:ecuted in favor of respondent P1B three A0B promissor+ notes
covering the %ive Hundred Thousand Pesos AP!00,000.00B credit line, one dated March
H, 1/8/ for Three Hundred Ten Thousand Pesos AP010,000.00BJ another dated March
00, 1/8/ for %ort+ Thousand Pesos APF0,000.00BJ and the last dated *eptem'er )8, 1/8/
for ne Hundred %ift+ Thousand Pesos AP1!0,000.00B.
Petitioner made use of his #2MT@ line to purchase raw materials from foreign
importers. He signed a total of eleven A11B documents denominated as L.pplication and
.greement for 2ommercial #etter of 2redit,L on various dates
&n a letter dated =anuar+ 0, 1/H0 and signed '+ Branch Manager %il *. 2arreon
=r., respondent P1B advised petitioner Mendo>a that effective Decem'er 1, 1/8/, the
'an$ raised its interest rates to 1FE per annum, in line with 2entral Ban$Ks Monetar+
Board @esolution 1o. )1)" dated 1ovem'er )/, 1/8/.
n March /, 1/H1, he wrote a letter to respondent P1B re4uesting for the
restructuring of his past due accounts into a five6+ear term loan and for an additional
#2MT@ line of Two Million Pesos AP),000,000.00B. .ccording to the letter, 'ecause of
the shut6down of his end6user companies and the huge amount spent for the e:pansion
Page | 372
of his 'usiness, petitioner failed to pa+ to respondent 'an$ his #2MT@ accounts as the+
'ecame due and demanda'le.
2eferino D. 2ura, Branch Manager of P1B Mandalu+ong replied on 'ehalf of the
respondent 'an$ and re4uired petitioner to su'mit the following documents 'efore the
'an$ would act on his re4uest: 1B .udited %inancial *tatements for 1/8/ and 1/H0J )B
Pro(ected cash flow Acash in 6 cash outB for five A!B +ears detailed +earl+J and 0B #ist of
additional machiner+ and e4uipment and proof of ownership thereof. 2ura also
suggested that petitioner reduce his total loan o'ligations to Three Million Pesos
AP0,000,000.00B.
n *eptem'er )!, 1/H1, petitioner sent another letter addressed to P1B Cice6
President =ose *alvador, regarding his re4uest for restructuring of his loans. He offered
respondent P1B the following proposals: 1B the disposal of some of the mortgaged
properties, more particularl+, his house and lot and a vacant lot in order to pa+ the
overdue trust receiptsJ )B capitali>ation and conversion of the 'alance into a !6+ear term
loan pa+a'le semi6annuall+ or on annual installmentsJ 0B a new Two Million Pesos
AP),000,000.00B #2MT@ line in order to ena'le .tlantic <:change Philippines to
operate at full capacit+J FB assignment of all his receiva'les to P1B from all domestic
and e:port sales generated '+ the #2MT@ lineJ and !B maintenance of the e:isting %ive
Hundred Thousand Pesos AP!00,000.00B credit line.
The petitioner testified that respondent P1B Mandalu+ong Branch found his
proposal favora'le and recommended the implementation of the agreement. However,
%ernando Maramag, P1B <:ecutive Cice6President, disapproved the proposed release of
the mortgaged properties and reduced the proposed new #2MT@ line to ne Million
Pesos AP1,000,000.00B. Petitioner claimed he was forced to agree to these changes and
that he was re4uired to su'mit a new formal proposal and to sign two A)B 'lan$
promissor+ notes.
&n a letter dated =ul+ ), 1/H), petitioner offered the following revised proposals to
respondent 'an$: 1B the restructuring of past due accounts including interests and
penalties into a !6+ear term loan, pa+a'le semi6annuall+ with one +ear grace period on
the principalJ )B pa+ment of %our Hundred Thousand Pesos APF00,000.00B upon the
approval of the proposalJ 0B reduction of penalt+ from 0E to 1EJ FB capitali>ation of the
interest component with interest rate at 1"E per annumJ !B esta'lishment of a ne
Million Pesos AP1,000,000.00B #2MT@ line against the mortgaged propertiesJ "B
assignment of all his e:port proceeds to respondent 'an$ to guarantee pa+ment of his
Petitioner failed to pa+ the su'(ect two A)B Promissor+ 1otes 1os. 1)8MH) and
1)HMH) as the+ fell due. @espondent P1B e:tra6(udiciall+ foreclosed the real and
chattel mortgages, and the mortgaged properties were sold at pu'lic auction to
respondent P1B, as highest 'idder, for a total of Three Million *even Hundred 1inet+
<ight Thousand *even Hundred 1ineteen Pesos and %ift+ 2entavos AP0,8/H,81/.!0B.
The petitioner filed a complaint for specific performance, nullification of the
e:tra6(udicial foreclosure and damages against respondents P1B. He alleged that the
Page | 373
<:tra(udicial %oreclosure *ale of the mortgaged properties was null and void since his
loans were restructured to a five6+ear term loanJ hence, it was not +et due and
demanda'le. n March 1", 1//), the trial court rendered (udgment in favor of the
petitioner and ordered the nullification of the e:tra(udicial foreclosure of the real estate
mortgage, the *heriff9s sale of the mortgaged real properties '+ virtue of consolidation
thereof and the cancellation of the new titles issued to P1BJ that P1B vacate the su'(ect
premises in Pasig and turn the same over to the petitionerJ and also the nullification of
the e:tra(udicial foreclosure and sheriffKs sale of the mortgaged chattels, and that the
chattels 'e returned to petitioner Mendo>a if the+ were removed from his Pasig
premises or 'e paid for if the+ were lost or rendered unservicea'le.
The trial court decided for the petitioner. Dpon appeal, the 2ourt of .ppeals
reversed the decision of the trial court and dismissed the complaint.
ISS$E8
,hether or not respondent promised to 'e 'ound '+ the proposal of the
petitioner for a five6+ear restructuring of his overdue loan.
R$LING8
1o. @espondent 2ourt of .ppeals held that there is no evidence of a promise
from respondent P1B, admittedl+ a 'an$ing corporation, that it had accepted the
proposals of the petitioner to have a five6+ear restructuring of his overdue loan
o'ligations. &t found and held, on the 'asis of the evidence adduced, that LappelleeKs
AMendo>aB communications were mere proposals while the 'an$Ks responses were not
categorical that the appelleeKs re4uest had 'een favora'l+ accepted '+ the 'an$.L
1owhere in those letters presented '+ the petitioner is there a categorical
statement that respondent P1B had approved the petitioner9s proposed five6+ear
restructuring plan. &t is stretching the imagination to construe them as evidence that his
proposed five6+ear restructuring plan has 'een approved '+ the respondent P1B which
is admittedl+ a 'an$ing corporation. nl+ an a'solute and un4ualified acceptance of a
definite offer manifests the consent necessar+ to perfect a contract. &f an+thing, those
correspondences onl+ prove that the parties had not gone 'e+ond the preparation stage,
which is the period from the start of the negotiations until the moment (ust 'efore the
agreement of the parties.
The doctrine of promissor+ estoppel is an e:ception to the general rule that a
promise of future conduct does not constitute an estoppel. &n some (urisdictions, in
order to ma$e out a claim of promissor+ estoppel, a part+ 'ears the 'urden of
esta'lishing the following elements: A1B a promise reasona'l+ e:pected to induce action
or fore'earanceJ A)B such promise did in fact induce such action or fore'earance, and A0B
the part+ suffered detriment as a result.
&t is clear from the forgoing that the doctrine of promissor+ estoppel presupposes
the e:istence of a promise on the part of one against whom estoppel is claimed. The
Page | 374
promise must 'e plain and unam'iguous and sufficientl+ specific so that the =udiciar+
can understand the o'ligation assumed and enforce the promise according to its terms.
%or petitioner to claim that respondent P1B is estopped to den+ the five6+ear
restructuring plan, he must first prove that respondent P1B had promised to approve
the plan in e:change for the su'mission of the proposal. .s discussed earlier, no such
promise was proven, therefore, the doctrine does not appl+ to the case at 'ar. . cause of
action for promissor+ estoppel does not lie where an alleged oral promise was
conditional, so that reliance upon it was not reasona'le. &t does not operate to create
lia'ilit+ where it does not otherwise e:ist.

RO%LE## IN0$S#RIAL CONS#R$C#ION CORPORA#ION
5s. CO$R# OF APPEALS
66 SCRA 71
FAC#S8
Page | 375
n )0 *eptem'er 1/H" respondent 2ontractors <4uipment 2orporation A2<2B
instituted an action for a sum of mone+ against petitioner @o'lett &ndustrial
2onstruction 2orporation A@&22B 'efore the @egional Trial 2ourt of Ma$ati alleging that
in 1/H! it leased to the latter various construction e4uipment which it used in its
pro(ects. .s a result @&22 incurred unpaid accounts amounting to P0F),/0/.0H.
n 1/ Decem'er 1/H! @&22 through its .ssistant Cice President for %inance
2andelario *. .ller =r. entered into an .greement with 2<2 where it confirmed
petitionerKs account. .s an off6setting arrangement respondent received from petitioner
construction materials worth P11!,000.00 thus reducing petitionerKs 'alance to
P))8,/0/.0H.
. da+ 'efore the e:ecution of their .greement, or on 1H Decem'er 1/H!, @&22
paid 2<2 P10,000.00 in postdated chec$s which when deposited were dishonored. .s a
conse4uence the latter de'ited the amount to petitionerKs account of P))8,/0/.0H thus
increasing its 'alance to P)08,/0/.0H.
n )F =ul+ 1/H" Mariano @. Manaligod, =r., 7eneral Manager of 2<2, sent a
letter of demand to petitioner through its Cice President for %inance regarding the
latterKs overdue account of P)08,/0/.0H and sought settlement thereof on or 'efore 01
=ul+ 1/H". &n repl+, petitioner re4uested for thirt+ A00B da+s to have enough time to loo$
for funds to su'stantiall+ settle its account.
Traversing the allegations of respondent, 2andelario *. .ller =r. declared that he
signed the .greement with the real intention of having proof of pa+ment. &n fact
Balta>ar Banlot, Cice President for %inance of petitioner, claimed that after deli'eration
and audit it appeared that petitioner overpaid respondent '+ P1),000.00 on the 'asis of
the latterKs <4uipment Dail+ Time @eports for ) Ma+ to 1F =une 1/H! which reflected a
total o'ligation of onl+ P100,000.00. He claimed however that the .greement was not
approved '+ the Board and that he did not authori>e .ller =r. to sign thereon.
n re'uttal, Manaligod =r. declared that petitioner had received a statement of
account covering the period from )H March to 1) =ul+ 1/H! in the amount of
P08",0!0.1H which it never 4uestioned. %rom this amount P0,FF0.H0, 'ased on
respondentKs account with petitioner and P00,000.00, representing pa+ments made '+
the latter, were deducted thus leaving a 'alance of P0F),/0/.0H as mentioned in the
.greement. n 1/ Decem'er 1//0 the trial court rendered (udgment ordering petitioner
to pa+ respondent

ISS$E8
,hether or not the agreement 'etween the parties is 'inding upon them.

Page | 376
R$LING8
-es. &t must 'e emphasi>ed that the same agreement was used '+ plaintiff as the
'asis for claiming defendantKs o'ligation of P)08,/0/.0H and also used '+ defendant as
the same 'asis for its alleged pa+ment in full of its o'ligation to plaintiff. But while
plaintiff treats the entire agreement as valid, defendant wants the court to treat that
portion which treats of the offsetting of P11!,000.00 as valid, whereas it considers the
other terms and conditions as Lonerous, illegal and want of prior consent and Board
approval.L This 2ourt cannot agree to defendantKs contention. &t must 'e stressed that
defendantKs answer was not made under oath, and therefore, the genuineness and due
e:ecution of the agreement which was the 'asis for plaintiffKs claim is deemed admitted
A*ection H, @ule H, @ules of 2ourtB. *uch admission, under the principle of estoppel, is
rendered conclusive upon defendant and cannot 'e denied or disproved as against
plaintiff A.rt. 1F01, 2ivil 2odeB. <ither the agreement is valid or void. &t must 'e treated
as a whole and not to 'e divided into parts and consider onl+ those provisions which
favor one part+ Ain this case the defendantB. 2ontracts must 'ind 'oth contracting
parties, its validit+ or compliance cannot 'e left to the will of one of them A.rt. 100H,
1ew 2ivil 2odeB.

Page | 377
ME#RO%AN4 5s. CA%IL:O
!10 *2@. )!/
FAC#S8
n 1) 1ovem'er 1//F, 2a'il>o issued a Metro'an$ 2hec$ 1o. /H!/HH, pa+a'le to
32.*H5 and postdated on )F 1ovem'er 1//F in the amount of ne Thousand Pesos AP1,
000.00B. The chec$ was drawn against 2a'il>o9s .ccount with Metro'an$ Pasong Tamo
Branch under 2urrent .ccount 1o. "1H0FFH8060 and was paid '+ 2a'il>o to a certain
Mr. Mar4ue>, as his sales commission. *u'se4uentl+, the chec$ was presented to
,estmont Ban$ for pa+ment. ,estmont Ban$, in turn, indorsed the chec$ to
Metro'an$ for appropriate clearing. .fter the entries thereon were e:amined, including
the availa'ilit+ of funds and the authenticit+ of the signature of the drawer, Metro'an$
cleared the chec$ for encashment in accordance with the Philippine 2learing House
2orporation AP2H2B @ules.
n 1" 1ovem'er 1//F, 2a'il>o9s representative was at Metro'an$ Pasong Tamo
Branch to ma$e some transaction when he was as$ed '+ 'an$ personnel if 2a'il>o had
issued a chec$ in the amount of P/1, 000.00 to which the former replied in the negative.
n the afternoon of the same date, 2a'il>o himself called Metro'an$ to reiterate that he
did not issue a chec$ in the amount of P/1, 000.00 and re4uested that the 4uestioned
chec$ 'e returned to him for verification, to which Metro'an$ complied. Dpon receipt
of the chec$, 2a'il>o discovered that Metro'an$ 2hec$ 1o. /H!/HH which he issued on
1) 1ovem'er 1//F in the amount of P1, 000.00 was altered to P/1, 000.00 and the date
)F 1ovem'er 1//F was changed to 1F 1ovem'er 1//F.Hence, 2a'il>o demanded that
Metro'an$ re6credit the amount of P/1, 000.00 to his account. Metro'an$, however,
refused reasoning that it has to refer the matter first to its #egal Division for appropriate
action. @epeated ver'al demands followed 'ut Metro'an$ still failed to re6credit the
amount of P/1, 000.00 to 2a'il>o9s account
n 00 =une 1//!, 2a'il>o, thru counsel, finall+ sent a letter6demand to Metro'an$
for the pa+ment of P/0, 000.00, after deducting the original value of the chec$ in the
amount of P1, 000.00. *uch written demand notwithstanding, Metro'an$ still failed or
Page | 378
refused to compl+ with its o'ligation. 2onse4uentl+, 2a'il>o instituted a civil action for
damages against Metro'an$ 'efore the @T2 of Manila, Branch 10. &n his 2omplaint
doc$eted as 2ivil 2ase 1o. /!68!"!1, @enato D. 2a'il>o v. Metropolitan Ban$ and Trust
2ompan+, 2a'il>o pra+ed that in addition to his claim for reim'ursement, actual and
moral damages plus costs of the suit 'e awarded in his favor.
ISS$E8
,hether e4uita'le estoppel can 'e appreciated in favor of petitioner
3EL08
The degree of diligence re4uired of a reasona'le man in the e:ercise of his tas$s
and the performance of his duties has 'een faithfull+ complied with '+ 2a'il>o. &n fact,
he was war+ enough that he filled with asteris$s the spaces 'etween and after the
amounts, not onl+ those stated in words, 'ut also those in numerical figures, in order to
prevent an+ fraudulent insertion, 'ut unfortunatel+, the chec$ was still successfull+
altered, indorsed '+ the collecting 'an$, and cleared '+ the drawee 'an$, and encashed
'+ the perpetrator of the fraud, to the damage and pre(udice of 2a'il>o.
Metro'an$ cannot lightl+ impute that 2a'il>o was negligent and is therefore
prevented from asserting his rights under the doctrine of e4uita'le estoppel when the
facts on record are 'are of evidence to support such conclusion. The doctrine of
e4uita'le estoppel states that when one of the two innocent persons, each guiltless of
an+ intentional or moral wrong, must suffer a loss, it must 'e 'orne '+ the one whose
erroneous conduct, either '+ omission or commission, was the cause of in(ur+.
Metro'an$9s reliance on this dictum is misplaced. %or one, Metro'an$9s representation
that it is an innocent part+ is flims+ and evidentl+, misleading. .t the same time,
Metro'an$ cannot asseverate that 2a'il>o was negligent and this negligence was the
pro:imate cause of the loss in the a'sence of even a scintilla proof to 'uttress such
claim. 1egligence is not presumed 'ut must 'e proven '+ the one who alleges it, which
petitioner failed to.
Page | 379
MESINA 5s. GARCIA
!0/ *2@. F01
FAC#S8
.tt+. Honorio Calisno 7arcia and %elicisima Mesina, during their lifetime, or on
)" .pril 1/88, to 'e e:act entered into a 2ontract to *ell over a lot consisting of )0!
s4uare meters, situated at Diversion @oad, *angitan, 2a'anatuan 2it+, covered and
em'raced '+ T2T 1o. T601"F0 in the name of %elicisima Mesina which title was
eventuall+ cancelled and T2T 1o. T68HHH1 was issued in the name of herein
petitioners. .tt+. Honorio Calisno 7arcia is the deceased hus'and of Nherein respondent
7loria 2. 7arciaO while the late %elicisima Mesina is the mother of Danilo, *imeon, and
Melanie, all surnamed Mesina.
Page | 380
The 2ontract to sell provides that the cost of the lot is P80.00 per s4uare
meter for a total amount of P1", F!0.00J pa+a'le within a period not to e:ceed seven A8B
+ears at an interest rate of 1)E per annum, in successive monthl+ installments of
P)"0.H! per month, starting Ma+ 1/88. Thereafter, the succeeding monthl+
installments are to 'e paid within the first wee$ of ever+ month, at the residence of the
vendor at ?ue>on 2it+, with all unpaid monthl+ installments earning an interest of one
percent A1EB per month.
The 2ontract also stipulated, among others, that: *hould the spouses 7arcia fail
to pa+ five A!B successive monthl+ installments, %elicisima Mesina shall have a right to
rescind the 2ontract to *ell. .ll paid installments to 'e recomputed as rental for usage
of lot shall 'e at the rate of P100.00 a month and that %elicisima Mesina shall have the
further option to return the downpa+ment plus whatever 'alance spouses 7arcia paid,
there'+ rescinding the 2ontract to *ell. Dpon rescission of the 2ontract to sell,
spouses 7arcia agree to remove all the improvements 'uilt on the lot within three A0B
months from rescission of this contract, spouses 7arcia shouldering all e:penses of said
removal.
&nstituting this case at 'ar, respondent asserts that despite the full pa+ment made
on %e'ruar+ 8, 1/HF for the consideration of the su'(ect lot, petitioners refused to issue
the necessar+ Deed of *ale to effect the transfer of the propert+ to her
ISS$ES8
,hether respondent9s cause of action had alread+ prescri'ed
,hether petitioners are in estoppel
3EL08
&n the case at 'ar, as pointed out '+ the 2ourt of .ppeals, the right of action of
the respondent accrued on the date that the full and final pa+ment of the contract price
was made. .ccordingl+, as the full pa+ment of the purchase price on the su'(ect
2ontract to *ell had 'een effected on 8 %e'ruar+ 1/HF thus, respondent had from said
date until %e'ruar+ 8, 1//F within which to 'ring an action to enforce the written
contract, the 2ontract to *ell. &t was then the contention of the petitioners that when
the respondent instituted her 2omplaint for *pecific Performance with Damages on )0
=anuar+ 1//8, the same had alread+ 'een 'arred '+ prescription. The contention of the
petitioners is untena'le. .rticle 11!! of the 2ivil 2ode is e:plicit that the prescriptive
period is interrupted when an action has 'een filed in courtJ when there is a written
e:tra(udicial demand made '+ the creditorsJ and when there is an+ written
ac$nowledgment of the de't '+ the de'tor. Hence the action has not +et prescri'ed.
,ith respect to the issue on estoppel, this 2ourt, upon reviewing the records of
the case at 'ar, finds no reason to overturn the findings of the appellate court that,
indeed, petitioners are estopped from avowing that the+ never had $nowledge as to the
acceptance of the dela+ed pa+ments made '+ the respondent, and that the+ never
Page | 381
induced respondent to 'elieve that she had validl+ effected full pa+ment. <vidence on
record show that petitioners can no longer den+ having accepted the late pa+ments
made '+ the respondent 'ecause in a letter dated .pril 10, 1/H" sent to petitioner
*imeon Mesina '+ <ngineer Danilo .ngeles, who is the hus'and of petitioners9
authori>ed collection agent .ngelina .ngeles, he told petitioner *imeon Mesina that the
title and the Deed of *ale were 'oth read+ for their signature, and respondent was
willing and read+ to pa+ for the e:cess area. Hence, if petitioners did not accept the late
pa+ments of the respondent, and if the+ did not consider such as full pa+ment of the
purchase price on the su'(ect propert+ as the+ claimed it to 'e, the title as well as the
Deed of *ale could not have 'een prepared for their signature. &n the same wa+,
respondent could not have sent a demand letter to as$ for the e:ecution of those
documents had the+ not 'een induced to 'elieve that the late pa+ments were validl+
accepted and that the purchase price had alread+ 'een paid in full. There were
statements, which were made under oath, which made it cr+stal clear that the late
pa+ments were accepted '+ the petitioners, and that the pa+ments corresponded to the
purchase value of the su'(ect propert+J therefore, petitioners cannot den+ the fact that
the full pa+ment of the purchase value of the lot in 4uestion had in fact 'een made '+
the respondent.
Page | 382
PA3AMO#ANG VS. PN%
G.R. No. 1564!', Mar1< 1, !!5
FAC#S8
n =ul+ 1, 1/8), Melitona Pahamotang died. *he was survived '+ her hus'and
.gustin Pahamotang, and their eight AHB children, namel+: .na, 7enoveva, &sa'elita,
2ora>on, *usana, 2oncepcion and herein petitioners =osephine and <leonor, all
surnamed Pahamotang. n *eptem'er 1!, 1/8), .gustin filed with the then 2ourt of
%irst &nstance of Davao 2it+ a petition for issuance of letters administration over the
estate of his deceased wife. The petition, doc$eted as *pecial 2ase 1o. 18/), was raffled
to Branch C& of said court, hereinafter referred to as the intestate court. &n his petition,
.gustin identified petitioners =osephine and <leonor as among the heirs of his deceased
spouse. &t appears that .gustin was appointed petitionersK (udicial guardian in an
earlier case 6 *pecial 2ivil 2ase 1o. 18H! I also of the 2%& of Davao 2it+, Branch C&. n
Decem'er 8, 1/8), the intestate court issued an order granting .gustin9s petition.
The late .gustin then e:ecuted several mortgages and later sale of the properties
with the P1B and .rguna respectivel+. The heirs later 4uestioned the validit+ of the
transactions pre(udicial to them. The trial court declared the real estate mortgage and
the sale void 'ut 'oth were valid with respect to the other parties. The decision was
reversed '+ the 2ourt of .ppealsJ to the appellate court, petitioners committed a fatal
error of mounting a collateral attac$ on the foregoing orders instead of initiating a direct
action to annul them.
ISS$E8
,hether the 2ourt of .ppeals erred in reversing the decision of the trial court
R$LING8
&n the present case, the appellate court erred in appreciating laches against
petitioners. The element of dela+ in 4uestioning the su'(ect orders of the intestate court
is sorel+ lac$ing. Petitioners were totall+ unaware of the plan of .gustin to mortgage
and sell the estate properties. There is no indication that mortgagor P1B and vendee
.rguna had notified petitioners of the contracts the+ had e:ecuted with .gustin.
.lthough petitioners finall+ o'tained $nowledge of the su'(ect petitions filed '+
their father, and eventuall+ challenged the =ul+ 1H, 1/80, cto'er 1/, 1/8F, %e'ruar+ )!,
Page | 383
1/H0 and =anuar+ 8, 1/H1 orders of the intestate court, it is not clear from the
challenged decision of the appellate court when the+ ApetitionersB actuall+ learned of
the e:istence of said orders of the intestate court. .'sent an+ indication of the point
in time when petitioners ac4uired $nowledge of those orders, their alleged dela+ in
impugning the validit+ thereof certainl+ cannot 'e esta'lished. .nd the 2ourt of .ppeals
cannot simpl+ impute laches against them.
S3OPPERMS PARA0ISE REAL#, @ 0EVELOPMEN# CORPORA#ION
5s. EFREN RO/$E
-a.uary 1', !!4
FAC#S8
n )0 Decem'er 1//0, petitioner *hopperKs Paradise @ealt+ P Development
2orporation, represented its president, Ceredigno .tien>a, entered into a twent+6five
+ear lease with Dr. %elipe 2. @o4ue, now deceased, over a parcel of land, Petitioner
issued to Dr. @o4ue a chec$ for P)!0,000.00 '+ wa+ of Lreservation pa+ment.L
*imultaneousl+, petitioner and Dr. @o4ue li$ewise entered into a memorandum of
agreement for the construction, development and operation of a commercial 'uilding
comple: on the propert+. 2onforma'l+ with the agreement, petitioner issued a chec$ for
another P)!0,000.00 Ldownpa+mentL to Dr. @o4ue.
The annotations, however, were never made 'ecause of the untimel+ demise of
Dr. %elipe 2. @o4ue. The death of Dr. @o4ue on 10 %e'ruar+ 1//F constrained petitioner
to deal with respondent <fren P. @o4ue, one of the surviving children of the late Dr.
@o4ue, 'ut the negotiations 'ro$e down due to some disagreements. &n a letter, dated 0
1ovem'er 1//F, respondent advised petitioner Lto desist from an+ attempt to enforce
the aforementioned contract of lease and memorandum of agreementL. n 1! %e'ruar+
1//!, respondent filed a case for annulment of the contract of lease and the
memorandum of agreement, with a pra+er for the issuance of a preliminar+ in(unction.
<fren P. @o4ue alleged that he had long 'een the a'solute owner of the su'(ect propert+
'+ virtue of a deed of donation inter vivos e:ecuted in his favor '+ his parents, Dr. %elipe
@o4ue and <lisa @o4ue, on )" Decem'er 1/8H, and that the late Dr. %elipe @o4ue had
no authorit+ to enter into the assailed agreements with petitioner. The donation was
made in a pu'lic instrument dul+ ac$nowledged '+ the donor6spouses 'efore a notar+
pu'lic and dul+ accepted on the same da+ '+ respondent 'efore the notar+ pu'lic in the
same instrument of donation. The title to the propert+, however, remained in the name
Page | 384
of Dr. %elipe 2. @o4ue, and it was onl+ transferred to and in the name of respondent
si:teen +ears later, or on 11 Ma+ 1//F, while he resided in the Dnited *tates of .merica,
delegated to his father the mere administration of the propert+. @espondent came to
$now of the assailed contracts with petitioner onl+ after retiring to the Philippines upon
the death of his father. n / .ugust 1//", the trial court dismissed the complaint of
respondentJ it e:plained:
rdinaril+, a deed of donation need not 'e registered in order to 'e valid 'etween
the parties. @egistration, however, is important in 'inding third persons. Thus, when
%elipe @o4ue entered into a lease contract with defendant corporation, plaintiff <fren
@o4ue AcouldB no longer assert the unregistered deed of donation and sa+ that his
father, %elipe, was no longer the owner of the su'(ect propert+ at the time the lease on
the su'(ect propert+ was agreed upon. LThe registration of the Deed of Donation after
the e:ecution of the lease contract did not affect the latter unless he had $nowledge
thereof at the time of the registration which plaintiff had not 'een a'le to esta'lish.
Plaintiff $new ver+ well of the e:istence of the lease. He, in fact, met with the officers of
the defendant corporation at least once 'efore he caused the registration of the deed of
donation in his favor and although the lease itself was not registered, it remains valid
considering that no third person is involved. Plaintiff cannot 'e the third person 'ecause
he is the successor6in6interest of his father, %elipe @o4ue, the lessor, and it is a rule that
contracts ta$e effect not onl+ 'etween the parties themselves 'ut also 'etween their
assigns and heirs A.rticle 1011, 2ivil 2odeB and therefore, the lease contract together
with the memorandum of agreement would 'e conclusive on plaintiff <fren @o4ue. He
is 'ound '+ the contract even if he did not participate therein. Moreover, the
agreements have 'een perfected and partiall+ e:ecuted '+ the receipt of his father of the
downpa+ment and deposit totaling to P!00,000.00.L The trial court ordered respondent
to surrender T2T 1o. 10/8!F to the @egister of Deeds of ?ue>on 2it+ for the annotation
of the 4uestioned 2ontract of #ease and Memorandum of .greement.
n appeal, the 2ourt of .ppeals reversed the decision of the trial court and held
to 'e invalid the 2ontract of #ease and Memorandum of .greement. ,hile it shared the
view e:pressed '+ the trial court that a deed of donation would have to 'e registered in
order to 'ind third persons, the appellate court, however, concluded that petitioner was
not a lessee in good faith having had prior $nowledge of the donation in favor of
respondent, and that such actual $nowledge had the effect of registration insofar as
petitioner was concerned. The appellate court 'ased its findings largel+ on the testimon+
of Ceredigno .tien>a during cross6e:amination.
ISS$E8
,hether or not the respondent is 'arred '+ laches and estoppel from den+ing the
contracts.
R$LING8
The 2ourt cannot accept petitionerKs argument that respondent is guilt+ of laches.
#aches, in its real sense, is the failure or neglect, for an unreasona'le and une:plained
Page | 385
length of time, to do that which, '+ e:ercising due diligence, could or should have 'een
done earlierJ it is negligence or omission to assert a right within a reasona'le time,
warranting a presumption that the part+ entitled to assert it either has a'andoned or
declined to assert it. @espondent learned of the contracts onl+ in %e'ruar+ 1//F after the
death of his father, and in the same +ear, during 1ovem'er, he assailed the validit+ of
the agreements. Hardl+, could respondent then 'e said to have neglected to assert his
case for an unreasona'le length of time.
1either is respondent estopped from repudiating the contracts. The essential
elements of estoppel in pais, in relation to the part+ sought to 'e estopped, are: 1B a clear
conduct amounting to false representation or concealment of material facts or, at least,
calculated to conve+ the impression that the facts are otherwise than, and inconsistent
with, those which the part+ su'se4uentl+ attempts to assertJ )B an intent or, at least, an
e:pectation, that this conduct shall influence, or 'e acted upon '+, the other part+J and
0B the $nowledge, actual or constructive, '+ him of the real facts. ,ith respect to the
part+ claiming the estoppel, the conditions he must satisf+ are: 1B lac$ of $nowledge or
of the means of $nowledge of the truth as to the facts in 4uestionJ )B reliance, in good
faith, upon the conduct or statements of the part+ to 'e estoppedJ and 0B action or
inaction 'ased thereon of such character as to change his position or status calculated to
cause him in(ur+ or pre(udice. 1) &t has not 'een shown that respondent intended to
conceal the actual facts concerning the propert+J more importantl+, petitioner has 'een
shown not to 'e totall+ unaware of the real ownership of the su'(ect propert+.
.ltogether, there is no cogent reason to reverse the 2ourt of .ppeals in its assailed
decision.

MEA#MAS#ER 5s. LELIS IN#EGRA#E0
45 SCRA 66
FAC#S8
n 1ovem'er 11, 1//0, petitioner Meatmasters &nternational 2orporation
engaged the services of respondent #elis &ntegrated Development 2orporation to
Page | 386
underta$e the construction of a slaughterhouse and meat cutting and pac$ing plant.
The 2onstruction .greement provided that the construction of petitioner9s
slaughterhouse should 'e completed '+ March 10, 1//F. @espondent failed to finish the
construction of the said facilit+ within the stipulated period, hence, petitioner filed a
complaint for rescission of contract and damages on .ugust /, 1//" 'efore the @egional
Trial 2ourt.
n 1ovem'er )0, 1//H, the trial court rendered decision @<*2&1D&17 the
2onstruction .greement 'etween plaintiff Meatmaster &nt9l. 2orp. and defendant #elis
&ntegrated Dev9t. 2orp. with 'oth parties shouldering their own respective damage.
. cop+ of the decision was received '+ the respondent on Decem'er /, 1//H. .
motion for reconsideration was filed '+ respondent on Decem'er )), 1//H, 'ut the same
was denied. . cop+ of the resolution den+ing the motion for reconsideration was
received on March )!, 1///. @espondent filed its notice of appeal on March )/, 1///.
&nitiall+, the trial court dismissed the appeal for failure of the respondent to pa+
the re4uisite doc$et fees within the reglementar+ period. Dpon motion '+ the
respondent however, the trial court reconsidered and gave due course to the notice of
appeal 'ecause respondent paid the doc$et fees.
&n a motion to dismiss filed 'efore the appellate court, the petitioner alleged that
respondent9s appeal suffers from (urisdictional infirmit+ 'ecause of late pa+ment of
doc$et fees.
2. set aside the decision of the trial court and directed petitioner to pa+
respondent the amount of P1,H"0,0H1.!0. Petitioner9s motion for reconsideration was
denied Hence, the instant petition.
ISS$E8
,hether or not the 2ourt of .ppeals erred in entertaining the appeal of
respondent despite the finalit+ of the trial court9s decision.
R$LING8
-es. &t is well6esta'lished that the pa+ment of doc$et fees within the prescri'ed
period is mandator+ for the perfection of an appeal. This is so 'ecause a court ac4uires
(urisdiction over the su'(ect matter of the action onl+ upon the pa+ment of the correct
amount of doc$et fees regardless of the actual date of filing of the case in court. The
pa+ment of the full amount of the doc$et fee is a sine 4ua non re4uirement for the
perfection of an appeal. The court ac4uires (urisdiction over the case onl+ upon the
pa+ment of the prescri'ed doc$et fees.
&n the case at 'ar, the respondent seasona'l+ filed the notice of appeal 'ut it paid the
doc$et fees one A1B month after the lapse of the appeal period. .s admitted '+ the
respondent, the last da+ for filing the notice of appeal was on March )/, 1///, 'ut it paid
Page | 387
the doc$et fees onl+ on .pril 00, 1/// 'ecause of oversight. 'viousl+, at the time the
said doc$et fees were paid, the decision appealed from has long attained finalit+ and no
longer appeala'le.
@espondent9s contention that the petitioner is now estopped from raising the
issue of late pa+ment of the doc$et fee 'ecause of his failure to assail promptl+ the trial
court9s order approving the notice of appeal and accepting the appeal fee, is untena'le.
<stoppel '+ laches arises from the negligence or omission to assert a right within a
reasona'le time, warranting a presumption that the part+ entitled to assert it either has
a'andoned or declined to assert it. &n the case at 'ar, petitioner raised at the first
instance the non6pa+ment of the doc$et fee in its motion for reconsideration 'efore the
trial court. Petitioner reiterated its o'(ection in the motion to dismiss 'efore the
appellate court and finall+, in the instant petition. Plainl+, petitioner cannot 'e faulted
for 'eing remiss in asserting its rights considering that it vigorousl+ registered a
persistent and consistent o'(ection to the 2ourt of .ppeals9 assumption of (urisdiction at
all stages of the proceedings.
Page | 388

MANIPOR 5s. RICAFOR#
4!7 SCRA +"
FAC#S8
@espondent spouses Pa'lo and .ntonia @icafort instituted an action for
annulment of Transfer of 2ertificate of Title in the name of spouses @enato and Teresita
Cillareal covering a )// s4.m. lot. The @icaforts alleged that the+ are co6owners of said
propert+ together with .'elardo, the father and predecessor of @enato as evidenced '+
an agreement where'+ .'elardo recogni>ed their ownership of \ portion of the lot.
@espondents also claim that, in violation of the agreement, .'elardo o'tained during
his lifetime riginal 2ertificate of Title over the lot without their $nowledge and
consent. ,hen .'elardo died in 1//0, @enato and Teresita transferred the title over the
land in their name and were issued a T2T.
&n the course of the proceedings, parties entered into a compromise settlement
wherein the Cillareals admitted the genuineness and due e:ecution of the agreement
'etween respondents and .'elardo. Hence, the+ agreed to ph+sicall+ divide the lot into
half. The+ also agreed to cause a relocation surve+ and the e:penses will 'e 'orne
e4uall+ '+ them.
The trial court approved the compromise agreement 'ut not long thereafter,
respondents filed a motion to cite the Cillareals in contempt of court for refusing to
compl+ with the terms of the agreement. <ventuall+, herein petitioners who are all
si'lings of @enato filed a motion for intervention and su'stitution of parties alleging
that spouses @enato and Teresita have waived their interest in the disputed lot in their
favor. Petitioners availed of various remedies onl+ to pursue the endeavor for the
annulment of the compromise (udgment. Most of them were denied until the+ resorted
to this review 'efore the *upreme 2ourt.
ISS$E8
Page | 389
,hether or not the petitioners are estopped from see$ing the annulment of the
compromise (udgment.
R$LING8
-es, note that in a *inumpaang *ala+sa+, petitioners admitted that the+
ac4uiesced to have the su'(ect lot donated and registered in @enato9s name. &n view of
such admission, petitioners are estopped from den+ing @enato9s a'solute title to the lot.
Dnder the principle of estoppel, an admission or representation is rendered conclusive
upon the person ma$ing it and cannot 'e denied against the person rel+ing thereon.
Ceril+, since petitioners admitted that the+ donated the lot to @enato, the+ cannot now
'e allowed to defeat respondent9s claim '+ convenientl+ asserting that the+ are co6
owners of the lot. therwise, respondents, who rightfull+ relied on the 2ertificate of
Title, would 'e pre(udiced '+ petitioner9s misleading conduct.
LARENA 5s. MAPILI
4!" SCRA 4"4
FAC#S8
Hipolito Mapili during his lifetime owned a parcel of unregistered land declared
for ta:ation purposes in his name. The propert+ had descended '+ succession from
Hipolito to his onl+ son Magno and on to the latter9s own widow and children. These
heirs, the herein respondents, too$ possession of the propert+ up to the out'rea$ of
,orld ,ar && when the+ evacuated to the hinterlands.
n the other hand, petitioner .4uilina #arena too$ possession of the propert+ in
the1/809s alleging that she had purchased it from her aunt A%ilomena #arenaB on
%e'ruar+ 18, 1/"H. %ilomena #arena in turn claimed to have 'ought it from Hipolito on
cto'er )H, 1/F/, as evidence '+ the .ffidavit of Transfer of @eal Propert+ e:ecuted on
the same date. The @egional Trial 2ourt, however, declared the said affidavit as
spurious 'ecause Hipolito was alread+ dead when the alleged transfer was made to
%ilomena #arena.
n appeal, the 2ourt of .ppeals declared that respondents had never lost their
right to the land in 4uestion as the+ were the heirs to whom the propert+ had descended
upon the death of the original claimant and possessor.
Page | 390
ISS$E8
,hether or not %ilomena #arena ac4uired the su'(ect propert+ '+ means of sale,
prescription, andMor laches.
R$LING8
1o, %ilomena did not ac4uire said propert+ '+ means of sale, prescription andMor
laches. %irst, the ta: declarations are not a conclusive evidence of ownership, 'ut a proof
that the holder has a claim of title over the propert+. &t is good indicia of possession in
the concept of owner. &t ma+ strengthen .4uilina9s 'ona fide claim of ac4uisition of
ownership. However, petitioners failed to present the evidence needed to tac$ the date
of possession on the propert+ in 4uestion.
*econd, ac4uisitive prescription is a mode of ac4uiring ownership '+ a possessor
through the re4uisite lapse of time. *ince the claims of purchase were unsu'stantiated,
petitioners9 acts of possessor+ character have 'een merel+ tolerated '+ the owner.
Hence, it did not constitute possession. Moreover, there is lac$ of (ust title on the part of
.4uilina and therefore, ordinar+ ac4uisitive prescription of ten A10B +ears as provided
under .rticle 110F of the 2ivil 2ode cannot 'e applied. Dnder .rticle 1108 of the 2ivil
2ode, the lapse of time re4uired for e:tra6ordinar+ ac4uisitive prescription is thirt+ A00B
+ears, and records show that the lapse of time was onl+ twent+6seven A)8B +earsZa
period that was short of three A0B +ears, when the complaint was filed.
%inall+, laches is a failure or neglect for an unreasona'le and une:plained length
of time to do that which could or should have 'een done earlier through the e:ercise of
due diligence. The filing '+ respondents of the complaint in 1/88 completel+ negates the
decision that the latter were negligent in asserting their claim.
SAN#OS 5s. SAN#OS
'66 SCRA '+5

FAC#S8
Petitioner Renaida M. *antos is the widow of *alvador *antos, a 'rother of
private respondents 2ali:to, .l'erto, .ntonio, all surnamed *antos and @osa *antos6
2arreon.
The spouses =esus and @osalia were the parents of the respondents and the
hus'and of the petitioner. The spouses owned a parcel of registered land with a four6
door apartment administered '+ @osalia who rented them out. n =anuar+ 1/, 1/!/, the
Page | 391
spouses e:ecuted a deed of sale of the properties in favor of their children *alvador and
@osa. @osa in turn sold her share to *alvador on 1ovem'er )0, 1/80, which resulted in
the issuance of new T2T. Despite the transfer of the propert+ to *alvador, @osalia
continued to lease and receive rentals from the apartment units.
n =anuar+ /, 1/H!, *alvador died, followed '+ @osalia who died the following
month. *hortl+ after, petitioner Renaida, claiming to 'e *alvador9s heir, demanded the
rent from .ntonio Hom're'ueno, a tenant of @osalia. ,hen the latter refused to pa+,
Renaida filed an e(ectment suit against him with the Metropolitan Trial 2ourt of Manila,
which eventuall+ decided in Renaida9s favor.
n =anuar+ !, 1/H/, private respondent instituted an action for reconve+ance of
propert+ with preliminar+ in(unction against petitioner in the @egional Trial 2ourt of
Manila, where the+ alleged that the two deeds of sale were simulated for lac$ of
consideration. The petitioner on the other hand denied the material allegations in the
complaint and that she further alleged that the respondents9 right to reconve+ance was
alread+ 'arred '+ prescription and laches considering the fact that from the date of sale
from @osa to *alvador up to his death, more or less twelve A1)B +ears had lapsed, and
from his death up to the filing of the case for reconve+ance, four AFB +ears has elapsed.
&n other words, it too$ respondents a'out si:teen A1"B +ears to file the case. Moreover,
petitioner argues that an action to annul a contract for lac$ of consideration prescri'es
in ten A10B +ears and even assuming that the cause of action has not prescri'ed,
respondents are guilt+ of laches for their inaction for a long period of time.
The trial court decided in favor of private respondents in as much as the deeds of
sale were fictitious, the action to assail the same does not prescri'e.
Dpon appeal, the 2ourt of .ppeals affirmed the trial court9s decision. &t held that
the su'(ect deeds of sale did not confer upon *alvador the ownership over the su'(ect
propert+, 'ecause even after the sale, the original vendors remained in dominion,
control, and possession thereof.
ISS$E8
,hether or not the cause of action of the respondents had prescri'ed andMor
'arred '+ laches.
R$LING8
1o, the cause of action '+ the respondents had not prescri'ed nor is it 'arred '+
laches.
%irst, the right to file an action for the reconve+ance of the su'(ect propert+ to the
estate of @osalia has not prescri'ed since deeds of sale were simulated and fictitious.
The complaint amounts to a declaration of nullit+ of a void contract, which is
imprescripti'le. Hence, respondents9 cause of action has not prescri'ed.
Page | 392
*econd, neither is their action 'arred '+ laches. The elements of laches are: 1B
conduct on the part of the defendant, or of one under whom he claims, giving rise to the
situation of which the complainant see$s a remed+J )B dela+ in asserting the
complainant9s rights, the complainant having $nowledge or notice of the defendant9s
conduct as having 'een afforded an opportunit+ to institute a suitJ 0B lac$ of $nowledge
or notice on the part of the defendant that the complainant would assert the right in
which he 'ases his suitJ and FB in(ur+ or pre(udice to the defendant in the event relief is
accorded to the complainant, or the suit is not held 'arred. These elements must all 'e
proved positivel+. The lapse of four AFB +ears is not an unreasona'le dela+ sufficient to
'ar respondent9s action. Moreover, the fourth AF
th
B element is lac$ing in this case. The
concept of laches is not concerned with the lapse of time 'ut onl+ with the effect of
unreasona'le lapse. The alleged si:teen A1"B +ears of respondents9 inaction has no
adverse effect on the petitioner to ma$e respondents guilt+ of laches.
Page | 393
VILLAN$EVA- MI-ARES E#. AL. 5s. CO$R# OF APPEALS
A(r)* 1, !!!
FAC#S8
%elipe Cillanueva left a 1!,00"6s4uare6meter parcel of land in Gali'o, 2api> to his
eight children: *implicio, Benito, #eon, <usta4uio, 2amila, %austa and Pedro. &n 1/!),
Pedro declared under his name 1M" portion of the propert+ A1,/0! s4. m.B. He held the
remaining properties in trust for his co6heirs who demanded the su'division of the
propert+ 'ut to no avail. .fter #eon9s death in 1/8), private respondents discovered that
the shares of *implicio, 1icolasa, %austa and Maria Balta>ar had 'een purchased '+
#eon through a deed of sale dated .ugust )!, 1/F" 'ut registered onl+ in 1/81. &n =ul+
1/80, #eon also sold and partitioned the propert+ in favor of petitioners, his children,
who thereafter secured separate and independent titles over their respective pro6
indiviso shares.
Private respondents, who are also descendants of %elipe, filed an action for
partition with annulment of documents andMor reconve+ance and damages against
petitioners. The+ contended that #eon fraudulentl+ o'tained the sale in his favor
through machinations and false pretenses. The @T2 declared that private respondents9
action had 'een 'arred '+ res (udicata and that petitioners are the 3legal owners of the
propert+ in 4uestion in accordance with the individual titles issued to them.
ISS$E8
,hether or not laches appl+ against the minor9s propert+ that was held in trust.
R$LING8
1o. .t the time of the signing of the Deed of *ale of .ugust )",1/FH, private
respondents Procerfina, Prosperedad, @amon and @osa were minors. The+ could not 'e
faulted for their failure to file a case to recover their inheritance from their uncle #eon,
since up to the age of ma(orit+, the+ 'elieved and considered #eon their co6heir
administrator. &t was onl+ in 1/8!, not in 1/FH, that the+ 'ecame aware of the actiona'le
'etra+al '+ their uncle. Dpon learning of their uncle9s actions, the+ filed for recover+.
Hence, the doctrine of stale demands formulated in Ti(am cannot 'e applied here. The+
did not sleep on their rights, contrar+ to petitioner9s assertion.
Page | 394
%urthermore, when %elipe Cillanueva died, an implied trust was created '+
operation of law 'etween %elipe9s children and #eon, their uncle, as far as the 1M" share
of %elipe. #eon9s fraudulent titling of %elipe9s 1M" share was a 'etra+al of that implied
trust.
#OLEN#INO 5s. SECRE#AR,
'5 SCRA 6'!

FAC#S8
The valued6added ta: AC.TB is levied on the sale, 'arter or e:change of goods and
properties as well as on the sale or e:change of services. &t is e4uivalent to 10E of the
gross selling price or gross value in mone+ of goods or properties sold, 'artered or
e:changed or of the gross receipts from the sale or e:change of services. @epu'lic .ct
1o. 881" see$s to widen the ta: 'ase of the e:isting C.T s+stem and enhance its
administration '+ amending the 1ational &nternal @evenue 2ode. The petitioners
challenge the constitutionalit+ of @epu'lic .ct 1o. 881" on various grounds.
ISS$E8
,hether or not the imposition of Cat violates the non6impairment clause.
R$LING8
nl+ slightl+ less a'stract 'ut nonetheless h+pothetical is the contention of
2@<B. that the imposition of the C.T on the sales and leases of real estate '+ virtue of
contracts entered into prior to the effectivit+ of the law would violate the constitutional
provision that L1o law impairing the o'ligation of contracts shall 'e passed.L &t is
enough to sa+ that the parties to a contract cannot, through the e:ercise of prophetic
discernment, fetter the e:ercise of the ta:ing power of the *tate. %or not onl+ are
e:isting laws read into contracts in order to fi: o'ligations as 'etween parties, 'ut the
reservation of essential attri'utes of sovereign power is also read into contracts as a
'asic postulate of the legal order. The polic+ of protecting contracts against impairment
Page | 395
presupposes the maintenance of a government which retains ade4uate authorit+ to
secure the peace and good order of societ+.
0$NCAN ASSOCIA#ION OF 0E#AILMAN P#G9 5s. GLA>O9ELLCOM
P3ILIPPINES
7.@. 1o. 1")//F, *eptem'er 18, )00F

FAC#S8
Petitioner Pedro .. Tecson ATecsonB was hired '+ respondent 7la:o ,ellcome
Philippines, &nc. A7la:oB as medical representative on cto'er )F, 1//!, after Tecson
had undergone training and orientation. Thereafter, Tecson signed a contract of
emplo+ment which stipulates, among others, that he agrees to stud+ and a'ide '+
e:isting compan+ rulesJ to disclose to management an+ e:isting or future relationship '+
consanguinit+ or affinit+ with co6emplo+ees or emplo+ees of competing drug companies
and should management find that such relationship poses a possi'le conflict of interest,
to resign from the compan+.
The <mplo+ee 2ode of 2onduct of 7la:o similarl+ provides that an emplo+ee is
e:pected to inform management of an+ e:isting or future relationship '+ consanguinit+
Page | 396
or affinit+ with co6emplo+ees or emplo+ees of competing drug companies. &f
management perceives a conflict of interest or a potential conflict 'etween such
relationship and the emplo+ee9s emplo+ment with the compan+, the management and
the emplo+ee will e:plore the possi'ilit+ of a 3transfer to another department in a non6
counterchec$ing position5 or preparation for emplo+ment outside the compan+ after si:
months. Tecson was initiall+ assigned to mar$et 7la:o9s products in the 2amarines *ur6
2amarines 1orte sales area. *u'se4uentl+, Tecson entered into a romantic relationship
with Betts+, an emplo+ee of .stra Pharmaceuticals A.straB, a competitor of 7la:o.
Betts+ was .stra9s Branch 2oordinator in .l'a+. *he supervised the district managers
and medical representatives of her compan+ and prepared mar$eting strategies for
.stra in that area.
<ven 'efore the+ got married, Tecson received several reminders from his District
Manager regarding the conflict of interest which his relationship with Betts+ might
engender. *till, Tec son married Betts+ in *eptem'er 1//H. Tecson was later reassigned
at Butuan6*urigao6.gusan area to prevent conflict of interest 'ut he refused and argued
that he was constructivel+ dismissed.
&**D<:
,hether the 2ourt of .ppeals erred in ruling that 7la:o9s polic+ against its
emplo+ees marr+ing emplo+ees from competitor companies is valid
H<#D:
7la:o has a right to guard its trade secrets, manufacturing formulas, mar$eting
strategies and other confidential programs and information from competitors, especiall+
so that it and .stra are rival companies in the highl+ competitive pharmaceutical
industr+. The prohi'ition against personal or marital relationships with emplo+ees of
competitor companies upon 7la:o9s emplo+ees is reasona'le under the circumstances
'ecause relationships of that nature might compromise the interests of the compan+. &n
la+ing down the assailed compan+ polic+, 7la:o onl+ aims to protect its interests against
the possi'ilit+ that a competitor compan+ will gain access to its secrets and procedures.
That 7la:o possesses the right to protect its economic interests cannot 'e denied.
1o less than the 2onstitution recogni>es the right of enterprises to adopt and enforce
such a polic+ to protect its right to reasona'le returns on investments and to e:pansion
and growth. &ndeed, while our laws endeavor to give life to the constitutional polic+ on
social (ustice and the protection of la'or, it does not mean that ever+ la'or dispute will
'e decided in favor of the wor$ers. The law also recogni>es that management has rights
which are also entitled to respect and enforcement in the interest of fair pla+.
&n this case, there were notices and advises given to the petitioner regarding his
romantic relationship to his marriage regarding the conflict of interest.
Hence the petition was denied.

Page | 397
Page | 398
S#AR PAPER 5s. SIM%OL
FH8 *2@. ))H
FAC#S8
Petitioner was the emplo+er of the respondents. Dnder the polic+ of *tar Paper
the emplo+ees are:
1. 1ew applicants will not 'e allowed to 'e hired if in case heMshe has a relative, up to
the 0rd degree of relationship, alread+ emplo+ed '+ the compan+.
). &n case of two of our emplo+ees Asingles, one male and another femaleB developed a
friendl+ relationship during the course of their emplo+ment and then decided to get
married, one of them should resign to preserve the polic+ stated a'ove.
@espondents 2omia and *im'ol 'oth got married to their fellow emplo+ees.
<strella on the other hand had a relationship with a co6emplo+ee resulting to her
pregnanc+ on the 'elief that such was separated. The respondents allege that the+ were
forced to resign as a result of the implementation of the said assailed compan+ polic+.
The #a'or .r'iter and the 1#@2 ruled in favor of petitioner. The decision was
appealed to the 2ourt of .ppeals which reversed the decision.
ISS$E8
,hether the prohi'ition to marr+ in the contract of emplo+ment is valid
3EL08
&t is significant to note that in the case at 'ar, respondents were hired after the+
were found fit for the (o', 'ut were as$ed to resign when the+ married a co6emplo+ee.
Petitioners failed to show how the marriage of *im'ol, then a *heeting Machine
perator, to .lma Da+rit, then an emplo+ee of the @epac$ing *ection, could 'e
detrimental to its 'usiness operations. 1either did petitioners e:plain how this
detriment will happen in the case of ,ilfreda 2omia, then a Production Helper in the
*electing Department, who married Howard 2omia, then a helper in the cutter6
machine. The polic+ is premised on the mere fear that emplo+ees married to each other
will 'e less efficient. &f we uphold the 4uestioned rule without valid (ustification, the
emplo+er can create policies 'ased on an unproven presumption of a perceived danger
at the e:pense of an emplo+ee9s right to securit+ of tenure.
Petitioners contend that their polic+ will appl+ onl+ when one emplo+ee marries a
co6emplo+ee, 'ut the+ are free to marr+ persons other than co6emplo+ees. The
4uestioned polic+ ma+ not faciall+ violate .rticle 10" of the #a'or 2ode 'ut it creates a
Page | 399
disproportionate effect and under the disparate impact theor+, the onl+ wa+ it could
pass (udicial scrutin+ is a showing that it is reasona'le despite the discriminator+, al'eit
disproportionate, effect. The failure of petitioners to prove a legitimate 'usiness concern
in imposing the 4uestioned polic+ cannot pre(udice the emplo+ee9s right to 'e free from
ar'itrar+ discrimination 'ased upon stereot+pes of married persons wor$ing together in
one compan+.
#astl+, the a'sence of a statute e:pressl+ prohi'iting marital discrimination in our
(urisdiction cannot 'enefit the petitioners. The protection given to la'or in our
(urisdiction is vast and e:tensive that we cannot prudentl+ draw inferences from the
legislature9s silence that married persons are not protected under our 2onstitution and
declare valid a polic+ 'ased on a pre(udice or stereot+pe. Thus, for failure of petitioners
to present undisputed proof of a reasona'le 'usiness necessit+, we rule that the
4uestioned polic+ is an invalid e:ercise of management prerogative. 2orollar+, the issue
as to whether respondents *im'ol and 2omia resigned voluntaril+ has 'ecome moot and
academic.
&n the case of <strella, the petitioner failed to adduce proof to (ustif+ her
dismissal. Hence, the 2ourt ruled that it was illegal.
Petition was denied.
Page | 400
#I$ 5s. PLA#IN$M PLANS P3ILIPPINES
7.@. 1o. 1"0!1), %e'ruar+ )H, )008
FAC#S8
@espondent Platinum Plans Philippines, &nc. is a domestic corporation engaged
in the pre6need industr+. %rom 1/H8 to 1/H/, petitioner Dais+ B. Tiu was its Division
Mar$eting Director. n =anuar+ 1, 1//0, respondent re6hired petitioner as *enior
.ssistant Cice6President and Territorial perations Head in charge of its Hong Gong
and .sean operations. The parties e:ecuted a contract of emplo+ment valid for five
+ears.
n *eptem'er 1", 1//!, petitioner stopped reporting for wor$. &n 1ovem'er 1//!, she
'ecame the Cice6President for *ales of Professional Pension Plans, &nc., a corporation
engaged also in the pre6need industr+.
2onse4uentl+, respondent sued petitioner for damages 'efore the @T2 of Pasig
2it+, Branch )"1. @espondent alleged, among others, that petitioner9s emplo+ment with
Professional Pension Plans, &nc. violated the non6involvement clause in her contract of
emplo+ment. &n upholding the validit+ of the non6involvement clause, the trial court
ruled that a contract in restraint of trade is valid provided that there is a limitation upon
either time or place. &n the case of the pre6need industr+, the trial court found the two6
+ear restriction to 'e valid and reasona'le. n appeal, the 2ourt of .ppeals affirmed the
trial court9s ruling. &t reasoned that petitioner entered into the contract on her own will
and volition. Thus, she 'ound herself to fulfill not onl+ what was e:pressl+ stipulated in
Page | 401
the contract, 'ut also all its conse4uences that were not against good faith, usage, and
law. The appellate court also ruled that the stipulation prohi'iting non6emplo+ment for
two +ears was valid and enforcea'le considering the nature of respondent9s 'usiness.
ISS$E8
,hether the 2ourt of .ppeals erred in sustaining the validit+ of the non6
involvement clause
3EL08
&n this case, the non6involvement clause has a time limit: two +ears from the time
petitioner9s emplo+ment with respondent ends. &t is also limited as to trade, since it
onl+ prohi'its petitioner from engaging in an+ pre6need 'usiness a$in to respondent9s.
More significantl+, since petitioner was the *enior .ssistant Cice6President and
Territorial perations Head in charge of respondent9s Hong$ong and .sean operations,
she had 'een priv+ to confidential and highl+ sensitive mar$eting strategies of
respondent9s 'usiness. To allow her to engage in a rival 'usiness soon after she leaves
would ma$e respondent9s trade secrets vulnera'le especiall+ in a highl+ competitive
mar$eting environment. &n sum, The 2ourt finds the non6involvement clause not
contrar+ to pu'lic welfare and not greater than is necessar+ to afford a fair and
reasona'le protection to respondent. Hence the restraint is valid and such stipulation
prevails.
AVON COSME#ICS 5s. L$NA
!11 *2@. 08"
FAC#S8
The present petition stemmed from a complaintN0O dated 1 Decem'er 1/HH, filed
'+ herein respondent #una alleging, inter alia] that she 'egan wor$ing for Beautifont,
&nc. in 1/8), first as a franchise dealer and then a +ear later, as a *upervisor. *ometime
in 1/8H, .von 2osmetics, &nc. A.vonB, herein petitioner, ac4uired and too$ over the
management and operations of Beautifont, &nc. 1onetheless, respondent #una
continued wor$ing for said successor compan+. .side from her wor$ as a supervisor,
Page | 402
respondent #una also acted as a ma$e6up artist of petitioner .von9s Theatrical
Promotion9s 7roup, for which she received a per diem for each theatrical performance.
The contract was that:
The 2ompan+ agrees:
1B To allow the *upervisor to purchase at wholesale the products of the 2ompan+.
The *upervisor agrees:
1B To purchase products from the 2ompan+ e:clusivel+ for resale and to 'e
responsi'le for o'taining all permits and licenses re4uired to sell the products on retail.
The 2ompan+ and the *upervisor mutuall+ agree:
1B That this agreement in no wa+ ma$es the *upervisor an emplo+ee or agent of the
2ompan+, therefore, the *upervisor has no authorit+ to 'ind the 2ompan+ in an+
contracts with other parties.
)B That the *upervisor is an independent retailerMdealer insofar as the 2ompan+ is
concerned, and shall have the sole discretion to determine where and how products
purchased from the 2ompan+ will 'e sold. However, the *upervisor shall not sell such
products to stores, supermar$ets or to an+ entit+ or person who sells things at a fi:ed
place of 'usiness.
0B That this agreement supersedes an+ agreementMs 'etween the 2ompan+ and the
*upervisor.
FB That the *upervisor shall sell or offer to sell, displa+ or promote onl+ and
e:clusivel+ products sold '+ the 2ompan+.
!B <ither part+ ma+ terminate this agreement at will, with or without cause, at an+
time upon notice to the other.
#ater, respondent #una entered into the sales force of *andre Philippines which
caused her termination for the alleged violation of the terms of the contract. The trial
court ruled in favor of #una that the contract was contrar+ to pu'lic polic+ thus the
dismissal was not proper. The 2ourt of .ppeals affirmed the decision, hence this
petition.
ISS$E8
,hether the 2ourt of .ppeals erred in ruling that the *upervisor9s .greement
was invalid for 'eing contrar+ to pu'lic polic+
,hether there was su'version of the autonom+ of contracts '+ the lower courts
Page | 403
H<#D:
.greements in violation of orden p^'lico must 'e considered as those which
conflict with law, whether properl+, strictl+ and wholl+ a pu'lic law AderechoB or
whether a law of the person, 'ut law which in certain respects affects the interest of
societ+. Plainl+ put, pu'lic polic+ is that principle of the law which holds that no su'(ect
or citi>en can lawfull+ do that which has a tendenc+ to 'e in(urious to the pu'lic or
against the pu'lic good. .s applied to contracts, in the a'sence of e:press legislation or
constitutional prohi'ition, a court, in order to declare a contract void as against pu'lic
polic+, must find that the contract as to the consideration or thing to 'e done, has a
tendenc+ to in(ure the pu'lic, is against the pu'lic good, or contravenes some
esta'lished interests of societ+, or is inconsistent with sound polic+ and good morals, or
tends clearl+ to undermine the securit+ of individual rights, whether of personal lia'ilit+
or of private propert+.
%rom another perspective, the main o'(ection to e:clusive dealing is its tendenc+
to foreclose e:isting competitors or new entrants from competition in the covered
portion of the relevant mar$et during the term of the agreement. nl+ those
arrangements whose pro'a'le effect is to foreclose competition in a su'stantial share of
the line of commerce affected can 'e considered as void for 'eing against pu'lic polic+.
The foreclosure effect, if an+, depends on the mar$et share involved. The relevant
mar$et for this purpose includes the full range of selling opportunities reasona'l+ open
to rivals, namel+, all the product and geographic sales the+ ma+ readil+ compete for,
using easil+ converti'le plants and mar$eting organi>ations.
.ppl+ing the preceding principles to the case at 'ar, there is nothing invalid or
contrar+ to pu'lic polic+ either in the o'(ectives sought to 'e attained '+ paragraph !,
i.e., the e:clusivit+ clause, in prohi'iting respondent #una, and all other .von
supervisors, from selling products other than those manufactured '+ petitioner .von.
Having held that the 3e:clusivit+ clause5 as em'odied in paragraph ! of the
*upervisor9s .greement is valid and not against pu'lic polic+, we now pass to a
consideration of respondent #una9s o'(ections to the validit+ of her termination as
provided for under paragraph " of the *upervisor9s .greement giving petitioner .von
the right to terminate or cancel such contract. The paragraph " or the 3termination
clause5 therein e:pressl+ provides that:
The 2ompan+ and the *upervisor mutuall+ agree:
"B <ither part+ ma+ terminate this agreement at will, with or without cause, at an+
time upon notice to the other.
&n the case at 'ar, the termination clause of the *upervisor9s .greement clearl+
provides for two wa+s of terminating andMor canceling the contract. ne mode does not
e:clude the other. The contract provided that it can 'e terminated or cancelled for
cause, it also stated that it can 'e terminated without cause, 'oth at an+ time and after
written notice. Thus, whether or not the termination or cancellation of the *upervisor9s
Page | 404
.greement was 3for cause,5 is immaterial. The onl+ re4uirement is that of notice to the
other part+. ,hen petitioner .von chose to terminate the contract, for cause,
respondent #una was dul+ notified thereof.
,orth stressing is that the right to unilaterall+ terminate or cancel the
*upervisor9s .greement with or without cause is e4uall+ availa'le to respondent #una,
su'(ect to the same notice re4uirement. 'viousl+, no advantage is ta$en against each
other '+ the contracting parties.
Hence, the petition was granted.
0EL CAS#ILLO 5s. RIC3MON0
F! PH&#. @<P@T* "8/
FAC#S8
The plaintiff alleges that the provisions and conditions contained in the third
paragraph of their contract constitute an illegal and unreasona'le restriction upon his
li'ert+ to contract, are contrar+ to pu'lic polic+, and are unnecessar+ in order to
constitute a (ust and reasona'le protection to the defendantJ and as$ed that the same 'e
declared null and void and of no effect. The defendant interposed a general and special
defense. &n his special defense he alleges that during the time the plaintiff was in the
defendantKs emplo+ he o'tained $nowledge of his trade and professional secrets and
came to $now and 'ecame ac4uainted and esta'lished friendl+ relations with his
customers so that to now annul the contract and permit plaintiff to esta'lish a
competing drugstore in the town of #egaspi, as plaintiff has announced his intention to
do, would 'e e:tremel+ pre(udicial to defendantKs interest.L The defendant further, in an
amended answer, alleges that this action not having 'een 'rought within four +ears
from the time the contract referred to in the complaint was e:ecuted, the same has
prescri'ed.
ISS$E8
,hether the contract is valid and the autonom+ of contracts 'e upheld
3EL08
2onsidering the nature of the 'usiness in which the defendant is engaged, in
relation with the limitation placed upon the plaintiff 'oth as to time and place, The
2ourt is of the opinion, and so decide, that such limitation is legal and reasona'le and
not contrar+ to pu'lic polic+, otherwise, the autonom+ of the contract will 'e su'verted.
Page | 405
AR9OO0 IN0$S#RIES, INC. 5s. 0M CONS$N-I, INC.
0/F *2@. 11
FAC#S8
Petitioner and respondent, as owner and contractor, respectivel+, entered into a
civil, structural and architectural wor$s .greement dated %e'ruar+ ", 1/H/ for the
construction of petitioners ,estwood condominium at 1o. )0 <isenhower *t.,
7reenhills, *an =uan, Metro Manila. The contract price for the condominium pro(ect
aggregated P)0, H00,000.00.
Despite the completion of the condominium pro(ect, the amount of P/"), F0F.8H
remain unpaid '+ petitioner. @epeated demands '+ respondent for petitioner to pa+
went unheeded.
Thus on .ugust 10, 1//0, respondent as plaintiff in a civil case filed its complaint
for the recover+ of the 'alance of the contract price and for damages against petitioner.
@espondent specificall+ pra+ed for the pa+ment of the: AaB amount of P/"),
F0F.8H with interest of )E per month or a fraction thereof, from 1ovem'er 1//0 up to
the time of pa+mentJ A'B the amount of P)!0,000 as .ttorne+s fees and litigation
e:pensesJ AcB amount of P1!0,000.00 as e:emplar+ damagesJ and AdBcost of suit.
n appeal, the 2ourt of .ppeals affirmed the lower court9s decision with
modification
Page | 406
ISS$E8
,hether or not the imposition of two percent interest on the amount ad(udged is
proper.
R$LING8
-es. &t must 'e noted that the agreement provided the contractor, respondent in
this case, two A)B options in case of dela+ in monthl+ pa+ments, to wit: aB suspend wor$s
on the pro(ect until pa+ment is remitted '+ the owner or continue the wor$ 'ut the
owner shall 'e re4uired to pa+ interest at a rate of two A)B percent per month or a
fraction thereof. <videntl+, respondent chose the latter option, as the condominium
pro(ect was in fact alread+ completed. *ince the agreement stands as the law 'etween
the parties, the court cannot ignore the e:istence of such provision providing for a
penalt+ for ever+ months dela+.
PASC$AL 5s. RAMOS
0HF *2@. 10!
FAC#S8
@amos alleged that on 0 =une 1/H8, for and in consideration of P1!0,000, the
*pouses Pascual e:ecuted in his favor a Deed of .'solute *ale with @ight to @epurchase
over two parcels of land and the improvements thereon located in Bam'ang, Bulacan,
Bulacan. This document was annotated at the 'ac$ of the title. The Pascuals did not
e:ercise their right to repurchase the propert+ within the stipulated one6+ear periodJ
hence, @amos pra+ed that the title or ownership over the su'(ect parcels of land and
improvements thereon 'e consolidated in his favor.
&n their .nswer, the Pascuals admitted having signed the Deed of .'solute *ale
with @ight to @epurchase for a consideration of P1!0, 000 'ut averred that what the
parties had actuall+ agreed upon and entered into was a real estate mortgage. The+
further alleged that there was no agreement limiting the period within which to e:ercise
Page | 407
the right to repurchase and that the+ had even overpaid @amos. The trial court found
that the transaction 'etween the parties was actuall+ a loan in the amount of P1!0,000,
the pa+ment of which was secured '+ a mortgage of the propert+ covered '+ T2T 1o.
00!")". &t also found that the Pascuals had made pa+ments in the total sum of
P0FF,000, and that with interest at 8E per annum, the+ had overpaid the loan '+
P1F1,!00. .ccordingl+, in its Decision of 1! March 1//! the trial court ruled in favor of
the defendants. The Pascuals interposed the following defenses: AaB the trial court had
no (urisdiction over the su'(ect or nature of the petitionJ A'B @amos had no legal
capacit+ to sueJ AcB the cause of action, if an+, was 'arred '+ the statute of limitationsJ
AdB the petition stated no cause of actionJ AeB the claim or demand set forth in @amos9s
pleading had 'een paid, waived, a'andoned, or otherwise e:tinguishedJ and AfB @amos
has not complied with the re4uired confrontation and conciliation 'efore the 'aranga+.
The 2ourt of .ppeals affirmed in toto the trial court9s rders of ! =une 1//! and 8
*eptem'er 1//!.
ISS$E8
,hether or not the contract entered into is a contract of loan.
R$LING8
The Pascuals are actuall+ raising as issue the validit+ of the stipulated interest
rate. &t must 'e stressed that the+ never raised as a defense or as 'asis for their
counterclaim the nullit+ of the stipulated interest. ,hile overpa+ment was alleged in
the .nswer, no ultimate facts which constituted the 'asis of the overpa+ment was
alleged. &n their pre6trial 'rief, the Pascuals made a long list of issues, 'ut not one of
them touched on the validit+ of the stipulated interest rate. Their own evidence clearl+
shows that the+ have agreed on, and have in fact paid interest at, the rate of 8E per
month.
.fter the trial court sustained petitioners9 claim that their agreement with
@.M* was actuall+ a loan with real estate mortgage, the Pascuals should not 'e
allowed to turn their 'ac$ on the stipulation in that agreement to pa+ interest at the rate
of 8E per month. The Pascuals should accept not onl+ the favora'le aspect of the court9s
declaration that the document is actuall+ an e4uita'le mortgage 'ut also the necessar+
conse4uence of such declaration, that is, that interest on the loan as stipulated '+ the
parties in that same document should 'e paid. Besides, when @amos moved for a
reconsideration of the 1! March 1//! Decision of the trial court pointing out that the
interest rate to 'e used should 'e 8E per month, the Pascuals never lifted a finger to
oppose the claim. .dmittedl+, in their Motion for @econsideration of the rder of !
=une 1//!, the Pascuals argued that the interest rate, whether it 'e !E or 8E, is
e:or'itant, unconsciona'le, unreasona'le, usurious and ine4uita'le. However, in their
.ppellants9 Brief, the onl+ argument raised '+ the Pascuals was that @amos9s petition
did not contain a pra+er for general relief and, hence, the trial court had no 'asis for
ordering them to pa+ @amos P!11,000 representing the principal and unpaid interest. &t
was onl+ in their motion for the reconsideration of the decision of the 2ourt of .ppeals
Page | 408
that the Pascuals made an issue of the interest rate and pra+ed for its reduction to 1)E
per annum.
&t is a 'asic principle in civil law that parties are 'ound '+ the stipulations in the
contracts voluntaril+ entered into '+ them. Parties are free to stipulate terms and
conditions which the+ deem convenient provided the+ are not contrar+ to law, morals,
good customs, pu'lic order, or pu'lic polic+.
The interest rate of 8E per month was voluntaril+ agreed upon '+ @amos and the
Pascuals. There is nothing from the records and, in fact, there is no allegation showing
that petitioners were victims of fraud when the+ entered into the agreement with
@amos. 1either is there a showing that in their contractual relations with @amos, the
Pascuals were at a disadvantage on account of their moral dependence, ignorance,
mental wea$ness, tender age or other handicap, which would entitle them to the vigilant
protection of the courts as mandated '+ .rticle )F of the 2ivil 2ode.
Page | 409
MA>IMA 3EME0ES VS. CO$R# OF APPEALS
7.@. 1o. 10HF8) cto'er H, 1///
FAC#S8
The instant controvers+ involves a 4uestion of ownership over an unregistered
parcel of land. &t was originall+ owned '+ the late =ose Hemedes, father of Ma:ima
Hemedes and <nri4ue D. Hemedes. n March )), 1/F8 =ose Hemedes e:ecuted a
document entitled 3Donation &nter Civos ,ith @esolutor+ 2onditions5 where'+ he
conve+ed ownership over the su'(ect land, together with all its improvements, in favor
of his third wife, =usta Gausapin. Ma:ima Hemedes, through her counsel, filed an
application for registration and confirmation of title over the su'(ect unregistered land.
*u'se4uentl+, an riginal 2ertificate of Title A2TB was issued in the name of Ma:ima
Hemedes married to @aul @odrigue> '+ the @egistr+ of Deeds of #aguna on =une H,
1/"), with the annotation that 3=usta Gausapin shall have the usufructuar+ rights over
the parcel of land herein descri'ed during her lifetime or widowhood.5
n %e'ruar+ )H, 1/8/, <nri4ue D. Hemedes sold the propert+ to Dominium
@ealt+ and 2onstruction 2orporation ADominiumB. n .pril 10, 1/H1, =usta Gausapin
e:ecuted an affidavit affirming the conve+ance of the su'(ect propert+ in favor of
<nri4ue D. Hemedes as em'odied in the 3Gasunduan5 dated Ma+ )8, 1/81, and at the
same time den+ing the conve+ance made to Ma:ima Hemedes.
n .ugust )8, 1/H1, Dominium and <nri4ue D. Hemedes filed a complaint for
the annulment of the T2T issued in favor of @ P ' &nsurance andMor the reconve+ance to
Dominium of the su'(ect propert+. *pecificall+, the complaint alleged that Dominium
was the a'solute owner of the su'(ect propert+ '+ virtue of the %e'ruar+ )H, 1/8/ deed
of sale e:ecuted '+ <nri4ue D. Hemedes, who in turn o'tained ownership of the land
from =usta Gausapin, as evidenced '+ the 3Gasunduan5 dated Ma+ )8, 1/81. The
Plaintiffs asserted that =usta Gausapin never transferred the land to Ma:ima Hemedes
and that <nri4ue D. Hemedes had no $nowledge of the registration proceedings
initiated '+ Ma:ima Hemedes.
The trial court rendered (udgment in favor of plaintiffs Dominium and <nri4ue
D. Hemedes. Both @ P B &nsurance and Ma:ima Hemedes appealed from the trial
court9s decision. The 2ourt of .ppeals affirmed the assailed decision in toto. Hence, this
petition.
ISS$E8
Page | 410
,hich of the two conve+ances '+ =usta Gausapin, the first in favor of Ma:ima
Hemedes and the second in favor of <nri4ue D. Hemedes, effectivel+ transferred
ownership over the su'(ect land;
R$LING8
Pu'lic respondent9s finding that the 3Deed of 2onve+ance of Dnregistered @eal
Propert+ B+ @eversion5 e:ecuted '+ =usta Gausapin in favor of Ma:ima Hemedes is
spurious and not supported '+ the factual findings in this case. &t is grounded upon the
mere denial of the same '+ =usta Gausapin.
. part+ to a contract cannot (ust evade compliance with his contractual
o'ligations '+ the simple e:pedient of den+ing the e:ecution of such contract. &f, after a
perfect and 'inding contract has 'een e:ecuted 'etween the parties, it occurs to one of
them to allege some defect therein as a reason for annulling it, the alleged defect must
'e conclusivel+ proven, since the validit+ and fulfillment of contracts cannot 'e left to
the will of one of the contracting parties.
&n upholding the deed of conve+ance in favor of Ma:ima Hemedes, the 2ourt
must concomitantl+ rule that <nri4ue D. Hemedes and his transferee, Dominium, did
not ac4uire an+ rights over the su'(ect propert+.
=usta Gausapin sought to transfer to her stepson e:actl+ what she had earlier
transferred to Ma:ima Hemedes I the ownership of the su'(ect propert+ pursuant to the
first condition stipulated in the deed of donation e:ecuted '+ her hus'and. Thus, the
donation in favor of <nri4ue D. Hemedes is null and void for the purported o'(ect
thereof did not e:ist at the time of the transfer, having alread+ 'een transferred to his
sister.
*imilarl+, the sale of the su'(ect propert+ '+ <nri4ue D. Hemedes to Dominium is
also a nullit+ for the latter cannot ac4uire more rights than its predecessor6in6interest
and is definitel+ not an innocent purchaser for value since <nri4ue D. Hemedes did not
present an+ certificate of title upon which it relied.
The 2ourt upheld petitioner @ P B &nsurance9s assertion of ownership over the
propert+ in dispute, as evidenced '+ T2T 1o. F1/H!, su'(ect to the usufructuar+ rights of
=usta Gausapin, which encum'rance has 'een properl+ annotated upon the said
certificate of title.
Page | 411
-OSELI#O VILLEGAS a.; 0OMINGA VILLEGAS vs. CO$R# OF APPEALS
7.@. 1o. 1)//88. %e'ruar+ 1, )001
FAC#S8
Before *eptem'er ", 1/80, #ot B606., with an area of F hectares was registered
under T2T 1o. "H"F1 in the names of 2iriaco D. .ndres and Henson 2aigas. This land
was also declared for real estate ta:ation under Ta: Declaration 1o. 2)6FFF). n
*eptem'er ", 1/80, .ndres and 2aigas, with the consent of their respective spouses,
.nita Barrientos and 2onsolacion To'ias, sold the land to %ortune To'acco 2orporation
for P"0,000.00. *imultaneousl+, the+ e:ecuted a (oint affidavit declaring that the+ had
no tenants on said lot. n the same date, the sale was registered in the ffice of the
@egister of Deeds of &sa'ela. T2T 1o. "H"F1 was cancelled and T2T 1o. T6"H808 was
issued in %ortune9s name. n .ugust ", 1/8", .ndres and 2aigas e:ecuted a Deed of
@econve+ance of the same lot in favor of %ilomena Domingo, the mother of =oselito
Cillegas, defendant in the case 'efore the trial court. .lthough no title was mentioned in
this deed, Domingo succeeded in registering this document in the ffice of the @egister
of Deeds on .ugust ", 1/8", causing the latter to issue T2T 1o. T6/1H"F in her name. &t
Page | 412
appears in this title that the same was a transfer from T2T 1o. T6"H"F1. n .pril 10,
1/H1, Domingo declared the lot for real estate ta:ation under Ta: Declaration 1o. 106
!"00. n Decem'er F, 1/8", the ffice of the @egister of Deeds of &sa'ela was 'urned
together with all titles in the office. n Decem'er 18, 1/8", the original of T2T 1o. T6
/1H"F was administrativel+ reconstituted '+ the @egister of Deeds. n =une ), 1/8/, a
Deed of .'solute *ale of a portion of )0,000 s4uare meters of #ot B606. was e:ecuted
'+ %ilomena Domingo in favor of Cillegas for a consideration of P1,000.00. This
document was registered on =une 0, 1/H1 and as a result T2T 1o. T6101H08 was issued
'+ the @egister of Deeds to Cillegas. n the same date, the technical description of #ot
B606.6) was registered and T2T 1o. T6101H0H was issued in the name of Domingo. n
=anuar+ )), 1//1, this document was registered and T2T 1o. 1!F/") was issued to the
defendant, =oselito Cillegas.
n .pril 10, 1//1, the trial court upon a petition filed '+ %ortune ordered the
reconstitution of the original of T2T 1o. T6"H808. .fter trial on the merits, the trial
court rendered its assailed decision in favor of %ortune To'acco, declaring it to 'e
entitled to the propert+. Petitioners thus appealed this decision to the 2ourt of .ppeals,
which affirmed the trial court9s decision.
ISS$ES8
,hether or not the 2ourt of .ppeals was correct in affirming the trial court9s
decision.
R$LING8
<ven if %ortune had validl+ ac4uired the su'(ect propert+, it would still 'e 'arred
from asserting title 'ecause of laches. The failure or neglect, for an unreasona'le length
of time to do that which '+ e:ercising due diligence could or should have 'een done
earlier constitutes laches. &t is negligence or omission to assert a right within a
reasona'le time, warranting a presumption that the part+ entitled to assert it has either
a'andoned it or declined to assert it. ,hile it is '+ e:press provision of law that no title
to registered land in derogation of that of the registered owner shall 'e ac4uired '+
prescription or adverse possession, it is li$ewise an enshrined rule that even a registered
owner ma+ 'e 'arred from recovering possession of propert+ '+ virtue of laches.
Hence, petition was 7@.1T<D and the Decision of the 2ourt of .ppeals was
@<C<@*<D.
E/$A#ORIAL REAL#, 0EVELOPMEN#, INC. @ CARMELO @
%A$ERMANN, INC 5s. MA,FAIR #3EA#ER, INC
7.@. 1o. 10"0"0 1//" 1ov )1 )"F *2@. FH0
FAC#S8
2armelo owned a parcel of land, together with two )6store+ 'uildings constructed
thereon. n =une 1, 1/"8 2armelo entered into a contract of lease with Ma+fair for the
latter9s lease of a portion of 2armelo9s propert+. Two +ears later, on March 01, 1/"/,
Page | 413
Ma+fair entered into a second contract of lease with 2armelo for the lease of another
portion of 2armelo9s propert+.
Both contracts of lease provide identicall+ worded paragraph H, which reads:
TThat if the #<**@ should desire to sell the leased premises, the #<**<< shall
'e given 006da+s e:clusive option to purchase the same.
&n the event, however, that the leased premises is sold to someone other than the
#<**<<, the #<**@ is 'ound and o'ligated, as it here'+ 'inds and o'ligates itself, to
stipulate in the Deed of *ale thereof that the purchaser shall recogni>e this lease and 'e
'ound '+ all the terms and conditions thereof.
Mr. Henr+ Pascal of 2armelo informed Mr. Henr+ -ang, President of Ma+fair, through a
telephone conversation that 2armelo was desirous of selling the entire 2laro M. @ecto
propert+. Mr. Pascal told Mr. -ang that a certain =ose .raneta was offering to 'u+ the
whole propert+ for D* Dollars 1,)00,000, and Mr. Pascal as$ed Mr. -ang if the latter
was willing to 'u+ the propert+ for *i: to *even Million Pesos.
Dnder +our compan+9s two lease contracts with our client, it is uniforml+ provided:
TH. That if the #<**@ should desire to sell the leased premises the #<**<< shall 'e
given 006da+s e:clusive option to purchase the same. &n the event, however, that the
leased premises is sold to someone other than the #<**<<, the #<**@ is 'ound and
o'ligated, as it here 'inds and o'ligates itself, to stipulate in the Deed of *ale thereof
that the purchaser shall recogni>e this lease and 'e 'ound '+ all the terms and
conditions hereof.
2armelo did not repl+ to this letter.
n *eptem'er 1H, 1/8F, Ma+fair sent another letter to 2armelo purporting to
e:press interest in ac4uiring not onl+ the leased premises 'ut Tthe entire 'uilding and
other improvements if the price is reasona'le. However, 'oth 2armelo and <4uatorial
4uestioned the authenticit+ of the second letter.
%our +ears later, on =ul+ 00, 1/8H, 2armelo sold its entire 2.M. @ecto .venue
land and 'uilding, which included the leased premises housing the TMa:im9 and
TMiramar9 theatres, to <4uatorial '+ virtue of a Deed of .'solute *ale, for the total sum
of P11,000,000.00.
&n *eptem'er 1/8H, Ma+fair instituted the action a 4uo for specific performance
and annulment of the sale of the leased premises to <4uatorial. &t dismissed the
complaint with costs against the plaintiff. The 2ourt of .ppeals reversed the decision of
the trial court.
R$LING8
,hether or not the decision of the 2ourt of .ppeals9 decision was correct.
Page | 414
R$LING8
The 2ourt agrees with the 2ourt of .ppeals that the aforecited contractual
stipulation provides for a right of first refusal in favor of Ma+fair. &t is not an option
clause or an option contract. &t is a contract of a right of first refusal.
.s earl+ as 1/1", in the case of Beaumont vs. Prieto, une4uivocal was our
characteri>ation of an option contract as one necessaril+ involving the choice granted to
another for a distinct and separate consideration as to whether or not to purchase a
determinate thing at a predetermined fi:ed price.
%urther, what 2armelo and Ma+fair agreed to, '+ e:ecuting the two lease
contracts, was that Ma+fair will have the right of first refusal in the event 2armelo sells
the leased premises. &t is undisputed that 2armelo did recogni>e this right of Ma+fair,
for it informed the latter of its intention to sell the said propert+ in 1/8F. There was an
e:change of letters evidencing the offer and counter6offers made '+ 'oth parties.
2armelo, however, did not pursue the e:ercise to its logical end. ,hile it initiall+
recogni>ed Ma+fair9s right of first refusal, 2armelo violated such right when without
affording its negotiations with Ma+fair the full process to ripen to at least an interface of
a definite offer and a possi'le corresponding acceptance within the 3006da+ e:clusive
option5 time granted Ma+fair, 2armelo a'andoned negotiations, $ept a low profile for
some time, and then sold, without prior notice to Ma+fair, the entire 2laro M. @ecto
propert+ to <4uatorial.
*ince <4uatorial is a 'u+er in 'ad faith, this finding renders the sale to it of the
propert+ in 4uestion rescissi'le. ,e agree with respondent .ppellate 2ourt that the
records 'ear out the fact that <4uatorial was aware of the lease contracts 'ecause its
law+ers had, prior to the sale, studied the said contracts. .s such, <4uatorial cannot
tena'l+ claim to 'e a purchaser in good faith, and, therefore, rescission lies.
Hence, the petition was denied.
Page | 415
POL,#EC3NIC $NIVERSI#, OF #3E P3ILIPPINES vs. CO$R# OF
APPEALS a.; FIRES#ONE CERAMICS, INC.
7.@. 1o. 1F0!10. 1ovem'er 1F, )001
NA#IONAL 0EVELOPMEN# CORPORA#ION
vs. FIRES#ONE CERAMICS INC
7.@. 1o. 1F0!/0. 1ovem'er 1F, )001
FAC#S8
&n the earl+ si:ties, petitioner 1ational Development 2orporation A1D2B, had in
its disposal a ten6hectare propert+ located along Pure>a *t., *ta. Mesa, Manila. The
estate was popularl+ $nown as the 1D2 compound and covered '+ Transfer 2ertificates
of Title 1os. /)HH!, 110001 and 1F!F80. Private respondent %irestone 2eramics &nc.
manifested its desire to lease a portion of the propert+ for its ceramic manufacturing
'usiness. 1D2 and %&@<*T1< entered into a contract of lease denominated as
2ontract 1o. 26006"! covering a portion of the propert+ measured at )./011H hectares
for use as a manufacturing plant for a term of ten +ears, renewa'le for another ten +ears
under the same terms and conditions. &n conse4uence of the agreement, %&@<*T1<
constructed on the leased premises several warehouses and other improvements needed
for the fa'rication of ceramic products. Three and a half +ears later, %&@<*T1<
entered into a second contract of lease with 1D2 over the latterKs four6unit pre6
fa'ricated reparation steel warehouse stored in Daliao, Davao. %&@<*T1< agreed to
ship the warehouse to Manila for eventual assem'l+ within the 1D2 compound. The
second contract, denominated as 2ontract 1o. 26)"6"H, was for similar use as a ceramic
manufacturing plant and was agreed e:pressl+ to 'e Lco6e:tensive with the lease of
#<**<< with #<**@ on the )."0 hectare6lot. The parties signed a similar contract
concerning a si:6unit pre6fa'ricated steel warehouse which, as agreed upon '+ the
parties, would e:pire on ) Decem'er 1/8H. Prior to the e:piration of the aforementioned
contract, %&@<*T1< wrote 1D2 re4uesting for an e:tension of their lease agreement.
2onse4uentl+, the Board of Directors of 1D2 adopted the @esolution e:tending the term
of the lease, su'(ect to several conditions among which was that in the event 1D2 Lwith
the approval of higher authorities, decide to dispose and sell these properties including
the lot, priorit+ should 'e given to the #<**<<L. &n pursuance of the resolution, the
parties entered into a new agreement for a ten6+ear lease of the propert+, renewa'le for
another ten +ears, e:pressl+ granting %&@<*T1< the first option to purchase the
leased premises in the event that it decided Lto dispose and sell these properties
including the lot5.
Page | 416
The partiesK lessor6lessee relationship went smoothl+ until earl+ 1/HH when
%&@<*T1<, cogni>ant of the impending e:piration of their lease agreement with 1D2,
informed the latter through several letters and telephone calls that it was renewing its
lease over the propert+. ,hile its letter of 18 March 1/HH was answered '+ .ntonio ..
Henson, 7eneral Manager of 1D2, who promised immediate action on the matter, the
rest of its communications remained unac$nowledged. %&@<*T1<Ks predicament
worsened when rumors of 1D2Ks supposed plans to dispose of the su'(ect propert+ in
favor of petitioner Pol+technic Dniversit+ of the Philippines came to its $nowledge.
%orthwith, %&@<*T1< served notice on 1D2 conve+ing its desire to purchase the
propert+ in the e:ercise of its contractual right of first refusal. .pprehensive that its
interest in the propert+ would 'e disregarded, %&@<*T1< instituted an action for
specific performance to compel 1D2 to sell the leased propert+ in its favor. %ollowing
the denial of its petition, %&@<*T1< amended its complaint to include PDP and
<:ecutive *ecretar+ 2atalino Macaraeg, =r., as part+6defendants, and sought the
annulment of +emorandum ,rder -o. ./0.
.fter trial, (udgment was rendered declaring the contracts of lease e:ecuted
'etween %&@<*T1< and 1D2 covering the )."06hectare propert+ and the warehouses
constructed thereon valid and e:isting until ) =une 1///. The 2ourt of .ppeals affirmed
the decision of the trial court ordering the sale of the propert+ in favor of %&@<*T1<.
ISS$E8
,hether or not the 2ourt of .ppeals decided a 4uestion of su'stance in a wa+
definitel+ not in accord with law or (urisprudence.
R$LING8
The courts a #uo did not h+pothesi>e, much less con(ure, the sale of the disputed
propert+ '+ 1D2 in favor of petitioner PDP. .side from the fact that the intention of
1D2 and PDP to enter into a contract of sale was clearl+ e:pressed in the +emorandum
,rder -o. ./0, a close perusal of the circumstances of this case strengthens the theor+
that the conve+ance of the propert+ from 1D2 to PDP was one of a'solute sale, for a
valua'le consideration, and not a mere paper transfer as argued '+ petitioners.
. contract of sale, as defined in the 2ivil 2ode, is a contract where one of the
parties o'ligates himself to transfer the ownership of and to deliver a determinate thing
to the other or others who shall pa+ therefore a sum certain in mone+ or its e4uivalent.
&t is therefore a general re4uisite for the e:istence of a valid and enforcea'le contract of
sale that it 'e mutuall+ o'ligator+, i.e., there should 'e a concurrence of the promise of
the vendor to sell a determinate thing and the promise of the vendee to receive and pa+
for the propert+ so delivered and transferred. The 2ivil 2ode provision is, in effect, a
Lcatch6allL provision which effectivel+ 'rings within its grasp a whole gamut of transfers
where'+ ownership of a thing is ceded for a consideration.
2ontrar+ to what petitioners PDP and 1D2 propose, there is not (ust one part+ involved
in the 4uestioned transaction. Petitioners 1D2 and PDP have their respective charters
and therefore each possesses a separate and distinct individual personalit+.
Hence, the petition was denied.
Page | 417
SPS. LI#ON-$A 5s. L @ R CORPORA#ION
7.@. 1o. 1008)). Decem'er /, 1///
0)0 *2@. F0!
FAC#S8
This stems from loans o'tained '+ the spouses #iton(ua from #P@ 2orporation in
the aggregate sum of PF00,000.00J P)00,000.00 of which was o'tained on .ugust ",
1/8F and the remaining P)00,000.00 o'tained on March )8, 1/8H. The loans were
secured '+ a mortgage

constituted '+ the spouses upon their two parcels of land and the
improvements thereon The mortgage was dul+ registered with the @egister of Deeds.
*pouses #iton(ua sold to Philippine ,hite House .uto *uppl+, &nc. AP,H.*B the
parcels of land the+ had previousl+ mortgaged to # P @ 2orporation for the sum of
PF00,000.00. Meanwhile, with the spouses #iton(ua having defaulted in the pa+ment of
their loans, # P @ 2orporation initiated e:tra(udicial foreclosure proceedings with the
<:6ficio *heriff of ?ue>on 2it+. The mortgaged properties were sold at pu'lic auction
to # P @ 2orporation as the onl+ 'idder for the amount of P))1,")F.!H.
Page | 418
The Deput+ *heriff informed # P @ 2orporation of the pa+ment '+ P,H.* of the
full redemption price and advised it that it can claim the pa+ment upon surrender of its
owner9s duplicate certificates of title. The spouses #iton(ua presented for registration the
2ertificate of @edemption issued in their favor to the @egister of Deeds of ?ue>on 2it+.
The 2ertificate also informed # P @ 2orporation of the fact of redemption and directed
the latter to surrender the owner9s duplicate certificates of title within five da+s.
n .pril )), 1/H1, # P @ 2orporation wrote a letter to the *heriff, cop+ furnished to the
@egister of Deeds, stating: A1B that the sale of the mortgaged properties to P,H.* was
without its consent, in contravention of paragraphs H and / of their Deed of @eal <state
MortgageJ and A)B that it was not the spouses #iton(ua, 'ut P,H.*, who was see$ing to
redeem the foreclosed properties, when under .rticles 1)0" and 1)08 of the 1ew 2ivil
2ode, the latter had no legal personalit+ or capacit+ to redeem the same.
n the other hand, the spouses #iton(ua as$ed the @egister of Deeds to annotate
their 2ertificate of @edemption as an adverse claim on the titles of the su'(ect properties
on account of the refusal of # P @ 2orporation to surrender the owner9s duplicate copies
of the titles to the su'(ect properties. ,ith the refusal of the @egister of Deeds to
annotate their 2ertificate of @edemption, the #iton(ua spouses filed a Petition on =ul+
18, 1/H1 against # P @ 2orporation for the surrender of the owner9s duplicate of Transfer
2ertificates of Title 1o. 1/8)0) and 1/8)00 'efore the then 2%&.
,hile the said case was pending, # P @ 2orporation e:ecuted an .ffidavit of
2onsolidation of wnership. The @egister of Deeds cancelled Transfer 2ertificates of
Title 1o. 1/8)0) and 1/8)00 and in lieu thereof, issued Transfer 2ertificates of Title 1o.
)H00!F and )H0!!

in favor of # P @ 2orporation, free of an+ lien or encum'rance. .
complaint for ?uieting of Title, .nnulment of Title and Damages with preliminar+
in(unction was filed '+ the spouses #iton(ua and P,H.* against herein respondents
'efore the then 2%&.
ISS$E8
,hether or not the 2ourt of .ppeals erred in its decision.
R$LING8
&n the case at 'ar, P,H.* cannot claim ignorance of the right of first refusal
granted to # P @ 2orporation over the su'(ect properties since the Deed of @eal <state
Mortgage containing such a provision was dul+ registered with the @egister of Deeds.
.s such, P,H.* is presumed to have 'een notified thereof '+ registration, which
e4uates to notice to the whole world. Thus, the Decision appealed from was .%%&@M<D
with the following MD&%&2.T&1*.
-OSEFA VS. :3AN0ONG #RA0ING CORPORA#ION
417 SCRA 6+
G.R. NO. 15!+!' 0ECEM%ER ", !!'
FAC#S8
Page | 419
@espondent Rhandong delivered to petitioner =osefa, who was introduced to it as
a client '+ Mr. Tan, the total volume of 010 crates of 'oards valued at PF,!!H,100.00
pa+a'le within "0 da+s from deliver+. &nstead of pa+ing respondent, petitioner remitted
his pa+ments to Tan who in turn delivered various chec$s to respondent, who accepted
them upon Tan9s assurance that said chec$s came from petitioner. ,hen a num'er of
the chec$s 'ounced, Tan issued his own chec$s and those of his mother, 'ut Tan later
stopped pa+ments. @espondent demanded pa+ment from Tan and petitioner 'ut was
ignoredJ hence he filed the instant complaint.
&n his answer petitioner averred that he had alread+ paid all his o'ligations to
respondent through Tan. %urthermore, he claimed he is not priv+ to the agreements
'etween Tan and respondent, and hence, in case his pa+ments were not remitted to
respondent, then it was not his ApetitionerB fault and that respondent should 'ear the
conse4uences.
ISS$E8
,hether or not petitioner is lia'le for pa+ment of the 'oards to respondent when
he did not negotiate the transaction with it, rather through Tan as intermediar+.
R$LING8
1o. The transaction was negotiated 'etween Tan and petitioner who onl+
received the goods delivered '+ respondent. Petitioner was not priv+ to the
arrangement 'etween Tan and respondent. Petitioner has full+ paid for the goods to Tan
with whom he had arranged the transaction.
2ontracts ta$e effect onl+ 'etween the parties, their successors in interest, heirs,
and assigns. ,hen there is no privit+ of contract, there is li$ewise no o'ligation or
lia'ilit+ and thus, no cause of action arises. Petitioner, 'eing not priv+ to the transaction
'etween Tan and respondent, should not 'e made lia'le for the failure of Tan to deliver
the pa+ment to respondent.
Therefore, respondent should recover the pa+ment from Tan.
Page | 420
PCI VS NG S3$ENG NGOR
..M. 1o. P60!61/80. March 1H, )00!
FAC#S8
2omplainant <P2&B is the defendant in 2ivil 2ase 1o. 2<B6)"/H0 'efore the
@egional Trial 2ourt A@T2B, Branch 1", 2e'u 2it+, entitled, 31g *heung 1gor, doing
'usiness under the name and st+le TGen Mar$eting,9 Gen .ppliance Division, &nc. and
Ben(amin 7o, Plaintiffs, vs. <4uita'le P2& Ban$, .imee -u and Ben .pas, Defendants5
for .nnulment andMor @eformation of Documents and 2ontracts.
@espondents .ntonio .. Bellones and 7eneroso B. @egalado are the sheriffs in
Branches / and 1", respectivel+, of the @T2 of 2e'u 2it+.
%or garnishing accounts maintained '+ <4uita'le P2& Ban$, &nc. A<P2&BB at
2iti'an$, 1..., and Hong$ong and *hanghai Ban$ 2orporation AH*B2B, allegedl+ in
violation of *ection /A'B of @ule 0/ of the @ules of 2ourt, a complaint for grave a'use of
authorit+ was filed '+ .tt+. Paulino #. -usi against *heriffs .ntonio .. Bellones and
7eneroso B. @egalado. There was an offer of other real propert+ '+ petitioner.
ISS$E8
Did respondents violate the @ules of 2ourt;
R$LING8
B+ serving notices of garnishment on 2iti'an$, 1..., H*B2 and P1B, *heriff
@egalado violated <P2&B9s right to choose which propert+ ma+ 'e levied upon to 'e sold
at auction for the satisfaction of the (udgment de't. Thus, it is clear that when <P2&B
offered its real properties, it e:ercised its option 'ecause it cannot immediatel+ pa+ the
full amount stated in the writ of e:ecution and all lawful fees in cash, certified 'an$
chec$ or an+ other mode of pa+ment accepta'le to the (udgment o'ligee.
&n the case at 'ar, <P2&B cannot immediatel+ pa+ '+ wa+ of Manager9s 2hec$ so
it e:ercised its option to choose and offered its real properties. ,ith the e:ercise of the
option, *heriff @egalado should have ceased serving notices of garnishment and
discontinued their implementation. This is not true in the instant case. *heriff
@egalado was adamant in his posture even if real properties have 'een offered which
were sufficient to satisf+ the (udgment de't.
Page | 421
#ERESI#A 0IO 5s. S#. FER0INAN0 MEMORIALPAR4, INC.
G.R. No. 16+57" No5e2ber '!, !!6
5!+ SCRA 45'
FAC#S8
n Decem'er 11, 1/80, Teresita Dio agreed to 'u+, on installment 'asis, a
memorial lot from the *t. %erdinand Memorial Par$, &nc. A*%MP&B in #ucena 2it+. The
purchase was evidenced '+ a Pre61eed Purchase .greement. *he o'liged herself to
a'ide '+ all such rules and regulations governing the *%MP& dated Ma+ )!, 1/8). *%MP&
issued a Deed of *ale and 2ertificate of Perpetual. The ownership of Dio over the
propert+ was made su'(ect to the rules and regulations of *%MP&, as well as the
government, including all amendments, additions and modifications that ma+ later 'e
adopted. .ccording to the @ules A@ule "/B Mausoleum 'uilding and memorials should
'e constructed '+ the Par$ Personnel. #ot wners cannot contract other contractors for
the construction of the said 'uildings and memorial, however, the lot owner is free to
give their own design for the mausoleum to 'e constructed, as long as it is in accordance
with the par$ standards. The construction shall 'e under the close supervision of the
Par$ *uperintendent.
The mortal remains of Dio9s hus'and, father and daughter were interred in the
lot at her own e:pense, without the $nowledge and intervention of *%MP&..
&n cto'er 1/H", Dio informed *%MP&, through its president and controlling
stoc$holder, Mildred %. Tantoco, that she was planning to 'uild a mausoleum on her lot
and sought the approval thereof. Dio showed to Tantoco the plans and pro(ect
specifications accomplished '+ her private contractor at an estimated cost of
P"0,000.00. The plans and specifications were approved, 'ut Tantoco insisted that the
mausoleum 'e 'uilt '+ it or its agents at a minimum cost of P100,000.00 as provided in
@ule "/ of the @ules and @egulations the *%MP& issued on Ma+ )!, 1/8). The total
amount e:cluded certain specific designs in the approved plan which if included would
cost Dio much more. Dio, through counsel, demanded that she 'e allowed to construct
the mausoleum within 10 da+s, otherwise, she would 'e impelled to file the necessar+
actionMs against *%MP& and Tantoco. Dio filed a 2omplaint for &n(unction with Damages
against *%MP& and Tantoco 'efore the @T2. *he averred that she was not aware of @ule
Page | 422
"/ of the *%MP& @ules and @egulationsJ the amount of P100,000.00 as construction
cost of the mausoleum was unconsciona'le and oppressive. *he pra+ed that, after trial,
(udgment 'e rendered in her favor, granting a final in(unction perpetuall+ restraining
defendants from enforcing the invalid @ule "/ of *%MP&9s 3@ules for Memorial ,or$ in
the Mausoleum of the Par$5 or from refusing or preventing the construction of an+
improvement upon her propert+ in the par$. The court issued a cease and desist order
against defendants.
The trial court rendered (udgment in favor of defendants. n appeal, the 2.
affirmed the decision of the trial court.
ISS$E8
,hether or not petitioner had $nowledge of @ule "/ of *%MP& @ules and
@egulations for memorial wor$s in the mausoleum areas of the par$ when the Pre61eed
Purchase .greement and the Deed of *ale was e:ecuted and whether the said rule is
valid and 'inding upon petitioner.
R$LING8
Plaintiff9s allegation that she was not aware of the said @ules and @egulations
lac$s credence. .dmittedl+, in her 2omplaint and during the trial, plaintiff testified that
she informed the defendants of her intention to construct a mausoleum. <ven counsel
for the plaintiff, who is the son of the plaintiff, informed the 2ourt during the trial in this
case that her mother, the plaintiff herein, informed the defendants of her plan to
construct and erect a mausoleum. 1his act of the plaintiff clearly sho2s that she 2as
fully a2are of the said rules and regulations otherwise she should not consult, inform
and see$ permission from the defendants of her intention to 'uild a mausoleum if she is
not 'arred '+ the rules and regulations to do the same. ,hen she signed the contract
with the defendants, she was estopped to 4uestion and attac$ the legalit+ of said
contract later on.
%urther, a contract of adhesion, wherein one part+ imposes a read+made form of
contract on the other, is not strictl+ against the law. . contract of adhesion is as 'inding
as ordinar+ contracts, the reason 'eing that the part+ who adheres to the contract is free
to re(ect it entirel+. 2ontrar+ to petitioner9s contention, not ever+ contract of adhesion is
an invalid agreement.
Thus, the petition was denied.
Page | 423
PILIPINO #ELEP3ONE CORPORA#ION vs. 0ELFINO #ECSON
G.R. No. 156+66. May 7, !!4
FAC#S8
n various dates in 1//", Delfino 2. Tecson applied for " cellular phone
su'scriptions with petitioner Pilipino Telephone 2orporation AP&#T<#B, a compan+
engaged in the telecommunications 'usiness, which applications were each approved
and covered, respectivel+, '+ si: mo'iline service agreements. n 0! .pril )001,
respondent filed with the @egional Trial 2ourt a complaint against petitioner for a 3*um
of Mone+ and Damages.5 Petitioner moved for the dismissal of the complaint on the
Page | 424
ground of improper venue, citing a common provision in the mo'iline service
agreements to the effect that 6 3Cenue of all suits arising from this .greement or an+
other suit directl+ or indirectl+ arising from the relationship 'etween P&#T<# and
su'scri'er shall 'e in the proper courts of Ma$ati, Metro Manila. *u'scri'er here'+
e:pressl+ waives an+ other venues.5 The @egional Trial 2ourt of &ligan 2it+, #anao del
1orte, denied petitioner9s motion to dismiss and re4uired it to file an answer within 1!
da+s from receipt thereof.
Petitioner filed a petition for certiorari 'efore the 2ourt of .ppeals. The 2ourt of
.ppeals saw no merit in the petition and affirmed the assailed orders of the trial court.
ISS$E8
,hether or not the 2ourt of .ppeals erred in affirming the orders of the trial
court.
R$LING8
The contract herein involved is a contract of adhesion. But such an agreement is
not per se inefficacious. The rule instead is that, should there 'e am'iguities in a
contract of adhesion, such am'iguities are to 'e construed against the part+ that
prepared it. &f, however, the stipulations are not o'scure, 'ut are clear and leave no
dou't on the intention of the parties, the literal meaning of its stipulations must 'e held
controlling. . contract of adhesion is (ust as 'inding as ordinar+ contracts. &t is true that
this 2ourt has, on occasion, struc$ down such contracts as 'eing assaila'le when the
wea$er part+ is left with no choice '+ the dominant 'argaining part+ and is thus
completel+ deprived of an opportunit+ to 'argain effectivel+. 1evertheless, contracts of
adhesion are not prohi'ited even as the courts remain careful in scrutini>ing the factual
circumstances underl+ing each case to determine the respective claims of contending
parties on their efficac+. &n the case at 'ar, respondent secured " su'scription contracts
for cellular phones on various dates. &t would 'e difficult to assume that, during each of
those times, respondent had no sufficient opportunit+ to read and go over the terms and
conditions em'odied in the agreements. @espondent continued, in fact, to ac4uire in the
pursuit of his 'usiness su'se4uent su'scriptions and remained a su'scri'er of
petitioner for 4uite sometime.
Hence, the petition was granted '+ the 2ourt and the decision of the 2ourt of
.ppeals is reversed and set aside. The 2ivil 2ase pending 'efore the @egional Trial 2ourt
of &ligan 2it+, Branch F, was D&*M&**<D without pre(udice to the filing of an
appropriate complaint '+ respondent against petitioner with the court of proper venue.
Page | 425
P3ILIPPINE AIRLINES VS. CO$R# OF APPEALS
55 SCRA 4"
G.R. No. 11+7!6 Mar1< 14, 1++6
FACTS:
n =anuar+ )8, 1//0, plaintiff 7ilda 2. Me(ia shipped thru defendant, Philippine
.irlines, one A1B unit microwave oven under P.# .ir ,a+'ill 1o. 068/6101000H60, with
a gross weight of 00 $ilograms from *an %rancisco, D.*... to Manila, Philippines. Dpon
arrival, however, of said article in Manila, Philippines, plaintiff discovered that its front
glass door was 'ro$en and the damage rendered it unservicea'le. Demands 'oth oral
and written were made '+ plaintiff against the defendant for the reim'ursement of the
value of the damaged microwave oven, and transportation charges paid '+ plaintiff to
defendant compan+. But these demands fell on deaf ears. This is 'ecause, according to
petitioner, was filed out of time under paragraph 1), a A1B of the .ir ,a+'ill which
provides: LAaB the person entitled to deliver+ must ma$e a complaint to the carrier in
writing in case: A1B of visi'le damage to the goods, immediatel+ after discover+ of the
damage and at the latest within 1F da+s from the receipt of the goods.
n *eptem'er )!, 1//0, 7ilda 2. Me(ia filed an action for damages against the
petitioner in the lower court. The latter rendered a decision rendering P.# lia'le to pa+,
actual, moral and e:emplar+ damages as well as attorne+9s fees. n appeal, the 2ourt of
.ppeals similarl+ ruled in favor of private respondent '+ affirming in full the trial
courtKs (udgment, with costs against petitioner.
ISS$E8
,hether or not the respondent court erred in affirming the conclusions of the
trial court that since the air wa+'ill is a contract of adhesion, its provisions should 'e
strictl+ construed against herein petitioner.
R$LING8
The *upreme 2ourt affirmed the appealed decision.
The trial court relied on the ruling in the case of %ieldmenKs &nsurance 2o., &nc.
vs. Cda. De *ongco, et al. in finding that the provisions of the air wa+'ill should 'e
strictl+ construed against petitioner.
The .ir ,a+'ill is a contract of adhesion considering that all the provisions
thereof are prepared and drafted onl+ '+ the carrier. The onl+ participation left of the
other part+ is to affi: his signature thereto. &n the earlier case of .ngeles v. 2alasan>, the
*upreme 2ourt ruled that the terms of a contract of adhesion must 'e interpreted
against the part+ who drafted the same.
Page | 426
ERMI#A=O VS. CO$R# OF APPEALS
'!6 SCRA 1"
FAC#S8
Petitioner #uis <rmitaQo applied for a credit card from private respondent BP&
<:press 2ard 2orp. AB<22B on cto'er H, 1/H" with his wife, Manuelita, as e:tension
card holder. The spouses were given credit limit of P10, 000.00. The+ often e:ceeded
this credit limit without protest from B22.
n .ugust /, 1/H/, Manuelita9s 'ag was snatched from her as she was shopping
at the green'elt mall in Ma$ati. .mong the items inside the 'ag was her B<22 credit
card. That same night she informed, '+ telephone, B<22 of the loss. The call was
received '+ B<22 offices through a certain 7ina Ban>on. This was followed '+ a letter
dated .ugust 00, 1/H/. *he also surrendered #uis9 credit card and re4uested for
replacement cards. &n her letter, Manuelita stated that she 3shall not 'e responsi'le for
an+ and all charges incurred Nthrough the use of the lost cardO after .ugust )/, 1/H/.
However, when #uis received his monthl+ 'illing statement from B<22 dated
*eptem'er )0, 1/H/, the charges included amounts for purchases were made, one
amounting to P),0!0.0! and the other, P"08.!0. Manuelita received a 'illing statement
dated cto'er )0,1/H/ which re4uired her to immediatel+ pa+ the total amount of
P0,1/8.80 covering the same Aunauthori>edB purchases. Manuelita wrote again B<22
disclaiming responsi'ilit+ for those charges, which were made after she had served
B<22 with notice of loss of her card.
However, B<22, in a letter dated =ul+ 10, 1//0, pointed to #uis the stipulation in
their contract. However, #uis stressed that the contract B<22 was referring to was a
contract of adhesion and warned that if B<22 insisted on charging him and his wife for
the unauthori>ed purchases, the+ will sue B<22 continued to 'ill the spouses for said
purchases.
ISS$E8
,hether or not the 2ourt of .ppeals gravel+ erred in rel+ing on the case of *erra
v. 2ourt of appeals, ))/ *2@. "0, 'ecause unli$e that case, petitioners have no chance
Page | 427
at all to contest the stipulations appearing in the credit card application that was drafted
entirel+ '+ private respondent, thus, a clear contract of adhesion.
R$LING8
The contract 'etween the parties in this case is indeed a contract of adhesion, so6
called 'ecause its terms are prepared '+ onl+ one part+ while the other part+ merel+
affi:es his signature signif+ing his adhesion thereto. *uch contracts are not void in
themselves. The+ are as 'inding as ordinar+ contracts. Parties who enter in to such
contracts are free to re(ect the stipulations entirel+.
&n this case, the cardholder, Manuelita, has complied with what was re4uired of
her under the contract with B<22, *he immediatel+ notified B<22 of loss of her card on
the same da+ it was lost and, the following da+, she sent a written notice of the loss to
B<22.
2learl+, what happened in this case was that B<22 failed to notif+ promptl+ the
esta'lishment in which the unauthori>ed purchases were made with the use of
Manuelita9s lost card.
$NI9I0E SALES REAL#, AN0 RESO$RCES CORPORA#ION,
5s. #I#AN-I4E0A CONS#R$C#IONAN0 0EVELOPMEN# CORPORA#ION
G.R. No. 1661+ 0e1e2ber !, !!6
511 SCRA ''5
FAC#S8
PR,&3C1 /. The first agreement was a written 32onstruction 2ontract5 entered
into '+ Titan and Dniwide sometime in Ma+ 1//1 where'+ Titan undertoo$ to construct
Dniwide9s ,arehouse 2lu' and .dministration Building in #i'is, ?ue>on 2it+ for a fee
of P1)0,/0",!/1.!0, pa+a'le in monthl+ progress 'illings to 'e certified to '+ Dniwide9s
representative. The parties stipulated that the 'uilding shall 'e completed not later than
00 1ovem'er 1//1. .s found '+ the 2&.2, the 'uilding was eventuall+ finished on 1!
%e'ruar+ 1//) and turned over to Dniwide.
PR,&3C1 .. *ometime in =ul+ 1//), Titan and Dniwide entered into the second
agreement where'+ the former agreed to construct an additional floor and to renovate
the latter9s warehouse located at the <D*. 2entral Mar$et .rea in Mandalu+ong 2it+.
There was no written contract e:ecuted 'etween the parties for this pro(ect.
2onstruction was allegedl+ to 'e on the 'asis of drawings and specifications provided '+
Dniwide9s structural engineers. The parties proceeded on the 'asis of a cost estimate of
P)1,001,08!.88 inclusive of Titan9s )0E mar$6up. Titan conceded in its complaint to
having received P1!,000,000.00 of this amount. This pro(ect was completed in the
latter part of cto'er 1//) and turned over to Dniwide.
Page | 428
PR,&3C1 3. The parties e:ecuted the third agreement in Ma+ 1//). &n a written
32onstruction 2ontract,5 Titan undertoo$ to construct the Dniwide *ales Department
*tore Building in Galoo$an 2it+ for the price of P11H,000,000.00 pa+a'le in progress
'illings to 'e certified to '+ Dniwide9s representative. &t was stipulated that the pro(ect
shall 'e completed not later than )H %e'ruar+ 1//0. The pro(ect was completed and
turned over to Dniwide in =une 1//0.
Dniwide asserted in its petition that: AaB it overpaid Titan for unauthori>ed
additional wor$s in Pro(ect 1 and Pro(ect 0J A'B it is not lia'le to pa+ the Calue6.dded
Ta: for Pro(ect 1J AcB it is entitled to li4uidated damages for the dela+ incurred in
constructing Pro(ect 1 and Pro(ect 0J and AdB it should not have 'een found lia'le for
deficiencies in the defectivel+ constructed Pro(ect ).
The decision:
O. ProKe17 1 N L)b)s: Dniwide is a'solved of an+ lia'ilit+ for the claims made
'+ NTitanO on this Pro(ect.
ProKe17 N E;sa Ce.7ra*: Dniwide is a'solved of an+ lia'ilit+ for C.T
pa+ment on this pro(ect, the same 'eing for the account of Titan. n the other hand,
Titan is a'solved of an+ lia'ilit+ on the counterclaim for defective construction of this
pro(ect. Dniwide is held lia'le for the unpaid 'alance in the amount of P",001,08!.88
which is ordered to 'e paid to the Titan with 1)E interest per annum commencing from
1/ Decem'er 1//) until the date of pa+ment.
O. ProKe17 ' N 4a*ooDa.: Dniwide is held lia'le for the unpaid 'alance in the
amount of P!,1!H,0"F."0 which is ordered to 'e paid to Titan with 1)E interest per
annum commencing from 0H *eptem'er 1//0 until the date of pa+ment. Dniwide is held
lia'le to pa+ in full the C.T on this pro(ect, in such amount as ma+ 'e computed '+ the
Bureau of &nternal @evenue to 'e paid directl+ thereto. The B&@ is here'+ notified that
Dniwide *ales @ealt+ and @esources 2orporation has assumed responsi'ilit+ and is held
lia'le for C.T pa+ment on this pro(ect. This accordingl+ e:empts 2laimant Titan6&$eda
2onstruction and Development 2orporation from this o'ligation.
ISS$E8
,hether or not the decision rendered is correct.
R$LING8
The petition is D<1&<D and the Decision of the 2ourt of .ppeals was
.%%&@M<D.
Page | 429
3EIRS OF A$G$S#O L. SALAS, -R. vs. LAPERAL REAL#, CORPORA#ION
G.R. NO. 1'5'6. 0e1e2ber 1', 1+++
FAC#S8
Page | 430
*alas, =r. was the registered owner of a vast tract of land in #ipa 2it+, Batangas
spanning 1,FHF,0!F s4uare meters. n Ma+ 1!, 1/H8, he entered into an wner6
2ontractor .greement with respondent #aperal @ealt+ 2orporation to render and
provide complete Ahori>ontalB construction services on his land. n *eptem'er )0,
1/HH, *alas, =r. e:ecuted a *pecial Power of .ttorne+ in favor of respondent #aperal
@ealt+ to e:ercise general control, supervision and management of the sale of his land,
for cash or on installment 'asis. n =une 10, 1/H/, *alas, =r. left his home in the
morning for a 'usiness trip to 1ueva <ci(a. He never returned.n .ugust ", 1//",
Teresita Dia> *alas filed with the @egional Trial 2ourt a verified petition for the
declaration of presumptive death of her hus'and, *alas, =r., who had then 'een missing
for more than seven A8B +ears. &t was granted on Decem'er 1), 1//".
Meantime, respondent #aperal @ealt+ su'divided the land of *alas, =r. and sold
su'divided portions thereof to respondents @oc$wa+ @eal <state 2orporation and *outh
@idge Cillage, &nc. on %e'ruar+ )), 1//0J to respondent spouses .'ra(ano and #ava and
scar Dacillo on =une )8, 1//1J and to respondents <duardo Cacuna, %lorante de la
2ru> and =esus Cicente 2apalan on =une F, 1//".
n %e'ruar+ 0, 1//H, petitioners as heirs of *alas, =r. filed in the @egional Trial
2ourt a 2omplaint for declaration of nullit+ of sale, reconve+ance, cancellation of
contract, accounting and damages against herein respondents. #aperal @ealt+ filed a
Motion to Dismiss

on the ground that petitioners failed to su'mit their grievance to
ar'itration as re4uired under .rticle C& of the .greement. *pouses .'ra(ano and #ava
and respondent Dacillo filed a =oint .nswer with 2ounterclaim and 2rossclaim pra+ing
for dismissal of petitioners9 2omplaint for the same reason.
The trial court issued an rder dismissing petitioners9 2omplaint for non6
compliance with the ar'itration clause.
ISS$E8
,hether or not the trial court erred in dismissing the complaint.
R$LING8
. su'mission to ar'itration is a contract. .s such, the .greement, containing the
stipulation on ar'itration, 'inds the parties thereto, as well as their assigns and heirs.
But onl+ the+. Petitioners, as heirs of *alas, =r., and respondent #aperal @ealt+ are
certainl+ 'ound '+ the .greement. &f respondent #aperal @ealt+, had assigned its rights
under the .greement to a third part+, ma$ing the former, the assignor, and the latter,
the assignee, such assignee would also 'e 'ound '+ the ar'itration provision since
assignment involves such transfer of rights as to vest in the assignee the power to
enforce them to the same e:tent as the assignor could have enforced them against the
de'tor

or in this case, against the heirs of the original part+ to the .greement. However,
respondents @oc$wa+ @eal <state 2orporation, *outh @idge Cillage, &nc., Maharami
Development 2orporation, spouses .'ra(ano, spouses #ava, scar Dacillo, <duardo
Cacuna, %lorante de la 2ru> and =esus Cicente 2apellan are .o7 assignees of the rights
of respondent #aperal @ealt+ under the .greement to develop *alas, =r.9s land and sell
the same. The+ are, rather, 'u+ers of the land that respondent #aperal @ealt+ was given
the authorit+ to develop and sell under the .greement. .s such, the+ are .o7 3assigns5
Page | 431
contemplated in .rt. 1011 of the 1ew 2ivil 2ode which provides that 3contracts ta$e
effect onl+ 'etween the parties, their assigns and heirs5.
#aperal @ealt+, as a contracting part+ to the .greement, has the right to compel
petitioners to first ar'itrate 'efore see$ing (udicial relief. However, to split the
proceedings into ar'itration for respondent #aperal @ealt+ and trial for the respondent
lot 'u+ers, or to hold trial in a'e+ance pending ar'itration 'etween petitioners and
respondent #aperal @ealt+, would in effect result in multiplicit+ of suits, duplicitous
procedure and unnecessar+ dela+. n the other hand, it would 'e in the interest of
(ustice if the trial court hears the complaint against all herein respondents and
ad(udicates petitioners9 rights as against theirs in a single and complete proceeding.
Hence, the trial court9s decision was nullified and set aside. *aid court was
ordered to proceed with the hearing.
Page | 432
%IENVENI0O R. ME0RANO a.; I%AAN R$RAL %AN4 vs. CA, PACI#A G.
%OR%ON, -OSEFINA E. AN#ONIO a.; ES#ELA A. FLOR
G.R. No. 15!67". February 1", !!5
FAC#S8
Bienvenido @. Medrano was the Cice62hairman of &'aan @ural Ban$, a 'an$
owned '+ the Medrano famil+. &n 1/H", Mr. Medrano as$ed Mrs. <stela %lor, a cousin6
in6law, to loo$ for a 'u+er of a foreclosed asset of the 'an$,

a 186hectare mango
plantation priced at P),)00,000.00. Mr. Dominador #ee, a 'usinessman from Ma$ati
2it+, was a client of respondent Mrs. Pacita 7. Bor'on, a licensed real estate 'ro$er.
Bor'on rela+ed to her 'usiness associates and friends that she had a read+ 'u+er for a
mango orchard. %lor then advised her that her cousin6in6law owned a mango plantation
which was up for sale. *he told %lor to confer with Medrano and to give them a written
authorit+ to negotiate the sale of the propert+. Thus, Medrano issued the #etter of
.uthorit+ in favor of Pacita 7. Bor'on and =osefina <. .ntonio.
. Deed of *ale was eventuall+ e:ecuted 'etween the 'an$, represented '+ its
PresidentM7eneral Manager Teresa M. 7an>on Aas CendorB and G7B %arms, &nc.,
represented '+ Dominador #ee Aas CendeeB, for the purchase price of P1,)00,000.00.
*ince the sale of the propert+ was consummated, the respondents as$ed from the
petitioners their commission, or !E of the purchase price. The petitioners refused to pa+
and offered a measl+ sum of P!,000.00 each. Hence, the respondents were constrained
to file an action against herein petitioners.
The trial court rendered a Decision in favor of the respondents. &t found that the
letter of authorit+ was valid and 'inding as against Medrano and the &'aan @ural 'an$.
Medrano signed the said letter for and in 'ehalf of the 'an$, and as owner of the
propert+, promising to pa+ the respondents a !E commission for their efforts in loo$ing
for a purchaser of the propert+. He is, therefore, estopped from den+ing lia'ilit+ on the
'asis of the letter of authorit+ he issued in favor of the respondents. The trial court
further stated that the sale of the propert+ could not have 'een possi'le without the
representation and intervention of the respondents. .s such, the+ are entitled to the
Page | 433
'ro$er9s commission of !E of the selling price of P1,)00,000.00 as evidenced '+ the
deed of sale. n appeal, the 2. affirmed the trial court9s decision.
ISS$E8
,hether or not the 2ourt of .ppeals erred in affirming the trial court9s decision.
R$LING8
There can 'e no other conclusion than the respondents are indeed the procuring
cause of the sale. &f not for the respondents, #ee would not have $nown a'out the mango
plantation 'eing sold '+ the petitioners. The sale was consummated. The 'an$ had
profited from such transaction. &t would certainl+ 'e ini4uitous if the respondents would
not 'e rewarded their commission pursuant to the letter of authorit+. Hence, the 2ourt
of .ppeal9s decision is affirmed.
MAN$EL %. #AN, GREGG M. #ECSON a.; ALE>AN0ER SAL0A=A,
vs. E0$AR0O R. G$LLAS a.; NORMA S. G$LLAS
G.R. No. 14'+7". 0e1e2ber ', !!
FAC#S8
*pouses <duardo @. 7ullas and 1orma *. 7ullas, were the registered owners of a
parcel of land measuring 10F,11F s4. m., with Transfer 2ertificate of Title 1o. 01F"!. n
=une )/, 1//), the+ e:ecuted a special power of attorne+ authori>ing petitioners Manuel
B. Tan, a licensed real estate 'ro$er, and his associates 7regg M. Tecson and .le:ander
*aldaQa, to negotiate for the sale of the land at P!!0.00 per s4uare meter, at a
commission of 0E of the gross price. The power of attorne+ was non6e:clusive and
effective for one month from =une )/, 1//). n the same date, petitioner Tan contacted
<ngineer #edesma, construction manager of the *isters of Mar+ of Banneau:, &nc.
Ahereafter, *isters of Mar+B, a religious organi>ation interested in ac4uiring a propert+.
n 1, 1//), petitioner Tan visited the propert+ with <ngineer #edesma.
Thereafter, the two men accompanied *isters Michaela Gim and .>ucena 7aviola,
representing the *isters of Mar+, who had seen and inspected the land, found the same
suita'le for their purpose and e:pressed their desire to 'u+ it. However, the+ re4uested
that the selling price 'e reduced to P!00.00 per s4uare meter instead of P!!0.00 per
s4uare meter. Private respondent <duardo 7ullas referred the prospective 'u+ers to his
wife.
Page | 434
&t was the first time that the 'u+ers came to $now that private respondent
<duardo 7ullas was the owner of the propert+. Private respondents agreed to sell the
propert+ to the *isters of Mar+, and su'se4uentl+ e:ecuted a special power of attorne+
in favor of <ufemia 2aQete, giving her the special authorit+ to sell, transfer and conve+
the land at a fi:ed price of P)00.00 per s4uare meter. .ttorne+6in6fact 2aQete e:ecuted
a deed of sale in favor of the *isters of Mar+ for the price of P)0,H)),H00.00, or at the
rate of P)00.00 per s4uare meter. The 'u+ers su'se4uentl+ paid the corresponding
ta:es. Thereafter, the @egister of Deeds of issued T2T 1o. 8!/H1 in the name of the
*isters of Mar+ of Banneau:, &nc.
<arlier, on =ul+ 0, 1//), petitioners went to see private respondent <duardo
7ullas to claim their commission, 'ut the latter told them that he and his wife have
alread+ agreed to sell the propert+ to the *isters of Mar+. Private respondents refused to
pa+ the 'ro$er9s fee and alleged that another group of agents was responsi'le for the sale
of land to the *isters of Mar+.
petitioners filed a complaint

against the defendants for recover+ of their 'ro$er9s
fee in the sum of P1,"!!,F1)."0, as well as moral and e:emplar+ damages and attorne+9s
fees. The+ alleged that the+ were the efficient procuring cause in 'ringing a'out the sale
of the propert+ to the *isters of Mar+, 'ut that their efforts in consummating the sale
were frustrated '+ the private respondents who, in evident 'ad faith, malice and in
order to evade pa+ment of 'ro$er9s fee, dealt directl+ with the 'u+er whom petitioners
introduced to them. The+ further pointed out that the deed of sale was undervalued
o'viousl+ to evade pa+ment of the correct amount of capital gains ta:, documentar+
stamps and other internal revenue ta:es.
&n their answer, private respondents countered that, contrar+ to petitioners9 claim, the+
were not the efficient procuring cause in 'ringing a'out the consummation of the sale
'ecause another 'ro$er, @o'erto Pacana, introduced the propert+ to the *isters of Mar+
ahead of the petitioners. Private respondents maintained that when petitioners
introduced the 'u+ers to private respondent <duardo 7ullas, the former were alread+
decided in 'u+ing the propert+ through Pacana, who had 'een paid his commission.
Private respondent <duardo 7ullas admitted that petitioners were in his office on =ul+
0, 1//), 'ut onl+ to as$ for the reim'ursement of their cellular phone e:penses.
.fter trial, the lower court rendered (udgment in favor of petitioners. <duardo
and 1orma 7ullas were ordered to pa+ (ointl+ and severall+ plaintiffs Manuel Tan,
7regg Tecson and .le:ander *aldaQa the sum of P")F,"HF.00 as 'ro$er9s fee with legal
interest at the rate of "E per annum from the date of filing of the complaintJ and the
sum of P!0,000.00 as attorne+9s fees and costs of litigation.
The 2ourt of .ppeals reversed and set aside the lower court9s decision and
rendered another (udgment dismissing the complaint.
ISS$E8
,hether or not the 2ourt of .ppeals erred in dismissing the complaint.
R$LING8
&t is readil+ apparent that private respondents are tr+ing to evade pa+ment of the
commission which rightfull+ 'elongs to petitioners as 'ro$ers with respect to the sale.
There was no dispute as to the role that petitioners pla+ed in the transaction. .t the ver+
Page | 435
least, petitioners set the sale in motion. The+ were not a'le to participate in its
consummation onl+ 'ecause the+ were prevented from doing so '+ the acts of the
private respondents. &n the case of 'lfred 4ahn v. Court of 'ppeals and )ayerische
+otoren 5er*e '*tiengesellschaft 6)+57 the *2 ruled that, 3.n agent receives a
commission upon the successful conclusion of a sale. n the other hand, a "ro*er earns
his pa+ merel+ '+ 'ringing the 'u+er and the seller together, even if no sale is eventuall+
made.5 2learl+, therefore, petitioners, as 'ro$ers, should 'e entitled to the commission
whether or not the sale of the propert+ su'(ect matter of the contract was concluded
through their efforts.
Hence, the trial court9s decision is reinstated.
-ES$S M. GO:$N 5s. -OSE #EOFILO #. MERCA0O
Page | 436
G.R. No. 167"1 0e1e2ber 1+, !!6
FAC#S8
&n the local elections of 1//!, respondent vied for the gu'ernatorial post in
Pampanga. Dpon respondent9s re4uest, petitioner, owner of =M7 Pu'lishing House, a
printing shop, su'mitted to respondent draft samples and price 4uotation of campaign
materials.
B+ petitioner9s claim, respondent9s wife had told him that respondent alread+
approved his price 4uotation and that he could start printing the campaign materials,
hence, he did print campaign materials. 7iven the urgenc+ and limited time to do the
(o' order, petitioner availed of the services and facilities of Metro .ngeles Printing and
of *t. =oseph Printing Press, owned '+ his daughter =ennifer 7o>un and mother
<pifania Macalino 7o>un, respectivel+.
Petitioner delivered the campaign materials to respondent9s head4uarters.
n March 01, 1//!, respondent9s sister6in6law, #ilian *oriano o'tained from
petitioner 3cash advance5 of P)!0,000 allegedl+ for the allowances of poll watchers who
were attending a seminar and for other related e:penses. #ilian ac$nowledged on
petitioner9s 1//! diar+ receipt of the amount.
Petitioner later sent respondent a *tatement of .ccount in the total amount of
P),188,/0" itemi>ed as follows: P"F0,010 for =M7 Pu'lishing HouseJ PH08,"/" for
Metro .ngeles PrintingJ PFF",/00 for *t. =oseph Printing PressJ and P)!0,000, the
3cash advance5 o'tained '+ #ilian. @espondent9s wife partiall+ paid P1,000,000 to
petitioner who issued a receipt therefor. Despite repeated demands and respondent9s
promise to pa+, respondent failed to settle the 'alance of his account to petitioner.
Petitioner thus filed with the @T2 a complaint against respondent to collect the
remaining amount of P1,188,/0" plus 3inflationar+ ad(ustment5 and attorne+9s fees. The
trial court rendered (udgment in favor of the petitioner. The 2. however, reversed the
trial court9s decision and dismissed the complaint for lac$ of cause of action.
ISS$E8
,hether or not the 2ourt of .ppeals erred in reversing the trial courts9 decision.
R$LING8
Petitioner is the real part+ in interest in this case. The trial court9s findings on the
matter were affirmed '+ the appellate court. &t erred, however, in not declaring
petitioner as a real part+ in interest insofar as recover+ of the cost of campaign materials
made '+ petitioner9s mother and sister are concerned, upon the wrong notion that the+
should have 'een, 'ut were not, impleaded as plaintiffs.
Thus, respondent has the o'ligation to pa+ the total cost of printing his campaign
materials delivered '+ petitioner in the total of P1,/)F,/0", less the partial pa+ment of
P1,000,000, or P/)F,/0".
Page | 437
-OSEP3 C3AN, 9ILSON C3AN a.; LIL, C3AN VS. %ONIFACIO S.
MACE0A, -R
4! SCRA
G.R. No. 145+1 '5 !!' A(r '!
FAC#S8
n =ul+ )H, 1/8", Bonifacio *. Maceda, =r., herein respondent, o'tained a P8.0
million loan from the Development Ban$ of the Philippines for the construction of his
1ew 7ran Hotel Pro(ect in Taclo'an 2it+. Thereafter, on *eptem'er )/, 1/8",
respondent entered into a 'uilding construction contract with Moreman Builders 2o.,
&nc. The+ agreed that the construction would 'e finished not later than Decem'er )),
1/88. @espondent purchased various construction materials and e4uipment in Manila.
Moreman, in turn, deposited them in the warehouse of ,ilson and #il+ 2han, herein
petitioners. The deposit was free of charge. Dnfortunatel+, Moreman failed to finish the
construction of the hotel at the stipulated time. Hence, on %e'ruar+ 1, 1/8H, respondent
filed with the then 2%& an action for rescission and damages against Moreman. n
1ovem'er )H, 1/8H, the 2%& rendered its Decision rescinding the contract 'etween
Moreman and respondent and awarding to the latter PFF!,000.00 as actual, moral and
li4uidated damagesJ P)0,000.00 representing the increase in the construction
materialsJ and P0!,000.00 as attorne+9s fees. Moreman interposed an appeal to the
2ourt of .ppeals 'ut the same was dismissed on March 8, 1/H/ for 'eing dilator+. He
elevated the case to the *2 via a petition for review on certiorari. &n a Decision dated
%e'ruar+ )1, 1//0, the 2ourt denied the petition. n .pril )0, 1//0 an <ntr+ of
=udgment was issued.
Meanwhile, during the pendenc+ of the case, respondent ordered petitioners to
return to him the construction materials and e4uipment which Moreman deposited in
their warehouse. Petitioners, however, told them that Moreman withdrew those
construction materials in 1/88. Hence, on Decem'er 11, 1/H!, respondent filed with the
@T2 an action for damages with an application for a writ of preliminar+ attachment
against petitioners.
ISS$E8
,hether or not respondent have the right to demand the release of the said
materials and e4uipment or claim for damages.
Page | 438
R$LING8
.t the outset, the case should have 'een dismissed outright '+ the trial court
'ecause of patent procedural infirmities. <ven without such serious procedural flaw, the
case should also 'e dismissed for utter lac$ of merit. Dnder .rticle 1011 of the 2ivil
2ode, contracts are 'inding upon the parties Aand their assigns and heirsB who e:ecute
them. ,hen there is no privit+ of contract, there is li$ewise no o'ligation or lia'ilit+ to
spea$ a'out and thus no cause of action arises. *pecificall+, in an action against the
depositar+, the 'urden is on the plaintiff to prove the 'ailment or deposit and the
performance of conditions precedent to the right of action. . depositar+ is o'liged to
return the thing to the depositor, or to his heirs or successors, or to the person who ma+
have 'een designated in the contract.
&n the present case, the record is 'ereft of an+ contract of deposit, oral or written,
'etween petitioners and respondent. &f at all, it was onl+ 'etween petitioners and
Moreman. .nd granting arguendo that there was indeed a contract of deposit 'etween
petitioners and Moreman, it is still incum'ent upon respondent to prove its e:istence
and that it was e:ecuted in his favor. However, respondent misera'l+ failed to do so.
The onl+ pieces of evidence respondent presented to prove the contract of deposit were
the deliver+ receipts. *ignificantl+, the+ are unsigned and not dul+ received or
authenticated '+ either Moreman, petitioners or respondent or an+ of their authori>ed
representatives. Hence, those deliver+ receipts have no pro'ative value at all. ,hile our
laws grant a person the remedial right to prosecute or institute a civil action against
another for the enforcement or protection of a right, or the prevention or redress of a
wrong, ever+ cause of action e:6contractu must 'e founded upon a contract, oral or
written, e:press or implied. Moreover, respondent also failed to prove that there were
construction materials and e4uipment in petitioners9 warehouse at the time he made a
demand for their return. 2onsidering that respondent failed to prove A1B the e:istence of
an+ contract of deposit 'etween him and petitioners, nor 'etween the latter and
Moreman in his favor, and A)B that there were construction materials in petitioners9
warehouse at the time of respondent9s demand to return the same, we hold that
petitioners have no corresponding o'ligation or lia'ilit+ to respondent with respect to
those construction materials.
Page | 439
#IMO#EO %AL$,O#, e7 a*. VS. CO$R# OF APPEALS
1+++ -u*
FAC#S8
Petitioners are residents of Baranga+ 2ru>6na6#igas. Diliman, ?ue>on 2it+. The
2ru>6na6#igas Homesite .ssociation, &nc. is a non6stoc$ corporation of which
petitioners and other residents of Baranga+ 2ru>6na6#igas are mem'ers.
Petitioners filed a complaint for specific performance and damages against
private respondent Dniversit+ of the Philippines 'efore the @T2. The complaint was
later on amended to include private respondent ?ue>on 2it+ government as defendant.
that plaintiffs and their ascendants are owners since memor+ can no longer recall
of that parcel of riceland $nown *itio #i'is, Barrio 2ru>6na6#igas, ?ue>on 2it+ Anow
Diliman, ?ue>on 2it+B, while the mem'ers of the plaintiff .ssociation and their
Page | 440
ascendants have possessed since time immemorial openl+, adversel+, continuousl+ and
also in the concept of an owner, the rest of the area em'raced '+ and within the Barrio
2ru>6na6#igas, Diliman, ?ue>on 2it+J
that since cto'er 1/8), the claims of the plaintiffs andMor mem'ers of plaintiff
.ssociation have 'een the su'(ect of 4uasi6(udicial proceedings and administrative
investigations in the different 'ranches of the government penultimatel+ resulting in the
issuance of that &ndorsement dated Ma+ 8, 1/8! '+ the Bureau of #ands, and ultimatel+,
in the issuance of the &ndorsement of %e'ruar+ 1), 1/H!, '+ the office of the President of
the @ep. of the Philippines confirming the rights of the 'onafide residents of Barrio
2ru>6na6#igas to the parcel of land the+ have 'een possessing or occup+ingJ
that defendant DP, pursuant to the said &ndorsement from the ffice of the
President of the @ep. of the Philippines, issued that @epl+ &ndorsement wherein it
approved the donation of a'out /.) hectares of the site, directl+ to the residents of Brg+.
Grus 1a #igas. .fter several negotiations with the residents, the area was increased to
1!.H hectares A1!H,08/ s4uare metersBJ
that, however, defendant DP 'ac$ed6out from the arrangement to donate directl+
to the plaintiff .ssociation for the 'enefit of the 4ualified residents and high6handedl+
resumed to negotiate the donation thru the defendant ?ue>on 2it+ 7overnment under
the terms disadvantageous or contrar+ to the rights of the 'onafide residents of the
BarrioJ that plaintiff .ssociation forthwith amended its petition and pra+ed for a writ of
preliminar+ in(unction to restrain defendant DP from donating the area to the
defendant ?ue>on 2it+ 7overnment which was grantedJ
that in the hearing of the Motion for @econsideration filed '+ defendant DP,
plaintiff .ssociation finall+ agreed to the lifting of the said rder granting the in(unction
after defendant DP made an assurance in their said Motion that the donation to the
defendant ?ue>on 2it+ 7overnment will 'e for the 'enefit of the residents of 2ru>61a6
#igasJ
that, however, defendant DP too$ e:ception to the aforesaid rder lifting the
rder of &n(unction and insisted on the dismissal of the caseJ
that plaintiff manifested its willingness to the dismissal of the case, provided, that
the area to 'e donated thru the defendant ?ue>on 2it+ government 'e su'divided into
lots to 'e given to the 4ualified residents together with the certificate of titles, without
costJ
that defendant DP failed to deliver the certificate of title covering the propert+ to
'e donated thus the defendant ?ue>on 2it+ 7overnment was not a'le to register the
ownership so that the defendant ?ue>on 2it+ 7overnment can legall+ and full+ compl+
with their o'ligations under the said deed of donationJthat upon e:piration of the period
of eighteen A1HB months, for alleged non6compliance of the defendant ?ue>on 2it+
7overnment with terms and conditions 4uoted in par. 1" hereof, defendant DP thru its
President, Mr. =ose .'ueva, unilaterall+, capriciousl+, whimsicall+ and unlawfull+
Page | 441
issued that .dministrative rder 1o. )1 declaring the deed of donation revo$ed and the
donated propert+ 'e reverted to defendant DP.
The petitioners, then, pra+ed that a writ of preliminar+ in(unction or at least a
temporar+ restraining order 'e issued, ordering defendant DP to o'serve status 4uoJ
thereafter, after due notice and hearing, a writ of preliminar+ in(unction 'e issuedJ AaB to
restrain defendant DP or to their representative from e(ecting the plaintiffs from and
demolishing their improvements on the riceland or farmland situated at *itio #i'isJ A'B
to order defendant DP to refrain from e:ecuting another deed of donation in favor
another person or entit+ and in favor of non6'onafide residents of Barrio 2ru>6na6#igas
different from the Deed of Donation, and after trial on the merits, (udgment 'e
rendered:declaring the Deed of Donation as valid and su'sisting and ordering the
defendant DP to a'ide '+ the terms and conditions thereof.
The 2ourt of .ppeals reversed the decision of the trial court.
ISS$E8
,hether or not defendant DP could e:ecute another deed of donation in favor of
third person.
R$LING8
The 2ourt found all the elements of a cause of action contained in the amended
complaint of petitioners. ,hile, admittedl+, petitioners were not parties to the deed of
donation, the+ anchor their right to see$ its enforcement upon their allegation that the+
are intended 'eneficiaries of the donation to the ?ue>on 2it+ government. .rt. 1011,
second paragraph, of the 2ivil 2ode provides:
8f a contract should contain some stipulation in favor of a third person% he may
demand its fulfillment provided he communicated his acceptance to the o"ligor "efore
its revocation. ' mere incidental "enefit or interest of a person is not sufficient. 1he
contracting parties must have clearly and deli"erately conferred a favor upon a third
person.
Dnder this provision of the 2ivil 2ode, the following re4uisites must 'e present in
order to have a stipulation pour autrui:A1B there must 'e a stipulation in favor of a third
personJ A)B the stipulation must 'e a part, not the whole of the contractJA0B the
contracting parties must have clearl+ and deli'eratel+ conferred a favor upon a third
person, not a mere incidental 'enefit or interestJ AFB the third person must have
communicated his acceptance to the o'ligor 'efore its revocationJ and A!B neither of the
contracting parties 'ears the legal representation or authori>ation of the third part+.
The allegations in the following paragraphs of the amended complaint are
sufficient to 'ring petitioners9 action within the purview of the second paragraph of .rt.
1011 on stipulations pour autrui:
1. Paragraph 18, that the deed of donation contains a stipulation that the ?ue>on 2it+
government, as donee, is re4uired to transfer to 4ualified residents of 2ru>6na6#igas, '+
wa+ of donations, the lots occupied '+ themJ
Page | 442
). The same paragraph, that this stipulation is part of conditions and o'ligations
imposed '+ DP, as donor, upon the ?ue>on 2it+ government, as doneeJ
0. Paragraphs 1! and 1", that the intent of the parties to the deed of donation was to
confer a favor upon petitioners '+ transferring to the latter the lots occupied '+ themJ
F. Paragraph 1/, that conferences were held 'etween the parties to convince DP to
surrender the certificates of title to the cit+ government, impl+ing that the donation had
'een accepted '+ petitioners '+ demanding fulfillment thereof and that private
respondents were aware of such acceptanceJ and
!. .ll the allegations considered together from which it can 'e fairl+ inferred that
neither of private respondents acted in representation of the otherJ each of the private
respondents had its own o'ligations, in view of conferring a favor upon petitioners.
The amended complaint further alleges that respondent DP has an o'ligation to
transfer the su'(ect parcel of land to the cit+ government so that the latter can in turn
compl+ with its o'ligations to ma$e improvements on the land and thereafter transfer
the same to petitioners 'ut that, in 'reach of this o'ligation, DP failed to deliver the title
to the land to the cit+ government and then revo$ed the deed of donation after the latter
failed to fulfill its o'ligations within the time allowed in the contract. %or the purpose of
determining the sufficienc+ of petitioners9 cause of action, these allegations of the
amended complaint must 'e deemed to 'e h+potheticall+ true. *o assuming the truth of
the allegations, we hold that petitioners have a cause of action against DP.
The decision of the 2ourt of .ppeals is reversed and the case is remanded to the
@T2 of ?ue>on 2it+ for trial on the merits.
Page | 443
SPO$SES A0ELINA S. C$,CO a.; FELICIANO $. C$,CO
5s.
SPO$SES RENA#O C$,CO a.; FILIPINA C$,CO
G.R. No. 16"7'6 A(r)* 1+, !!6
FAC#S8
Petitioners o'tained a loan in the amount of P1,!00,000.00 from respondents
pa+a'le within one +ear at 1HE interest per annum, and secured '+ a @eal <state
Mortgage over a parcel of land with improvements thereon situated in 2u'ao, ?ue>on
2it+ covered '+ a T2T.
*u'se4uentl+, petitioners o'tained additional loans from the respondents in the
aggregate amount of P1,)!0,000.00, 'ro$en down as follows: A1B P1!0,000.00 on Ma+
00, 1//)J A)B P1!0,000.00 on =ul+ 1, 1//)J A0B P!00,000.00 on *eptem'er !, 1//)J AFB
P)00,000.00 on cto'er )/, 1//)J and A!B P)!0,000.00 on =anuar+ 10, 1//0.
Petitioners made pa+ments amounting to P)/1,800.00, 'ut failed to settle their
outstanding loan o'ligations. @espondents filed a complaint

for foreclosure of mortgage
with the @T2. The+ alleged that petitioners9 loans were secured '+ the real estate
mortgageJ that as of .ugust 01, 1//8, their inde'tedness amounted to P",/"8,)F1.1F,
inclusive of the 1HE interest compounded monthl+J and that petitioners9 refusal to settle
the same entitles the respondents to foreclose the real estate mortgage.
Petitioners filed a motion to dismiss on the ground that the complaint states no
cause of action which was denied '+ the @T2 for lac$ of merit. Petitioners admitted their
loan o'ligations 'ut argued that onl+ the original loan of P1,!00,000.00 was secured '+
the real estate mortgage at 1HE per annum and that there was no agreement that the
same will 'e compounded monthl+.
Page | 444
The @T2 rendered (udgment in favor of the respondents and ordered the
petitioners to pa+ to the 2ourt or to the respondents the amounts of P",00),01/.HF, plus
interest until full+ paid, P)!,000.00 as attorne+9s fees, and costs of suit, within a period
of 1)0 da+s from the entr+ of (udgment, and in case of default of such pa+ment and upon
proper motion, the propert+ shall 'e ordered sold at pu'lic auction to satisf+ the
(udgment.
The 2. partiall+ granted the petition and modified the @T2 decision insofar as
the amount of the loan o'ligations secured '+ the real estate mortgage. &t held that '+
e:press intention of the parties, the real estate mortgage secured the original
P1,!00,000.00 loan and the su'se4uent loans of P1!0,000.00 and P!00,000.00
o'tained on =ul+ 1, 1//) and *eptem'er !, 1//), respectivel+. .s regards the loans
o'tained on Ma+ 01, 1//), cto'er )/, 1//) and =anuar+ 10, 1//0 in the amounts of
P1!0,000.00, P)00,000.00 and P)!0,000.00, respectivel+, the appellate tri'unal held
that the parties never intended the same to 'e secured '+ the real estate mortgage.
Hence, this petition.
ISS$E8
,hether or not petitioners must pa+ respondents legal interest of 1)E per annum
on the stipulated interest of 1HE per annum, computed from the filing of the complaint
until full+ paid.
R$LING8
.ppl+ing the rules in the computation of interest, the principal amount of loans
su'(ect of the real estate mortgage must earn the stipulated interest of 1HE per annum%
which interest, as long as unpaid, also earns legal interest of 1)E per annum, computed
from the date of the filing of the complaint on *eptem'er 10, 1//8 until finalit+ of the
2ourt9s Decision. *uch interest is not due to stipulation 'ut due to the mandate of the
law as em'odied in .rticle ))1) of the 2ivil 2ode. %rom such date of finalit+, the total
amount due shall earn interest of 1)E per annum until satisfied
2ertainl+, the computed interest from the filing of the complaint on *eptem'er
10, 1//8 would no longer 'e true upon the finalit+ of this 2ourt9s decision. &n accordance
with the rules laid down in 3astern Shipping Lines% 8nc. v. Court of 'ppeals, the *2
derived the following formula for the @T2s guidance:
TT.# .MD1T DD< _ Nprincipal ` interest ` interest on interestO 6 partial
pa+ments made
&nterest _ principal : 1H E per annum : no. of +ears from due date until finalit+
of (udgment
&nterest on interest _ &nterest computed as of the filing of the complaint
A*eptem'er 10, 1//8B : 1)E : no. of +ears until finalit+ of (udgment
Total amount due as of the date of finalit+ of (udgment will earn an interest of
1)E per annum until full+ paid.
Hence, the *2 affirmed the 2. decision with modifications. &t ordered petitioners
to pa+ the respondents A1B the total amount due, as computed '+ the @T2 in accordance
Page | 445
with the formula specified a'ove, A)B the legal interest of 1)E per annum on the total
amount due from such finalit+ until full+ paid, A0B the reasona'le amount of P)!,000.00
as attorne+9s fees, and AFB the costs of suit, within a period of not less than /0 da+s nor
more than 1)0 da+s from the entr+ of (udgment, and in case of default of such pa+ment
the propert+ shall 'e sold at pu'lic auction to satisf+ the (udgment.
#A,AG VS. CO$R# OF APPEALS
)1/ *2@. FH1
FAC#S8
Petitioners are the heirs of =uan 7alicia, *r. who are see$ing to rescind the deed
of conve+ance e:ecuted '+ 7alicia, *r. together with 2elerina #a'uguin, in favor of
.l'rigido #e+va, respondent involving the undivided one6half portion of a piece of land
situated at Po'lacion, 7uim'a, 1ueva <ci(a. The+ contend that respondent is in 'reach
of the conditions of the deed. 2ontained in the deed were stipulations regarding the
Page | 446
pa+ment and settlement of the purchase price of the land. The respondent however did
not strictl+ compl+ this with. Despite the posterior pa+ments however, petitioners
accepted them. @espondent, on the contention that he fulfilled his o'ligation to pa+
filed this case for specific performance '+ the petitioners.
The court of origin which tried the suit for specific performance on account of the
herein petitioner9s reluctance to a'ide '+ the covenant, ruled in favor of the vendee
while respondent court practicall+ agreed with the trial court e:cept as to the amount to
'e paid to petitioners and the refund to private respondent are concerned.
&**D<:
The issue is whether or not petitioners9 pra+er for the rescission of the deed can
prosper.
@D#&17:
The *upreme 2ourt affirmed the decision of the lower courts.
The suggestion of petitioners that the covenant must 'e cancelled in the light of
private respondent9s so6called 'reach seems to overloo$ petitioners9 demeanor who,
instead of immediatel+ filing the case precisel+ to rescind the instrument 'ecause of
non6compliance, allowed private respondent to effect numerous pa+ments posterior to
the grace periods provided in the contract. This apath+ of petitioners, who even
permitted private respondent to ta$e the initiative in filing the suit for specific
performance against them, is a$in to waiver of a'andonment of the right to rescind.
Page | 447
SO PING %$N VS. CO$R# OF APPEALS
'14 SCRA 751
FAC#S8
&n 1/"0, Te$ Hua Trading 2o., through its managing partner, *o Pe$ 7io$,
entered into lease agreements with lessor Dee 2. 2huan and *ons &nc AD22*&B. *u'(ects
of four AFB lease contracts were premises located at 1os. /00, /006 &nt., /)F6B and /)F6
2, *oler *treet, Binondo, Manila. Te$ Hua used the areas to store its te:tiles. The
contracts each had a one +ear term. The+ provided that should the lessee continue to
occup+ the premises after the term, the lease shall 'e on a month to month 'asis.
,hen the contracts e:pired, the parties did not renew the contracts, 'ut Te$ Hua
continued to occup+ the premises in 1/8" Te$ Hua Trading 2orp. was dissolved. #ater,
the original mem'ers of Te$ Hua Trading 2o., including Manuel 2.Tiong, formed Te$
Hua <nterprising 2orp., herein respondent corporation.
*o Pe$ 7io$, managing partner of Te$ Hua Trading, died in 1/H". *o Pe$ 7io$9s
grandson, petitioner *o Ping Bun, occupied the warehouse for his own te:tile 'usiness,
Trendsetter Mar$eting.
n .ugust 1, 1/H/, lessor D22*& sent letters addressed to Te$ Hua enterprises,
informing the latter of the )!E increase in rent effective *eptem'er 1, 1/H/. The rent
increase was later on reduced to )0E effective =anuar+ 1, 1//0, upon other lessees9
demand. .gain on Decem'er 1, 1//0, the lessor implemented a 00E rent increase.
<nclosed in these letters were new lease contracts for signing. D22*& warned that
failure of the lessee to accomplish the contracts shall 'e deemed as lac$ of interest on
the lessee9s part, and agreement to the termination of the lese. Private respondents did
not answer an+ of these letters. *till, the lease contracts were not rescinded.
n March 1, 1//1, private respondent Tiong sent a letter to petitioner as$ing Mr.
*o Ping Bun to vacate the premise 'ecause he used a warehouse.
Petitioner refused to vacate. n March F, 1//), petitioner re4uested formal
contracts of lease with D22*& in favor Trendsetter Mar$eting. *o Ping Bun claimed that
after the death of his grandfather, *o Pe$ 7io$, he had 'een occup+ing the premises for
his te:tile 'usiness and religiousl+ paid rent. D22*& acceded to petitioner9s re4uest.
The lease contracts in favor of Trendsetter were e:ecuted.
ISS$E8
,hether the appellate court erred in affirming the trial court9s decision finding
*o Ping Bun guilt+ of tortuous interference of contact.
R$LING8
&n the instant case, it is clear that petitioner *o Ping Bun prevailed upon D22*&
to lease the warehouse to his enterprise at the e:pense of respondent corporation.
Though petitioner too$ interest in the propert+ of respondent corporation and 'enefited
from it, nothing on record imputes deli'erate wrongful motives or malice on him.
Page | 448
. dut+ which the law of torts is concerned with is respect for the propert+ of
others, and cause of action ex delicto ma+ 'e predicated upon an unlawful interference
'+ one person of the en(o+ment '+ the other of his private propert+. This ma+ pertain to
a situation where a third person induces a part+ to renege on or violate his underta$ing
under a contract. &n the case 'efore us, petitioner9s Trendsetter Mar$eting as$ed D22*&
to e:ecute lease contracts in its favor, and as a result petitioner deprived respondent
corporation of the latter9s propert+ right. 2learl+, and as correctl+ viewed '+ the
appellate court, the three elements of tort interference a'ove mentioned are present in
the instant case.
.uthorities de'ate on whether interference ma+ 'e (ustified where the defendant
acts for the sole purpose of furthering his own financial or economic interest. ne view
is that, as a general rule, (ustification for interfering with the 'usiness relations of
another e:ist where the actor9s motive is to 'enefit himself. *uch (ustification does not
e:ist where his sole motive is to cause harm to the other. .dded to this, some
authorities 'elieve that it is not necessar+ that the interferer9s interest outweigh that of
the part+ whose rights are invaded, and that an individual acts under an economic
interest that is su'stantial, not merel+ & de minimis for he acts in self protection.
Moreover, (ustification for protecting ones financial position should not 'e made to
depend on a comparison of his economic interest in the su'(ect matter with that of
others. &t is sufficient if the impetus of his conduct lies in a proper 'usiness interest
rather than in wrongful motives.
.s earl+ as 9ilchrist vs. Cuddy we held that where there was no malice in the
interference of a contract, and the impulse 'ehind one9s conduct lies in a proper
'usiness interest rather than in wrongful motives, a part+ cannot 'e a malicious
interferer. ,here the alleged interferer is financiall+ interested and such interest
motivates his conduct it cannot 'e said that he is an officious or malicious intermeddler.
Page | 449
ROC4LAN0 CONS#R$C#ION COMPAN,, INC 5s. MI0-PASIG LAN0
0EVELOPMEN# CORPORA#ION
G.R. No. 1645"7, February !4, !!"
@oc$land 2onstruction 2ompan+, &nc. in a letter dated March 1, )000, offered to
lease from Mid6Pasig #and Development 2orporation the latter9s 0.16hectare propert+ in
Pasig 2it+. This propert+ is covered '+ Transfer 2ertificate of Title 1os. F"/80) and
0081!H under the control of the Presidential 2ommission on 7ood 7overnment. Dpon
instruction of Mid6Pasig to address the offer to the P277, @oc$land wrote the P277 on
.pril 1!, )000. The letter, addressed to P277 2hairman Magdangal <lma, included
@oc$land9 proposed terms and conditions for the lease. This letter was also received '+
Mid6Pasig on .pril 1H, )000, 'ut Mid6Pasig made no response.
.gain, in another letter dated =une H, )000 addressed to the 2hairman of Mid6
Pasig, Mr. @onaldo *alonga, @oc$land sent a Metropolitan Ban$ and Trust 2ompan+
2hec$ 1o. )/000!01"H for P1 million as a sign of its good faith and readiness to enter
into the lease agreement under the certain terms and conditions stipulated in the letter.
Mid6Pasig received this letter on =ul+ )H, )000.
&n a su'se4uent follow6up letter

dated %e'ruar+ ), )001, @oc$land then said that
it presumed that Mid6Pasig had accepted its offer 'ecause the P1 million chec$ it issued
had 'een credited to Mid6Pasig9s account on Decem'er !, )000.
Mid6Pasig, however, denied it accepted @oc$land9s offer and claimed that no
chec$ was attached to the said letter. &t also vehementl+ denied receiving the P1 million
chec$, much less depositing it in its account.
&n its letter dated %e'ruar+ ", )001, Mid6Pasig replied to @oc$land that it was
onl+ upon receipt of the latter9s %e'ruar+ ) letter that the former came to $now where
the chec$ came from and what it was for. 1evertheless, it categoricall+ informed
Page | 450
@oc$land that it could not entertain the latter9s lease application. Mid6Pasig reiterated
its refusal of @oc$land9s offer in a letter dated %e'ruar+ 10, )001.
@oc$land then filed an action for specific performance. @oc$land sought to
compel Mid6Pasig to e:ecute in @oc$land9s favor, a contract of lease over a 0.16hectare
portion of Mid6Pasig9s propert+ in Pasig 2it+.
The @T29s decision:
1. the plaintiff and the defendant have dul+ agreed upon a valid and enforcea'le
lease agreement of su'(ect portions of defendant9s properties comprising an area
of !,000 s4uare meters, 11,000 s4uare meters and 1!,000 s4uare meters, or a
total of 01,000 s4uare metersJ
). the principal terms and conditions of the aforesaid lease agreement are as stated
in plaintiff9s =une H, )000 letterJ
0. defendant to e:ecute a written lease contract in favor of the plaintiff containing
the principal terms and conditions mentioned in the ne:t6preceding paragraph,
within si:t+ A"0B da+s from finalit+ of this (udgment, and li$ewise ordering the
plaintiff to pa+ rent to the defendant as specified in said terms and conditionsJ
F. defendant to $eep and maintain the plaintiff in the peaceful possession and
en(o+ment of the leased premises during the term of said contractJ
!. defendant to pa+ plaintiff attorne+9s fees in the sum of ne Million Pesos
AP1,000,000.00B, plus P),000.00 for ever+ appearance made '+ counsel in courtJ
". The temporar+ restraining order dated .pril ), )001 is made P<@M.1<1TJ
8. Dismissed defendant9s counterclaim.
The 2ourt of .ppeals reversed the trial court9s decision.
ISS$ES8
1. ,as there a perfected contract of lease;
). Had estoppel in pais set in;
R$LING8
1. . close review of the events in this case, in the light of the parties9
evidence, shows that there was no perfected contract of lease 'etween the parties. Mid6
Pasig was not aware that @oc$land deposited the P1 million chec$ in its account. &t onl+
learned of @oc$land9s chec$ when it received @oc$land9s %e'ruar+ ), )001 letter. Mid6
Pasig, upon investigation, also learned that the chec$ was deposited at the Philippine
1ational Ban$ *an =uan Branch, instead of P1B rtigas Branch where Mid6Pasig
maintains its account. &mmediatel+, Mid6Pasig wrote @oc$land on %e'ruar+ ", )001
re(ecting the offer, and proposed that @oc$land appl+ the P1 million to its other e:isting
lease instead. These circumstances clearl+ show that there was no concurrence of
@oc$land9s offer and Mid6Pasig9s acceptance.
). Mid6Pasig is also not in estoppel in pais. The doctrine of estoppel is 'ased
on the grounds of pu'lic polic+, fair dealing, good faith and (ustice, and its purpose is to
for'id one to spea$ against his own act, representations, or commitments to the in(ur+
of one to whom the+ were directed and who reasona'l+ relied thereon. *ince estoppel is
Page | 451
'ased on e4uit+ and (ustice, it is essential that 'efore a person can 'e 'arred from
asserting a fact contrar+ to his act or conduct, it must 'e shown that such act or conduct
has 'een intended and would un(ustl+ cause harm to those who are misled if the
principle were not applied against him.
Hence, the petition was denied.
ME#ROPOLI#AN MANILA 0EVELOPMEN# A$#3ORI#,, VS. -ANCOM
ENVIRONMEN#AL CORPORA#ION
G.R. No. 147465 -a.uary '!, !!
FAC#S8
Page | 452
The Philippine 7overnment under the @amos .dministration, and through the
Metro Manila Development .uthorit+ AMMD.B 2hairman, and the 2a'inet fficer for
@egional Development61ational 2apital @egion A2@D612@B, entered into a contract
with respondent =.12M, on waste6to6energ+ pro(ects for the waste disposal sites in
*an Mateo, @i>al and 2armona, 2avite under the 'uild6operate6transfer ABTB scheme.
However, 'efore President @amos could have signed the said contract, there was
a change in the .dministration and <V<2M. *aid change caused the passage of the
law, the 2lean .ir .ct, prohi'iting the incineration of gar'age and thus, against the
contents of said contract. The Philippine 7overnment, through the MMD. 2hairman,
declared said contract ine:istent for several reasons. Herein respondent filed a suit
against petitioner. The @egional Trial 2ourt ruled in favor of the respondent. &nstead of
filing an appeal to the decision, petitioner filed a writ of certiorari on the 2ourt of
.ppeals, which the latter granted. The @egional Trial 2ourt declared its decision final
and e:ecutor+, for which the petitioner appealed to the 2., which the 2. denied such
appeal and affirming @T29s decision.
ISS$E8
,hether or not a valid contract is e:isting 'etween herein petitioner and
respondent.
R$LING8
Dnder .rticle 100! of the 2ivil 2ode, 3a contract is a meeting of minds 'etween
two persons where'+ one 'inds himself, with respect to the other, to give something or
to render some service.5 . contract undergoes three distinct stages6 preparation or
negotiation, its perfection, and finall+, its consummation. 1egotiation 'egins from the
time the prospective contracting parties manifest their interest in the contract and ends
at the moment of agreement of the parties. The perfection or 'irth of the contract ta$es
place when the parties agree upon the essential elements of the contract. The last stage
is the consummation of the contract wherein the parties fulfill or perform the terms
agreed upon in the contract, culminating in the e:tinguishment thereof. .rticle 101! of
the 2ivil 2ode, provides that a contract is perfected '+ mere consent. 2onsent, on the
other hand, is manifested '+ the meeting of the offer and the acceptance upon the thing
and the cause which are to constitute the contract. &n the case at 'ar, the signing and
e:ecution of the contract '+ the parties clearl+ show that, as 'etween the parties, there
was a concurrence of offer and acceptance with respect to the material details of the
contract, there'+ giving rise to the perfection of the contract. The e:ecution and signing
of the contract is not disputed '+ the parties. .s the 2ourt of .ppeals aptl+ held:
2ontrar+ to petitioners9 insistence that there was no perfected contract, the meeting of
the offer and acceptance upon the thing and the cause, which are to constitute the
contract A.rts. 101! and 101/, 1ew 2ivil 2odeB, is 'orne out '+ the records.
.dmittedl+, when petitioners accepted private respondents9 'id proposal AofferB,
there was, in effect, a meeting of the minds upon the o'(ect Awaste management pro(ectB
and the cause ABT schemeB. Hence, the perfection of the contract. &n City of Ce"u vs.
Page | 453
4eirs of Candido Ru"i, the *upreme 2ourt held that 3the effect of an un4ualified
acceptance of the offer or proposal of the 'idder is to perfect a contract, upon notice of
the award to the 'idder.
&n fact, in asserting that there is no valid and 'inding contract 'etween the
parties, MMD. can onl+ allege that there was no valid notice of awardJ that the contract
does not 'ear the signature of the President of the PhilippinesJ and that the conditions
precedent specified in the contract were not complied with.
&n asserting that the notice of award to =.12M is not a proper notice of award,
MMD. points to the &mplementing @ules and @egulations of @epu'lic .ct 1o. "/!8,
otherwise $nown as the BT #aw, which re4uire that iB prior to the notice of award, an
&nvestment 2oordinating 2ommittee clearance must first 'e o'tainedJ and iiB the notice
of award indicate the time within which the awardee shall su'mit the prescri'ed
performance securit+, proof of commitment of e4uit+ contri'utions and indications of
financing resources.
.dmittedl+, the notice of award has not complied with these re4uirements.
However, the defect was cured '+ the su'se4uent e:ecution of the contract entered into
and signed '+ authori>ed representatives of the partiesJ hence, it ma+ not 'e gainsaid
that there is a perfected contract e:isting 'etween the parties giving to them certain
rights and o'ligations Aconditions precedentsB in accordance with the terms and
conditions thereof. ,e 'orrow the words of the 2ourt of .ppeals:
Petitioners 'ela'or the point that there was no valid notice of award as to
constitute acceptance of private respondent9s offer. The+ maintain that former MMD.
2hairman reta9s letter to =.12M <2 dated %e'ruar+ )8, 1//8 cannot 'e considered
as a valid notice of award as it does not compl+ with the rules implementing @ep. .ct
1o. "/!8, as amended. The argument is untena'le.
Page | 454
ROC4LAN0 CONS#R$C#ION COMPAN,, INC 5s. MI0-PASIG LAN0
0EVELOPMEN# CORPORA#ION
G.R. No. 1645"7, February !4, !!"
FAC#S8
@oc$land 2onstruction 2ompan+, &nc. in a letter dated March 1, )000, offered to
lease from Mid6Pasig #and Development 2orporation the latter9s 0.16hectare propert+ in
Pasig 2it+. This propert+ is covered '+ Transfer 2ertificate of Title 1os. F"/80) and
0081!H under the control of the Presidential 2ommission on 7ood 7overnment. Dpon
instruction of Mid6Pasig to address the offer to the P277, @oc$land wrote the P277 on
.pril 1!, )000. The letter, addressed to P277 2hairman Magdangal <lma, included
@oc$land9 proposed terms and conditions for the lease. This letter was also received '+
Mid6Pasig on .pril 1H, )000, 'ut Mid6Pasig made no response.
.gain, in another letter dated =une H, )000 addressed to the 2hairman of Mid6
Pasig, Mr. @onaldo *alonga, @oc$land sent a Metropolitan Ban$ and Trust 2ompan+
2hec$ 1o. )/000!01"H for P1 million as a sign of its good faith and readiness to enter
into the lease agreement under the certain terms and conditions stipulated in the letter.
Mid6Pasig received this letter on =ul+ )H, )000.
&n a su'se4uent follow6up letter

dated %e'ruar+ ), )001, @oc$land then said that
it presumed that Mid6Pasig had accepted its offer 'ecause the P1 million chec$ it issued
had 'een credited to Mid6Pasig9s account on Decem'er !, )000.
Mid6Pasig, however, denied it accepted @oc$land9s offer and claimed that no
chec$ was attached to the said letter. &t also vehementl+ denied receiving the P1 million
chec$, much less depositing it in its account.
&n its letter dated %e'ruar+ ", )001, Mid6Pasig replied to @oc$land that it was
onl+ upon receipt of the latter9s %e'ruar+ ) letter that the former came to $now where
the chec$ came from and what it was for. 1evertheless, it categoricall+ informed
@oc$land that it could not entertain the latter9s lease application. Mid6Pasig reiterated
its refusal of @oc$land9s offer in a letter dated %e'ruar+ 10, )001.
@oc$land then filed an action for specific performance. @oc$land sought to
compel Mid6Pasig to e:ecute in @oc$land9s favor, a contract of lease over a 0.16hectare
portion of Mid6Pasig9s propert+ in Pasig 2it+.
The @T29s decision:
Page | 455
H. the plaintiff and the defendant have dul+ agreed upon a valid and enforcea'le
lease agreement of su'(ect portions of defendant9s properties comprising an area
of !,000 s4uare meters, 11,000 s4uare meters and 1!,000 s4uare meters, or a
total of 01,000 s4uare metersJ
/. the principal terms and conditions of the aforesaid lease agreement are as stated
in plaintiff9s =une H, )000 letterJ
10. defendant to e:ecute a written lease contract in favor of the plaintiff containing
the principal terms and conditions mentioned in the ne:t6preceding paragraph,
within si:t+ A"0B da+s from finalit+ of this (udgment, and li$ewise ordering the
plaintiff to pa+ rent to the defendant as specified in said terms and conditionsJ
11. defendant to $eep and maintain the plaintiff in the peaceful possession and
en(o+ment of the leased premises during the term of said contractJ
1). defendant to pa+ plaintiff attorne+9s fees in the sum of ne Million Pesos
AP1,000,000.00B, plus P),000.00 for ever+ appearance made '+ counsel in courtJ
10. The temporar+ restraining order dated .pril ), )001 is made P<@M.1<1TJ
1F. Dismissed defendant9s counterclaim.
The 2ourt of .ppeals reversed the trial court9s decision.
ISS$ES8
0. ,as there a perfected contract of lease;
F. Had estoppel in pais set in;
R$LING8
0. . close review of the events in this case, in the light of the parties9
evidence, shows that there was no perfected contract of lease 'etween the parties. Mid6
Pasig was not aware that @oc$land deposited the P1 million chec$ in its account. &t onl+
learned of @oc$land9s chec$ when it received @oc$land9s %e'ruar+ ), )001 letter. Mid6
Pasig, upon investigation, also learned that the chec$ was deposited at the Philippine
1ational Ban$ *an =uan Branch, instead of P1B rtigas Branch where Mid6Pasig
maintains its account. &mmediatel+, Mid6Pasig wrote @oc$land on %e'ruar+ ", )001
re(ecting the offer, and proposed that @oc$land appl+ the P1 million to its other e:isting
lease instead. These circumstances clearl+ show that there was no concurrence of
@oc$land9s offer and Mid6Pasig9s acceptance.
F. Mid6Pasig is also not in estoppel in pais. The doctrine of estoppel is 'ased
on the grounds of pu'lic polic+, fair dealing, good faith and (ustice, and its purpose is to
for'id one to spea$ against his own act, representations, or commitments to the in(ur+
of one to whom the+ were directed and who reasona'l+ relied thereon. *ince estoppel is
'ased on e4uit+ and (ustice, it is essential that 'efore a person can 'e 'arred from
asserting a fact contrar+ to his act or conduct, it must 'e shown that such act or conduct
has 'een intended and would un(ustl+ cause harm to those who are misled if the
principle were not applied against him.
Hence, the petition was denied.
Page | 456
MANILA ME#AL CON#AINER CORPORA#ION, (e7)7)o.er
RE,NAL0O C. #OLEN#INO, ).7er5e.or,
5s.
P3ILIPPINE NA#IONAL %AN4, res(o.;e.7,
0MCI-PRO-EC# 0EVELOPERS, INC., ).7er5e.or
G.R. No. 166"6 0e1e2ber !, !!6
FAC#S8
Petitioner was the owner of a H,01! s4uare meter parcel of land and to secure a
P/00,000.00 loan it had o'tained from respondent P1B, petitioner e:ecuted a real
estate mortgage over the lot. @espondent P1B later granted petitioner a new credit
accommodation of P1,000,000.00J and, on 1ovem'er 1", 1/80, petitioner e:ecuted an
.mendment

of @eal <state Mortgage over its propert+. n March 01, 1/H1, petitioner
Page | 457
secured another loan of P"!0,000.00 from respondent P1B, pa+a'le in 4uarterl+
installments of P0),"!0.00, plus interests and other charges.
P1B filed a petition for e:tra(udicial foreclosure of the real estate mortgage and
sought to have the propert+ sold at pu'lic auction for P/11,!0).)1, petitionerKs
outstanding o'ligation to respondent P1B as of =une 00, 1/H),

plus interests and
attorne+Ks fees. .fter due notice and pu'lication, the propert+ was sold at pu'lic auction
where respondent P1B was declared the winning 'idder for P1,000,000.00. The period
to redeem the propert+ was to e:pire on %e'ruar+ 18, 1/HF. Petitioner sent a letter dated
.ugust )!, 1/H0 to respondent P1B, re4uesting that it 'e granted an e:tension of time
to redeemMrepurchase the propert+.

@espondent P1B informed petitioner that the
re4uest had 'een referred to its Pasa+ 2it+ Branch for appropriate action and
recommendation
Petitioner reiterated its re4uest for a one +ear e:tension from %e'ruar+ 18, 1/HF
within which to redeemMrepurchase the propert+ on installment 'asis. &t reiterated its
re4uest to repurchase the propert+ on installment. Meanwhile, some P1B Pasa+ 2it+
Branch personnel informed petitioner that as a matter of polic+, the 'an$ does not
accept Lpartial redemption5.
*ince petitioner failed to redeem the propert+, the @egister of Deeds cancelled
T2T 1o. 0)0/H and issued a new title in favor of respondent P1B. PetitionerKs offers
had not +et 'een acted upon '+ respondent P1B.
Meanwhile, the *pecial .ssets Management Department A*.MDB had prepared a
statement of account, and as of =une )!, 1/HF petitionerKs o'ligation amounted to
P1,!8F,!"0.F8. This included the 'id price of P1,0!",/)F.!0, interest, advances of
insurance premiums, advances on realt+ ta:es, registration e:penses, miscellaneous
e:penses and pu'lication cost.

,hen apprised of the statement of account, petitioner
remitted P8)!,000.00 to respondent P1B as Ldeposit to repurchase,L and an fficial
@eceipt was issued. The *.MD recommended to the management of respondent P1B
that petitioner 'e allowed to repurchase the propert+ for P1,!8F,!"0.00. &n a letter dated
1ovem'er 1F, 1/HF, the P1B management informed petitioner that it was re(ecting the
offer and the recommendation of the *.MD. &t was suggested that petitioner purchase
the propert+ for P),""0,000.00, its minimum mar$et value. @espondent P1B gave
petitioner until Decem'er 1!, 1/HF to act on the proposalJ otherwise, its P8)!,000.00
deposit would 'e returned and the propert+ would 'e sold to other interested 'u+ers.
Petitioner, however, did not agree to respondent P1BKs proposal. &nstead, it
wrote another letter dated Decem'er 1), 1/HF re4uesting for a reconsideration.
@espondent P1B replied in a letter dated Decem'er )H, 1/HF, wherein it reiterated its
proposal that petitioner purchase the propert+ for P),""0,000.00. P1B again informed
petitioner that it would return the deposit should petitioner desire to withdraw its offer
to purchase the propert+. n %e'ruar+ )!, 1/H!, petitioner, through counsel, re4uested
that P1B reconsider its letter dated Decem'er )H, 1/HF. Petitioner declared that it had
alread+ agreed to the *.MDKs offer to purchase the propert+ for P1,!8F,!"0.F8, and that
was wh+ it had paid P8)!,000.00. Petitioner warned respondent P1B that it would see$
(udicial recourse should P1B insist on the position.
n =une F, 1/H!, respondent P1B informed petitioner that the P1B Board of
Directors had accepted petitionerKs offer to purchase the propert+, 'ut for P1,/01,0H/.!0
in cash less the P8)!,000.00 alread+ deposited with it. Petitioner did not respond, so
P1B re4uested petitioner in a letter dated =une 00, 1/HH to su'mit an amended offer to
Page | 458
repurchase. Petitioner re(ected respondentKs proposal in a letter dated =ul+ 1F, 1/HH. &t
maintained that respondent P1B had agreed to sell the propert+ for P1,!8F,!"0.F8, and
that since its P8)!,000.00 downpa+ment had 'een accepted, respondent P1B was
proscri'ed from increasing the purchase price of the propert+.

Petitioner averred that it
had a net 'alance pa+a'le in the amount of P"F0,F!).0F. @espondent P1B, however,
re(ected petitionerKs offer to pa+ the 'alance of P"F0,F!).0F in a letter dated .ugust 1,
1/H/.
Petitioner filed a complaint against respondent P1B for L.nnulment of Mortgage
and Mortgage %oreclosure, Deliver+ of Title, or *pecific Performance with Damages.5
@espondent P1B averred, as a special and affirmative defense, that it had ac4uired
ownership over the propert+ after the period to redeem had elapsed. &t claimed that no
contract of sale was perfected 'etween it and petitioner after the period to redeem the
propert+ had e:pired. The trial court rendered (udgment dismissing the amended
complaint and respondent P1BKs counterclaim. &t ordered respondent P1B to refund
the P8)!,000.00 deposit petitioner had made.

The trial court ruled that there was no
perfected contract of sale 'etween the partiesJ hence, petitioner had no cause of action
for specific performance against respondent. The 2ourt of .ppeals affirmed the @T29s
decision.
ISS$E8
,hether or not petitioner and respondent P1B had entered into a perfected
contract for petitioner to repurchase the propert+ from respondent.
R$LING8
The ruling of the appellate court that there was no perfected contract of sale
'etween the parties is correct.
&t appears that although respondent re4uested petitioner to conform to its
amended counter6offer, petitioner refused and instead re4uested respondent to
reconsider its amended counter6offer. PetitionerKs re4uest was ultimatel+ re(ected and
respondent offered to refund its P8)!,000.00 deposit. &n sum, then, there was no
perfected contract of sale 'etween petitioner and respondent over the su'(ect propert+.
Page | 459
MON#ECILLO VS. RE,NES
'"5 SCRA 44
FAC#S8
@espondents &gnacia @e+nes and spouses .'uca+ filed on =une )0, 1/HF a
complaint for Declaration of 1ullit+ and ?uieting of Title against petitioner @ico
Montecillo. @e+nes asserted that she is the owner of a lot situated in Ma'olo, 2e'u 2it+.
&n 1/H1 @e+nes sold 1H! s4uare meters of the Ma'olo #ot to the .'uca+ *pouses who
'uilt a residential house on the lot the+ 'ought.
@e+nes alleged further that she signed a Deed of *ale of the Ma'olo #ot in favor
of Montecillo. @e+nes, 'eing illiterate signed '+ affi:ing her thum'6mar$ on the
document. Montecillo promised to pa+ the agreed PF8,000.00 purchase price within
one month from the signing of the Deed of *ale. .nd that Montecillo failed to pa+ the
purchase price after the lapse of the one6month period, prompting @e+nes to demand
from Montecillo the return of the Deed of *ale. *ince Montecillo refused to return the
Deed of *ale, @e+nes e:ecuted a document unilaterall+ revo$ing the sale and gave a cop+
of the document to Montecillo.
*u'se4uentl+, on Ma+ )0, 1/HF @e+nes signed a Deed of *ale transferring to the
.'uca+ *pouses the entire Ma'olo #ot, at the same time confirming the previous sale in
1/H1 of a 1H! s4uare meter portion of the lot.
@e+nes and the .'uca+ *pouses alleged that the+ received information that the
@egister of Deeds of 2e'u 2it+ issued a 2ertificate of Title in the name of Montecillo for
the Ma'olo #ot. The+ argued that 3for lac$ for consideration there Awas no meeting of
the mindsB 'etween @e+nes and Montecillo. Thus, the trial court should declare null and
void a' initio Monticello9s Deed of sale, and order the cancellation of certificates of title
1o. /0H0! in the name of Montecillo.
&n his .nswer, Montecillo a 'an$ e:ecutive claimed he was a 'u+er in good faith
and had actuall+ paid the PF8,000.00 consideration stated on his Deed of *ale.
Montecillo however admitted he still owned @e+nes a 'alance of P10,000.00. He also
alleged that he paid P!0,000.00 for the release of the chattel mortgage which he argued
constituted a lien on the Ma'olo #ot. He further alleged that he paid for the real
propert+ ta: as well as the capital gains ta: on the sale of the Ma'olo #ot.
&n their repl+, @e+nes and the .'uca+ *pouses contended that Montecillo did not
have authorit+ to discharge the chattel mortgage especiall+ after @e+nes revo$ed
Page | 460
Montecillo9s Deed of *ale and gave the mortgagee a cop+ of the document of revocation.
@e+nes and the .'uca+ *pouses claimed that Montecillo secured the release of the
chattel mortgage through machination. The+ further asserted that Montecillo too$
advantage of the real propert+ ta:es paid '+ the .'uca+ *pouses and surreptitiousl+
caused the transfer of the title to the Ma'olo #ot in his name.
During pre6trial Montecillo claimed that the consideration for the sale of the
Ma'olo #ot was the amount he paid to 2e'u &ced and 2old *torage 2orporation for the
mortgage de't of Bienvenido =a+ag. Montecillo argued that the release of the mortgage
was necessar+ since the mortgage constituted a lien on the Ma'olo #ot.
@e+nes, however stated that she had nothing to do with =a+ag9s mortgage de't
e:cept that the house mortgaged '+ =a+ag stood on a portion of the Ma'olo #ot. @e+nes
further stated that the pa+ment '+ Montecillo to release the mortgage on =a+ag9s house
is a matter 'etween Montecillo and =a+ag. The mortgage on the house 'eing a chattel
mortgage could not 'e interpreted in an+ wa+ as an encum'rance on the Ma'olo #ot.
@e+nes further claimed that the mortgage de't had long prescri'ed since the
PF8,000.00 mortgage de't was due for pa+ment on =anuar+ 00,1/"8.
ISS$E8
9<e7<er or .o7 7<ere Cas a 5a*); 1o.se.7 ). 7<e 1ase a7 bar 7o <a5e a 5a*);
1o.7ra17.
R$LING8
ne of the three essential re4uisites of a valid contract is consent of the parties on
the o'(ect and cause of the contract. &n a contract of sale, the parities must agree not
onl+ on the price, 'ut also on the manner of pa+ment of the price. .n agreement on the
price 'ut a disagreement on the manner of its pa+ment will not result in consent, thus
preventing the e:istence of a valid contract for a lac$ of consent. This lac$ of consent is
separate and distinct for lac$ of consideration where the contract states that the price
has 'een paid when in fact it has never 'een paid.
@e+nes e:pected Montecillo to pa+ him directl+ the PF8, 000.00 purchase price
within one month after the signing of the Deed of *ale. n the other hand, Montecillo
thought that his agreement with @e+nes re4uired him to pa+ the PF8,000.006purchase
price to 2e'u &ce *torage to settle =a+ag9s mortgage de't. Montecillo also ac$nowledged
a 'alance of P10, 000.00 in favor of @e+nes although this amount is not stated in
Montecillo9s Deed of *ale. Thus, there was no consent or meeting of the minds, 'etween
@e+nes and Montecillo on the manner of pa+ment. This prevented the e:istence of a
valid contract 'ecause of lac$ of consent.
&n summar+, Montecillo9s Deed of *ale is null and void a" initio not onl+ for lac$
of consideration, 'ut also for lac$ of consent. The cancellation of T2T 1o. /0H0! in the
name of Montecillo is in order as there was no valid contract transferring ownership of
the Ma'olo #ot from @e+nes to Montecillo.
Page | 461
-ASMIN SOLER VS. CO$R# OF APPEALS
G.R. No. 1'"+ May , !!1
FAC#S8
Petitioner is a professional interior designer. &n 1ovem'er 1/H", her friend
@osario Pardo as$ed her to tal$ to 1ida #ope>, who was manager of the 2MB.1G
<rmita Branch for the+ were planning to renovate the 'ranch offices. <ven prior to
1ovem'er 1/H", petitioner and 1ida #ope> $new each other 'ecause of @osario Pardo,
the latter9s sister. During their meeting, petitioner was hesitant to accept the (o'
'ecause of her man+ out of town commitments, and also considering that Ms. #ope> was
as$ing that the designs 'e su'mitted '+ Decem'er 1/H", which was such a short notice.
Ms. #ope> insisted, however, 'ecause she reall+ wanted petitioner to do the design for
renovation. Petitioner acceded to the re4uest. Ms. #ope> assured her that she would 'e
compensated for her services. Petitioner even told Ms. #ope> that her professional fee
was P10,000.00, to which Ms. #ope> acceded.
During the 1ovem'er 1/H" meeting 'etween petitioner and Ms. #ope>, there
were discussions as to what was to 'e renovated. Ms. #ope> again assured petitioner
Page | 462
that the 'an$ would pa+ her fees. .fter a few da+s, petitioner re4uested for the 'lueprint
of the 'uilding so that the proper design, plans and specifications could 'e given to Ms.
#ope> in time for the 'oard meeting in Decem'er 1/H". Petitioner then as$ed her
draftsman =ac$ie Barcelon to go to the (o'site to ma$e the proper measurements using
the 'lue print. Petitioner also did her research on the designs and individual drawings of
what the 'an$ wanted. Petitioner hired <ngineer rtane> to ma$e the electrical la+out,
architects %rison 2ru> and De Mesa to do the drafting. %or the services rendered '+
these individuals, petitioner paid their professional fees. Petitioner also contacted the
suppliers of the wallpaper and the sash ma$ers for their 4uotation. *o come Decem'er
1/H", the la+ out and the design were su'mitted to Ms. #ope>. *he even told petitioner
that she li$ed the designs.
*u'se4uentl+, petitioner repeatedl+ demanded pa+ment for her services 'ut Ms.
#ope> (ust ignored the demands. &n %e'ruar+ 1/H8, '+ chance petitioner and Ms. #ope>
saw each other in a concert at the 2ultural 2enter of the Philippines. Petitioner in4uired
a'out the pa+ment for her services, Ms. #ope> curtl+ replied that she was not entitled to
it 'ecause her designs did not conform to the 'an$9s polic+ of having a standard design,
and that there was no agreement 'etween her and the 'an$.
Petitioner, through her law+ers, who wrote Ms. #ope>, demanding pa+ment for
her professional fees in the amount of P10,000.00 which Ms. #ope> ignored. The
law+ers wrote Ms. #ope> once again demanding the return of the 'lueprint copies
petitioner su'mitted which Ms. #ope> refused to return. The petitioner then filed at the
trial court a complaint against 2MB.1G and Ms. #ope> for collection of professional
fees and damages.
&n its answer, 2MB.1G stated that there was no contract 'etween 2MB.1G
and petitionerJ that Ms. #ope> merel+ invited petitioner to participate in a 'id for the
renovation of the 2MB.1G <rmita BranchJ that an+ proposal was still su'(ect to the
approval of the 2MB.1G9s head office.
The trial court rendered (udgment in favor of plaintiff. n appeal, the 2ourt of
.ppeals reversed the decision. Hence, this petition.
ISS$E8
,hether or not the 2ourt of .ppeals erred in ruling that there was no contract
'etween petitioner and respondents, in the a'sence of the element of consent.
R$LING8
. contract is a meeting of the minds 'etween two persons where'+ one 'inds
himself to give something or to render some service to 'ind himself to give something to
render some service to another for consideration. There is no contract unless the
following re4uisites concur: 1. 2onsent of the contracting partiesJ ). '(ect certain
which is the su'(ect matter of the contractJ and 0. 2ause of the o'ligation which is
esta'lished.
Page | 463
&n the case at 'ar, there was a perfected oral contract. ,hen Ms. #ope> and
petitioner met in 1ovem'er 1/H", and discussed the details of the wor$, the first stage of
the contract commenced. ,hen the+ agreed to the pa+ment of the P10,000.00 as
professional fees of petitioner and that she should give the designs 'efore the Decem'er
1/H" 'oard meeting of the 'an$, the second stage of the contract proceeded, and when
finall+ petitioner gave the designs to Ms. #ope>, the contract was consummated.
Petitioner 'elieved that once she su'mitted the designs she would 'e paid her
professional fees. Ms. #ope> assured petitioner that she would 'e paid.
&t is familiar doctrine that if a corporation $nowingl+ permits one of its officers,
or an+ other agent, to act within the scope of an apparent authorit+, it holds him out to
the pu'lic as possessing the power to do those actsJ and thus, the corporation will, as
against an+one who has in good faith dealt with it through such agent, 'e estopped from
den+ing the agent9s authorit+.
.lso, petitioner ma+ 'e paid on the 'asis of 4uantum meruit. L&t is essential for
the proper operation of the principle that there is an acceptance of the 'enefits '+ one
sought to 'e charged for the services rendered under circumstances as reasona'l+ to
notif+ him that the law+er performing the tas$ was e:pecting to 'e paid compensation
therefor. The doctrine of 4uantum meruit is a device to prevent undue enrichment 'ased
on the e4uita'le postulate that it is un(ust for a person to retain 'enefit without pa+ing
for it.L
The designs petitioner su'mitted to Ms. #ope> were not returned. Ms. #ope>, an
officer of the 'an$ as 'ranch manager used such designs for presentation to the 'oard of
the 'an$. Thus, the designs were in fact useful to Ms. #ope> for she did not appear to the
'oard without an+ designs at the time of the deadline set '+ the 'oard.
Decision reversed and set aside. Decision of the trial court affirmed.
Page | 464
PALA##AO VS. CO$R# OF APPEALS
'"1 SCRA 6"1 MA, 7, !!
FAC#S8
Petitioner -olanda Palattao entered into a lease contract where'+ she leased to
private respondent a house and a F/06s4uare6meter lot located in 101 2aimito @oad,
2aloocan 2it+, covered '+ a Transfer 2ertificate of Title and registered in the name of
petitioner. The duration of the lease contract was for three +ears, commencing from
=anuar+ 1, 1//1, to Decem'er 01, 1//0, renewa'le at the option of the parties. The
agreed monthl+ rental was P8,!00.00 for the first +earJ P H,000.00 for the second +ear:
and PH,!00.l00 for the third +ear. The contract gave respondent lessee the first option
to purchase the leased propert+.
During the last +ear of the contract, the parties 'egan negotiations for the sale of
the leased premises to private respondent. &n a letter, petitioner offered to sell to private
respondents F10.)H s4uare meters of the leased lot at P 8,H00.00 per s4uare meter, or
for the total amount of P0,))0,!FH.00. Private respondents replied on .pril 1!, 1//0
wherein he informed petitioner that he 3shall definitel+ e:ercise his option to 'u+5 the
leased propert+. Private respondent, however, manifested his desire to 'u+ the whole
F/06s4uare meters in4uired from petitioner the reason wh+ onl+ F10.)H s4uare meters
of the leased lot were 'eing offered for sale. &n a letter dated 1ovem'er ", 1//0,
petitioner made a final offer to sell the lot at P8,!00.00 per s4uare meter with a down
pa+ment of !0E upon the signing of the contract of conditional sale, the 'alance pa+a'le
in one +ear with a monthl+ leaseMinterest pa+ment P 1F,000.00 which must 'e paid on
or 'efore the fifth da+ ever+ month that the 'alance is still outstanding. Private
respondents accepted petitioners offer and reiterated his re4uest for respondent
accepted petitioner9s offers and reiterated his re4uest for clarification as to the si>e of
the lot for sale. Petitioner ac$nowledged private respondent9s acceptance of the offer in
his letter dated 1ovem'er 10, 1//0.
Petitioner gave private respondent on or 'efore 1ovem'er )F, 1//0, within which
to pa+ the !0E downpa+ment in cash or manager9s chec$. Petitioner stressed that
failure to pa+ the downpa+ment on the stipulated period will ena'le petitioner to freel+
sell her propert+ to others. Petitioner li$ewise notified private respondent, that she is no
longer renewing the lease agreement upon its e:piration on Decem'er 01, 1//0.
Private respondent did not accept the terms proposed '+ petitioner. 1either
were there an+ documents of sale nor pa+ment '+ private respondent of the re4uired
downpa+ment. Private respondent wrote a letter to petitioner on 1ovem'er )/, 1//0
manifesting his intention to e:ercise his option to renew their lease contract for another
three +ears, starting =anuar+ 1, 1//F to Decem'er 01, 1//". This was re(ected '+
petitioner, reiterating that she was no longer renewing the lease. Petitioner demanded
that private respondent vacate the premises, 'ut the latter refused.
Page | 465
Hence, private respondent filed with the @egional Trial 2ourt a case for specified
performance see$ing to compel petitioner to sell to him the leased propert+. Private
respondent further pra+ed for the issuance of a writ preliminar+ in(unction to prevent
petitioner from filing an e(ectment case upon the e:piration of the lease contract on
Decem'er 01, 1//0.
During the proceedings in the specific performance case, the parties agreed to
maintain the status #uo. .fter the+ failed to reach an amica'le settlement, petitioner
filed the instant e(ectment case 'efore the Metropolitan Trial 2ourt. &n his answer,
private respondent alleged that he refused to vacate the leased premises 'ecause there
was a perfected contract of sale of the leased propert+ 'etween him and petitioner.
Private respondent argued that he did not a'andon his option to 'u+ the leased propert+
and that his proposal to renew the lease was 'ut an alternative proposal to the sale. He
further contended that the filing of the e(ectment case violated their agreement to
maintain the status #uo.
ISS$E8
,hether or not there was a valid consent in the case at 'ar.
R$LING8
There was no valid consent in the case at 'ar.
2ontracts that are consensual in nature, li$e a contract of sale, are perfected upon
mere meeting of the minds. nce there is concurrence 'etween the offer and the
acceptance upon the su'(ect matter, consideration, and terns of pa+ment, a contract is
produced. The offer must 'e certain. To convert the offer into a contract, the acceptance
must 'e a'solute and must not 4ualif+ the terms of the offerJ it must 'e plain,
une4uivocal, unconditional, and without variance of an+ sort from the proposal. .
4ualified acceptance, or one that involves a new proposal, constitutes a counter6offer
and is a re(ection of the original offer. 2onse4uentl+, when something is desired which
is not e:actl+ is proposed in the offer, such acceptance is not sufficient to generate
consent 'ecause an+ modification or variation from the terms of the offer annuals the
offer.
&n the case at 'ar, while it is true that private respondent informed petitioner that
he is accepting the latter9s offer to sell the leased propert+, it appears that the+ did not
reach an agreement as to the e:tent of the lot su'(ect of the proposed sale.
#etters reveal that private respondent did not give his consent to 'u+ onl+ F10.)H
s4uare meters of the leased lot, as he desired to purchase the whole F/0 s4uare6meter6
leased premises which, however, was not what was e:actl+ proposed in petitioner9s offer.
2learl+, therefore, private respondent9s acceptance of petitioner9s offer was not a'solute,
and will conse4uentl+ not generate consent that would perfect a contract.
Page | 466
A%S-C%N %ROA0CAS#ING CORPORA#ION VS. CO$R# OF APPEALS
'!1 SCRA 57'
G.R. No. 1"6+! -a.uary 1, 1+++
FAC#S8
&n 1//0, .B*62B1 and C&C. e:ecuted a %ilm <:hi'ition .greement where'+
Civa gave .B*62B1 an e:clusive right to e:hi'it some Civa films. Civa, through
defendant Del @osario, offered .B*62B1, through its vice6president 2haro *antos6
2oncio, a list of three film pac$ages A0" titleB from which .B*62B1 ma+ e:ercise its
right of first refusal under the afore6said agreement. .B*62B1, however through Mrs.
2oncio, Lcan tic$ off onl+ ten titlesL Afrom the listB Lwe can purchaseL and therefore did
not accept said list. The titles tic$ed off '+ Mrs. 2oncio are not the su'(ect of the case at
'ar e:cept the film LMaging *ino Ga Man.L
n %e'ruar+ )8, 1//), defendant Del @osario approached .B*62B19s Ms.
2oncio, with a list consisting of !) original movie titles Ai.e., not +et aired on televisionB
including the 1F titles su'(ect of the present case, as well as 10F re6runs Apreviousl+
aired on televisionB from which .B*62B1 ma+ choose another !) titles, as a total of 1!"
titles, proposing to sell to .B*62B1 airing rights over this pac$age of !) originals and !)
re6runs for P"0,000,000.00 of which P00,000,000.00 will 'e in cash and
P00,000,000.00 worth of television spots.
Page | 467
n .pril ), 1//), defendant Del @osario and .B*62B19s general manager,
<ugenio #ope> &&& discussed the pac$age proposal of C&C.. Mr. #ope> testified that he
and Mr. Del @osario allegedl+ agreed that .B*62B1 was granted e:clusive film rights to
fourteen A1FB films for a total consideration of P0" millionJ that he allegedl+ put this
agreement as to the price and num'er of films in a Lnap$inL and signed it and gave it to
Mr. Del @osario. n the other hand, Del @osario denied having made an+ agreement
with #ope> regarding the 1F Civa filmsJ denied the e:istence of a nap$in in which #ope>
wrote somethingJ and insisted that what he and #ope> discussed at the lunch meeting
was Civa9s film pac$age offer of 10F films A!) originals and !) re6runsB for a total price
of P"0 million.
Del @osario and Mr. 7raciano 7o>on of @B* *enior vice6president for %inance
discussed the terms and conditions of Civa9s offer to sell the 10F films, after the re(ection
of the same pac$age '+ .B*62B1. n the following da+, Del @osario received a draft
contract from Ms. 2oncio which contains a counter6proposal of .B*62B1 on the offer
made '+ C&C. including the right of first refusal to 1//) Civa %ilms. However, the
proposal was re(ected '+ the Board of Directors of C&C. and such was rela+ed to Ms.
2oncio.
n .pril )/, 1//), after the re(ection of .B*62B1 and following several
negotiations and meetings defendant Del @osario and Civa9s President Teresita 2ru>, in
consideration of P"0 million, signed a letter of agreement dated .pril )F, 1//), granting
@B* the e:clusive right to air 10F Civa6produced andMor ac4uired films including the
fourteen films su'(ect of the present case.
n )8 Ma+ 1//), .B*62B1 filed 'efore the @T2 a complaint for specific
performance with a pra+er for a writ of preliminar+ in(unction andMor temporar+
restraining order against private respondents @epu'lic Broadcasting *+stem Anow 7M.
1etwor$ &nc.B n )H Ma+ 1//), the @T2 issued a temporar+ restraining order.
The @T2 then rendered decision in favor of @B* and against .B*62B1. n
appeal, the same decision was affirmed. Hence, this decision.
ISS$E8
,hether or not there e:ists a perfected contract 'etween .B*62B1 and C&C..
R$LING8
. contract is a meeting of minds 'etween two persons where'+ one 'inds himself
to give something or render some service to another N.rt. 100!, 2ivil 2ode.O for a
consideration. There is no contract unless the following re4uisites concur:
A1B consent of the contracting partiesJ
A)B o'(ect certain which is the su'(ect of the contractJ and
A0B cause of the o'ligation, which is esta'lished. N.rt. 101H, 2ivil 2ode.O
. contract undergoes three stages:
AaB preparation, conception, or generation, which is the period of negotiation
and 'argaining rending at the moment of agreement of the partiesJ
Page | 468
A'B perfection or 'irth of the contract, which is the moment when the parties
come to agree on the terms of the contractJ and
AcB consummation or death, which is the fulfillment or performance of the
terms agreed upon in the contract.
&n the present case, when Mr. Del @osario of Civa met Mr. #ope> of .B*62B1 on
) .pril 1//) to discuss the pac$age of films, said pac$age of 10F C&C. films was C&C.9s
offer to .B*62B1 to enter into a new %ilm <:hi'ition .greement. But .B*62B1, sent
through Ms. 2oncio, counter6proposal in the form a draft contract proposing e:hi'ition
of !0 films for a consideration of P0! million. This counter6proposal could 'e nothing
less than the counter6offer of Mr. #ope> during his conference with Del @osario at
Tamarind 7rill @estaurant. 2learl+, there was no acceptance of C&C.9s offer, for it was
met '+ a counter6offer which su'stantiall+ varied the terms of the offer.
%urthermore, .B*62B1 made no acceptance of C&C.9s offer hence, the+
underwent period of 'argaining. .B*62B1 then formali>ed its counter6proposals or
counter6offer in a draft contract. C&C. through its Board of Directors, re(ected such
counter6offer. <ven if it 'e conceded arguendo that Del @osario had accepted the
counter6offer, the acceptance did not 'ind C&C., as there was no proof whatsoever that
Del @osario had the specific authorit+ to do so.
The instant petition was 7@.1T<D.
LO$R0ES ONG LIMSON VS. CO$R# oE APPEALS, e7 a*
'57 SCRA !+
G. R. No. 1'5++ A(r)* !, !!1
Page | 469
FAC#S8
&n =ul+ 1/8H, respondent spouses #oren>o de Cera and .suncion *antos6de Cera,
through their agent Marcosa *anche>, offered to sell to petitioner #ourdes ng #imson a
parcel of land. The respondent spouses were the owners of the su'(ect propert+.
n =ul+ 01, 1/8H, she agreed to 'ut the propert+ at the price of P0F. 00 per s4uare
meter and gave P)0, 000.00 as 3earnest mone+5. The respondent spouses signed a
receipt thereafter and gave her a 106da+ option period to purchase the propert+.
@espondent spouses informed petitioner that the su'(ect propert+ was mortgaged to
<milio @amos and &sidro @amos. Petitioner was as$ed to pa+ the 'alance of the
purchase price to ena'le the respondent spouses to settle their o'ligation with the
@amoses. Petitioner agreed to meet respondent spouses and the @amoses on .ugust !,
1/8H, to consummate the transactionJ however, the respondent spouses and the
@amoses did not appear, same with their second meeting.
n .ugust )0, 1/8H, petitioner allegedl+ gave respondent spouses three chec$s
for the settlement the 'ac$ ta:es of propert+. n *eptem'er !, 1/8H, the agent of the
respondent spouses informed petitioner that the propert+ was the su'(ect of a
negotiation for the sale to respondent *unvar @ealt+ Development 2orporation.
Petitioner alleged that it was onl+ on *eptem'er 1!, 1/8H, that T2T 1o. *68)/F"
covering the propert+ was issued to respondent spouses. n the same da+, petitioner
filed and .ffidavit of .dverse 2laim with the ffice of the @egistr+ of Deeds of Ma$ati,
Metro Manila. The Deed of *ale 'etween respondent spouses and respondent *unvar
was e:ecuted on *eptem'er 1!, 1/8H and T2T 1o. *68)088 was issued in favor of *unvar
on *eptem'er )", 1/8H with the .dverse 2laim of petitioner annotated thereon.
@espondent spouses and *unvar filed their .nswers and .nswers to 2ross62laim,
respectivel+. n appeal, the 2ourt of .ppeals completel+ reversed the decision of the
trial court and ordered the @egister of Deeds of Ma$ati 2it+ to lift the .dverse 2laim and
ordered petitioner to pa+ respondent *unvar and respondent spouses e:emplar+ and
nominal damages and attorne+9s fees. Hence, this petition.
ISS$E8
,hether or not the agreement 'etween petitioner and respondent spouses was a
mere option or a contract to sell.
R$LING8
The *upreme 2ourt held that the agreement 'etween the parties was a contract of
option and not a contract to sell. .n option is continuing offer or contract '+ which the
owner stipulates with another that the latter shall have the right to 'u+ the propert+ at a
Page | 470
fi:ed price within a time certain, or under, or in compliance with, certain terms and
conditions, or which gives the owner of the propert+ the right to sell or demand a sale. &t
is also sometimes called an 3unaccepted offer5. .n option is not of itself a purchase, 'ut
merel+ secures the privilege to 'u+. &t is not a sale of propert+ 'ut a sale of the right to
purchase. &ts distinguishing characteristic is that it imposes no 'inding o'ligation on the
person holding the option, aside from the consideration for the offer.
RE,NAL0O VILLAN$EVA 5s. P3ILIPPINE NA#IONAL %AN4
G.R. NO. 1544+' 0e1e2ber 6, !!6
FAC#S8
The *pecial .ssets Management Department A*.MDB of P1B issued an
advertisement for the sale thru 'idding of certain P1B properties including #ot 1o. 18,
covered '+ T2T 1o. T61!0F), with an advertised floor price of P1,F0/,000.00, and #ot
1o. 1/, covered '+ T2T 1o. T61!00", with an advertised floor price of P),)"H,000.00.
Bidding was su'(ect to the following conditions: 1B that cash 'ids 'e su'mitted not later
than .pril )8, 1/H/J )B that said 'ids 'e accompanied '+ a 10E deposit in manager9s or
cashier9s chec$J and 0B that all accepta'le 'ids 'e su'(ect to approval '+ P1B
authorities.
&n a =une )H, 1//0 letter to the Manager, @e+naldo Cillanueva offered to
purchase #ot 1os. 18 and 1/ for P0,"88,000.00. He also manifested that he was
depositing PF00,000.00 to show his good faith 'ut with the understanding that said
amount ma+ 'e treated as part of the pa+ment of the purchase price onl+ when his offer
is accepted '+ P1B. .t the 'ottom of said letter there appears an unsigned marginal
note stating that PF00,000.00 was deposited into Cillanueva9s account A*avings
.ccount 1o. F0"1)B with P1B67eneral *antos Branch.
7uevara, the vice6president informed Cillanueva that onl+ #ot 1o. 1/ is availa'le
and that the as$ing price therefor is P),HH0,000.00. P1B also stated that if 4uoted price
is accepta'le to Cillanueva, then the latter must su'mit a revised offer to purchase. And
Sale shall be subject to its Board of Directors approval and to other terms
and conditions imposed by the Ban on sale of ac!uired assets.
&nstead of su'mitting a revised offer, Cillanueva merel+ inserted at the 'ottom of
7uevara9s letter a =ul+ 11, 1//0 marginal note, which reads:
2 1 % @ M <:
P@&2< % P),HH0,000.00 Ado"npayment of #$%%&%%%.%% and the
balance payable in t"o '() years at !uarterly amorti*ations.B
Cillanueva paid P)00,000.00 to P1B which issued .@. 1o. 1"//8 to
ac$nowledge receipt of the 3partial pa+ment deposit on offer to purchase.5 n the dorsal
portion of fficial @eceipt 1o. 1"//8, Cillanueva signed a t+pewritten note, stating:
Page | 471
This is a deposit made to show the sincerit+ of m+ purchase offer with the
understanding that it shall 'e returned without interest if m+ offer is not favora'l+
considered or 'e forfeited if m+ offer is approved 'ut & failMrefuse to push through the
purchase.
.lso, on =ul+ )F, 1//0, P0H0,000.00 was de'ited from Cillanueva9s *avings
.ccount 1o. F0"1) and credited to *.MD.
n cto'er 11, 1//0, however, 7uevara wrote Cillanueva that upon orders of the
P1B Board of Directors to conduct another appraisal and pu'lic 'idding of #ot 1o. 1/,
*.MD is deferring negotiations with him over said propert+ and returning his deposit of
P!H0,000.00. Dndaunted, Cillanueva attempted to deliver postdated chec$s covering
the 'alance of the purchase price 'ut P1B refused the same.
Hence, Cillanueva filed with the @T2 a 2omplaint

for specific performance and
damages against P1B. The @T2 rendered (udgment in favor of the plaintiff and against
the defendant directing it to e:ecute a deed of sale in favor of the plaintiff over #ot 1/
comprising after pa+ment of the 'alance in cash in the amount of P),000,000.00 and to
pa+ the plaintiff P1,000,000.00 as moral damagesJ P!00,000.00 as attorne+9s fees, plus
litigation e:penses and costs of the suit.
P1B appealed to the 2. which reversed and set aside the @T2 decision.
ISS$E8
,hether or not a perfected contract of sale e:ists 'etween petitioner and
respondent P1B.
R$LING8
The 2ourt sustained the 2.. The 2. held that the case at 'ench, consent, in
respect to the price and manner of its pa+ment, is lac$ing. The record shows that
appellant, thru 7uevara9s =ul+ ", 1//0 letter, made a 4ualified acceptance of appellee9s
letter6offer dated =une )H, 1//0 '+ imposing an as$ing price of P),HH0,000.00 in cash
for #ot 1/. The letter dated =ul+ ", 1//0 constituted a counter6offer A.rt. 101/, 2ivil
2odeB, to which appellee made a new proposal, i.e., to pa+ the amount of P),HH0,000.00
in staggered amounts, that is, P"00,000.00 as downpa+ment and the 'alance within
two +ears in 4uarterl+ amorti>ations.
. 4ualified acceptance, or one that involves a new proposal, constitutes a
counter6offer and a re(ection of the original offer A.rt. 101/, id.B. 2onse4uentl+, when
something is desired which is not e:actl+ what is proposed in the offer, such acceptance
is not sufficient to generate consent 'ecause an+ modification or variation from the
terms of the offer annuls the offer. .ppellee9s new proposal, which constitutes a counter6
offer, was not accepted '+ appellant, its 'oard having decided to have #ot 1/ reappraised
and sold thru pu'lic 'idding.
Page | 472
CA#ALAN 5s. %ASA
-$L, '1, !!7
FAC#S8
n cto'er )0, 1/FH, %<#&2&.1 2.T.#.1 %eliciano was discharged from
active militar+ service. The Board of Medical fficers of the Department of Ceteran
.ffairs found that he was unfit to render militar+ service due to his 3schi(ophrenic
reaction% catatonic type% 2hich incapacitates him "ecause of flattening of mood and
affect% preoccupation 2ith 2orries% 2ithdra2al% and sparse and pointless speech.5
n *eptem'er )H, 1/F/, %eliciano married 2ora>on 2ere>o.
n =une 1", 1/!1, a document was e:ecuted, titled 3.'solute Deed of Donation,5
wherein %eliciano allegedl+ donated to his sister M<@2<D<* 2.T.#.1 one6half of the
real propert+ descri'ed, vi(:
. parcel of land located at Baranga+ Basing, Binmale+, Pangasinan. Bounded on
the 1orth '+ heirs of %elipe BasaJ on the *outh '+ Barrio @oadJ n the <ast '+ heirs of
*egundo 2atalanJ and on the ,est '+ @oman Basa. 2ontaining an area of <ight
Hundred ne AH01B s4uare meters, more or less. The donation was registered with the
@egister of Deeds.
Page | 473
n Decem'er 11, 1/!0, People9s Ban$ and Trust 2ompan+ filed a *pecial
Proceedings 'efore the 2ourt of %irst &nstance to declare %eliciano incompetent. n
Decem'er )), 1/!0, the trial court issued its rder for .d(udication of &ncompetenc+ for
.ppointing 7uardian for the <state and %i:ing .llowance of %eliciano. The following
da+, the trial court appointed People9s Ban$ and Trust 2ompan+ as %eliciano9s guardian.
People9s Ban$ and Trust 2ompan+ has 'een su'se4uentl+ renamed, and is presentl+
$nown as the Ban$ of the Philippine &slands ABP&B.
n 1ovem'er )), 1/8H, %eliciano and 2ora>on 2ere>o donated #ots 1 and 0 of
their propert+, registered under riginal 2ertificate of Title A2TB 1o. 1H/)0, to their
son <ulogio 2atalan.
Mercedes sold the propert+ in issue in favor of her children Delia and =esus Basa.
The Deed of .'solute *ale was registered with the @egister of Deeds and a Ta:
Declaration was issued in the name of respondents.
%eliciano and 2ora>on 2ere>o donated #ot ) of the aforementioned propert+
registered under 2T 1o. 1H/)0 to their children .le: 2atalan, #i'rada 2atalan and
Renaida 2atalan. n %e'ruar+ 1F, 1/H0, %eliciano and 2ora>on 2ere>o donated #ot F
APlan Psu6)1!/!"B of the same 2T 1o. 1H/)0 to <ulogio and %lorida 2atalan.
BP&, acting as %eliciano9s guardian, filed a case for Declaration of 1ullit+ of
Documents, @ecover+ of Possession and wnership, as well as damages against the
herein respondents. BP& alleged that the Deed of .'solute Donation to Mercedes was
void a" initio, as %eliciano never donated the propert+ to Mercedes. &n addition, BP&
averred that even if %eliciano had trul+ intended to give the propert+ to her, the
donation would still 'e void, as he was not of sound mind and was therefore incapa'le of
giving valid consent. Thus, it claimed that if the Deed of .'solute Donation was void a"
initio, the su'se4uent Deed of .'solute *ale to Delia and =esus Basa should li$ewise 'e
nullified, for Mercedes 2atalan had no right to sell the propert+ to an+one. BP& raised
dou'ts a'out the authenticit+ of the deed of sale, sa+ing that its registration long after
the death of Mercedes 2atalan indicated fraud. Thus, BP& sought remuneration for
incurred damages and litigation e:penses.
n .ugust 1F, 1//8, %eliciano passed awa+. The original complaint was amended
to su'stitute his heirs in lieu of BP& as complainants in 2ivil 2ase 1o. 18""".
The trial court found that the evidence presented '+ the complainants was
insufficient to overcome the presumption that %eliciano was sane and competent at the
time he e:ecuted the deed of donation in favor of Mercedes 2atalan. Thus, the court
declared, the presumption of sanity or competency not having "een duly impugned%
the presumption of due execution of the donation in #uestion must "e upheld. The 2ourt
of .ppeals upheld the trial court9s decision.
ISS$E8
,hether said decision of the lower courts is correct.
R$LING8
Petitioners 4uestioned %eliciano9s capacit+ at the time he donated the propert+,
+et did not see fit to 4uestion his mental competence when he entered into a contract of
marriage with 2ora>on 2ere>o or when he e:ecuted deeds of donation of his other
Page | 474
properties in their favor. The presumption that %eliciano remained competent to
e:ecute contracts, despite his illness, is 'olstered '+ the e:istence of these other
contracts. 2ompetenc+ and freedom from undue influence, shown to have e:isted in the
other acts done or contracts e:ecuted, are presumed to continue until the contrar+ is
shown.
1eedless to state, since the donation was valid, Mercedes had the right to sell the
propert+ to whomever she chose. 1ot a shred of evidence has 'een presented to prove
the claim that Mercedes9 sale of the propert+ to her children was tainted with fraud or
falsehood. &t is of little 'earing that the Deed of *ale was registered onl+ after the death
of Mercedes. ,hat is material is that the sale of the propert+ to Delia and =esus Basa
was legal and 'inding at the time of its e:ecution. Thus, the propert+ in 4uestion 'elongs
to Delia and =esus Basa.
petitioners raised the issue of prescription and laches for the first time on appeal
'efore this 2ourt. &t is sufficient for this 2ourt to note that even if the present appeal
had prospered, the Deed of Donation was still a voida'le, not a void, contract. .s such, it
remained 'inding as it was not annulled in a proper action in court within four +ears.
IN VIE9 93EREOF, there 'eing no merit in the arguments of the petitioners,
the petition is D<1&<D. The 2. decision was affirmed in toto.
Page | 475
0OMINGO V. CO$R# OF APPEALS
7.@. 1o. 1)8!F0. cto'er 18, )001
FAC#S8
Paulina @igonan owned three parcels of land including the house and warehouse on one
parcel. *he allegedl+ sold them to private respondents, the spouses %elipe and
2oncepcion @igonan, who claim to 'e her relatives. &n 1/"", petitioners who claim to 'e
her closest surviving relatives, allegedl+ too$ possession of the properties '+ means of
stealth, force and intimidation, and refused to vacate the same. .ccording to defendants,
the alleged deed of a'solute sale was void for 'eing spurious as well as lac$ing
consideration. The+ said that Paulina @igonan did not sell her properties to an+one. .s
her nearest surviving $in within the fifth degree of consanguinit+, the+ inherited the
three lots and the permanent improvements thereon when Paulina died. The+ said the+
had 'een in possession of the contested properties for more than 10 +ears.
ISS$E8
1.B ,hether or not the consideration in Deed of *ale can 'e used to impugn the validit+
of the 2ontract of *ale.
).B ,hether or not the alleged Deed of *ale e:ecuted '+ Paulina @igonan in favor of the
private respondents is valid.
R$LING8
1.B 2onsideration is the wh+ of a contract, the essential reason which moves the
contracting parties to enter into the contract. The 2ourt had seen no apparent and
compelling reason for her to sell the su'(ect / parcels of land with a house and
warehouse at a meager price of PH!0 onl+. n record, there is unre'utted testimon+ that
Paulina as landowner was financiall+ well off. *he loaned mone+ to several people.
Dndisputa'l+, the PH!0.00 consideration for the nine A/B parcels of land including the
house and 'odega is grossl+ and shoc$ingl+ inade4uate, and the sale is null and void a'
initio.
).B The 2urt ruled in the negative. Private respondents presented onl+ a car'on cop+ of
this deed. ,hen the @egister of Deeds was su'poenaed to produce the deed, no original
t+pewritten deed 'ut onl+ a car'on cop+ was presented to the trial court. 1one of the
witnesses directl+ testified to prove positivel+ and convincingl+ Paulina9s e:ecution of
the original deed of sale. The car'on cop+ did not 'ear her signature, 'ut onl+ her
alleged thum'print. =uan %ranco testified during the direct e:amination that he was an
instrumental witness to the deed. However, when cross6e:amined and shown a cop+ of
the su'(ect deed, he retracted and said that said deed of sale was not the document he
signed as witness.
Page | 476
MEN0O:ANA, E# AL. V. O:AMI: E# AL.
7.@. 1o. 1F0080, %e'ruar+ ", )00)
FAC#S8
Petitioner spouses Mario =. Mende>ona and Teresita M. Mende>ona, petitioner
spouses #uis =. Mende>ona and Maricar #. Mende>ona, and petitioner Teresita .dad
Cda. de Mende>ona own a parcel of land each with almost similar areas of 0,F") s4uare
meters, 0,F"" s4uare meters and 0,F"H s4uare meters. The petitioners ultimatel+ traced
their titles of ownership over their respective properties from a notari>ed Deed of
.'solute *ale e:ecuted in their favor '+ 2armen >ami>. The petitioners initiated the
suit to remove a cloud on their said respective titles caused '+ the inscription thereon.
The respondents opposed the petitioners9 claim of ownership of the said parcels of land
alleging that the titles issued in the petitioners9 names are defective and illegal, and the
ownership of the said propert+ was ac4uired in 'ad faith and without value inasmuch as
the consideration for the sale is grossl+ inade4uate and unconsciona'le. @espondents
further alleged that at the time of the sale as alleged, 2armen >ami> was alread+ ailing
and not in full possession of her mental facultiesJ and that her properties having 'een
placed in administration, she was in effect incapacitated to contract with petitioners.
The+ argue that the Deed of .'solute sale is a simulated contract.
ISS$E8
,hether or not the Deed of .'solute *ale in the case at 'ar was simulated.
R$LING8
The 2ourt ruled that the Deed in the case at 'ar is not a simulated contract.
*imulation is defined as 3the declaration of a fictitious will, deli'eratel+ made '+
agreement of the parties, in order to produce, for the purposes of deception, the
appearances of a (uridical act which does not e:ist or is different from what that which
was reall+ e:ecuted.5 The re4uisites of simulation are:
Page | 477
AaB an outward declaration of will different from the will of the partiesJ A'B the false
appearance must have 'een intended '+ mutual agreementJ and AcB the purpose is to
deceive third persons.
1one of these were clearl+ shown to e:ist in the case at 'ar. The Deed of .'solute *ale is
a notari>ed document dul+ ac$nowledged 'efore a notar+ pu'lic. .s such, it has in its
favor the presumption of regularit+, and it carries the evidentiar+ weight conferred upon
it with respect to its due e:ecution. &t is admissi'le in evidence without further proof of
its authenticit+ and is entitled to full faith and credit upon its face. The 'urden fell
upon the respondents to prove their allegations attac$ing the validit+ and due e:ecution
of the said Deed of .'solute *ale. @espondents failed to discharge that 'urdenJ hence,
the presumption in favor of the said deed stands.
LIM VS. CO$R# OF APPEALS
7.@. 1o. !!)01, %e'ruar+ 0, 1//F
FAC#S8
The deceased spouses Tan ?uico and =osefa raa, who 'oth died intestate left /"
hectares of land. The late spouses were survived '+ four childrenJ 2resencia, #oren>o,
Hermogenes and <lias. <lias died on Ma+ ), 1/0!. 2resencia died on Decem'er )0,
1/"8. *he was survived '+ her hus'and, #im 2ha+ *ing, and children, Mariano, =aime,
=ose =ovita, .nacoreta, .ntonietta, @u'en, Ben(amin and @ogelio who are now the
petitioners in the case at 'ench.
The 2resencia onl+ reached the second grade of elementar+ school. *he could not
read or write in <nglish. n the other hand, #oren>o is a law+er and a 2P.. Heirs of
2resencia alleged that since the demise of the spouses Tan ?uico and =osefa raa, the
su'(ect properties had 'een administered '+ respondent #oren>o. The+ claimed that
'efore her death, 2resencia had demanded their partition from #oren>o. .fter
2resencia9s death, the+ li$ewise clamored for their partition. Their effort proved
fruitless.
@espondents #oren>o and Hermogenes9 un+ielding stance against partition is
'ased on various contentions. The+ cited as evidence the 3Deed of 2onfirmation of <:tra
=udicial *ettlement of the <state of Tan ?uico and =osefa raa5 and a receipt of
pa+ment. Principall+, the+ urge that the properties had alread+ 'een partitioned, al'eit,
Page | 478
orall+J and during her lifetime, the late 2resencia had sold and conve+ed all her interests
in said properties to respondent #oren>o.
ISS$E8
,hether or not there is error or mista$e in the signing of the Deed.
R:L8-9;
There is an error in the signing of the Deed.
.rticle 100) of the 2ivil 2ode provides: 3,hen one of the parties is una'le to
read, or if the contract is in a language not understood '+ him, and mista$e or fraud is
alleged, the person enforcing the contract must show that the terms thereof have 'een
full+ e:plained to the former.5
&n the case at 'ar, the 4uestioned Deed is written in <nglish, a language not
understood '+ 2resencia an illiterate in the said language. &t was prepared '+ the
respondent #oren>o, a law+er and 2P.. #oren>o did not cause the notari>ation of the
Deed. 2onsidering these circumstances, the 'urden was on private respondents to prove
that the content of the Deed was e:plained to the illiterate 2resencia 'efore she signed
it. &n this regard, the evidence adduced '+ the respondents failed to discharge their
'urden.
This su'stantive law came into 'eing due to the finding of the 2ode 2ommission
that there is still a fairl+ large num'er of illiterates in this countr+, and documents are
usuall+ drawn up in <nglish or *panish. &t is also in accord with our state polic+ of
promoting social (ustice. &t also supplements .rticle )F of the 2ivil 2ode which calls on
court to 'e vigilant in the protection of the rights of those who are disadvantaged in life.
R$I: VS. CO$R# OF APPEALS
7.@. 1. 1F"/F) .P@&# )), )000
FAC#S8
Petitioner 2ora>on @ui> is engaged in the 'usiness of 'u+ing and selling (ewelr+.
*he o'tained loans from private respondent 2onsuelo Torres on different occasions and
in different amounts. Prior to their maturit+, the loans were consolidated under 1
promissor+ note worth P8!0 000 secured '+ real estate mortgage of a land registered to
petitioner.
Page | 479
Petitioner o'tained 0 more loans from private respondent worth P100 000 each.
These com'ined loans of P000 000 were secured '+ (ewelr+ pledged '+ petitioner to
private respondent worth P!81 000.
Petitioner paid the stipulated 0E monthl+ interest on the P8!0 000 loan,
amounting to P)80 000. .fter March 1//", petitioner was una'le to ma$e interest
pa+ments as she had difficulties collecting from her clients in her (ewelr+ 'usiness.
Because of petitioner9s failure to pa+ the principal loan of P8!0 000, as well as
the interest pa+ment, private respondent demanded pa+ment not onl+ of the P8!0 000
loan 'ut also of the P000 000 loan. ,hen petitioner failed to pa+, private respondent
sought the e:tra(udicial foreclosure of the aforementioned real estate mortgage.
ISS$E8
,hether or not there is undue influence in the signing of the promissor+ note.
R$LING8
The fact that petitioner and private respondent had entered into not onl+ one 'ut
several loan transactions shows that petitioner was not in an+ wa+ compelled to accept
the terms allegedl+ imposed '+ private respondent.
The promissor+ notes in 4uestion did not contain an+ fine print provision which
could have escaped the attention of the petitioner. Petitioner had all the time to go over
and stud+ the stipulations em'odied in the promissor+ notes. These promissor+ notes
contain similar terms and conditions, with a little variance in the terms of interests and
surcharges. Moreover, petitioner, in her complaint never claimed that she was forced to
sign the su'(ect note.
Page | 480
0ELA CR$: V. SISON
7.@. 1o. 1"0880 %e'ruar+ 18, )00!
FAC#S8
<pifania Dela 2ru> alleged that in 1//), she discovered that her rice land in has
'een transferred and registered in the name of her nephew, <duardo 2. *ison, without
her $nowledge and consent, purportedl+ on the strength of a Deed of *ale she e:ecuted.
<pifania then filed a complaint pra+ing to declare the deed of sale null and void. *he
alleged that <duardo tric$ed her into signing the Deed of *ale, '+ inserting the deed
among the documents she signed pertaining to the transfer of her residential land,
house and camarin, in favor of Demetrio, her foster child and the 'rother of <duardo.
@espondents, spouses <duardo and <ufemia *ison denied that the+ emplo+ed fraud or
tric$er+ in the e:ecution of the Deed of *ale. The+ claimed that the+ purchased the
propert+ from <pifania for P)0 000 and that the deed was dul+ notari>ed, complied
with all re4uisites for its registration, as evidenced '+ the &nvestigation @eport '+ the
Department of .grarian @eform, .ffidavit of *ellerMTransferor, .ffidavit of
Bu+erMTransferee, 2ertification issued '+ the Provincial .grarian @eform fficer, #etter
for the *ecretar+ of .grarian @eform, 2ertificate .uthori>ing Pa+ment of 2apital 7ains
Ta:, and the pa+ment of the registration fees. *ome of these documents even 'ore the
signature of <pifania which onl+ proves that she agreed to the transfer of the propert+.
&**D<:
1.B ,hether fraud attended the e:ecution of a contract
).B ,hether the deed of a'solute sale is valid.
@D#&17:
1.B . comparison of the deed of sale in favor of Demetrio and the deed of sale in favor
<duardo, draws out the conclusion that there was no tric$er+ emplo+ed. ne can
readil+ see that the first deed of sale is in all significant respects different from the
second deed of sale. . casual perusal, even '+ someone as old as <pifania, would ena'le
one to easil+ spot the differences. <pifania could not have failed to miss them.
The 2ourt is 'ound '+ the appellate court9s findings, unless the+ are contrar+ to those of
the trial court, in which case we ma+ wade into the factual dispute to settle it with
finalit+.
).B .fter a careful perusal of the records, we sustain the 2ourt of .ppeals9 ruling that the
Deed of .'solute *ale dated 1ovem'er )F, 1/H/ is valid.
There 'eing no evidence adduced to support her 'are allegations, thus, <pifania failed to
satisfactoril+ esta'lish her ina'ilit+ to read and understand the <nglish language.
.lthough <pifania was 8/ +ears old at the time of the e:ecution of the assailed contract,
her age did not impair her mental faculties as to prevent her from properl+ and
intelligentl+ protecting her rights. <ven at H0 +ears, she e:hi'ited mental astuteness
when she testified in court. &t is, therefore, inconceiva'le for her to sign the assailed
Page | 481
documents without ascertaining their contents, especiall+ if, as she alleges, she did not
direct <duardo to prepare the same.
R$RAL %AN4 OF S#. MARIA, PANGASINAN V. CO$R# OF APPEALS
7.@. 1o. 110"8). *eptem'er 1F, 1///
FAC#S8
@eal <state Mortgage as a securit+ for loans o'tained amounting to P1!" )80 was
e:ecuted '+ Manuel Behis on a land in favor of @ural Ban$ of *t. Maria, Pangasinan.
But Manuel, 'eing a delin4uent, sold the land, evidenced '+ a Deed of .'solute *ale
with .ssumption of Mortgage to @a+anda+an and .rceQo for the sum of P)!0 000. n
the same da+, @a+anda+an and .rceQo, together with Manual Behis e:ecuted another
.greement em'od+ing the consideration of the sale of the land in the sum of P).F
million. The land, however, remained in the name of Behis 'ecause the former did not
present to the @egister of Deeds the contracts.
@a+andaran and .rceQo presented the Deed of .'solute *ale to the 'an$ and
negotiated with the principal stoc$holder of the 'an$ for the assumption of the
inde'tedness of Manuel Behis and the su'se4uent release of the mortgage on the
propert+ '+ the 'an$. @a+andaran and .rceQo did not show to the 'an$ the agreement
with Manuel Behis providing for the real consideration of P).F million. *u'se4uentl+,
the 'an$ consented to the su'stitution of plaintiffs as mortgage de'tors in place of
Manuel Behis in a Memorandum of .greement 'etween private respondents and the
'an$ with restricted and li'erali>ed terms for the pa+ment of the mortgage de't
including the initial pa+ment of P1F0 8H).)).
Due to the appearance of 2hristina Behis, Manuel9s wife and a co6signator+ in the
mortgaged land alleging that her signature in the deed of sale was forged, the 'an$
discontinued to compl+ with the Memorandum of .greement considering it to 'e void.
&n a letter, plaintiffs demanded that the 'an$ compl+ with its o'ligation under
the Memorandum of .greement to which the latter denied. Petitioner 'an$ argued that
the Memorandum of .greement is voida'le on the ground that its consent to enter said
agreement was vitiated '+ fraud 'ecause private respondents withheld from petitioner
'an$ the material information that the real consideration for the sale with assumption
of mortgage of the propert+ '+ Manuel Behis to @a+anda+an and .rceQo is
P),F00,000.00, and not P)!0,000.00 as represented to petitioner 'an$. .ccording to
petitioner 'an$, had it $nown for the real consideration for the sale, i.e. P).F million, it
would not have consented into entering the Memorandum of .greement with
@a+anda+an and .rceQo as it was put in the dar$ as to the real capacit+ and financial
standing of private respondents to assume the mortgage from Manuel Behis.
Page | 482
&**D<:
,hether or not there e:isted a fraud in the case at 'ar.
@D#&17:
The 2ourt ruled that there was no fraud in the case at 'ar.
&t is 'elieved that the non6disclosure to the 'an$ of the purchase price of the sale
of the land 'etween private respondents and Manuel Behis cannot 'e the 3fraud5
contemplated '+ .rticle 100H of the 2ivil 2ode.
The $ind of fraud that will vitiate a contract refers to those insidious words or
machinations resorted to '+ one of the contracting parties to induce to the other to enter
into a contract which without them he would not have agreed to. *impl+ stated, the
fraud must 'e determining cause of the contract, or must have caused the consent to 'e
given.
Pursuant to .rt. 100/ of the 2ode, silence or concealment, '+ itself, does not
constitute fraud unless there is a special dut+ to disclose certain facts. &n the case at 'ar,
private respondents had no dut+ to do such.
%rom the sole reason su'mitted '+ the petitioner 'an$ that it was $ept in the dar$
as to the financial capacit+ of private respondents, the 2ourt cannot see how the
omission or concealment of the real purchase price could have induced the 'an$ into
giving its consent to the agreementJ or that the 'an$ would not have otherwise given its
consent had it $nown of the real purchase price.
Page | 483
C3AVE: VS. P$%LIC ES#A#ES A$#3ORI#,
7.@. 1o. 100)!0, / =ul+ )00)
FAC#S8
The *enate Blue @i''on 2ommittee and 2ommittee on .ccounta'ilit+ of Pu'lic
fficers conducted pu'lic hearings to determine the actual mar$et value of the pu'lic
lands along @o:as Boulevard under controvers+. The investigation found out that the
sale of such was lands grossl+ undervalued 'ased on official documents su'mitted '+ the
proper government agencies during the investigations. &t was found out that the Pu'lic
<states .uthorit+, under the =oint Centure .greement, sold it to .mari 2oastal Ba+
Development 2orporation 1!8.HF hectares of reclaimed pu'lic lands totaling to P 1.H/ B
or P 1,)00 per s4uare meter. However during the investigation process, the B&@ pitted
the value at P 8,H00 per s4uare meter, while the Municipal .ssessor of ParaQa4ue at P
",000 per s4uare meter and '+ the 2ommission on .udit A2.B at P)1,000 per s4uare
Page | 484
meter. Based on the official appraisal of the 2., the actual loss on the part of the
government is a gargantuan value of P 01.8H B. However, P<. (ustified the purchase
price 'ased from the various appraisals of private real estate corporations, amounting
from P !00 I 1,000 per s4uare meter. %urther, it was also found out that there were
various offers from different private entities to 'u+ the reclaimed pu'lic land at a rate
higher than the offer of .mari, 'ut still, P<. finali>ed the =C. with .mari. During the
process of investigation, .mari did not hide the fact that the+ agreed to pa+ huge
commissions and 'onuses to various persons for professional efforts and services in
successfull+ negotiating and securing for .mari the =C.. The amount constituting the
commissions and 'onuses totaled to a huge P 1.8" BJ an indicia of great 'ri'er+.
ISS$E8
,hether or not the sale of pu'lic lands 'etween P<. and .mari is constitutional.
R$LING8
The 2ourt found that the sale is unconstitutional, 'ecause what was sold or
alienated are lands of the pu'lic domain. Ta$ing the fact the sold parcel of land is
su'merged land is inaliena'le. .s une4uivocall+ stated in .rticle V&&, *ection ) of the
2onstitution, all lands of the pu'lic domain, waters, minerals, coals, petroleum, forces
which are potential energies, fisheries, forests or tim'er, wildlife, flora and fauna, and
other natural resources, with the e:ception of agricultural lands, are inaliena'le.
*u'merged lands fall within the scope of such provision.
<rgo, the su'merged lands, 'eing inaliena'le and outside the commerce of man,
could not 'e the su'(ect of the commercial transactions specified in the .mended =C..
Hence, the contract 'etween .mari and the P<. is void.
MELLI:A VS. CI#, OF ILOILO
+., -o. ./(012(& April 2%& 34$5
FAC#S8
Page | 485
=uliana Melli>a owned three parcels of residential land. *he sold to the
Municipalit+ of &loilo a certain lot to serve as site for the municipal hall. The donation
was however revo$ed '+ the parties for the reason that area was found inade4uate to
meet the re4uirements of the development plan. *u'se4uentl+ the said lot was divided
into several divisions. *he then sold her remaining interest on the said lot to @emedios
*an Cillanueva. @emedios in turn transferred the rights to said portion of land to Pio
*ian Melli>a. The transfer 2ertificate of title in Melli>a9s name 'ears on annotation
stating that a portion of said lot 'elongs to the Municipalit+ of &loilo.
#ater the 2it+ of &loilo donated the cit+ hall site to the Dniversit+ of the
Philippines, &loilo which fenced the same with iron wires.
Pio *ian Melli>a then filed action against &loilo 2it+ and the Dniversit+ of the
Philippines for recover+ of the parcel of land or of its value.
Petitioner contends that the claimed lot was not included in those lots which were
sold '+ =uliana Melli>a to &loilo 2it+ and further asserts that the Deed of *ale invalid
'ecause the law re4uires as an essential element of sale, determinate o'(ect, which was
'lur in the case at 'ar.
ISS$E8
,hether or not the Deed of *ale should 'e declared invalid 'ecause the o'(ect is not
determinate as re4uired '+ law.
R$LING8
.rticle 1F"0 of the 2ivil 2ode states that the sale must have for its o'(ect a
determinate thing, is fulfilled as long as, at the time the contract is entered into, the
o'(ect of the sale is ca'le of 'eing determinate without the necessit+ of a new or further
agreement 'etween the parties.
The specific mention of some of the lots plus the statement that the lots o'(ect of
the sale are the ones needed for cit+ hall site sufficient provides a 'asis, as of the time, of
the e:ecution of the contract, for rendering determinate said lots without the need of a
new further agreement of the parties.
Page | 486
AS4A, V. COSALAN
F" PH&# 18/ *eptem'er 1!, 1/)F
FAC#S8
Petitioner .s$a+ is an illiterate &gorrote, aging 'etween 80 and H0, who at various
times has 'een the owner of mining propert+. ,hile defendant %ernando .. 2osalan,
the nephew '+ marriage of .s$a+, and municipal president, who li$ewise has 'een
interested along with his uncle in mining enterprises. .s$a+ o'tained title to the Pet Gel
Mineral 2laim located in Tu'la+, Benguet then .s$a+ sold this to 2osalan. 1ine +ears
later .s$a+ instituted action in the 2ourt of %irst &nstance to have the sale of the Pet Gel
Mineral 2laim declared null, to secure possession of the mineral claim, and to o'tain
damages from the defendant in the amount of P10,!00. %ollowing the presentation of
various pleadings including the answer of the defendant, and following trial 'efore
=udge of %irst &nstance, (udgment was rendered dismissing the complaint and a'solving
the defendant from the same, with costs against the plaintiff. n 'eing informed of the
(udgment of the trial court, plaintiff attac$ed the decision on two grounds: %irst,
(urisdictional, and the second, formal. Both motions were denied and an appeal was
perfected.
ISS$E8
,hether or not the plaintiff has esta'lished his cause of action '+ a
preponderance of the evidence.
R$LING8
Plaintiff contends that the sale of the Pet Gel Mineral 2laim was accomplished
through fraud and deceit on the part of the defendant. Plaintiff ma+ 'e right 'ut in our
(udgment he has failed to esta'lish his claim. %raud must 'e 'oth alleged and proved.
ne fact e:ists in plaintiffs favor, and this is the age and ignorance of the plaintiff who
could 'e easil+ '+ the defendant, a man of greater intelligence. .nother fact is the
inade4uac+ of the consideration for the transfer which, according to the conve+ance,
consisted of P1 and other valua'le consideration, and which, according to the oral
testimon+, in realit+ consisted of P108 in cash, a 'ill6fold, one sheet, one cow, and two
cara'aos. 7ross inade4uac+ naturall+ suggest fraud is some evidence thereof, so that it
ma+ 'e sufficient to show it when ta$en in connection with other circumstances, such as
ignorance or the fact that one of the parties has an advantage over the other. But the fact
that the 'argain was a hard one, coupled with mere inade4uac+ of price when 'oth
parties are in a position to form an independent (udgment concerning the transaction, is
not a sufficient ground for the cancellation of a contract.
Page | 487
The 2ourt concludes, therefore, that the complaint was properl+ dismissed. .s a
result, (udgment is affirmed
3EIRS OF #3E LA#E SPO$SES A$RELIO AN0 ESPERAN:A %ALI#E VS.
LIM
7.@. 1o. 1!)1"H, Decem'er 10, )00F
FAC#S8
The spouses .urelio and <speran>a Balite were the owners of a parcels of land.
,hen .urelio died intestate, his wife <speran>a and their children inherited the su'(ect
propert+ and 'ecame co6owners thereof. <speran>a 'ecame ill and was in dire need of
mone+ for her hospital e:penses. *he, through her daughter, 2risteta, offered to sell to
@odrigo #im, her undivided share for the price of P1,000,000.00. <spera>a and
@odrigo agreed that under the Deed of .'solute *ale, it will 'e made to appear that the
purchase price of the propert+ would 'e P1!0,000.00 although the actual price agreed
upon '+ them for the propert+ was P1,000,000.00. n .pril 1", 1//", <speran>a
e:ecuted a Deed of .'solute *ale in favor of @odrigo. The+ also e:ecuted on the same
da+ a =oint .ffidavit under which the+ declared that the real price of the propert+ was
P1,000,000.00 pa+a'le to <speran>a '+ installments. nl+ <speran>a and two of her
children .ntonio and 2risteta $new a'out the said transaction. ,hen the rest of the
children $new of the sale, the+ wrote to the @egister of Deeds sa+ing that their mother
did not inform them of the sale of a portion of the said propert+ nor did the+ give
consent thereto. 1onetheless, @odrigo made partial pa+ments to .ntonio who is
authori>ed '+ his mother through a *pecial Power of .ttorne+.
<speran>a signed a letter addressed to @odrigo informing the latter that her
children did not agree to the sale of the propert+ to him and that she was withdrawing
all her commitments until the validit+ of the sale is finall+ resolved. Then <speran>a
died intestate and was survived '+ her children. Meanwhile, @odrigo caused to 'e
pu'lished the Deed of .'solute *ale.
Petitioners filed a complaint against @odrigo for the annulment of sale, 4uieting
of title, in(unction and damages. @odrigo secured a loan from the @i>al 2ommercial
Ban$ing 2orporation in the amount of P),000,000.00 and e:ecuted a @eal <state
Mortgage over the propert+ as securit+ thereof. n motion of the petitioners, the+ were
Page | 488
granted leave to file an amended complaint impleading the 'an$ as additional part+
defendant. The court issued an order re(ecting the amended complaint of the
petitioners. #i$ewise, the trial court dismissed the complaint. &t held that pursuant to
.rticle F/0 of the 2ivil 2ode, a co6owner is not invalidated '+ the a'sence of the consent
of the other co6owners. Hence, the sale '+ <speran>a of the propert+ was validJ the
e:cess from her undivided share should 'e ta$en from the undivided shares of 2risteta
and .ntonio, who e:pressl+ agreed to and 'enefit from the sale. The 2ourt of .ppeals
li$ewise held that the sale was valid and 'inding insofar as <speran>a Balite9s undivided
share of the propert+ was concerned. &t affirmed the trial court9s ruling that the lac$ of
consent of the co6owners did not nullif+ the sale.
ISS$E8
,hether or not the Deed of .'solute *ale is null and void on the ground that it is
falsifiedJ it has an unlawful causeJ and it is contrar+ to law andMor pu'lic polic+.
R$LING8
The petition was denied and the ruling of the court 'elow was affirmed '+ the
2ourt.
The Deed of *ale is not null and void. &t is an e:ample of a simulated contract
which .rticle 10F! of the 2ivil 2ode governs. The simulation of a contract ma+ either 'e
a'solute or relative. &n a'solute simulation, there is a colora'le contract 'ut without
an+ su'stance, 'ecause the parties have no intention to 'e 'ound '+ it. .n a'solutel+
simulated contract is void, and the parties ma+ recover from each other what the+ ma+
have given under the 3contract5. n the other hand, if the parties state a false cause is
relativel+ simulated. Here, the parties9 real agreement 'inds them. &n the present case,
the parties intended to 'e 'ound '+ the 2ontract, even if it did not reflect the actual
purchase price of the propert+. The letter of <speran>a to respondent and petitioner9s
admission that there was partial pa+ment made on the 'asis of the .'solute *ale reveals
that the parties intended the agreement to produce legal effect.
*ince the Deed of .'solute *ale was merel+ relativel+ simulated, it remains valid and
enforcea'le. .ll the essential re4uisites prescri'ed '+ law for the validit+ and perfection
of contracts is present. However, the parties shall 'e 'ound '+ their real agreement for
a consideration of P1,000,000 as reflected '+ their =oint .ffidavit..
Page | 489
S$N#A, V. CO$R# OF APPEALS
7.@. 1o. 11F/!0, Decem'er 1/, 1//!
FAC#S8
@espondent %ederico *unta+ is the owner of a parcel of land and a rice mill,
warehouse, and other improvements situated in the said land. . rice miller, %ederico, in
a letter applied as a miller6contractor of the 1ational @ice and 2orn 2orporation
A1.@&2B. He informed the 1.@&2 that he had a dail+ rice mill output of F00 cavans of
pala+ and warehouse storage capacit+ of 1!0,000 cavans of pala+.

His application,
Page | 490
although prepared '+ his nephew6law+er, @afael *unta+, was disapproved,

'ecause at
that time he was tied up with several unpaid loans.
%or purposes of circumvention, he had thought of allowing @afael to ma$e the
application for him. @afael prepared

an a'solute deed of sale

where'+ %ederico, for and
in consideration of P)0,000.00 conve+ed to @afael said parcel of land with all its
e:isting structures. *aid deed was notari>ed as Document 1o. !8 and recorded on Page
10 of Boo$ 1, *eries of 1/"), of the 1otarial @egister of .tt+. Herminio C. %lores. #ess
than three months after this conve+ance, a counter sale was prepared and signed '+
@afael who also caused its deliver+ to %ederico. Through this counter conve+ance, the
same parcel of land with all its e:isting structures was sold '+ @afael 'ac$ to %ederico
for the same consideration of P)0,000.00. .lthough on its face, this second deed
appears to have 'een notari>ed as Document 1o. !" and recorded on Page 1! of Boo$ 1,
*eries of 1/"), of the notarial register of .tt+. Herminio C. %lores, an e:amination
thereof will show that, recorded as Document 1o. !" on Page 10, is not the said deed of
sale 'ut a certain Lreal estate mortgage on a parcel of land with T2T 1o. 1"1!8 to secure
a loan of P0,!00.00 in favor of the Hagono+ @ural Ban$.L
1owhere on page 10 of the same notarial register could 'e found an+ entr+
pertaining to @afaelKs deed of sale. Testif+ing on this irregularit+, .tt+. %lores admitted
that he failed to su'mit to the 2ler$ of 2ourt a cop+ of the second deed. 1either was he
a'le to enter the same in his notarial register. <ven %ederico himself alleged in his
2omplaint that, when @afael delivered the second deed to him, it was neither dated nor
notari>ed.
Dpon the e:ecution and registration of the first deed, 2ertificate of Title 1o. 06
)01! in the name of %ederico was cancelled and in lieu thereof, T2T 1o. T60"81F was
issued in the name of @afael. <ven after the e:ecution of the deed, %ederico remained in
possession of the propert+ sold in concept of owner. *ignificantl+, notwithstanding the
fact that @afael 'ecame the titled owner of said land and rice mill, he never made an+
attempt to ta$e possession thereof at an+ time, while %ederico continued to e:ercise
rights of a'solute ownership over the propert+.
&n a letter, dated .ugust 1F, 1/"/, %ederico, through his new counsel, .grava P
.grava, re4uested that @afael deliver his cop+ of T2T 1o. T60"81F so that %ederico could
have the counter deed of sale in his favor registered in his name. The re4uest having
'een o'viousl+ turned down, .grava P .grava filed a petition with the 2ourt of %irst
&nstance of Bulacan as$ing @afael to surrender his ownerKs duplicate certificate of T2T
1o. T60"81F. &n opposition thereto, @afael chronicled the discrepanc+ in the
notari>ation of the second deed of sale upon which said petition was premised and
ultimatel+ concluded that said deed was a counterfeit or Lat least not a pu'lic document
which is sufficient to transfer real rights according to law.L n *eptem'er H, 1/"/,
.grava P .grava filed a motion to withdraw said petition, and, on *eptem'er 10, 1/"/,
the 2ourt granted the same.
n =ul+ H, 1/80, %ederico filed a complaint for reconve+ance and damages
against @afael. &n his answer, @afael scoffed at the attac$ against the validit+ and
genuineness of the sale to him of %edericoKs land and rice mill. @afael insisted that said
propert+ was La'solutel+ sold and conve+ed . . . for a consideration of P)0,000.00,
Philippine currenc+, and for other valua'le considerationL.
,hile the trial court upheld the validit+ and genuineness of the deed of sale
e:ecuted '+ %ederico in favor of @afael, which deed is referred to a'ove as <:hi'it ., it
Page | 491
ruled that the counter6deed, referred to as <:hi'it B, e:ecuted '+ @afael in favor of
%ederico, was simulated and without consideration, hence, null and void a" initio.
Moreover, while the trial court ad(udged @afael as the owner of the propert+ in
dispute, it did not go to the e:tent of ordering %ederico to pa+ 'ac$ rentals for the use of
the propert+ as the court made the evidential finding that @afael simpl+ allowed his
uncle to have continuous possession of the propert+ 'ecause or their understanding that
%ederico would su'se4uentl+ repurchase the same.
%rom the aforecited decision of the trial court, 'oth %ederico and @afael
appealed. The 2ourt of .ppeals rendered (udgment affirming the trial courtKs decision,
with a modification that %ederico was ordered to surrender the possession of the
disputed propert+ to @afael. 2ounsel of %ederico filed a motion for reconsideration of
the aforecited decision. ,hile the motion was pending resolution, .tt+. @icardo M.
%o(as entered his appearance in 'ehalf of the heirs of @afael who had passed awa+ on
1ovem'er )0, 1/HH. .tt+. %o(as pra+ed that said heirs 'e su'stituted as defendants6
appellants in the case. The pra+er for su'stitution was dul+ noted '+ the court in a
resolution dated .pril ", 1//0. Thereafter, .tt+. %o(as filed in 'ehalf of the heirs an
opposition to the motion for reconsideration. The parties to the case were heard on oral
argument on cto'er 1), 1//0. n Decem'er 1!, 1//0, the 2ourt of .ppeals reversed
itself and rendered an amended (udgment.
ISS$E8
,hether or not the deed of sale e:ecuted '+ %ederico in favor of @afael is
simulated and fictitious and, hence, null and void.
R$LING8
&n the aggregate, the evidence on record demonstrate a com'ination of
circumstances from which ma+ 'e reasona'l+ inferred certain 'adges of simulation that
attach themselves to the deed of sale in 4uestion. The complete a'sence of an attempt
on the part of the 'u+er to assert his rights of ownership over the land and rice mill in
4uestion is the most protu'erant inde: of simulation.
The deed of sale e:ecuted '+ %ederico in favor of his now deceased nephew,
@afael, is a'solutel+ simulated and fictitious and, hence, null and void, said parties
having entered into a sale transaction to which the+ did not intend to 'e legall+ 'ound.
.s no propert+ was validl+ conve+ed under the deed, the second deed of sale e:ecuted '+
the late @afael in favor of his uncle, should 'e considered ineffective and unavailing.
The allegation of @afael that the lapse of seven +ears 'efore %ederico sought the
issuance of a new title in his name necessaril+ ma$es %edericoKs claim stale and
unenforcea'le does not hold water. %edericoKs title was not in the hands of a stranger or
mere ac4uaintanceJ it was in the possession of his nephew who, 'eing his law+er, had
served him faithfull+ for man+ +ears. %ederico had 'een all the while in possession of
the land covered '+ his title and so there was no pressing reason for %ederico to have a
title in his name issued. <ven when the relationship 'etween the late @afael and
%ederico deteriorated, and eventuall+ ended, it is not at all strange for %ederico to have
'een complacent and unconcerned a'out the status of his title over the disputed
propert+ since he has 'een possessing the same actuall+, openl+, and adversel+, to the
Page | 492
e:clusion of @afael. &t was onl+ when %ederico needed the title in order to o'tain a
collateri>ed loan that %ederico 'egan to attend to the tas$ of o'taining a title in his name
over the su'(ect land and rice mill.
$, V. CO$R# OF APPEALS
7.@. 1o. 1)0F"!, *eptem'er /, 1///
FAC#S8
Being agents and authori>ed to sell eight AHB parcels of land '+ the owners
thereof, petitioners ,illiam D+ and @odel @o:as, '+ virtue of such authorit+, offered to
sell the lands, to respondent 1ational Housing .uthorit+ A1H.B to 'e utili>ed and
developed as a housing pro(ect. 1H. approved the ac4uisition of the said parcels of land
with an area of 01.H)01 hectares at the cost of P)0.H"8 million, pursuant to which the
parties e:ecuted a series of Deeds of .'solute *ale covering the su'(ect lands. 1H.
eventuall+ cancelled the sale over three A0B parcels of land of the eight parcels of lands
'ecause of the report it received from the #and 7eosciences Bureau of the Department
of <nvironment and 1atural @esources that the remaining area is located at an active
landslide area and therefore, not suita'le for development into a housing pro(ect.
Petitioners then filed a complaint for damages 'ut the trial court rendered the
cancellation of contract to 'e (ustified and awarded P1.)!! million as damages in favor
of petitioners. Dpon appeal '+ petitioners, the 2ourt of .ppeals reversed the decision
and entered a new one dismissing the complaint including the award of damages.
ISS$E8
1.B ,hether or not the contention of petitioner is correct.
).B ,hether or not a part+9s entr+ into a contract affects the validit+ of the
contract.
R$LING8
1.B The Petitioners are not correct. The+ confuse the cancellation of the contract
'+ the 1H. as a rescission of the contract under .rticle 11/1 of the 2ivil 2ode. The right
to rescission is predicated on a 'reach of faith '+ the other part+ that violates the
reciprocit+ 'etween them. The power to rescind is given to the in(ured part+. &n this
case, the 1H. did not rescind the contract. &ndeed, it did not have the right to do so for
the other parties to the contract, the vendors did not commit an+ 'reach, much less a
su'stantial 'reach, of their o'ligation. The 1H. did not suffer an+ in(ur+. The
cancellation was not therefore a rescission under .rticle 11/1. @ather, it was 'ased on
the negation of the cause arising from the reali>ation that the lands, which were the
o'(ects of the sale, were not suita'le for housing.
Page | 493
).B The general rule is that a part+9s motives for entering into a contract do not
affect the contract. However, when the motive predetermines the cause, the motive ma+
'e regarded as the cause. .s held in Ligue( v. C', &t is well to note, however, that
Manresa himself, while maintaining the distinction and upholding the inoperativess of
the motives of the parties to determine the validit+ of the contract, e:pressl+ e:cepts
from the rule those contracts that are conditioned upon the attainment of the motives of
either part+.
LIG$E: V. CO$R# OF APPEALS
7.@. 1o. #611)F0, Decem'er 1H, 1/!8
FAC#S8
#igue> filed a complaint against the widow and heirs of the late *alvador P. #ope>
to recover a parcel of !1.HF hectares of land. Plaintiff averred to 'e its legal owner,
pursuant to a deed of donation of said land, e:ecuted in her favor '+ the late owner,
*alvador P. #ope>. The defense interposed that the donation was null and void for
having an illicit cause or consideration, which was plaintiffKs entering into marital
relations with *alvador P. #ope>, a married manJ and that the propert+ had 'een
ad(udicated to the appellees as heirs of #ope> '+ the court.
The 2ourt of .ppeals held that the deed of donation was inoperative, and null
and void A1B 'ecause the hus'and, #ope>, had no right to donate con(ugal propert+ to the
plaintiff appellantJ and A)B 'ecause the donation was tainted with illegal causa or
consideration Aillicit se:ual relationB, of which donor and donee were participants.
.ppellant vigorousl+ contends that the 2ourt of %irst &nstance as well as the
2ourt of .ppeals erred in holding the donation void for having an illicit cause or
consideration. &t is argued that under .rticle 1)8F of the 2ivil 2ode of 1HH/ Awhich was
the governing law in 1/F0, when the donation was e:ecutedB, Lin contracts of pure
'eneficence the consideration is the li'eralit+ of the donorL, and that li'eralit+ per se
can never 'e illegal, since it is neither against law or morals or pu'lic polic+.
ISS$E8
,hether or not the deed of donation made '+ #ope> in favor of #igue> was valid.
Page | 494
R$LING8
Dnder .rticle 1)8F, li'eralit+ of the donor is deemed causa onl+ in those
contracts that are of LpureL 'eneficenceJ that is to sa+, contracts designed solel+ and
e:clusivel+ to procure the welfare of the 'eneficiar+, without an+ intent of producing an+
satisfaction for the donorJ contracts, in other words, in which the idea of self6interest is
totall+ a'sent on the part of the transferor.
Here the fact that the late *alvador P. #ope> was not moved e:clusivel+ '+ the
desire to 'enefit appellant 2onchita #igue>, 'ut also to secure her coha'iting with him,
so that he could gratif+ his se:ual impulses. This is clear from the confession of #ope> to
the witnesses @odrigue> and @aga+ that he was in love with appellant, 'ut her parents
would not agree unless he donated the land in 4uestion to her. .ctuall+, therefore, the
donation was 'ut one part of an onerous transaction Aat least with appellantKs parentsB
that must 'e viewed in its totalit+. Thus considered, the conve+ance was clearl+
predicated upon an illicit causa.
.ppellant see$s to differentiate 'etween the alleged li'eralit+ of #ope>, as causa
for the donation in her favor, and his desire for coha'iting with appellant, as motives
that impelled him to ma$e the donation, and 4uotes from Manresa and the
(urisprudence of this 2ourt on the distinction that must 'e maintained 'etween causa
and motives. &t is well to note, however, that Manresa himself, while maintaining the
distinction and upholding the inoperativeness of the motives of the parties to determine
the validit+ of the contract, e:pressl+ e:cepts from the rule those contracts that are
conditioned upon the attainment of the motives of either part+.
.ppellees, as successors of the late donor, 'eing thus precluded from pleading the
defense of immoralit+ or illegal causa of the donation, the total or partial ineffectiveness
of the same must 'e decided '+ different legal principles. &n this regard, the 2ourt of
.ppeals correctl+ held that #ope> could not donate the entiret+ of the propert+ in
litigation, to the pre(udice of his wife Maria 1go, 'ecause said propert+ was con(ugal in
character, and the right of the hus'and to donate communit+ propert+ is strictl+ limited
'+ law.
.ppellant 2onchita #igue> was declared '+ the *upreme 2ourt entitled to so
much of the donated propert+ as ma+ 'e found, upon proper li4uidation, not to
pre(udice the share of the widow Maria 1go in the con(ugal partnership with *alvador P.
#ope> or the legitimes of the forced heirs of the latter.
Page | 495
P3ILIPPINE %AN4ING CORPORA#ION V. L$I S3E,
1 SCRA 5
FAC#S8
=ustina who inherited parcels of land in Manila e:ecuted a contract of lease in favor of
,ong, covering a portion alread+ leased to him and another portion of the propert+.
Page | 496
The lease was for !0 +ears, although the lessee was give the right to withdraw at an+time
from the agreement with a stipulated monthl+ rental.
*he e:ecuted another contract giving ,ong the option to 'u+ the leased premises
for P1)0,000 pa+a'le within 10 +ears at monthl+ installment of P1,000. The option was
conditioned on his o'taining Philippine citi>enship, which was then pending. His
application for naturali>ation was withdrawn when it was discovered that he was a
resident of @i>al.
*he e:ecuted two other contracts one e:tending the term to // +ears and the
term fi:ing the term of the option of !0 +ears. &n the two wills, she 'ade her legatees to
respect the contract she had entered into with ,ong, 'ut it appears to have a change of
heart in a codicil. 2laiming that the various contracts were made 'ecause of her
machinations and inducements practiced '+ him, she now directed her e:ecutor to
secure the annulment of the contracts.
The complaint alleged that ,ong o'tained the contracts through fraud. ,ong
denied having ta$en advantage of her trust in order to secure the e:ecution of the
contracts on 4uestion. He insisted that the various contracts were freel+ and voluntaril+
entered into '+ the parties.
The lower court declared all the contracts null and void with the e:ception of the
first, which is the contract of lease.
ISS$E8
,hether or not the contracts entered into '+ the parties are void.
R$LING8
The contract is void. The 2ourt held the lease and the rest of the contracts were
o'tained with the consent of =ustina freel+ given and voluntaril+, hence the claim that
the consent was vitiated due to fraud or machination is 'ereft of merit. However the
contacts are not necessaril+ valid 'ecause the 2onstitution provides that aliens are not
allowed to own lands in the Philippines. The illicit purpose then 'ecomes the illegal
causa, rendering the contracts void.
&t does not follow from what has 'een said that 'ecause the parties are in pari
delicto the+ will 'e left where the+ are, without relief. %or one thing, the original parties
who were guilt+ of violation of fundamental charter have died and have since
su'stituted '+ their administrators to whom it would e un(ust to impute their guilt. %or
another thing, .rticle 1F1" of the 2ivil 2ode provides an e:ception to the pari de licto,
that when the agreement is not illegal per se 'ut is merel+ prohi'ited, and the
prohi'ition of the law is designed for the protection of the plaintiff, he ma+ recover what
he has paid or delivered.
Page | 497
LON0RES V. CO$R# OF APPEALS
7.@. 1o. 10"F)8, Decem'er 18, )00)
FAC#S8
The present case stemmed from a 'attle of ownership over #ots 10)0 and 1000
'oth located in Barrio Ba+'a+, @o:as 2it+, 2api>. Paulina originall+ owned these two
parcels of land. .fter Paulina9s death, ownership of the lots passed to her daughter,
%ilomena. The surviving children of %ilomena, namel+, *onia %uentes #ondres,
.rmando C. %uentes, 2hi62hita %uentes ?uintia, @o'erto C. %uentes, #eopoldo C.
%uentes and Marilou %uentes <splana, herein petitioners, now claim ownership over
#ots 10)0 and 1000. n the other hand, private respondents 2onsolacion and <lena
anchor their right of ownership over #ots 10)0 and 1000 on the .'solute *ale e:ecuted
'+ %ilomena on .pril )F, 1/!/. %ilomena sold the two lots in favor of 2onsolacion and
her hus'and, =ulian. <lena is the daughter of 2onsolacion and =ulian.
n March 00, 1/H/, petitioners filed a complaint for the declaration of nullit+ of
contract, damages and (ust compensation. Petitioners sought to nullif+ the .'solute *ale
conve+ing #ots 10)0 and 1000 and to recover (ust compensation from pu'lic
respondents DP,H and DT2. Petitioners claimed that as the surviving children of
%ilomena, the+ are the owners of #ots 10)0 and 1000. Petitioners claimed that these two
lots were never sold to =ulian. Petitioners dou't the validit+ of the .'solute *ale 'ecause
it was tampered. The cadastral lot num'er of the second lot mentioned in the .'solute
*ale was altered to read #ot 1000 when it was originall+ written as #ot )00F. Petitioners
pointed out that #ot )00F, situated in Barrio 2ulasi, @o:as 2it+, 2api>, was also owned
'+ their grandmother, Paulina. .nd that it was onl+ recentl+ that the+ learned of the
claim of private respondents when 2onsolacion filed a petition for the (udicial
reconstitution of the original certificates of title of #ots 10)0 and 1000 with the 2api>
2adastre. Dpon further in4uir+, petitioners discovered that there e:ists a notari>ed
.'solute *ale e:ecuted on .pril )F, 1/!/ registered onl+ on *eptem'er )), 1/H) in the
ffice of the @egister of Deeds of @o:as 2it+. The private respondents9 cop+ of the
.'solute *ale was tampered so that the second parcel of lot sold, #ot )00F would read as
#ot 1000. However, the @ecords Management and .rchives ffice $ept an unaltered
cop+ of the .'solute *ale. This other cop+ shows that the o'(ects of the sale were #ots
10)0 and )00F.
Private respondents maintained that the+ are the legal owners of #ots 1000 and
10)0. =ulian purchased the lots from %ilomena in good faith and for a valid
consideration. Private respondents e:plained that =ulian was deaf and dum' and as
such, was placed in a disadvantageous position compared to %ilomena. =ulian had to
rel+ on the representation of other persons in his 'usiness transactions. .fter the sale,
=ulian and 2onsolacion too$ possession of the lots. Dp to now, the spouses9 successors6
in6interest are in possession of the lots in the concept owners. Private respondents
claimed that the alteration in the .'solute *ale was made '+ %ilomena to ma$e it
Page | 498
conform to the description of the lot in the .'solute *ale. Private respondents filed a
counterclaim with damages.
The cross6claim of petitioners against pu'lic respondents was for the recover+ of
(ust compensation. Petitioners claimed that during the lifetime of Paulina, pu'lic
respondents too$ a 0,)006s4uare meter portion of #ot 10)0. The land was used as part
of the .rnaldo Boulevard in @o:as 2it+ without an+ pa+ment of (ust compensation. &n
1/HH, pu'lic respondents also appropriated a 1,8H"6s4uare meter portion of #ot 1000 as
a vehicular par$ing area for the @o:as 2it+ .irport. *onia, one of the petitioners,
e:ecuted a deed of a'solute sale in favor of the @epu'lic of the Philippines over this
portion of #ot 1000. .ccording to petitioners, the vendee agreed to pa+ petitioners
P)1F,0)0.00. Despite demands, the vendee failed to pa+ the stipulated amount.
The trial court issued its decision upholding the validit+ of the .'solute *ale. This
was affirmed '+ the 2ourt of .ppeals.
ISS$E8
,hether or not the notari>ed cop+ should prevail.
R$LING8
Decision affirmed with the modification that the cross6claim against pu'lic
respondents is dismissed.
.mong others, petitioners harp on the fact that the notari>ed and registered cop+
of the .'solute *ale should have, 'een correspondingl+ corrected. Petitioners 'elieve
that the notari>ed and archived cop+ should prevail. ,e disagree. . contract of sale is
perfected at the moment there is a meeting of the minds upon the thing which is the
o'(ect of the contract and upon the price. Being consensual, a contract of sale has the
force of law 'etween the contracting parties and the+ are e:pected to a'ide in good faith
with their respective contractual commitments. .rticle 10!H of the 2ivil 2ode, which
re4uires certain contracts to 'e em'odied in a pu'lic instrument, is onl+ for
convenience, and registration of the instrument is needed onl+ to adversel+ affect third
parties. %ormal re4uirements are, therefore, for the purpose of 'inding or informing
third parties. 1on6compliance with formal re4uirements does not adversel+ affect the
validit+ of the contract or the contractual rights and o'ligations of the parties.
Page | 499
%ALA#%A# V. CO$R# OF APPEALS
7.@. 1o. 10/F10, .ugust )H, 1//"
FAC#S8
The lot in 4uestion covered '+ Transfer 2ertificate of Title 1o. !1000 was
ac4uired '+ plaintiff .urelio @o4ue and Maria Mesina during their con(ugal union and
the house constructed thereon was li$ewise 'uilt during their marital union. ut of their
union, plaintiff and Maria Mesina had four children. ,hen Maria Mesina died on
.ugust )H, 1/"", the onl+ con(ugal properties left are the house and lot a'ove stated of
which plaintiff herein, as the legal spouse, is entitled to one6half share pro6indiviso
thereof. ,ith respect to the one6half share pro6indiviso now forming the estate of Maria
Mesina, plaintiff and the four children, the defendants here, are each entitled to one6
fifth A1M!B share pro6indiviso.
.urelio @o4ue then entered into a contract of .'solute *ale with the spouses
.urora and =ose @epu+an. However, on .ugust )0, 1/H0, .urelio filed a complaint for
@escission of 2ontract against *pouses @epu+an for the latter9s failure to pa+ the
'alance of the purchase price. . deed of a'solute sale was then e:ecuted on %e'ruar+ F,
1/H) 'etween .urelio *. @o4ue, 2ora>on @o4ue, %eliciano @o4ue, *evera @o4ue and
smundo @o4ue and 2lara Balat'at, married to .le(andro Balat'at. n .pril 1F, 1/H),
Page | 500
2lara Balat'at filed a motion for the issuance of a writ of possession which was granted
'+ the trial court on *eptem'er 1F, 1/H) Lsu'(ect, however, to valid rights and interest of
third persons over the same portion thereof, other than vendor or an+ other person or
persons priv+ to or claiming an+ rights or interests under it.L The corresponding writ of
possession was issued on *eptem'er )0, 1/H).
The lower court then rendered (udgment in favor of the *pouses @epu+an and
declared the Deed of .'solute *ale as valid. n appeal '+ petitioner Balat'at, the 2ourt
of .ppeals affirmed the lower court9s decision.
ISS$E8
,hether or not the deliver+ of the owner9s certificate of title to spouses @epu+an
'+ .urelio @o4ue is for convenience or for validit+ or enforcea'ilit+.
R$LING8
The provision of .rticle 10!H on the necessit+ of a pu'lic document is onl+ for
convenience, not for validit+ or enforcea'ilit+. &t is not a re4uirement for the validit+ of a
contract of sale of a parcel of land that this 'e em'odied in a pu'lic instrument.
The *upreme 2ourt found that the sale 'etween .urelio and the *pouses
@epu+an is not merel+ for the reason that there was no deliver+ of the su'(ect propert+
and that considerationMprice was not full+ paid 'ut the sale as consummated, hence,
valid and enforcea'le.
The non6deliver+ of the possession of the su'(ect propert+ to the private
respondent, suffice it to sa+ that ownership of the thing sold is ac4uired onl+ from the
time of deliver+ thereof, either actual or constructive. .rticle 1F/H of the 2ivil 2ode
provides that when the sale is made through a pu'lic instrument, the e:ecution thereof
shall 'e e4uivalent to the deliver+ of the thing which is the o'(ect of the contract, if from
the deed the contrar+ does not appear or cannot 'e inferred. The e:ecution of the pu'lic
instrument, without actual deliver+ of the thing, transfers the ownership from the
vendor to the vendee, who ma+ thereafter e:ercise the rights of an owner over the same.
&n the instant case, vendor @o4ue delivered the ownerKs certificate of title to herein
private respondent. &t is not necessar+ that vendee 'e ph+sicall+ present at ever+ s4uare
inch of the land 'ought '+ him, possession of the pu'lic instrument of the land is
sufficient to accord him the rights of ownership. Thus, deliver+ of a parcel of land ma+
'e done '+ placing the vendee in control and possession of the land ArealB or '+
em'od+ing the sale in a pu'lic instrument AconstructiveB.
. contract of sale 'eing consensual, it is perfected '+ the mere consent of the
parties. Deliver+ of the thing 'ought or pa+ment of the price is not necessar+ for the
perfection of the contractJ and failure of the vendee to pa+ the price after the e:ecution
of the contract does not ma$e the sale null and void for lac$ of consideration 'ut results
at most in default on the part of the vendee, for which the vendor ma+ e:ercise his legal
remedies. Tthe petition for review is here'+ dismissed for lac$ of merit.
Page | 501
Page | 502
$NIVERSAL RO%INA S$GAR MILLING CORPORA#ION V. 3EIRS OF
ANGEL #EVES
7.@. 1o. 1)H!8F, *eptem'er 1H, )00)
FAC#S8
.ndres .'anto owned two parcels of land situated in 2ampu+o, Man(u+od,
1egros riental. ne lot is registered in his name and the other lot is unregistered.
,hen he died, his heirs e:ecuted an L<:tra(udicial *ettlement of the <state of the
Deceased and *imultaneous *ale.L &n this document, .'antoKs heirs ad(udicated unto
themselves the two lots and sold the unregistered lot to the Dnited Planters *ugar
Milling 2ompan+, &nc. ADP*DM2B, and the registered lot to .ngel M. Teves, for a total
sum of P11!,000.00. The sale was not registered.
ut of respect for his uncle Montenegro, who was DP*DM2Ks founder and
president, Teves ver'all+ allowed DP*DM2 to use the registered lot for pier and
loading facilities, free of charge, su'(ect to the condition that DP*DM2 shall shoulder
the pa+ment of real propert+ ta:es and that its occupation shall 'e co6terminus with its
corporate e:istence. DP*DM2 then 'uilt a guesthouse and pier facilities on the
propert+. -ears later, DP*DM29s properties were ac4uired '+ the Philippine 1ational
Ban$ AP1BB. #ater, P1B transferred the same properties to the .sset Privati>ation
Trust A.PTB which, in turn, sold the same to the Dniversal @o'ina *ugar Milling
2orporation AD@*DM2B. D@*DM2 then too$ possession of DP*DM29s properties,
including TevesK lot.
Dpon learning of the ac4uisition of his lot, Teves formall+ as$ed the corporation
to turn over to him possession thereof or the corresponding rentals. He stated in his
demand letters that he merel+ allowed DP*DM2 to use his propert+ until its corporate
dissolutionJ and that it was not mortgaged '+ DP*DM2 with the P1B and, therefore,
not included among the foreclosed properties ac4uired '+ D@*DM2.
D@*DM2 refused to heed TevesK demand, claiming that it ac4uired the right to
occup+ the propert+ from DP*DM2 which purchased it from .ndres .'antoJ and that
it was merel+ placed in the name of .ngel Teves, as shown '+ the LDeed of Transfer and
,aiver of @ights and PossessionL dated 1ovem'er )", 1/H8. Dnder this document,
DP*DM2 transferred to D@*DM2 its application for agricultural and foreshore
lease. The same document partl+ states that the lands su'(ect of the foreshore and
agricultural lease applications are 'ounded on the north '+ the Ltitled propert+ of
.ndres .'anto 'ought '+ the transferor ADP*DM2B 'ut placed in the name of .ngel
TevesL. D@*DM2 further claimed that it was DP*DM2, not Teves, which has 'een
pa+ing the corresponding realt+ ta:es.
2onse4uentl+, Teves filed a complaint for recover+ of possession of real propert+
with damages against D@*DM2. However, on *eptem'er F, 1//), Teves died and was
su'stituted '+ his heirs. n .pril ", 1//F, the @T2 held that D@*DM2 has no
personalit+ to 4uestion the validit+ of the sale of the propert+ 'etween the heirs of
.ndres .'anto and .ngel Teves since it is not a part+ theretoJ that TevesK failure to have
the sale registered with the @egistr+ of Deeds would not vitiate his right of ownership,
unless a third part+ has ac4uired the land in good faith and for value and has registered
the su'se4uent deedJ that the list of properties ac4uired '+ D@*DM2 from the P1B
Page | 503
does not include the disputed lot and, therefore, was not among those conve+ed '+
DP*DM2 to D@*DM2.
n appeal '+ D@*DM2, the 2ourt of .ppeals affirmed the @T2 decision,
holding that the transaction 'etween .ngel Teves and .ndres .'antoKs heirs is a
contract of sale, not one to sell, 'ecause ownership was immediatel+ conve+ed to the
purchaser upon pa+ment of P11!,000.00. n cto'er )/, 1//", D@*DM2 filed a
motion for reconsideration 'ut was denied '+ the .ppellate 2ourt. Hence, the instant
petition for review on certiorari.
ISS$E8
,hether or not the respondents have esta'lished a cause of action against
petitioner.
R$LING8
There is no esta'lished cause of action. Petitioner D@*DM2 contends that
respondents have no cause of action 'ecause the L<:tra(udicial *ettlement of the <state
of the Deceased .ndres .'anto and *imultaneous *aleL is merel+ a promise to sell and
not an a'solute deed of sale, hence, did not transfer ownership of the disputed lot to
.ngel Teves. .ssuming that the document is a contract of sale, the same is void for lac$
of consideration 'ecause the total price of P11!,000.00 does not specificall+ refer to the
registered lot ma$ing the price uncertain. %urthermore, the transaction, 'eing
unregistered, does not 'ind third parties.
PetitionerKs contentions lac$ merit. .s held '+ the @T2 and the 2ourt of .ppeals,
the transaction is not merel+ a contract to sell 'ut a contract of sale. &n a contract of
sale, title to the propert+ passes to the vendee upon deliver+ of the thing soldJ while in a
contract to sell, ownership is, '+ agreement, reserved in the vendor and is not to pass to
the vendee until full pa+ment of the purchase price. &n the case at 'ar, the su'(ect
contract, dul+ notari>ed, provides that the .'anto heirs sold to Teves the lot covered '+
T2T 1o. H608. There is no showing that the .'anto heirs merel+ promised to sell the
said lot to Teves.
The a'solute ownership over the registered land was indeed transferred to Teves
is further shown '+ his acts su'se4uent to the e:ecution of the contract. .s found '+ the
trial court, it was Teves, not .ndres .'antoKs heirs, who allowed DP*DM2 to construct
pier facilities and guesthouse on the land. ,hen the propert+ was erroneousl+ included
among DP*DM2Ks properties that were transferred to petitioner D@*DM2, it was
Teves, not the heirs of .ndres .'anto, who informed petitioner that he owns the same
and negotiated for an arrangement regarding its use. Teves even furnished petitioner
documents and letters showing his ownership of the lot, such as a cop+ of the
L<:tra(udicial *ettlement of the <state of the Deceased .ndres .'anto and
*imultaneous *aleL and a certified true cop+ of T2T 1o. H608 covering the disputed lot.
&ndeed, the trial court and the 2ourt of .ppeals correctl+ ruled that Teves purchased
the lot from the .'anto heirs.
That the contract of sale was not registered does not affect its validit+. Being
consensual in nature, it is 'inding 'etween the parties, the .'anto heirs and Teves.
Page | 504
.rticle 10!H of the 1ew 2ivil 2ode, which re4uires the em'odiment of certain contracts
in a pu'lic instrument, is onl+ for convenience, and the registration of the instrument
would merel+ affect third persons. %ormalities intended for greater efficac+ or
convenience or to 'ind third persons, if not done, would not adversel+ affect the validit+
or enforcea'ilit+ of the contract 'etween the contracting parties themselves. Thus, '+
virtue of the valid sale, .ngel Teves stepped into the shoes of the heirs of .ndres .'anto
and ac4uired all their rights to the propert+.
SARMING VS. 0,
0H0 *2@. 101, =D1< ", )00)
FAC#S8
. controvers+ arose regarding the sale of #ot F1"0 which was half6owned '+ the
original defendant, *ilveria %lores, although it was solel+ registered under her name.
The other half was originall+ owned '+ *ilveria9s 'rother, =ose. n =anuar+ 1/!", the
heirs of =ose entered into a contract with plaintiff .le(andra Delfino, for the sale of their
one6half share of #ot F1"0 after offering the same to their co6owner, *ilveria, who
declined for lac$ of mone+. *ilveria did not o'(ect to the sale of said portion to
.le(andra.
.tt+. Deogracias Pinili, .le(andra9s law+er then prepared the document of sale.
&n the preparation of the document however, 2T no. F/1H6., covering #ot !80F, and
not the correct title covering #ot F1"0 was the one delivered to Pinili.
Dnaware of the mista$e committed, .le(andra immediatel+ too$ possession of
#ot F1"0 and introduced improvements on the said lot.
Two +ears later, when .le(andra Delfino purchased the ad(oinin portion of the lot
she had 'een occup+ing, she discovered that what was designated in the deed, #ot !80F,
was the wrong lot. Thus, .le(andra and the vendors filed for the feformation of the
Deed of *ale.
&**D<:
,hether or not reformation is proper in this case.
@D#&17:
Page | 505
The 2ourt ruled that reformation is proper in the case at 'ar. @eformation is that
remed+ in e4uit+ '+ means of which a written instrument is made or construed so as to
e:press or inform to the real intention of the parties.
.n action for reformation of instrument under this provision of law ma+ prosper
onl+ upon the concurrence of the following re4uisites:
A1B there must have 'een a meeting of the minds of the parties to the
contractJ
A)B the instrument does not e:press the true intention of the partiesJ and
A0B the failure of the instrument to e:press the true intention of the parties
is due to mista$e, fraud, ine4uita'le conduct or accident.
.ll of these re4uisites are present in this case. There was a meeting of the minds
'etween the parties to the contract 'ut the deed did not e:press the true intention ot the
parties due to the designation of the lot su'(ect of the deed. There is no dispute as to the
intention of the parties to sell the land to .le(andra Delfino 'ut there was a mista$e as to
the designation of the lot intended to 'e sold as stated in the *ettlement of <state and
*ale.
CE%$ CON#RAC#ORS CONSOR#I$M CO. V. CO$R# OF APPEALS
7.@. 1o. 1081//, =ul+ )), )000
FAC#S8
M#%2 alleges that a lease agreement relating to various e4uipment was entered
into 'etween M#%2, as lessor, and 2222, as lessee. The terms and conditions of the
lease were defined in said agreement and in two lease schedules of pa+ment. To secure
the lease rentals, a chattel mortgage, and a su'se4uent amendment thereto, were
e:ecuted in favor of M#%2 over other various e4uipment owned '+ 2222.
2222 'egan defaulting on the lease rentals, prompting M#%2 to send demand
letters. ,hen the demand letters were not heeded, M#%2 filed a complaint for the
pa+ment of the rentals due and pra+ed that a writ of replevin 'e issued in order to
o'tain possession of the e4uipment leased and to foreclose on the e4uipment
mortgaged.
Page | 506
2229s position is that it is no longer inde'ted to M#%2 'ecause the total amounts
collected '+ the latter from the Ministr+ of Pu'lic Highwa+s, '+ virtue of the deed of
assignment, and from the proceeds of the foreclosed chattels were more than enough to
cover 2229s lia'ilities. 222 su'mits that in an+ event, the deed of assignment itself
alread+ freed 222 from its o'ligation to M#%2.
The trial court rendered decision upholding the lease agreement and finding 222
lia'le to M#%2 in lease rentals. n appeal, the appellate court affirmed the trial court9s
decision.
ISS$E8
,hether or not respondent court erred in upholding the so6 called sale6lease 'ac$
scheme of the private respondent when the same is in realit+ nothing 'ut an e4uita'le
mortgage.
R$LING8
The 2ourt affirms the decision of the court 'elow.
M#%29s own evidence discloses that it offers two t+pes of financing lease: a direct
lease and a sale6 lease 'ac$. The client sells to M#%2 e4uipment that it owns, which will
'e leased 'ac$ to him. The transaction 'etween 222 and M#%2 involved the second
t+pe of financing lease.222 argues that the sale and lease 'ac$ scheme is nothing more
than an e4uita'le mortgage and conse4uentl+, as$s for its reformation. The right of
action for reformation accrued from the date of e:ecution of the contract of lease in
1/8". This was properl+ e:ercised '+ 222 when it filed its answer with counterclaim to
M#%29s complaint in 1/8H and as$ed for the reformation of the lease contract.
A0R S3IPPING SERVICESS, INC V. GALLAR0O
7.@. 1o. 10FH80, *eptem'er 18, )00)
FAC#S8
Page | 507
Petitioner .D@ *hipping *ervices, &nc. entered into a contract with private
respondent 7allardo for the use of the former9s vessel MC Pacific Bree>e to transport
logs to Taiwan. The logs were the su'(ect of a sales agreement 'etween private
respondent as seller 'eing a tim'er concessionaire and log dealer, and *t+wood
Philippines, as 'u+er. Private respondent paid an advance charter fee of P)F),000
representing ten percent of the agreed charter fee. Dnder the charter agreement, the
'oat should 'e read+ to load '+ %e'ruar+ !, 1/HH.
The 'oat failed to arrive on time, prompting private respondent to notif+
petitioner of its cancellation of the charter contract and the withdrawal of the advance
pa+ment deposited to the account of .D@ shipping. .D@ *hipping refused to return the
advance pa+ment to 7allardo claiming that the agreement on the date of %e'ruar+ !,
1/HH was (ust the 3reference commencing date5 and the true loading date was %e'ruar+
1", 1/HH. This prompted the latter to file a case for sum of mone+ and damages. The
@egional Trial 2ourt ordered .D@ *hipping to pa+ 7allardo the advance pa+ment with "
percent interest per annum and attorne+9s fees. The decision of the trial court was
affirmed '+ the 2ourt of .ppeals. Hence, this petition.
ISS$E8
,hether or not private respondent is entitled to the refund of the advance
pa+ment representing his deposit for the charter of the ship provided '+ petitioner.
R$LING8
There was am'iguit+ in the interpretation of the contract provisions as to the date
of the loading of the ship. .m'iguities in a contract are interpreted strictl+, al'eit not
unreasona'l+, against the drafter thereof when (ustified in light of the operative facts
and surrounding circumstances. &n this case, am'iguit+ must 'e construed strictl+
against .D@ which drafted and caused the inclusion of the am'iguous provisions.
The charter agreement e:plicitl+ states that %e'ruar+ !, 1/HH is the intended date
when the ship is e:pected read+ to load while %e'ruar+ 1", 1/HH is merel+ the canceling
date. 2onsidering that the su'(ect contract contains the foregoing e:press provisions,
the parties have no other recourse 'ut to appl+ the literal meaning of the stipulations.
The cardinal rule is that when the terms of the contract are clear, leaving no dou't as to
the intention of the parties, the literal meaning of its stipulations is controlling.
Pursuant to the provision of .rt 11/1 of the 2ivil 2ode, the power to rescind
o'ligations is implied in reciprocal ones in case one of the o'ligors should not compl+
with what is incum'ent upon him, and the in(ured part+ ma+ rescind the o'ligation,
with pa+ment of damages. &n this case the private respondent is entitled to the return of
his down pa+ment, su'(ect to a legal interest of " percent per annum, and to the
pa+ment of damages.
Page | 508
#SPIC CORPORA#ION V. #SPIC EMPLO,EES $NION
7.@. 1o. 1"0F1/, %e'ruar+ 10, )00H
FAC#S8
T*P&2 is engaged in the 'usiness of designing, manufacturing, and mar$eting
integrated circuits to serve the communication, automotive, data processing, and
aerospace industries. T*P&2 <mplo+ees Dnion ADnionB, on the other hand, is the
registered 'argaining agent of the ran$6and6file emplo+ees of T*P&2. T*P&2 and the
Dnion entered into a 2ollective Bargaining .greement. .s a result all the regular ran$6
and6file emplo+ees of T*P&2 received a 10E increase in their salar+. . wage order was
issued '+ the 1ational 2apital @egion which raised the dail+ minimum wage from PhP
))0.!0 to PhP )!0, hence, the wages of 18 pro'ationar+ emplo+ees were increased to
PhP )!0.00. T*P&2 implemented the new wage rates as mandated '+ the 2B.. .s a
result several emplo+ees received fewer wage. . few wee$s after the salar+ increase for
the +ear )001 'ecame effective, T*P&2 notified some of their emplo+ees were overpaid
and the overpa+ment would 'e deducted from their salaries in a staggered 'asis.
ISS$E8
,hether or not deduction of the alleged overpa+ment from the salaries of the
affected mem'ers of the Dnion constitute diminution of 'enefits in violation of law.
R$LING8
The deduction of the alleged overpa+ment from the salaries of the respondents is
a valid act.
The 2B. provided in its provision in the computation for the increase in T*P&29s
emplo+ees, hence, the intention therein must 'e pursued 'asing on the principle that
littera necat spiritus vivificate. The fundamental doctrine in la'or law that the 2B. is
the law 'etween the parties and the+ are o'liged to compl+ with its provisions.
Therefore, the error found '+ T*P&2 in pursuance to the terms in the 2B. must 'e
sustained.
The 2ourt also agrees that T*P&2 in charging the overpa+ments made to the
respondents through staggered deductions from their salaries does not constitute
diminution of 'enefits. .n+ amount given to the emplo+ees in e:cess of what the+ were
entitled to, as computed a'ove, ma+ 'e legall+ deducted '+ T*P&2 from the emplo+ees9
salaries 'ecause on the first place that e:cess was not vested in them legall+ as a right
'ecause that will amount to un(ust enrichment.
Page | 509
ES#ANISLAO V. EAS# 9ES# %AN4ING CORPORA#ION
7.@. 1o. 18H!08, %e'ruar+ 11, )00H
FAC#S8
*pouses @afael and Renaida <stanislao o'tained a loan from <ast ,est Ban$ing
2orporation videnced '+ a promissor+ note and secured '+ two deeds of chattel
mortgage of two dump truc$s and a 'ulldo>er for the first and 'ulldo>er and a wheel
loader for the other. *pouses defaulted in the amorti>ations and the entire o'ligation
'ecame due and demanda'le. The 'an$ filed a suit for replevin with damages 'ut
su'se4uentl+, the 'an$ moved for suspension of the proceedings on account of an
earnest attempt to arrive at an amica'le settlement of the case. Both parties e:ecuted a
Deed of .ssignment, drafted '+ the 'an$, where it provides that the two dump truc$s
and the 'ulldo>er shall 'e transferred, assigned and conve+ed for the full pa+ment of the
de't. But the 'an$, for an un$nown reason failed to sign on the deed, 'ut it accepted the
three heav+ vehicles freel+ and voluntaril+ upon deliver+ made '+ the petitioner. .fter
some time, the 'an$ file a petition in court pra+ing for the deliver of the other heav+
vehicles mortgaged in the second chattel mortgage. The regional trial court dismissed
the complaint for lac$ of merit 'ut it was reversed and set aside '+ the court of appeals.
ISS$E8
,hether or not the Deed of .ssignment, unsigned '+ private respondent, e:tinguishes
the whole and full o'ligation of the petitioner.
R$LING8
The deed of assignment was a perfected agreement which e:tinguished
petitioner9s total outstanding o'ligation to the respondent. The deed e:plicitl+ provides
that the assignor ApetitionersB, in full pa+ment of its o'ligation, shall deliver the three
Page | 510
units of heav+ e4uipment to the assignee ArespondentB, which accepts the assignment in
full pa+ment of the a'ove6mentioned de't. This could onl+ mean that should petitioners
complete the deliver+ of the three units of heav+ e4uipment covered '+ the deed,
respondent9s credit would have 'een satisfied in full, and petitioner9s aggregate
inde'tedness would then 'e considered to have 'een paid in full as well.
The nature of the assignment was a dation in pa+ment, where'+ propert+ is
alienated to the creditor in satisfaction of a de't in mone+. *uch transaction is governed
'+ the law on sales. <ven if we were to consider the agreement as a compromise
agreement, there was no need for respondent9s signature on the same, 'ecause with the
deliver+ of the heav+ e4uipment which the latter accepted, the agreement was
consummated. @espondent9s approval ma+ 'e inferred from its un4ualified acceptance
of the heav+ e4uipment.
A/$IN#E, V.#I%ONG
7.@. 1o. 1""80F, Decem'er )0, )00"
FAC#S8
.grifina .4uinte+ filed a complaint for sum of mone+ and damages against the
respondents, spouses %elicidad and @ico Ti'ong. .grifina alleged that %elicidad had
secured loans from her on several occasions, at monthl+ interest rates. Despite
demands, the spouses Ti'ong failed to pa+ their outstanding loan e:clusive of interests.
*pouses Ti'ong admitted that the+ had secured loans from .grifina. The proceeds of the
loan were then re6lent to other 'orrowers at higher interest rates. The+, li$ewise, alleged
that the+ had e:ecuted deeds of assignment in favor of .grifina, and that their de'tors
had e:ecuted promissor+ notes in .grifinaKs favor. .ccording to the spouses Ti'ong, this
resulted in a novation of the original o'ligation to .grifina. The+ insisted that '+ virtue
of these documents, .grifina 'ecame the new collector of their de'torsJ and the
o'ligation to pa+ the 'alance of their loans had 'een e:tinguished.
ISS$E8
,hether or not consent is necessar+ in novation.
Page | 511
R$LING8
1ovation which consists in su'stituting a new de'tor AdelegadoB in the place of
the original one AdeleganteB ma+ 'e made even without the $nowledge or against the will
of the latter 'ut not without the consent of the creditor. *u'stitution of the person of the
de'tor ma+ 'e effected '+ delegacion, meaning, the de'tor offers, and the creditor
AdelegatarioB, accepts a third person who consents to the su'stitution and assumes the
o'ligation. Thus, the consent of those three persons is necessar+. &n this $ind of
novation, it is not enough to e:tend the (uridical relation to a third personJ it is
necessar+ that the old de'tor 'e released from the o'ligation, and the third person or
new de'tor ta$es his place in the relation. ,ithout such release, there is no novationJ
the third person who has assumed the o'ligation of the de'tor merel+ 'ecomes a co6
de'tor or a suret+. &f there is no agreement as to solidarit+, the first and the new de'tor
are considered o'ligated (ointl+.
Therefore, the 2ourt agrees with the appellate court9s decision that respondentsK
o'ligation to pa+ the 'alance of their account with petitioner was e:tinguished, pro
tanto, '+ the deeds of assignment of credit e:ecuted '+ respondent %elicidad in favor of
petitioner.
CR$: V. CO$R# OF APPEALS
7.@. 1.1))/0F, .pril 1!,)00!
FAC#S8
The 2omplaint alleged that petitioners and .rnel 2ru> were co6owners of a parcel
of land situated in Ta+ta+, @i>al. -et the propert+, which was then covered '+ Transfer
2ertificate of Title AT2TB 1o. F/!))!, was registered onl+ in the name of .rnel 2ru>.
.ccording to petitioners, the propert+ was among the properties the+ and .rnel 2ru>
inherited upon the death of Delfin 2ru>, hus'and of .doracion 2ru>.
Page | 512
Petitioners and .rnel 2ru> e:ecuted a Deed of Partial Partition, distri'uting to
each of them their shares consisting of several lots previousl+ held '+ them in common.
.mong the properties ad(udicated to defendant 2ru> was the parcel of land covered at
the time '+ T2T 1o. F/!))!. &t is the su'(ect of this case.
*u'se4uentl+, the same parties to the Deed of Partition agreed in writing to share
e4uall+ in the proceeds of the sale of the properties although the+ have 'een su'divided
and individuall+ titled in the names of the former co6owners pursuant to the Deed of
Partition. This arrangement was em'odied in a Memorandum of .greement e:ecuted
on .ugust )0, 1/88 or a da+ after the partition. The tenor of the Memorandum of
.greement was annotated at the 'ac$ of the T2T 1o. F/!))! on *eptem'er 1, 1/88.
*ometime in =anuar+ 1/H0, petitioner Thelma 2ru> discovered that T2T 1o.
!1FF88 was issued on cto'er 1H, 1/H) in the name of *ummit. Dpon investigation,
petitioners learned that .rnel 2ru> had e:ecuted a *pecial Power of .ttorne+ on Ma+ 1",
1/H0 in favor of one 1elson Tama+o, hus'and of petitioner 1erissa 2ru> Tama+o,
authori>ing him to o'tain a loan in the amount of ne Hundred %our Thousand Pesos
from respondent *ummit, to 'e secured '+ a real estate mortgage on the su'(ect parcel
of land.
*ince the loan remained outstanding on maturit+, *ummit instituted e:tra6
(udicial foreclosure proceedings, and at the foreclosure sale, it was declared the highest
'idder. 2onse4uentl+, *heriff *ta. .na issued a 2ertificate of *ale to respondent *ummit
which more than a +ear later consolidated its ownership of the foreclosed propert+.
Dpon presentation of the affidavit of consolidation of ownership, the .cting @egister of
Deeds of @i>al cancelled T2T 1o. F/!))! and issued and in lieu thereof, T2T 1o. !1FF88
in the name of respondent *ummit.
&n their complaint 'efore the @T2, petitioners asserted that the+ co6owned the
properties with .rnel 2ru>, as evidenced '+ the Memorandum of .greement. Hence,
the+ argued that the mortgage was void since the+ did not consent to it.
ISS$E8
,hether or not the real estate mortgage on the propert+ is valid.
R$LING8
. reading of the provisions of the Deed of Partition, no other meaning can 'e
gathered other than that petitioners and .rnel 2ru> had put an end to the co6ownership.
&n the aforesaid deed, the shares of petitioners and .rnel 2ru>9s in the mass of co6owned
properties were concretel+ determined and distri'uted to each of them. &n particular, to
.rnel 2ru> was assigned the disputed propert+. There is nothing from the words of said
deed which e:pressl+ or impliedl+ stated that petitioners and .rnel 2ru> intended to
remain as co6owners with respect to the disputed propert+ or to an+ of the properties for
that matter.
Petitioners do not 4uestion the validit+ or efficac+ of the Deed of Partial Partition.
&n fact, the+ admitted its e:istence in their pleadings and su'mitted it as a part of their
evidence. Thus, the deed is accorded its legal dire effect. *ince a partition legall+ made
confers upon each heir their e:clusive ownership of the propert+ ad(udicated to him, it
follows that .rnel 2ru> ac4uired a'solute ownership over the specific parcels of land
Page | 513
assigned to him in the Deed of Partial Partition, including the propert+ su'(ect of this
case. .s the a'solute owner thereof then, .rnel 2ru> had the right to en(o+ and dispose
of the propert+, as well as the right to constitute a real estate mortgage over the same
without securing the consent of the petitioners.
n the other hand, there is a'solutel+ nothing in the Memorandum of .greement
which diminishes the right of .rnel 2ru> to alienate or encum'er the properties allotted
to him in the deed of partition.
.s correctl+ held '+ the 2ourt of .ppeals, the parties onl+ 'ound themselves to
share in the proceeds of the sale of the properties. The agreement does not direct
reconve+ance of the properties to reinstate the common ownership of the properties.
Moreover, to ascertain the intent of the parties in a contractual relationship, it is
imperative that the various stipulations provided for in the contracts 'e construed
together, consistent with the parties contemporaneous and su'se4uent acts as regards
the e:ecution of the contract. *u'se4uent to the e:ecution of the Deed of Partition and
Memorandum of .greement, the properties were titled individuall+ in the names of the
co6owners to which the+ were respectivel+ ad(udicated, to the e:clusion of the other co6
owners. Petitioners .doracion 2ru> and Thelma 2ru> separatel+ sold the properties
distri'uted to them as a'solute owners thereof. Being clear manifestations of sole and
e:clusive dominion over the properties affected, the acts signif+ total incongruence with
the state of co6ownership claimed '+ the petitioners.
The real estate mortgage on the disputed propert+ is valid and does not
contravene the agreement of the parties.
Page | 514
GON:ALES VS. CO$R# OF APPEALS
0!F *2@. H
FAC#S8
Private respondents, Mr. and Mrs. 7a'riel 2a'allero, are the registered owneres
of two parcels of land situated in 2u'ao, ?ue>on 2it+ descri'ed in Transfer 2ertificate fo
Title 1o. )F800/ A#ot 1B and T2T 1o. )F8010 A#ot )B. The spouses9 residence stood in
#ot ).
*ometime in 1/8/, the+ o'tained a loan from the 2avite Development Ban$ in the
amount of P))!,000.00. The two lots were mortgaged to secure their loan. The loan
matured in 1/HF. To pa+ the loan the+ offered #ot 1 for sale. The offer was advertised in
the Bulletin Toda+. However, offers to purchase from prospective 'u+ers did not
materiali>e.
n cto'er )F, 1/H!, a certain Mrs. #agrimas approached the spouses offering to
'ro$er the sale to an interested 'u+er. &nitiall+, the spouses told the 'ro$er that the+
were selling onl+ to direct 'u+ers. 1onetheless, Mrs. #agrimas 'rought to the spouses
her 'u+er, herein petitioner 1apoleon H. 7on>ales, who turned out to 'e Mrs. #agrimas9
relative.
Petitioner offered to 'u+ the vacant lot for PF80,000.00. &nitiall+, respondents
refused to reduce their as$ing price. Petitioner 'argained for a lower price with the
suggestion that on paper the price will 'e mar$edl+ lower so the spouses would pa+
lower capital gains ta:. Petitioner assured the spouses this could 'e done since he had
connections with the Bureau of &nternal @evenue. The spouses agreed to sell at
PF80.000.00. Petitioners paid the 'an$ P08!,000.00, to 'e deducted from the
purchase price. .fter the mortgage was cancelled and upon release of the two titles,
7on>ales as$ed for the deeds of sale of the two lots and deliver+ of the titles to him.
Defendants signed the deed of sale covering onl+ #ot 1 'ut refused to deliver its title
until petitioner paid the remaining 'alance of P80,000.00
This prompted petitioner to file a complaint for specific performance and
damages.
ISS$E8
,hether or not the sale involved onl+ #ot 1 and not 'oth #ots.
R$LING8
Page | 515
The sale covers onl+ one of the lots. Principall+, the issue here is whether the
contract of sale 'etween the parties involved #ot 1 and ) as claimed '+ petitioner or onl+
#ot 1 as private respondents contend. &n a case where we have to (udge conflicting
claims on the intent of the parties, as in this instance, (udicial determination of the
parties9 intention is mandated. 2ontemporaneous and su'se4uent acts of the parties
material to the case are to 'e considered.
Petitioner admits he himself caused the preparation of the deed of sale presented 'efore
the lower court. -et he could not e:plain wh+ & referred onl+ to the sale of #ot 1 and not
to the two lots, if the intention of the parties was reall+ to cover the sale of two lots. .s
the courts a 4uo o'served, even if it were true that two lots were mortgaged and were
a'out to 'e foreclosed, the ads private respondents placed in the Bulletin Toda+ offered
onl+ #ot 1 and was strong indication that the+ did not intend to sell #ot ). The !01 s4.m.
lot was offered for P1,1!0.00 per s4.m. &t alone would have fetched P!8",1!0.00. The
loan still to 'e paid the 'an$ was onl+ P08!,000.00 which was what petitioner actuall+
paid the 'an$. .s the trial court o'served, it was incomprehensi'le wh+ the spouses
would part with two lots, one with a )6store+ house, and 'oth situated at a prime
commercial district for less than the price of one lot. 2ontrar+ to what petitioner would
ma$e us 'elieve, the sale of #ot 1 valued at P!8",1!0.00 for PF80,000.00, with
petitioner assuming the 'an$ loan of P08!,000.00 as well as pa+ment of the capital
gains ta:, appears more pla
ALMIRA V. CO$R# OF APPEALS
0// *2@. 0!1
FAC#S8
Petitioners are the wife and the children of the late =ulio 7arcia who inherited
from his mother, Ma. .li'ud'ud, a portion of a /0,"!! s4uare meter propert+
denominated as lot 1"F) of the *ta. @osa <state in Brg+. 2aingin *ta. @osa #aguna. The
lot was co6owned and registered in the names of three persons with the following
shares: Cicente de 7u>man A1M)B, <nri4ue Hemedes A1MFB and %rancisco .li'ud'ud, the
father of Ma. .li'ud'ud A1MFB. .lthough there wad no separate title in the name of =ulio
7arcia, there were ta: declaration in his name to the intent of his grandfather9s share
covering the area of )1F"0 s4uare meter.
n =ul+ !, 1/HF, petitioner as heirs of =ulio 7arcia, and respondent %ederico
Brines entered a Gasunduan ng Pag'i'ilihan AGasunduan for Brevit+B over the )1F"0
s4uare meter portion for the sum of P1!0.000.00. @espondent paid P"!, 000.00 upon
e:ecution of the contract while the 'alance of PH!, 000.00 was made pa+a'le within si:
A"B months from the date of the e:ecution of the instrument. The time of the e:ecution
of the $asunduan, petitioners allegedl+ informed respondent that T2T 1o. @T6108" was
in the possession of their cousin, 2onchila .li'ud'ud, who having 'ought Cicente de
7u>man9s \ shares, owned the 'igger portion of lot 1"F). This standing
notwithstanding, respondent willingl+ entered into the Gasunduan provided that the full
pa+ment of the purchase price will 'e made upon deliver+ to him of the title.
@espondent too$ possession of the propert+ su'(ect of the Gasunduan and made
various pa+ments to petitioiners amountiong to P!H!00.00. However upon failure of
petitionere to deliver to him a separate title to the propert+ in the name of =ulio 7arcia
Page | 516
he refused to ma$e further pa+ments, prompting petitioner to file a civil action 'efore
the @T2 for a rescission of the Gasunduan, return '+ respondent to petitioner of the
possession of the su'(ect parcel of land, and pa+ment '+ respondent of damages in
favour of petitioners.
ISS$E
,hether or not the petitioner ma+ rescind the Gasunduan pursuant to .rticle
11/1 of the 2ivil 2ode for the failure of respondent to give full pa+ment of the 'alance of
the purchase price.
R$LING8
1, the right of the parties are governed '+ the terms ands the nature of the
contract the+ entered. Hence, although the nature of the Gasunduan was never places in
dispute '+ 'oth parties, it is necessar+ to ascertain whether the Gasunduan is a contract
to sell or a contract of *ale. .lthough 'oth parties have consistenc+ referred to the
Gasunduan as a contract to *ell, a careful reading of the provision of the Gasunduan
reveals that it is a contract of *ale. . deed of sale is a'solute in nature in the a'sence of
an an+ stipulation reserving title to the vendor until full pa+ment of the purchase price.
The deliver+ of a separation title in the name of =ulio 7arcia was a condition imposed on
respondent9s o'ligation to pa+ the 'alance of the purchase price. &t was not a condition
imposed in the perfection of the contract of *ale.
The rescission will not prosper since the power to rescind is onl+ given to the
in(ured part+. The in(ured part+ is the part+ who has faithfull+ fulfilled his o'ligation. &n
the case at 'ar, the petitioners were not read+, willing and a'le to compl+ with their
o'ligation to deliver a separate title in the name of =ulio 7arcia to respondent therefore,
th+ are not in a position to as$ for rescission. %ailure to compl+ with a condition
imposed on the performance of an o'ligation gives the other part+ the option either to
refuse to proceed with the sale or to waive the condition under .rt 1!F! of the civil code.
Hence it is the respondent who has the option.
P3ILIPPINE %AN4 OF COMM$NICA#IONS V. LIM
7.@. 1. 1!H10H, .pril 1), )00!
FAC#S8
Petitioner filed a complaint against respondents for the collection of a deficienc+
amounting to PF,01F,)/8.)0 e:clusive of interest. Petitioner alleged that respondents
o'tained a loan from it and e:ecuted a continuing suret+ in favor of petitioner for all
loans, credits, etc., that were e:tended or ma+ 'e e:tended in the future to respondents.
Petitioner granted a renewal of said loan upon respondent9s re4uest as evidenced '+ a
promissor+ note renewal BD6Caria'le 1o. H)/H0)1001 on the amount of
P0,000,000.00. it was e:pressl+ stipulated therein that the venue for an+ legal action
that ma+ arise out of said promissor+ note shall 'e Ma$ati 2it+ 3to the e:c$lusion of all
other courts.5 @espondent allegedl+ failed to pa+ said o'ligation upon maturit+. Thus
petitioner foreclosed the real estate mortgage e:ecuted '+ the respondents valued at
P1,0H1,"00.00 leaving a deficienc+ 'alance of PF,01F,)/8.)0
Page | 517
@espondents moved to dismiss the complaint on the ground of improper venue,
invo$ing the stipulation contained in the last paragraph of the promissor+ note with
respect to the restrictionMe:clusive venue. The trial court denied said motion
asseverating that petitioners had separate causes of action arising from the promissor+
note and the continuing suret+ agreement.
ISS$E8
,hether or not the 3complementar+6contracts6construed together5 principle is
applica'le in the case at 'ar.
R$LING8
The aforementioned doctrine is applica'le to the present case. &n capa'le of
standing '+ itself, the suret+ agreement can 'e enforced onl+ in con(uction with the
promissor+ note. The latter documents the de't that is sought to 'e collected in the
action against the sureties
.ccording to this principle, an accessor+ contract must 'e read in its entiret+ and
together with the principal agreement. This principle is used in construing contractual
stipulations in order to arrive at their true meaningJ certain stipulations cannot 'e
segregated and then made to control. This no6segregation principle is 'ased on .rticle
108F of the 2ivil 2ode.
1ota'l+, the promissor+ note was a contract of adhesion that petitioner
re4uired the principal de'tor to e:ecute as a condition of the approval of the loan. &t
was made in the form and language prepared '+ the 'an$. B+ inserting the provision of
that Ma$ati 2it+ would 'e the 3venue for an+ legal action that ma+ arise out of the
promissor+ note,5 petitioner also restricted the venue of actions against the sureties.
The legal action against the sureties arose not onl+ from the securit+ agreement 'ut also
from the promissor+ note.
RIGOR V. CONSOLI0A#E0 ORI> LEASING AN0 FINANCE CORPORA#ION
7.@. 1o. 10"F)0. .ugust )0, )00)
FAC#S8
Page | 518
Petitioners o'tained a loan from private respondent 2onsolidated ri: #easing
and %inance 2orporation in the amount of P1,"00,0)0.00. Petitioners e:ecuted a
promissor+ note promising to pa+ the loan in )F e4ual monthl+ installments ever+ fifth
da+ of the month commencing on *eptem'er !, 1//". The promissor+ note also
provides that default in pa+ing an+ installment renders the entire unpaid amount due
and pa+a'le. To secure pa+ment of the loan, petitioners e:ecuted in favor of private
respondent a deed of chattel mortgage over two dump truc$s. Petitioners failed to pa+
several installments despite demand from private respondent.
Private respondent sought to foreclose the chattel mortgage '+ filing a complaint
for @eplevin with Damages against petitioners. .fter service of summons, petitioners
moved to dismiss the complaint on the ground of improper venue 'ased on a provision
in the promissor+ note which states that, : : : all legal actions arising out of this note or
in connection with the chattels su'(ect hereof shall onl+ 'e 'rought in or su'mitted to
the proper court in Ma$ati 2it+, Philippines. Private respondent opposed the motion to
dismiss and argued that venue was properl+ laid in Dagupan 2it+ where it has a 'ranch
office 'ased on a provision in the deed of chattel mortgage which states that, : : : in
case of litigation arising out of the transaction that gave rise to this contract, complete
(urisdiction is given the proper court of the cit+ of Ma$ati or an+ proper court within the
province of @i>al, or an+ court in the cit+, or province where the holderMmortgagee has a
'ranch office, waiving for this purpose an+ proper venue. .fter a further e:change of
pleadings, the Dagupan trial court denied petitioners9 motion to dismiss 1ot satisfied
with the orders, petitioners filed a petition for certiorari 'efore the 2ourt of .ppeals
imputing grave a'use of discretion '+ the Dagupan trial court in den+ing the motion to
dismiss which was denied.
ISS$E8
,hether or not venue was properl+ laid under the provisions of the chattel
mortgage contract in the light of .rticle 108F of the 2ivil 2ode.
R$LING8
The 2ourt holds that private respondent is not 'arred from filing its case against
petitioners in Dagupan 2it+ where private respondent has a 'ranch office as provided
for in the deed of chattel mortgage.
.rt. 108F of the 2ivil 2ode provides that the various stipulations of a contract
shall 'e interpreted together, attri'uting to the dou'tful ones that sense which ma+
result from all of them ta$en (ointl+.
.ppl+ing the doctrine to the instant case, we cannot sustain petitioners9
contentions. The promissor+ note and the deed of chattel mortgage must 'e construed
together. Private respondent e:plained that its older standard promissor+ notes
confined venue in Ma$ati 2it+ where it had its main office. .fter it opened a 'ranch
office in Dagupan 2it+, private respondent made corrections in the deed of chattel
mortgage, 'ut due to oversight, failed to ma$e the corresponding corrections in the
promissor+ notes. Petitioners affi:ed their signatures in 'oth contracts. The
presumption is applied that a person ta$es ordinar+ care of his concerns. &t is presumed
that petitioners did not sign the deed of chattel mortgage without informing themselves
Page | 519
of its contents. .s aptl+ stated in a case, the+ 'eing of age and 'usinessmen of
e:perience, it must 'e presumed that the+ acted with due care and have signed the
documents in 4uestion with full $nowledge of their import and the o'ligation the+ were
assuming there'+. &n an+ event, petitioners did not contest the deed of chattel mortgage
under *ection H, @ule H of the @evised @ules of 2ivil Procedure.
VELAS/$E V. CO$R# OF APPEALS
7.@. 1o. 1)F0F/, =une 00, 1///
FAC#S8
OThe Pic$6up %resh %arms, &nc. APD%%&B, of which petitioner Celas4ue> was an
officer and stoc$holder, filed an application for a loan of P8,!00,000.00 with P2&B
under the governmentKs 7uarantee %und for *mall and Medium <nterprises A7%*M<B.
The parties e:ecuted the corresponding loan agreement. .s securit+ for the loan,
promissor+ notes num'ered T# 1)1)01 and T# 1)1)!H for the amounts of
PF,000,000.00 and P0,!00,000.00, respectivel+, were signed '+ officers of and for 'oth
PD%%& and .ircon and @efrigeration &ndustries, &nc. A.@&&B. . chattel mortgage was
also e:ecuted '+ .@&& over its e4uipment and machineries in favor of P2&B. Petitioner
along with other officers also e:ecuted deeds of suret+ship in favor of P2&B. *eparate
deeds of suret+ship were further e:ecuted. ,hen PD%%& defaulted in the pa+ment of its
o'ligations P2&B foreclosed the chattel mortgage. The proceeds of the sale amounted to
P"8H,000.00.
Thus, P2&B filed an action to recover the remaining 'alance of the entire
o'ligation including interests, penalties and other charges. <:emplar+ damages and
attorne+9s fees of )!E of the total amount due were also sought. . writ of preliminar+
attachment was granted '+ the trial court. The trial court rendered a summar+
(udgment in favor of P2&B holding petitioner and 2anilao solidaril+ lia'le to pa+
P8,))8,")F.FH plus annual interest of 18E, and P800,000.00 as attorne+9s fees and the
costs of suit. The case was dismissed without pre(udice with regard to the other
defendants as the+ were not properl+ served with summons.

ISS$E8
,hether or not the appellate court committed reversi'le error in sustaining or
affirming the summar+ (udgment despite the e:istence of genuine tria'le issues of facts
and in refusing to set aside the default order against petitioner.
R$LING8
The more appropriate doctrine in this case is that of the 3complementar+
contracts construed together5 doctrine. The suret+ 'ond must 'e read in its entiret+ and
together with the contract 'etween the 1P2 and the contractors. The provisions must
'e construed together to arrive at their true meaning. 2ertain stipulations cannot 'e
segregated and then made to control.
That the 3complementar+ contracts construed together5 doctrine applies in this
case finds support in the principle that the suret+ contract is merel+ an accessor+
contract and must 'e interpreted with its principal contract, which in this case was the
Page | 520
loan agreement. This doctrine closel+ adheres to the spirit of .rt. 108F of the 2ivil 2ode.
E/$A#ORIAL REAL#, 0EVELOPMEN#, INC. V. MA,FAIR #3EA#ER, INC.
7.@. 1o. 10"))1 Ma+ 1), )000
FAC#S8
2armelo P Bauermann, &nc. A2armeloB used to own a parcel of land, together
with two two6store+ 'uildings constructed thereon. n =une 1, 1/"8, 2armelo entered
into a lease with Ma+fair Theater, &nc. AMa+fairB for a period of )0 +ears. The lease
covered a portion of the second floor and me>>anine. Two A)B +ears later, Ma+fair
entered into a second lease with 2armelo for the lease of another propert+, a part of the
second floor and two spaces on the ground floor. The lease was also for a period of
twent+ A)0B +ears. Both leases contained a provision granting Ma+fair a right of first
refusal to purchase the said properties. However, on =ul+ 00, 1/8H, within the )06+ear6
lease term, 2armelo sold the su'(ect properties to <4uatorial @ealt+ Development, &nc.
A<4uatorialB for the sum of P11.0M without their first 'eing offered to Ma+fair.
.s a result, Ma+fair filed a complaint for specific performance and damages.
.fter trial, the court ruled in favor of <4uatorial. n appeal, the 2ourt of .ppeals A2.B
reversed and set aside the (udgment of the lower court. n 1ovem'er )1, 1//", the
*upreme 2ourt denied <4uatorial9s petition for review and declared the contract
'etween 2armelo and <4uatorial rescinded. The decision 'ecame final and e:ecutor+
and Ma+fair filed a motion for its e:ecution, which the court granted on .pril )!, 1//8.
However, 2armelo could no longer 'e located thus Ma+fair deposited with the court its
pa+ment to 2armelo. The lower court issued a deed of reconve+ance in favor of 2armelo
and issued new certificates in the name of Ma+fair.
n *eptem'er 1H, 1//8, <4uatorial filed an action for the collection of sum of
mone+ against Ma+fair claiming pa+ment of rentals or reasona'le compensation for the
defendant9s use of the premises after its lease contracts had e:pired. The lower court
de'un$ed the claim of the petitioner for unpaid rentals, holding that the rescission of
the Deed of .'solute *ale in the mother case did not confer on <4uatorial an+ vested or
residual proprietar+ rights, even in e:pectanc+.
Page | 521
ISS$E8
,hether or not <4uatorial ma+ collect rentals or reasona'le compensation for
Ma+fair9s use of su'(ect premises after its lease contracts had e:pired.
R$LING8
<4uitorial ma+ not collect rentals or reasona'le compensation for Ma+fair9s use
of the su'(ect premises after its lease contracts had e:pired. @ent is a civil fruit that
'elongs to the owner of the propert+ producing it '+ right of accession. 2onse4uentl+
and ordinaril+, the rentals that fell due from the time of the perfection of the sale to
petitioner until its rescission '+ final (udgment should 'elong to the owner of the
propert+ during that period.
Petitioner never too$ actual control and possession of the propert+ sold, in view
of the respondent9s timel+ o'(ection to the sale and continued actual possession of the
propert+. The o'(ection too$ the form of a court action impugning the sale that was
rescinded '+ a (udgment rendered '+ the 2ourt in the mother case. &t has 'een held that
the e:ecution of a contract of sale as a form of constructive deliver+ is a legal fiction. &t
holds true onl+ when there is no impediment that ma+ prevent the passing of the
propert+ from the hands of the vendor into those of the vendee. ,hen there is such
impediment, fiction +ields to realit+J the deliver+ has not 'een effected. Hence,
respondent9s opposition to the transfer of propert+ '+ wa+ of sale to <4uatorial was a
legall+ sufficient impediment that effectivel+ prevented the passing of the propert+ into
the latter9s hands.
.rticle 10H" of the 2ivil 2ode provides rescission, which creates the o'ligation to
return the things, which were the o'(ect of the contract, together with their fruits, and
the price with its interest, 'ut also the rentals paid, if an+, had to 'e returned '+ the
'u+er.
Page | 522
SIG$AN V. LIM
7.@. 1o. 10F"H!, 1ovem'er 1/, 1///
FAC#S8
#im issued two Metro'an$ chec$s in the sums of P000,000 and P)F1,""H,
respectivel+, pa+a'le to Lcash.L Dpon presentment '+ petitioner with the drawee 'an$,
the chec$s were dishonored for the reason Laccount closed.L Demands to ma$e good the
chec$s proved futile. .s a conse4uence, a criminal case for violation of Batas Pam'ansa
were filed '+ petitioner against #im.
The court a 4uo convicted #im as charged. The case is pending 'efore this 2ourt
for review and doc$eted as 7.@. 1o. 10F"H!. &t also appears that on 01 =ul+ 1//0, #im
Page | 523
was convicted of estafa '+ the @T2 of ?ue>on 2it+ in 2riminal 2ase 1o. ?6H/6))1")
filed '+ a certain Cictoria *uare>. This decision was affirmed '+ the 2ourt of .ppeals.
n appeal, however, the *upreme 2ourt, in a decision promulgated on 8 .pril 1//8,
ac4uitted #im 'ut held her civill+ lia'le in the amount of P1"/,000, as actual damages,
plus legal interest.
Meanwhile, on ) =ul+ 1//1, a Deed of Donation conve+ing parcels of land and
purportedl+ e:ecuted '+ #im on 10 .ugust 1/H/ in favor of her children, #inde, &ngrid
and 1eil, was registered with the ffice of the @egister of Deeds of 2e'u 2it+. 1ew
transfer certificates of title were thereafter issued in the names of the donees.
n )0 =une 1//0, petitioner filed an accion pauliana against #im and her children
'efore Branch 1H of the @T2 of 2e'u 2it+ to rescind the 4uestioned Deed of Donation
and to declare as null and void the new transfer certificates of title issued for the lots
covered '+ the 4uestioned Deed. The complaint was doc$eted as 2ivil 2ase 1o. 2<B6
1F1H1. Petitioner claimed therein that sometime in =ul+ 1//1, #im, through a Deed of
Donation, fraudulentl+ transferred all her real propert+ to her children in 'ad faith and
in fraud of creditors, including herJ that #im conspired and confederated with her
children in antedating the 4uestioned Deed of Donation, to petitionerKs and other
creditorsK pre(udiceJ and that #im, at the time of the fraudulent conve+ance, left no
sufficient properties to pa+ her o'ligations.
n the other hand, #im denied an+ lia'ilit+ to petitioner. *he claimed that her
convictions in 2riminal 2ases 1os. ))1)86)H were erroneous, which was the reason wh+
she appealed said decision to the 2ourt of .ppeals. .s regards the 4uestioned Deed of
Donation, she maintained that it was not antedated 'ut was made in good faith at a time
when she had sufficient propert+. %inall+, she alleged that the Deed of Donation was
registered onl+ on ) =ul+ 1//1 'ecause she was seriousl+ ill.
&n its decision of 01 Decem'er 1//F the trial court ordered the rescission of the
4uestioned deed of donationJ A)B declared null and void the transfer certificates of title
issued in the names of private respondents #inde, &ngrid and 1eil #imJ A0B ordered the
@egister of Deeds of 2e'u 2it+ to cancel said titles and to reinstate the previous titles in
the name of @osa #imJ and AFB directed the #&Ms to pa+ the petitioner, (ointl+ and
severall+, the sum of P10,000 as moral damagesJ P10,000 as attorne+Ks feesJ and P!,000
as e:penses of litigation.
n appeal, the 2ourt of .ppeals, in a promulgated on )0 %e'ruar+ 1//H, reversed
the decision of the trial court and dismissed petitionerKs accion pauliana. &t held that two
of the re4uisites for filing an accion pauliana were a'sent, namel+, A1B there must 'e a
credit e:isting prior to the cele'ration of the contractJ and A)B there must 'e a fraud, or
at least the intent to commit fraud, to the pre(udice of the creditor see$ing the
rescission.
.ccording to the 2ourt of .ppeals, the Deed of Donation, which was e:ecuted and
ac$nowledged 'efore a notar+ pu'lic, appears on its face to have 'een e:ecuted on 10
.ugust 1/H/. Dnder *ection )0 of @ule 10) of the @ules of 2ourt, the 4uestioned Deed,
'eing a pu'lic document, is evidence of the fact which gave rise to its e:ecution and of
the date thereof. 1o antedating of the Deed of Donation was made, there 'eing no
convincing evidence on record to indicate that the notar+ pu'lic and the parties did
antedate it.
Page | 524
*ince #imKs inde'tedness to petitioner was incurred in .ugust 1//0, or a +ear
after the e:ecution of the Deed of Donation, the first re4uirement for accion pauliana
was not met.
.nent petitionerKs contention that assuming that the Deed of Donation was not
antedated it was nevertheless in fraud of creditors 'ecause Cictoria *uare> 'ecame #im9s
creditor on H cto'er 1/H8, the 2ourt of .ppeals found the same untena'le, for the rule
is 'asic that the fraud must pre(udice the creditor see$ing the rescission.
ISS$E8
,hether or not the deed of donation is valid.
R$LING8
The *upreme 2ourt upheld the validit+ of the deed of donation.
.rticle 10H1 of the 2ivil 2ode enumerates the contracts which are rescissi'le, and
among them are Lthose contracts underta$en in fraud of creditors when the latter
cannot in an+ other manner collect the claims due them.L
The action to rescind contracts in fraud of creditors is $nown as accion pauliana.
%or this action to prosper, the following re4uisites must 'e present:
A1B the plaintiff as$ing for rescission has a credit prior to the alienation,
although demanda'le laterJ
A)B the de'tor has made a su'se4uent contract conve+ing a patrimonial
'enefit to a third personJ
A0B the creditor has no other legal remed+ to satisf+ his claimJ
AFB the act 'eing impugned is fraudulentJ
A!B the third person who received the propert+ conve+ed, if it is '+ onerous
title, has 'een an accomplice in the fraud.
The general rule is that rescission re4uires the e:istence of creditors at the time of
the alleged fraudulent alienation, and this must 'e proved as one of the 'ases of the
(udicial pronouncement setting aside the contract. ,ithout an+ prior e:isting de't,
there can neither 'e in(ur+ nor fraud. ,hile it is necessar+ that the credit of the plaintiff
in the accion pauliana must e:ist prior to the fraudulent alienation, the date of the
(udgment enforcing it is immaterial. <ven if the (udgment 'e su'se4uent to the
alienation, it is merel+ declarator+, with retroactive effect to the date when the credit
was constituted.
&n the instant case, the alleged de't of #im in favor of petitioner was incurred in
.ugust 1//0, while the deed of donation was purportedl+ e:ecuted on 10 .ugust 1/H/.
The *upreme 2ourt is not convinced with the allegation of the petitioner that the
4uestioned deed was antedated to ma$e it appear that it was made prior to petitionerKs
credit. 1ota'l+, that deed is a pu'lic document, it having 'een ac$nowledged 'efore a
notar+ pu'lic. .s such, it is evidence of the fact which gave rise to its e:ecution and of
its date, pursuant to *ection )0, @ule 10) of the @ules of 2ourt.
Page | 525
&n the present case, the fact that the 4uestioned Deed was registered onl+ on )
=ul+ 1//1 is not enough to overcome the presumption as to the truthfulness of the
statement of the date in the 4uestioned deed, which is 10 .ugust 1/H/. PetitionerKs
claim against #im was constituted onl+ in .ugust 1//0, or a +ear after the 4uestioned
alienation. Thus, the first two re4uisites for the rescission of contracts are a'sent.
<ven assuming arguendo that petitioner 'ecame a creditor of #im prior to the
cele'ration of the contract of donation, still her action for rescission would not fare well
'ecause the third re4uisite was not met. Dnder .rticle 10H1 of the 2ivil 2ode, contracts
entered into in fraud of creditors ma+ 'e rescinded onl+ when the creditors cannot in
an+ manner collect the claims due them. .lso, .rticle 10H0 of the same 2ode provides
that the action for rescission is 'ut a su'sidiar+ remed+ which cannot 'e instituted
e:cept when the part+ suffering damage has no other legal means to o'tain reparation
for the same. The term Lsu'sidiar+ remed+L has 'een defined as Lthe e:haustion of all
remedies '+ the pre(udiced creditor to collect claims due him 'efore rescission is
resorted to.L &t is, therefore, essential that the part+ as$ing for rescission prove that he
has e:hausted all other legal means to o'tain satisfaction of his claim. Petitioner neither
alleged nor proved that she did so. n this score, her action for the rescission of the
4uestioned deed is not maintaina'le even if the fraud charged actuall+ did e:ist.L The
fourth re4uisite for an accion pauliana to prosper is not present either.
Page | 526

43E 3ONG C3ENG, a*)as FELI> 43E, SAN0RA -O, 43E a.; RA,
S#EVEN 43E, (e7)7)o.ers,
5s.CO$R# OF APPEALS, 3ON. #EOFILO G$A0I:, R#C 147, MA4A#I CI#,
a.; P3ILAM INS$RANCE CO., INC., res(o.;e.7s.
7.@. 1o. 1FF1"/ March )H, )00
%.2T*:
Petitioner Ghe Hong 2hang is the owner of the vessel which said vessel shipped 0,F00
'ags of copra at Mas'ate owned '+ the Philippine .gricultural Trading 2orporation. The
shipment of copra was covered '+ an insurance issued '+ .merican Home &nsurance
2ompan+. The vessel san$ while at sea which resulted to the loss of 'ags of copra. The
insurer paid the amount of Php 0F!,000.00 to the consignee.
The .merican Home filed a case for the recover+ of the mone+ paid to the
consignee, 'ased on 'reach of contract of carriage. During the pendenc+ of the case,
petitioner e:ecuted deed of donation in favor of his children *andra and @a+.
The trial court rendered its deciusion in favor of the plaintiff however when the
*heriff e:ecuted the writ of e:ecutuin the+ found out that petitioner no longer had an+
propert+ and that he conve+ed the su'(ect propertiues to his children.
@espondent Philam filed a complaint for the rescission of the deeds of donation
e:ecuted '+ petitioner Ghe Hong 2heng in favor of his children and for the nullification
of their titles. @espondent Philam alleged, inter alia, that petitioner Ghe Hong 2heng
e:ecuted the aforesaid deeds in fraud of his creditors, including respondent Philam.
The @T2 rendered its decision in favoir of Philam. The 2a affirmed the decision of @T2.
&**D<:
Page | 527
,hen does accion pauliano accrues;
R$LING8
.n accion pauliana accrues onl+ when the creditor discovers that he has no other legal
remed+ for the satisfaction of his claim against the de'tor other than an accion pauliana.
The accion pauliana is an action of a last resort. %or as long as the creditor still has a
remed+ at law for the enforcement of his claim against the de'tor, the creditor will not
have an+ cause of action against the creditor for rescission of the contracts entered into
'+ and 'etween the de'tor and another person or persons. &ndeed, an accion pauliana
presupposes a (udgment and the issuance '+ the trial court of a writ of e:ecution for the
satisfaction of the (udgment and the failure of the *heriff to enforce and satisf+ the
(udgment of the court. &t presupposes that the creditor has e:hausted the propert+ of the
de'tor. The date of the decision of the trial court against the de'tor is immaterial. ,hat
is important is that the credit of the plaintiff antedates that of the fraudulent alienation
'+ the de'tor of his propert+. .fter all, the decision of the trial court against the de'tor
will retroact to the time when the de'tor 'ecame inde'ted to the creditor.
,H<@<%@<, premises considered, the petition is here'+ D<1&<D for lac$ of merit.
RAFAEL G. S$N#A,, subs7)7u7e; by <)s <e)rs, .a2e*y8 ROSARIO, RAFAEL,
-R., APOLINARIO, RA,M$N0, MARIA VIC#ORIA, MARIA ROSARIO a.;
MARIA LO$R0ES, a** sur.a2e; S$N#A,, (e7)7)o.ers,
5s.#3E 3ON. CO$R# OF APPEALS a.; FE0ERICO C. S$N#A,,
res(o.;e.7s.
7.@. 1o. 11F/!0 Decem'er 1/, 1//!

%.2T*:
%ederico *unta+ was the registered owner of a parcel of land in dispute. He
applied as a miller contractor of the 1ational @ice and 2orn 2orporation A1.@&2B 'ut
the same was disapproved '+ 1.@&2 'ecause he was tied up with several unpaid loans.
%or purposes of circumvention, he as$ed his nephew6law+er, @afael to prepare an
a'solute deed of sale of the said land in dispute in consideration of Php )0,000.00 in
favor of @afael. #ess that 0 months after his conve+ance, the same parcel of land was
sold 'ac$ to %ederico for the same consideration. However on the second sale there was
Page | 528
irregularit+ 'ecause it appears that said land was not sold 'ut was mortgaged in favor of
the Hagono+ @ural Ban$. Moreover, after the e:ecution of the deed, %ederico remained
in possession of the propert+ sold.
%ederico re4uested @afael to deliver his cop+ of T2T no. T60"81F so that %ederico
could have the counter deed of sale in his favor registered on his name 'ut @afael
refuses.
%ederico filed a complaint for reconve+ance and damages against @afael. The
trial court rendered its decision that @afael is the owner of the propert+ in dispute 'ut
not to the e:tent of ordering %ederico to pa+ 'ac$ rentals for the use of the propert.
The 2. rendered its decision in favor of %ederico.
&**D<:
,hether or not said second deed of a'solute sale is null and void.
@DG&17:
The cumulative effect of the evidence on record as chronicled aforesaid identified
'adges of simulation proving that the sale '+ %ederico to his deceased nephew of his
land and rice mill, was not intended to have an+ legal effect 'etween them. Though the
notari>ation of the deed of sale in 4uestion vests in its favor the presumption of
regularit+, it is not the intention nor the function of the notar+ pu'lic to validate and
ma$e 'inding an instrument never, in the first place, intended to have an+ 'inding legal
effect upon the parties thereto. The intention of the parties still and alwa+s is the
primar+ consideration in determining the true nature of a contract.
The *2 hold that the deed of sale e:ecuted '+ %ederico in favor of his now deceased
nephew, @afael, is a'solutel+ simulated and fictitious and, hence, null and void, said
parties having entered into a sale transaction to which the+ did not intend to 'e legall+
'ound. .s no propert+ was validl+ conve+ed under the deed, the second deed of sale
e:ecuted '+ the late @afael in favor of his uncle, should 'e considered ineffective and
unavailing.
SANC3E: 5s. MAPALA0
!F1 *2@. 0/8
%.2T*:
Page | 529
@espondent Mapalad was the registered owner of four AFB parcels of land located
along @o:as Boulevard, Baclaran, ParaQa4ue
The P277 issued writs of se4uestration for Mapalad and all its properties.
=osef, Cice presidentMtreasurer and 7eneral Manager of Mapalad discovered that the F
T2Ts were missing, however the four missing tcts turned out to 'e in possession of
1ordela$ Development 2orporation. 1ordela$ came into possession of the F T2Ts '+
deed of sale purportedl+ e:ecuted '+ Miguel Magsa+sa+ in his capacit+ as President and
Board 2hairman of Mapalad.
Mapalad filed an action for annulment of deed of sale and reconve+ance of title with
damages against 1ordela$.
@T2 ruled in favour of 1ordela$. The 2a reversed the decision of @T2.
&**D<:
,hether or not there was a valid sale 'etween Mapalad and 1ordela$.
@DG&17:
&n the present case, consent was purportedl+ given '+ Miguel Magsa+sa+, the person
who signed for and in 'ehalf of Mapalad in the deed of a'solute sale dated 1ovem'er ),
1/H/. However, as he categoricall+ stated on the witness stand during trial, he was no
longer connected with Mapalad on the said date 'ecause he alread+ divested all his
interests in said corporation as earl+ as 1/H). <ven assuming, for the sa$e of argument,
that the signatures purporting to 'e his were genuine, it would still 'e voida'le for lac$
of authorit+ resulting in his incapacit+ to give consent for and in 'ehalf of the
corporation.
#ac$ of consideration ma$es a contract of sale fictitious. . fictitious sale is void a' initio.
The alleged deed of a'solute sale dated 1ovem'er ), 1/H/ notwithstanding, the contract
of sale 'etween Mapalad and 1ordela$ is not onl+ voida'le on account of lac$ of valid
consent on the part of the purported seller, 'ut also void a' initio for 'eing fictitious on
account of lac$ of consideration.
,H<@<%@<, the petition is here'+ D<1&<D and the appealed 2ourt of .ppeals
decision .%%&@M<D in toto.
Page | 530
RI:ALINO, subs7)7u7e; by <)s <e)rs, -OSEFINA, ROLAN0O a.;
FERNAN0O, ERNES#O, LEONORA, %I%IANO, -R., LI%RA0O a.;
ENRI/$E#A, a** sur.a2e; OESMER, Pe7)7)o.ers,
5s PARAISO 0EVELOPMEN# CORPORA#ION, Res(o.;e.7.
7.@. 1o. 1!8F/0 %e'ruar+ !, )008
%.2T*:
Petitioner <rnesto to meet with a certain *otero #ee, President of respondent Paraiso
Development 2orporation, at tani Hotel in Manila. The said meeting was for the
purpose of 'ro$ering the sale of petitioners9 properties to respondent corporation.
. 2ontract to *ell was drafted. . chec$ in the amount of P100,000.00, pa+a'le to
<rnesto, was given as option mone+. *ometime thereafter, @i>alino, #eonora, Bi'iano,
=r., and #i'rado also signed the said 2ontract to *ell. However, two of the 'rothers,
.dolfo and =esus, did not sign the document. However petitioners informed respondent
corporation a'out their intention to rescind the 2ontract to *ell and to return the
amount of Php 100,000.00. respondent did not respond to the aforesaid letter.
Petitioners, therefore, filed a complaint for Declaration of 1ullit+ or for .nnulment of
ption .greement or 2ontract to *ell with damages.
The @T2 rendered its decision in favor to respondent. 2. affirmed the decision of @T2
with modification.
&**D<:
,hether ot not 2ontract to *ell is void considering that on of the heirs did not
sign it as to indicate its consent to 'e 'ound '+ its terms.
@DG&17:
&t is well6settled that contracts are perfected '+ mere consent, upon the acceptance '+
the offeree of the offer made '+ the offeror. %rom that moment, the parties are 'ound
not onl+ to the fulfillment of what has 'een e:pressl+ stipulated 'ut also to all the
conse4uences which, according to their nature, ma+ 'e in $eeping with good faith, usage
and law. To produce a contract, the acceptance must not 4ualif+ the terms of the offer.
However, the acceptance ma+ 'e e:press or implied. %or a contract to arise, the
acceptance must 'e made $nown to the offeror. .ccordingl+, the acceptance can 'e
withdrawn or revo$ed 'efore it is made $nown to the offeror.10
&n the case at 'ar, the 2ontract to *ell was perfected when the petitioners consented to
the sale to the respondent of their shares in the su'(ect parcels of land '+ affi:ing their
signatures on the said contract. *uch signatures show their acceptance of what has 'een
stipulated in the 2ontract to *ell and such acceptance was made $nown to respondent
corporation when the duplicate cop+ of the 2ontract to *ell was returned to the latter
'earing petitioners9 signatures.
Page | 531
PERPE#$A V0A. 0E APE, (e7)7)o.er,
5s.#3E 3ONORA%LE CO$R# OF APPEALS a.; GENOROSA CA9I# V0A.
0E L$MA,NO, res(o.;e.7s
7.@. 1o. 100"0H .pril 1!, )00!
%.2T*:
7enerosa 2awit de #uma+no Aprivate respondent hereinB, (oined '+ her hus'and,
Braulio,0 instituted a case for L*pecific Performance of a Deed of *ale with DamagesL
against %ortunato and his wife Perpetua Apetitioner hereinB.
*he supposedl+ demanded that %ortunato e:ecute the corresponding deed of sale and to
receive the 'alance of the consideration. However, %ortunato un(ustifia'l+ refused to
heed her demands. Private respondent, therefore, pra+ed that %ortunato 'e ordered to
e:ecute and deliver to her La sufficient and registra'le deed of sale involving his one6
eleventh A1M11B share or participation in #ot 1o. )01/ of the <scalante 2adastre
Private respondent testified that %ortunato went to her store at the time when their
lease contract was a'out to e:pire. He allegedl+ demanded the rental pa+ment for his
land 'ut as she was no longer interested in renewing their lease agreement, the+ agreed
instead to enter into a contract of sale which %ortunato acceded to provided private
respondent 'ought his portion of #ot 1o. )01/ for P!,000.00. Thereafter, she as$ed her
son6in6law %lores to prepare the aforementioned receipt.
&**D<:
,hether or not the receipt signed '+ %ortunato proves the e:istence of a contrct
of sale 'etween him and private respondent.
@DG&17:
Dnder .rticle 100) of the 2ivil 2ode which provides that LNwOhen one of the parties is
una'le to read, or if the contract is in a language not understood '+ him, and mista$e or
fraud is alleged, the person enforcing the contract must show that the terms thereof
have 'een full+ e:plained to the former.L
.s can 'e gleaned from %loresKs testimon+, while he was ver+ much aware of %ortunatoKs
ina'ilit+ to read and write in the <nglish language, he did not 'other to full+ e:plain to
the latter the su'stance of the receipt A<:hi'it L7LB. He even dismissed the idea of
as$ing some'od+ else to assist %ortunato considering that a measl+ sum of thirt+ pesos
was involved. <videntl+, it did not occur to %lores that the document he himself
prepared pertains to the transfer altogether of %ortunatoKs propert+ to his mother6in6
law. &t is precisel+ in situations such as this when the wisdom of .rticle 100) of the 2ivil
2ode readil+ 'ecomes apparent which is Lto protect a part+ to a contract disadvantaged
'+ illiterac+, ignorance, mental wea$ness or some other handicap
Page | 532
-$LIAN FRANCISCO (e7)7)o.er,
5s.PAS#OR 3ERRERA, res(o.;e.7.
7.@. 1o. 10//H) 1ovem'er )1, )00)
%.2T*:
Petitioner 'ought ) parcels of land from <ligio Herrera *r. The children of <ligio, *r.
conteneded that the contract price for the two parcels of land was grossl+ inade4uate so
the+ tried to negotiate with petitioner. However petitioner refused.
The children of Herrera filed a complaint for annulment of sale. The @T2 rendered its
decision in favor of the children that 2a affirmed the decision of @T2.
&**D<:
,hether or not said contract is void.
@DG&17:
&n the present case, it was esta'lished that the vendor <ligio, *r. entered into an
agreement with petitioner, 'ut that the former9s capacit+ to consent was vitiated '+
senile dementia. Hence, we must rule that the assailed contracts are not void or
ine:istent per seJ rather, these are contracts that are valid and 'inding unless annulled
through a proper action filed in court seasona'l+.
.n annulla'le contract ma+ 'e rendered perfectl+ valid '+ ratification, which can 'e
e:press or implied. &mplied ratification ma+ ta$e the form of accepting and retaining the
'enefits of a contract. .s found '+ the trial court and the 2ourt of .ppeals, upon
learning of the sale, respondent negotiated for the increase of the purchase price while
receiving the installment pa+ments. &t was onl+ when respondent failed to convince
petitioner to increase the price that the former instituted the complaint for
reconve+ance of the properties. 2learl+, respondent was agreea'le to the contracts, onl+
he wanted to get more. %urther, there is no showing that respondent returned the
pa+ments or made an offer to do so. This 'olsters the view that indeed there was
ratification. ne cannot negotiate for an increase in the price in one 'reath and in the
same 'reath contend that the contract of sale is void.
Page | 533
ROSARIO L. 0E %RAGAN:A, E# AL., (e7)7)o.ers,
5s.FERNAN0O F. 0E VILLA A%RILLE, res(o.;e.7.
7.@. 1o. #61)F81 .pril 10, 1/!/
%.2T*:
@osario #. de Bragan>a and her sons @odolfo and 7uillermo petition for review of the
2ourt of .ppealKs decision where'+ the+ were re4uired solidaril+ to pa+ %ernando %. de
Cilla .'rille the sum of P10,000 plus ) E interest from cto'er 00, 1/FF. Because
pa+ment had not 'een made, Cilla .'rille sued them in March 1/F/.
The @T2 and 2. rendered its decision in favor of .'rile despite the fact tht 7uillermo
and @odolfo are minors.
&**D<:
,hether or not 7uillermo and @odolfo can 'e held lia'le to pa+ the loan.
@DG&17:
The *2 held that 'eing minors, @odolfo and 7uillermo could not 'e legall+ 'ound
'+ their o'ligation.These minors ma+ not 'e entirel+ a'solved from monetar+
responsi'ilit+. &n accordance with the provisions of 2ivil 2ode, even if their written
contact is unenforcea'le 'ecause of non6age, the+ shall ma$e restitution to the e:tent
that the+ have profited '+ the mone+ the+ received. A.rt. 10F0B There is testimon+ that
the funds delivered to them '+ Cilla .'rille were used for their support during the
=apanese occupation. *uch 'eing the case, it is 'ut fair to hold that the+ had profited to
the e:tent of the value of such mone+, which value has 'een authoritativel+ esta'lished
in the so6called Ballantine *chedule: in cto'er 1/FF, PF0.00 =apanese notes were
e4uivalent to P1 of current Philippine mone+.
Page | 534
9ILLIAM ALAIN MIAIL3E, (e7)7)o.er,
5s. CO$R# OF APPEALS a.; REP$%LIC OF #3E P3ILIPPINES,
res(o.;e.7s.
7.@. 1o. 10H//1 March )0, )001
%.2T*:
NPetitionerO ,illiam .lain Miailhe, on his own 'ehalf and on 'ehalf of Cictoria
Des'arats6Miailhe, Moni4ue Miailhe6*ichere and <laine Miailhe6#enc4uesaing filed a
2omplaint for .nnulment of *ale, @econve+ance and Damages against N@espondentO
@epu'lic of the Philippines and defendant Development Ban$ of the Philippines.
The petitioner alleged that DBP forged, threatened and intimidated petitioner to sell the
propert+ to DBP for the grossl+ low price. The @T2 and 2. rendered their decision in
favor of DBP and that the action is alread+ prescri'ed.
&**D<:
,hether or not e:tra(udicial demands did not interrupt prescription.
@DG&17:
&n the present case, there is as +et no o'ligation in e:istence. @espondent has no
o'ligation to reconve+ the su'(ect lots 'ecause of the e:isting 2ontract of *ale. .lthough
allegedl+ voida'le, it is 'inding unless annulled '+ a proper action in court.1) 1ot 'eing
a determinate conduct that can 'e e:tra(udicall+ demanded, it cannot 'e considered as
an o'ligation either. *ince .rticle 10/0 of the 2ivil 2ode states that voida'le Lcontracts
are 'inding, unless the+ are annulled '+ a proper action in court,L it is clear that the
defendants were not o'ligated to accede to an+ e:tra(udicial demand to annul the
2ontract of *ale.10
Page | 535
MIG$EL 4A#IP$NAN, INOCENCIO VAL0E:, E0GAR0O %ALG$MA a.;
LEOPOL0O %ALG$MA, -R., (e7)7)o.ers,
5s.%RA$LIO 4A#IP$NAN, -R., res(o.;e.7.
7.@. 1o. 10)F1! =anuar+ 00, )00)
%.2T*:
@espondent Braulio Gatipunan, =r. is the owner of a )00 s4uare meter lot and a five6
door apartment constructed thereon located at 0H!6% Matien>a *t., *an Miguel, Manila.
Petitioner Miguel Gatipunan, entered into a Deed of .'solute *aleF with 'rothers
<dgardo Balguma and #eopoldo Balguma, =r. Aco6petitionersB, represented '+ their
father .tt+. #eopoldo Balguma, *r., involving the su'(ect propert+ for a consideration of
P1H8,000.00.
@espondent filed a complaint for annulment of the Deed of .'solute *ale. He contended
that the said contract was o'tained through insidious words and machinations.
The T@2 dismissed the complaint. The 2. reversed the decision of @T2.
&**D<:
,hether or not 2. ered when it overturned the factual findings of the trial court which
are ampl+ supported '+ the evidence on record.
@DG&17:
The circumstances surrounding the e:ecution of the contract manifest a vitiated consent
on the part of respondent. Dndue influence was e:erted upon him '+ his 'rother Miguel
and &nocencio Calde> ApetitionersB and .tt+. Balguma. &t was his 'rother Miguel who
negotiated with .tt+. Balguma. However, the+ did not e:plain to him the nature and
contents of the document. ,orse, the+ deprived him of a reasona'le freedom of choice.
&t 'ears stressing that he reached onl+ grade three. Thus, it was impossi'le for him to
understand the contents of the contract written in <nglish and em'ellished in legal
(argon.
. contract where one of the parties is incapa'le of giving consent or where consent is
vitiated '+ mista$e, fraud, or intimidation is not void a' initio 'ut onl+ voida'le and is
'inding upon the parties unless annulled '+ proper 2ourt action. *ince the Deed of
.'solute *ale 'etween respondent and the Balguma 'rothers is voida'le and here'+
annulled, then the restitution of the propert+ and its fruits to respondent is (ust and
proper. Petitioners should turn over to respondent all the amounts the+ received
starting =anuar+, 1/H" up to the time the propert+ shall have 'een returned to the latter.
Page | 536
Page | 537
NILO R. -$MALON, (e7)7)o.er,
5s.CO$R# OF APPEALS, 3ON. R$%EN 0. #ORRES, ). <)s 1a(a1)7y as
EBe1u7)5e Se1re7ary, 3O$SING AN0 LAN0 $SE REG$LA#OR, %OAR0,
a.; MA. AS$NCION 0E LEON, res(o.;e.7s.
7.@. 1o. 1)88"8 =anuar+ 00, )00)
%.2T*:
2omplainant De #eon and herein petitioner, 1ilo @. =umalon, e:ecuted a
conditional sales agreement where'+ the former purchased from the latter a house and
lot. =umalon e:ecuted in favor of De #eon a Deed of .'solute *ale.
De #eon learned regarding the danger posed '+ the wires over the propert+. .lso,
De #eon was informed '+ H#D@B <nforcement 2enter, that construction of houses and
'uildings of whatever nature is strictl+ prohi'ited within the right6of Iwa+ of the
transmission line.
De #eon filed a case for declaration of nullit+ or annulment of sale of real
propert+ which was su'se4uentl+ dismissed. De #eon then, filed a complaint 'efore the
H#D@B see$ing the rescission of the conditional sales agreement and the .'solute Deed
of *ale.
H#D@B ar'iter rendered (udgement in favor of De #eon. The Board of
2ommissioners of H#D@B affirmed the decision of ar'iter. The 2. affirmed the
appealed decision.
&**D<:
,hether the 2ourt of .ppeals erred in affirming the decision of <:ecutive *ecretar+
@u'en D. Torres and the H#D@B declaring the rescission of the contract of sale of a
house and lot 'etween the petitioner and private respondent
@DG&17:
The *2 agree with the 2ourt of .ppeals that respondent de #eon was entitled to annul
the sale. There was fraud in the sale of the su'(ect house. &t is not safel+ ha'ita'le. &t is
'uilt in a su'division area where there is an e:isting 006meter right of wa+ of the Manila
<lectric 2ompan+ AMeralcoB with high6tension wires over the propert+, posing a danger
to life and propert+. The construction of houses underneath the high tension wires is
prohi'ited as ha>ardous to life and propert+ 'ecause the line carries 11!,000 volts of
electricit+, generates tremendous static electricit+ and produces electric spar$s
whenever it rained.
Page | 538
CA%ALES, E#. AL 5s CO$R# OF APPEALS
.ugust 01, )008
%.2T*:
*aturnina and her children Bonifacio, .l'ino, %rancisco, #eonara, .l'erto and
petitioner @ito inherited a parcel of land. The+ sold such propert+ to Dr. 2a+etano
2orrompido with a right to repurchase within H +ears.
.l'erto secured a note from Dr. 2orrompido in the amount of Php 000.00.
.l'erto died leaving a wife and son, petitioner 1elson.
,ithin the H6+ear redemption period, Bonifacio and .l'ino tendered their
pa+ment to Dr. 2orrompido. But Dr. 2orrompido onl+ released the document of sale
with pacto de retro after *aturnina paid the share of her deceased son, .l'erto, plus the
note.
*aturnina and her children e:ecuted an affidavit to the effect that petitioner
1elson would onl+ receive the amount of Php 18".0F from respondents6spouses when he
reaches the age if )1 considering that *aturnina paid Dr. 2orrompido Php /""."" for the
o'ligation of petitioner 1elson9s late father .l'erto.
&**D<:
,hether or not the slae entered into is valid and 'inding.
@DG&17:
The legal guardian onl+ has the plenar+ power of administration of the minor9s
propert+. &t does not include the power to alienation which needs (udicial authorit+.
Thus when *aturnina, as legal guardian of petitioner @ito, sold the latter9s pro indiviso
share in su'(ect land, she did not have the legal authorit+ to do so. The contarct of sale
as to the pro indiviso share of Petitioner @ito was unenforcea'le. However when he
ac$nowledged receipt of the proceeds of the sale on =ul+)F, 1/H", petitioner @ito
effectivel+ ratified it. This act of ratification rendered the sale valid and 'inding as to
him.
Page | 539
S3OEMA4ER 5s. LA #ON0EMA
"H Phil )F
%.2T*:
Defendant compan+, #a tondena, &nc. entered into a written contract of lease of
services with plaintiff Harr+ &ves *hoema$er for a period of ! +ears, with a
compensation consisting of HE of the net earnings of defendant. That during each +ear
that the contract was in force, plaintiff would receive monthl+ during the period of the
contract of the sum of Php 1,!00.00 or Php 1H,000.00 per annum as minimum
compensation if HE of the net earnings of the aforementioned alleged 'usiness would
not reach the amount.
The defendant compan+ alleged that there were changes in the contract in which
'oth the parties agreed upon.
Plaintiff filed a complaint against defendant compan+. The defendant interposed
a demurrer 'ased on the ground that the facts therein alleged do not constitute a cause
of action, since it is not averred that the alleged mutual agreement modif+ing the
contract of lease of services, has 'een put in writing, whereas it states that its terms and
conditions ma+ onl+ 'e modified upon the written consent of 'oth parties.
&**D<:
,hether or not the ocurt a 4uo ered in sustaining the demurrer interposed '+ the
defendant compan+ to the second amended complaint filed '+ plaintiff, on the ground
that the facts alleged therein do not constitute a couse of action.
@DG&17:
,hen in an oral contract which '+ its terms, is not to 'e performed within 1 +ear
from the e:ecution thereof, one of the contracting parties has complied within the +ear
with the o'ligations imposed on him said contract, the other part+ cannot avoid the
fulfillment of what is incum'ent on him under the same contract '+ invo$ing the statute
of frauds 'ecause the latter aims to prevent and not to protect fraud.
Page | 540
PN% 5s. P3ILIPPINE VEGE#A%LE OIL COMPAN,
F/ Phil H/8
%.2T*:
This appeal involves the legal right of the P1B to o'tain a (udgement against Cegeta'le
il 2o., &nc., for Php 1!,H1),F!F and to foreclose a mortgage on the propert+ of the
PC2 for Php 18,000,000.00 and the legal right of the Phil 2. ,hita$er as intervenor to
o'tain a (udgement declaring the mortgage which the P1B see$s to foreclose to 'e
without force and effect, re4uiring an accouting from the P1B of the sales of the
propert+ and assets of the Cegeta'le 2o. and ordering the PC2 and the P1B to pa+ him
the sum of Php F,F)F,F1H.08
&n 1/)0, the Cegeta'le il 2ompan+, found itself in financial straits. &t was in de't to the
e:tent of appro:imatel+ Php 00,000,000.00. The P1B was the largest creditor. The
C2 owed the 'an$ Php 18,000,000.00. The P1B was securedl+ principall+ '+ a real
and chattel mortgage in favor of the 'an$ on its vessels Tan$erville and H.*. <verett to
guarantee the pa+ment of sums not e:ceed Php F,000,000.00
&**D<:
,hether or not the plaintiff had failed to compl+ with the contract, that it was alleged to
have cele'rated with the defendant and the intervenor, that it would furnish funds to the
defendant so that it could continue operating its factor+.
@DG&17:
&n the present instance, it is found that the Board of Directors of the P1B had not
consented to an agreement for practicall+ unlimited 'ac$ing of the C corporation and
had not ratified an+ promise to trhat effect made '+ its general manager.
.ll the evidence, documentar+ and oral, pertinent to the issue considered and found to
disclose no 'inding promise, tacit, or e:press made '+ the P1B to continue indefinitel+
the operation of the C corporation. .ccordingl+, intervenor ,hita$er is not entitled to
recover damages from the 'an$.
Page | 541
#AN 5s VILLAPA:
F8! *2@. 8)0 1ovem'er )), )00!
%.2T*:
@espondent 2armelito Cillapa> issued a Philippine Ban$ of 2ommunications
APB2omB crossed chec$ in the amount of P)!0,000.00, pa+a'le to the order of
petitioner Ton+ Tan.
The Malita, Davao del *ur Police issued an invitation6re4uest to petitioner .ntonio
Tan inviting him to appear 'efore the Deput+ 2hief of Police ffice on =une )8, 1//F at
/:00 o9cloc$ in the morning 3in connection with the re4uest of Nherein respondentO
2armelito Cillapa>, for conference of vital importance.5
The invitation6re4uest was received '+ petitioner .ntonio Tan on =une )), 1//F
'ut on the advice of his law+er, he did not show up at the Malita, Davao del *ur Police
ffice.
@espondent filed a 2omplaint for sum of mone+ against petitioners6spouses, alleging
that, , his issuance of the %e'ruar+ ", 1//) PB2om crossed chec$ which loan was to 'e
settled interest6free in si: A"B monthsJ on the maturit+ date of the loan or on .ugust ",
1//), petitioner .ntonio Tan failed to settle the same, and despite repeated demands,
petitioners never did.
Petitioners alleged that the+ never received from respondent an+ demand for pa+ment,
'e it ver'al or written, respecting the alleged loanJ since the alleged loan was one with a
period Z pa+a'le in si: months, it should have 'een e:pressl+ stipulated upon in writing
'+ the parties 'ut it was not.


&**D<:

,hether or not Honora'le 2ourt of .ppeals erred in concluding that the
transaction in dispute was a contract of loan and not a mere matter of chec$ encashment
as found '+ the trial court.


@DG&17:
.t all events, a chec$, the entries of which are no dou't in writing, could prove a
loan transaction.
That petitioner .ntonio Tan had, on %e'ruar+ ", 1//), an outstanding 'alance of
more than P/!0,000.00 in his account at PB2om Monteverde 'ranch where he was
later to deposit respondent9s chec$ did not rule out petitioners9 securing a loan. &t is
pure naivete to 'elieve that if a 'usinessman has such an outstanding 'alance in his
'an$ account, he would have no need to 'orrow a lesser amount.
&n fine, as petitioners9 side of the case is incredi'le as it is inconsistent with the
principles '+ which men similarl+ situated are governed, whereas respondent9s claim
that the proceeds of the chec$, which were admittedl+ received '+ petitioners,
represented a loan e:tended to petitioner .ntonio Tan is credi'le, the preponderance of
evidence inclines on respondent.
Page | 542


Page | 543
SPO$SES VENANCIO 0AVI0 a.; PA#RICIA MIRAN0A 0AVI0 a.;
FLORENCIA VEN#$RA V0A. 0E %ASCO, (e7)7)o.ers,
5s. ALE-AN0RO a.; G$A0AL$PE #IONGSON, res(o.;e.7s.
7.@. 1o. 10H1"/ .ugust )!, 1///
%.2T*:
Three sets of plaintiffs, namel+ spouses Centura, spouses David and Cda. De
Basco, filed a complaint for specific performance with damges, against private
respondents spouses Tiongson, alleging that the latter sold to them lots located in
Pampanga.
The parties e:pressl+ agredd that in case of pa+ment has 'een full+ paid
respondents would e:ecute an individual deed of a'solute sale in plaintiffs flavor.
The respondents demanded the e:ecutuion of a deed of sale and issuance of
certificate of titile 'ut the respondents refused to issue the same.
The trial court rendered its decision in favor of the respondents. However the 2.
ruled that contract of sale was not 'een perfrected 'etween spouses David andMor Cda.
De Basco and respondents. .s with regard to the spouses Centura, the 2. affirmed the
@T2.
&**D<:
,hether or not contract of sale has not 'een perfected 'ut petitioners and
respondents.
@DG&17:
The *2 ruled that there was a perfected contact. However, the statute of frauds is
inapplica'le. The rule is settled that the statute of frauds applies onl+ to e:ecutor and
not to completed, e:ecuted or partiall+ e:ecuted contract. &n the case of spouses David,
the pa+ment made rendered the sales contract 'e+ong the am'it of the statutre of
fraudsM
The 2. erred in concluding that there was no perfected contract of sale. However,
in view of the stipulation of the parties that the deed of sale and corresponding
certificate of title would 'e issued after full pa+ment, then, the+ ad entered into a
contract to sell and not a contract of sale.
Page | 544
GENARO COR0IAL, (e7)7)o.er, 5s. 0AVI0 MIRAN0A, res(o.;e.7.
Decem'er 1F, )000
%.2T*:
David Miranda, a 'usinessman from .ngeles 2it+, was engaged in rattan
'usiness. 7ener Buelva was the supplier of David 'ut the former met an accident and
died. 7enero 2ordial and Miranda met through Buelva9s widow, 2ecilla.
The+ agreed that 2ordial will 'e his supplier of rattan poles. 2ordial shipped
rattan poles as to the agreed num'er of pieces and si>es however Miranda refused to pa+
the cost of the rattan poles delivered. Miranda alleged that there e:ist no privit+ of
contract 'etween Miranda and 2ordial.
2ordial filed a complaint againt Miranda. The @T2 rendered its decision in favor
of the petitioner. The 2. reversed the decision of the @T2.
&**D<:
,hether or not *tatute of %rauds applies in this case.
@DG&17:
The 2. and respondent Miranda stress the a'sence of a 3written memorandum of
the alleged contract 'etween the parties5. @espondent implicit+ agrues that the alleged
contract is unenforcea'le under the *tatute of %rauds however, the statute of frauds
applies onl+ to e:ecutor and not to completed, e:ecuted, or partiall+ e:ecuted contracts.
Thus, were one part+ has performed one9s o'ligation, oral evidence will 'e admitted to
prove the agreement. &n the present case, it has alread+ 'een esta'lished that petitioner
had delivered the rattan poles to respondent. The contract was partiall+ e:ecuted, the
*tatute of %rauds does not appl+.
Page | 545
VI,LLAN$EVA-MI-ARES (e7)7)o.ers,
5s.#3E CO$R# OF APPEALS, res(o.;e.7s.
7.@. 1o. 10H/)1 .pril 1), )000
%.2T*:
During the lifetime, %elipe, owned real propert+, a parcel of land situated at
<stancia, Gali'o, 2api>. Dpong %elipe9s death, ownership of the land was passed on to
his children. Pedro, on of the children, got his share. The remaining undivided portion
of the land was held in trust '+ leon. His co6heirs made several seasona'le and lawful
demands upon him to su'divide the partition the propert+, 'ut no su'division too$
place.
.fter the death of #eon, private respondents discovered that the shares of four of
the heirs of %elipe was purchased '+ #eon as evidenced '+ Deed of *ale.
&**D<:
,hether or not the appellate court erred in declaring the Deed of *ale
unenforcea'le against the private respondent fro 'eing unauthori>ed contract.
@DG&17:
The court has ruled that the nullit+ of the unenforcea'le contract is of a
permanent nature and it will e:ist as long the unenforcea'le contract is not dul+
ratifired. The mere lapse of time cannot igve efficac+ to such a contract. The defect is
such that it cannot 'e cured e:cept '+ the su'se4uent ratification of the unenforcea'le
contract '+ the person in whose name the contract was e:ecuted. &n the instant case,
there is no showing of an+ e:press or implied ratification of the assailed Deed of *ale '+
the private respondents Procerfina, @amon,. Prosperidad, and @osa. Thus, the said
Deed of *ale must remain unenforcea'le as to them.
Page | 546
ROSENCOR 0EVELOPMEN# CORPORA#ION a.; RENE -OA/$IN,
(e7)7)o.ers,
5s.PA#ERNO IN/$ING, IRENE G$ILLERMO, FE0ERICO %AN#$GAN,
FERNAN0O MAG%AN$A a.; LI::A #IANGCO, res(o.;e.7s.
7.@. 1o. 1F0F8/ March H, )000
%.2T*:
Plaintiffs and plaintiffs6intervenors averred that the+ are the lessess since 1/81 of a two6
stor+ residential apartment and owned '+ spouses %austino and 2resencia Tiangco. The
lease was nocovered '+ an+ contract. The lesses were renting the premises then for Php
1!0.00 a month and were allegedl+ ver'all+ granted '+ the lessors the pre6emptive right
to purchase the propert+ if ever the+ decide to sell the same.
Dpon the death of the spouses Tiangco, the management of the propert+ was
ad(udicated to their heirs who were represented '+ <ufrocina de#eon.
The lessees received a letter from de #eon advising them that the heirs of the late
spouses have alread+ sold the propert+ to @esencor.
The lessees filed an action fa'efore th @T2 pra+ing for the following: aB rescission of the
Deed of .'solute *ale 'etween de #eon and @ocencor, 'B the defendants @osencorM@ene
=oa4uin 'e ordered to reconve+ the propert+ to de #eon, cB de #eon 'e ordered to
reim'urse the plaintiffs for the repair of the propert+ or appl+ the said amount as part of
the purchase of the propert+.
The @T2 dismissed the complaint while the 2a reversed the decision of the @T2.
&**D<:
,hether or not a right of first refusal is indeed covered '+ the provisions of the
122 on the *tatute of %rauds.
@DG&17:
. right of first refusal is not among those listed as unenforcea'le under the
statute of frauds. %urthermore, the application of .rticle 1F00, par. )AeB of the 122,
presupposes the e:istence of a perfected, al'eit unwritten, contract of sale. . right of
first refusal, such as the one involved in the instant case, is not '+ an+ means a perfected
contract of sale of real propert+. .t 'est, it is a contractual grant, not of the sale of the
real propert+ involed '+t of the right of first refusal over the propert+ sought to 'e sold.
&t is thus evident that the statute of frauds does not contemplate cases involving a
right of right of first refusal. .s such, a right of first refusal need not 'e written to 'e
enforcea'le and ma+ 'e proven '+ oral evidence.
Page | 547
SPO$SES CONS#AN#E FIRME AN0 A:$CENA E. FIRME, (e7)7)o.ers,
5s.$4AL EN#ERPRISES AN0 0EVELOPMEN# CORPORA#ION,
res(o.;e.7.
7.@. 1o. 1F""0H cto'er )0, )000
%.2T*:
Petitioner *pouses %irme are the registered owner of a parcel of land located on
Dahlia .venue, %airview Par$, ?ue>on 2it+.
Bu$al <nterprises filed a complaint for specific performance and damges with the
trial court, aleeging that the *pouses %irme reneged on their agreement to sell the
propert+. The complaint as$ed the trial court to order the *pouses %irme to e:ecute the
deed of sale and to delover the title of the propert+ to Bu$al <nterpises upon pa+ment of
the agreed purchase price.
The @T2 rendered its decision against Bu$al. The 2. reversed and set aside the
decision of the @T2.
&**D<:
,hether or not *tatute of %rauds is applica'le.
@DG&17:
The 2. held that partial performance of the contract of sale ta$es the oral
contract out of the scope of *tatute of %rauds. This conclusion arose from the appellate
court9s erronoues finding that there was a perfected contract of sale. The recors shoe
that there was no perfected contract of sale. There is therefore no 'asis for the
application of the *tature of %rauds. The application of the *tatute of %rauds
presupposes the e:istence of a perfected contract.
Page | 548
3EIRS OF M. 0ORONIO 5s. 3EIR OF F. 0ORONIO
!F1 *2@. F8/
%.2T*:
Petitioners are the heirs of Maralino Doronio, while respondents are the heirs of
%ortunato Doronio.
The propert+ in dispute is one of a private deed of donation propter nuptias who
was e:ecuted '+ *pouses *imeon Doronio and 2ornelia 7ante in facor of Maralino
Doronio and his wife Ceronica Pico.
The heirs of %ortuanto Doronio contended that onl+ the half of the propert+ was
actuall+ incorporated in the deed of donation 'ecause it stated that %ortunato is the
owner of the ad(acent propert+. <ager to o'tain the entire propert+, the heirs of
Marcelino filed a petition 3%or the @egistration of a Private Deed of Donation5. The @T2
granted the petition.
The heirs of %ortunato files a pleading in the form of petition. &n the petition,
the+ pra+ed that an order 'e issued declaring null and void the registration of the
private deed of donation.
The @T2 ruled in favor of the heirs of Marcelino. The 2. reversed the decision of
@T2b
&**D<:
,hether or not the donation propter nuptias is valid.
@DG&17:
.rticle "00 of the 22 provides that figts of real propert+ , in order to 'e valid,
must appear in a pu'lic document. &t is settled that a donation of real estate propter
nuptias is void unless made '+ pu'lic instrument.
&n the instant case, the donation propter nuptias did not 'ecome valid. 1either
did it create an+ right 'ecause it was not made in a pu'lic instrument. Hence, it
conve+ed no title to the land in 4uestion to petitioner9s predecessors.
Page | 549
NA#IVI0A0 ARIAGA V0A. 0E G$RREA, CARLOS G$RREA, -$LIE#A
G$RREA, #ERESA G$RREA-RO0RIG$E:, RICAR0O G$RREA, -r., MA.
VIC#ORIA G$RREA-CAN0EL, a.; RAMONA G$RREA-MON#INOLA,
Pe7)7)o.ers,
5s ENRI/$E S$PLICO, Res(o.;e.7
7.@. 1o. 1FF0)0 .pril )", )00"
%.2T*:
The petition arose from a complaint for anuulment of tilte with pra+er for
preliminar+ in(unction filed with the court of %irst &nstance '+ @osalina 7urrea in her
capacit+ as attorne+6in6fact of the heirs of @icardo 7urrea. The complaint was filed
against .tt+. <nri4ue *uplico.
.tt+. *uplico alleged that the propert+ in dispurte was for the pa+ment of his
services rendered to the late @icardo 7urrrea which the offered to him as pa+ment.
&**D<:
,hether or not petitioner9s are entitled to the cancellation of respondent
attorne+9s title over the su'(ect propert+ and the reconve+ance thereof to the herein
petitioners or to 'e the estate of the #ate @icardo.
@DG&17:
Having 'een esta'lished that the su'(ect propert+ was still the o'(ect of litigation at the
time the su'(ect deed of Transfer of @ights and &nterest was e:ecuted, the assignment of
rights and interest over the su'(ect propert+ in favor of respondent is null and void for
'eing violative of the provisions of .rticle 1F/1 of the 2ivil 2ode which e:pressl+
prohi'its law+ers from ac4uiring propert+ or rights which ma+ 'e the o'(ect of an+
litigation in which the+ ma+ ta$e part '+ virtue of their profession.
&t follows that respondent9s title over the su'(ect propert+ should 'e cancelled and the
propert+ reconve+ed to the estate of @icardo, the same to 'e distri'uted to the latter;s
heirs. This is without pre(udice, however, to respondent;s right to claim his attorne+;s
fees from the estate of @icardo, it 'eing undisputed that he rendered legal services for
the latter.
Page | 550
ALFRE0 FRI#: FREN:EL, (e7)7)o.er, 5s.E0ERLINA P. CA#I#O,
res(o.;e.7.
7.@. 1o. 1F0/!H =ul+ 11, )000
%.2T*:
.lfred %ren>el and <derlina 2atito had an amorous relationship which started in
Ging9s 2ross, a night spot in *+dne+.
During their relationship .lfred 'ought properties in the Philippines in the name
of <derlina. Their relationship started to deteriorate when the hus'and of <derlina
threatened <derlina that he would file a 'igam+ case against her for having an illicit
affair with .lfred, who was also married.
.lfred filed a complaint against <derlina for specific performance, declaration of
real and personal properties, sum of mone+ and damages.
&**D<:
,hether or not ac4uisition of a parcel of land is valid.
@DG&17:
The sales of three parcels of land in favor of the petitioner who is a foreigner is illegal
per se. The transactions are void a' initio 'ecause the+ were entered into in violation of
the 2onstitution. Thus, to allow the petitioner to recover the properties or the mone+
used in the purchase of the parcels of land would 'e su'versive of pu'lic polic+.
.n action for recover+ of what has 'een paid without (ust cause has 'een designated as
an accion in rem verso. This provision does not appl+ if, as in this case, the action is
proscri'ed '+ the 2onstitution or '+ the application of the pari delicto doctrine. "H &t
ma+ 'e unfair and un(ust to 'ar the petitioner from filing an accion in rem verso over
the su'(ect properties, or from recovering the mone+ he paid for the said properties, 'ut,
as #ord Mansfield stated in the earl+ case of Holman vs. =ohnson:"/ LThe o'(ection that
a contract is immoral or illegal as 'etween the plaintiff and the defendant, sounds at all
times ver+ ill in the mouth of the defendant. &t is not for his sa$e, however, that the
o'(ection is ever allowedJ 'ut it is founded in general principles of polic+, which the
defendant has the advantage of, contrar+ to the real (ustice, as 'etween him and the
plaintiff.L
Page | 551
LA %$GA&AL-%LAAN 5s RAMOS
Decem'er 1, )00F
%.2T*:
The Petition for Prohi'ition and Mandamus 'efore the 2ourt challenges the
constitutionalit+ of A1B @epu'lic .ct 1o. N@.O 8/F) AThe Philippine Mining .ct of 1//!BJ
A)B its &mplementing @ules and @egulations AD<1@ .dministrative rder 1o. ND.O
/"6F0BJ and A0B the %T.. dated March 00, 1//!, e:ecuted '+ the government with
,estern Mining 2orporation APhilippinesB, &nc. A,M2PB.
n =anuar+ )8, )00F, the 2ourt en 'anc promulgated its Decision granting the Petition
and declaring the unconstitutionalit+ of certain provisions of @. 8/F), D. /"6F0, as
well as of the entire %T.. e:ecuted 'etween the government and ,M2P, mainl+ on the
finding that %T..s are service contracts prohi'ited '+ the 1/H8 2onstitution.
&**D<:
,hether or nor it is a void contract.
@DG&17:
*ection 8./ of the ,M2P %T.. has effectivel+ given awa+ the *tateKs share without
an+thing in e:change. Moreover, it constitutes un(ust enrichment on the part of the local
and foreign stoc$holders in ,M2P, 'ecause '+ the mere act of divestment, the local and
foreign stoc$holders get a windfall, as their share in the net mining revenues of ,M2P
is automaticall+ increased, without having to pa+ an+thing for it.Being grossl+
disadvantageous to government and detrimental to the %ilipino people, as well as
violative of pu'lic polic+, *ection 8./ must therefore 'e stric$en off as invalid.
*ection 8.HAeB of the ,M2P %T.. li$ewise is invalid, since '+ allowing the sums spent
'+ government for the 'enefit of the contractor to 'e deducti'le from the *tateKs share in
net mining revenues, it results in 'enefiting the contractor twice over. This constitutes
un(ust enrichment on the part of the contractor, at the e:pense of government. %or
'eing grossl+ disadvantageous and pre(udicial to government and contrar+ to pu'lic
polic+, *ection 8.HAeB must also 'e declared without effect. &t ma+ li$ewise 'e stric$en off
without affecting the rest of the %T...
Page | 552
AGAN 5s. PIA#CO
=anuar+ )1, )00F
%.2T*:
.sia9s <merging Dragon 2orp. A.<D2B su'mitted an unsolicited proposal to the
Philippine 7overnment through the Department of Transportation and 2ommunication
ADT2B and Manila &nternational .irport .uthorit+ AM&..B for the construction and
development of the 1.&. &PT &&& under a 'uild6operate6and6transfer arrangement
pursuant to @... 1o. "/!8, as amended '+ @... 1o. 881H ABT #awB.
The DT2 issued the notice of award for the 1.&. &PT &&& pro(ect to the Paircargo
2onsortium, which later organi>ed into herein respondent P&.T2.
Carious petitions were filed 'efore this 2ourt to annul the 1//8 2oncession .greement,
the .@2. and the *upplements and to prohi'it the pu'lic respondents DT2 and M&..
from implementing them.
&n a decision dated Ma+ !, )000, this 2ourt granted the said petitions and declared the
1//8 2oncession .greement, the .@2. and the *upplements null and void.
@espondent P&.T2, respondent62ongressmen and respondents6intervenors now see$
the reversal of the Ma+ !, )000 decision and pra+ that the petitions 'e dismissed.
&**D<:
,hether or not the contract is valid.
@DG&17:
*ection 1/, .rticle V&& of the 1/H8 2onstitution mandates that the *tate prohi'it or
regulate monopolies when pu'lic interest so re4uires. Monopolies are not per se
prohi'ited. 7iven its suscepti'ilit+ to a'use, however, the *tate has the 'ounden dut+ to
regulate monopolies to protect pu'lic interest. *uch regulation ma+ 'e called for,
especiall+ in sensitive areas such as the operation of the countr+9s premier international
airport, considering the pu'lic interest at sta$e.
B+ virtue of the P&.T2 contracts, 1.&. &PT &&& would 'e the onl+ international
passenger airport operating in the &sland of #u>on, with the e:ception of those alread+
operating in *u'ic Ba+ %reeport *pecial <conomic Rone AL*B%*<RLB, 2lar$ *pecial
<conomic Rone AL2*<RLB and in #aoag 2it+. Dndenia'l+, the contracts would create a
Page | 553
monopol+ in the operation of an international commercial passenger airport at the
1.&. in favor of P&.T2.
Page | 554
COMMISSION ON ELEC#IONS (e7)7)o.er, 5s. -$0GE MA. L$ISA
/$I-ANO-PA0ILLA res(o.;e.7s.
0H/ *2@. 0!0
%.2T*:
The Philippine 2ongress passed @epu'lic .ct 1o. H1H/, otherwise $nown as the LCoterKs
@egistration .ct of 1//",L providing for the moderni>ation and computeri>ation of the
votersK registration list and the appropriate of funds therefor Lin order to esta'lish a
clean, complete, permanent and updated list of voters.L
The 2M<#<2 issued invitations to pre64ualif+ and 'id for the suppl+ and installations
of information technolog+ e4uipment and ancillar+ services for its C@&* Pro(ect. Private
respondent Photo$ina Mar$eting 2orporation APHTG&1.B won the 'id however the
'udget appropriated '+ the 2ongress for the 2M<#<29s moderni>ation pro(ect was
onl+ 1B which was not sufficient to PHTG&1. 'id in the amount of ".!HHB.
*enator <dgardo =. .ngara directed the creation of a technical wor$ing group to 3assist
the 2M<#<2 in evaluating all programs for the moderni>ation of the 2M<#<2 which
will also consider the PHTG&1. contract as an alternative program and various
competing programs for the purpose.5
PHTG&1. filed a petition for mandamus, prohi'ition and damages Awith pra+er for
temporar+ restraining order, preliminar+ prohi'itor+ in(unction and preliminar+
mandator+ in(unctionB against the 2M<#<2 and all its 2ommissioners.
=udge #uisa ?ui(ano6Padilla rendered her decision in favor of PHTG&1..
&**D<:
Ma+ a successful 'idder compel a government agenc+ to formali>e a contract
with it notwithstanding that its 'id e:ceeds the amount appropriated '+ 2ongress for
the pro(ect;
@DG&17:
The *2 cannot accede to PHTG&1.Ks contention that there is alread+ a
perfected contract. ,hile we held in Metropolitan Manila Development .uthorit+ vs.
=ancom <nvironmental 2orporationN!0O that Lthe effect of an un4ualified acceptance of
the offer or proposal of the 'idder is to perfect a contract, upon notice of the award to
the 'idder,L however, such statement would 'e inconse4uential in a government where
the acceptance referred to is +et to meet certain conditions. To hold otherwise is to allow
a pu'lic officer to e:ecute a 'inding contract that would o'ligate the government in an
amount in e:cess of the appropriations for the purpose for which the contract was
attempted to 'e made.
&n the case at 'ar, there seems to 'e an oversight of the legal re4uirements as earl+ as
the 'idding stage. The first step of a Bids and .wards 2ommittee AB.2B is to determine
whether the 'ids compl+ with the re4uirements. The B.2 shall rate a 'id LpassedL onl+
Page | 555
if it complies with all the re4uirements and the su'mitted price does not e:ceed the
approved 'udget for the contract.5
The *2 ruled that PHTG&1., though the winning 'idder, cannot compel the
2M<#<2 to formali>e the contract. *ince PHTG&1.9s 'id is 'e+ond the amount
appropriated '+ 2ongress for the C@&* Pro(ect, the proposed contract is not 'inding
upon the 2M<#<2 and is considered voidJ and that in issuing the 4uestioned
preliminar+ writs of mandator+ and prohi'itor+ in(unction and in not dismissing *pecial
2ivil .ction 1o. ?6016F!F0!, respondent (udge acted with grave a'use of discretion.
Petitioners cannot 'e compelled '+ a writ of mandamus to discharge a dut+ that involves
the e:ercise of (udgment and discretion, especiall+ where dis'ursement of pu'lic funds
is concerned.
Page | 556
SENA#OR RO%ER# S. -A9ORS4I, (e7)7)o.er,
5s.P3ILIPPINE AM$SEMEN# AN0 GAMING CORPORA#ION a.; SPOR#S
AN0 GAMES EN#ER#AINMEN# CORPORA#ION, res(o.;e.7s.
7.@. 1o. 1FFF"0 =anuar+ 1F, )00F
%.2T*:
P.72@9s 'oard of directors approved an instrument denominated as L7rant of
.uthorit+ and .greement for the peration of *ports Betting and &nternet 7amingL,
which granted *.7< the authorit+ to operate and maintain *ports Betting station in
P.72@;s casino locations, and &nternet 7aming facilities to service local and
international 'ettors, provided that to the satisfaction of P.72@, appropriate
safeguards and procedures are esta'lished to ensure the integrit+ and fairness of the
games.
Petitioner, in his capacit+ as mem'er of the *enate and 2hairman of the *enate
2ommittee on 7ames, .musement and *ports, files the instant petition, pra+ing that the
grant of authorit+ '+ P.72@ in favor of *.7< 'e nullified.
&**D<:
,hether not not respondent P.72@9s legislative franchise includes to operate
&nternet gam'ling.
@DG&17:
,hile P.72@ is allowed under its charter to enter into operator;s andMor
management contracts, it is not allowed under the same charter to relin4uish or share
its franchise, much less grant a verita'le franchise to another entit+ such as *.7<.
P.72@ can not delegate its power in view of the legal principle of delegata potestas
delegare non potest, inasmuch as there is nothing in the charter to show that it has 'een
e:pressl+ authori>ed to do so. &n #im v. Pac4uing,10 the 2ourt clarified that Lsince .D2
has no franchise from 2ongress to operate the (ai6alai, it ma+ not so operate even if it
has a license or permit from the 2it+ Ma+or to operate the (ai6alai in the 2it+ of Manila.L
B+ the same to$en, *.7< has to o'tain a separate legislative franchise and not Lride onL
P.72@;s franchise if it were to legall+ operate on6line &nternet gam'ling.
Page | 557
RI:ALINO, subs7)7u7e; by <)s <e)rs, -OSEFINA, ROLAN0O a.;
FERNAN0O, ERNES#O, LEONORA, %I%IANO, -R., LI%RA0O a.;
ENRI/$E#A, a** sur.a2e; OESMER, Pe7)7)o.ers, 5s. PARAISO
0EVELOPMEN# CORPORA#ION, Res(o.;e.7.
7.@. 1o. 1!8F/0 %e'ruar+ !, )008
%.2T*:
Petitioner <rnesto to meet with a certain *otero #ee, President of respondent Paraiso
Development 2orporation, at tani Hotel in Manila. The said meeting was for the
purpose of 'ro$ering the sale of petitioners9 properties to respondent corporation.
. 2ontract to *ell was drafted. . chec$ in the amount of P100,000.00, pa+a'le to
<rnesto, was given as option mone+. *ometime thereafter, @i>alino, #eonora, Bi'iano,
=r., and #i'rado also signed the said 2ontract to *ell. However, two of the 'rothers,
.dolfo and =esus, did not sign the document. However petitioners informed respondent
corporation a'out their intention to rescind the 2ontract to *ell and to return the
amount of Php 100,000.00. respondent did not respond to the aforesaid letter.
Petitioners, therefore, filed a complaint for Declaration of 1ullit+ or for .nnulment of
ption .greement or 2ontract to *ell with damages.
The @T2 rendered its decision in favor to respondent. 2. affirmed the decision of @T2
with modification.
&**D<:
,hether ot not 2ontract to *ell is void considering that on of the heirs did not
sign it as to indicate its consent to 'e 'ound '+ its terms.
@DG&17:
&t is well6settled that contracts are perfected '+ mere consent, upon the acceptance '+
the offeree of the offer made '+ the offeror. %rom that moment, the parties are 'ound
not onl+ to the fulfillment of what has 'een e:pressl+ stipulated 'ut also to all the
conse4uences which, according to their nature, ma+ 'e in $eeping with good faith, usage
and law. To produce a contract, the acceptance must not 4ualif+ the terms of the offer.
However, the acceptance ma+ 'e e:press or implied. %or a contract to arise, the
acceptance must 'e made $nown to the offeror. .ccordingl+, the acceptance can 'e
withdrawn or revo$ed 'efore it is made $nown to the offeror.
&n the case at 'ar, the 2ontract to *ell was perfected when the petitioners consented to
the sale to the respondent of their shares in the su'(ect parcels of land '+ affi:ing their
signatures on the said contract. *uch signatures show their acceptance of what has 'een
stipulated in the 2ontract to *ell and such acceptance was made $nown to respondent
corporation when the duplicate cop+ of the 2ontract to *ell was returned to the latter
'earing petitioners9 signatures
Page | 558
3EIRS OF #3E LA#E SPO$SES A$RELIO AN0 ESPERAN:A %ALI#E
(e7)7)o.ers, 5s RO0RIGO N. LIM, res(o.;e.7.
7.@. 1o. 1!)1"H Decem'er 10, )00F
%.2T*:
The spouses .urelio and <speran>a Balite the owners of the disputed land,
located at 1othern *amar.
.urelio died intestate, <speran>a and their children 'ecame co6owners of the said
propert+. The said propert+ remained undivided.
<speran>a 'ecame ill and decided to sell the propert+ without informing the
other children of the said sale to @odrigo #im, onl+ .ntonio and 2risteta $new of the
said sale.
&**D<:
,hen the other children $new a'out it, <speran>a signed a letter addressed to
@odrigo informing the latter that her children did not agree to the sale of the propert+ to
him and that she was withdrawing all her commitments until the validit+ of the sale is
finall+ resolved.
,hether or not Deed of .'solute *ale is null and void.
@DG&17:
&n the present case, the parties intended to 'e 'ound '+ the 2ontract, even if it did not
reflect the actual purchase price of the propert+. That the parties intended the
agreement to produce legal effect is revealed '+ the letter of <speran>a Balite to
respondent dated cto'er )0, 1//" and petitioners; admission that there was a partial
pa+ment of P0)0,000 made on the 'asis of the Deed of .'solute *ale. There was an
intention to transfer the ownership of over 10,000 s4uare meters of the propert+ . 2lear
from the letter is the fact that the o'(ections of her children prompted <speran>a to
unilaterall+ withdraw from the transaction.
*ince the Deed of .'solute *ale was merel+ relativel+ simulated, it remains valid and
enforcea'le. .ll the essential re4uisites prescri'ed '+ law for the validit+ and perfection
of contracts are present. However, the parties shall 'e 'ound '+ their real agreement for
a consideration of P1,000,000 as reflected in their =oint .ffidavit.
The (uridical nature of the 2ontract remained the same. ,hat was concealed was merel+
the actual price. ,here the essential re4uisites are present and the simulation refers
onl+ to the content or terms of the contract, the agreement is a'solutel+ 'inding and
enforcea'le 'etween the parties and their successors in interest.
Page | 559
ALE-AN0RIA PINE0A a.; SPO$SES A0EO0A#O 0$/$E, -R., a.;
EVANGELINE MAR, -ANE 0$/$E, (e7)7)o.ers,
5s.CO$R# OF APPEALS a.; SPO$SES NELSON %A=E: a.; MERCE0ES
%A=E:
7.@. 1o. 1)80/F, %e'ruar+ ", )00)
%.2T*:
.ppellees 1elson BaQe> and Mercedes BaQe> and the appellees and .le(andria Pineda,
together with the latter9s spouse .lfredo 2aldona, e:ecuted an ;.greement to <:change
@eal Properties&n the agreement, the parties agreed to: 1B e:change their respective
propertiesJ )B Pineda to pa+ an earnest mone+ in the total amount of U1),000.00 on or
'efore the first wee$ of %e'ruar+ 1/H0J and 0B to consummate the e:change of
properties not later than =une 1/H0. &t appears that the parties undertoo$ to clear the
mortgages over their respective properties. .t the time of the e:ecution of the e:change
agreement, the ,hite Plains propert+ was mortgaged with the 7overnment *ervice
&nsurance *+stem A7*&*B while the 2alifornia propert+ had a total mortgage o'ligation
of UHF,000.00
&n the meantime, the appellees were allowed to occup+ or lease to a tenant Pineda;s
2alifornia propert+ and Pineda was authori>ed to occup+ appellees; ,hite Plains
propert+.
un$nown to the appellees, .le(andria Pineda and the appellants .deodato 2. Du4ue, =r.
and <vangeline Mar+ =ane Du4ue e:ecuted an ;.greement to *ell; over the ,hite
Plains propert+ where'+ Pineda sold the propert+ to the appellants for the amount of
P1,"00,000.00
. series of communications ensued 'etween the representatives of the appellees and
Ms. Pineda with regards to the status of the e:change agreement which resulted in its
rescission for failure of Pineda to clear her mortgage o'ligation of the 2alifornia
propert+. 1egotiations for the purchase of the propert+ were held 'etween the
appellants and the appellees 'ut the same failed which resulted in the appellees
demanding for the appellants to vacate the propert+.
&**D<:
,hether petitioners validl+ ac4uired the su'(ect propert+.
@DG&17:
The 2ivil 2ode provides that in a sale of a parcel of land or an+ interest therein made
through an agent, a special power of attorne+ is essential.This authorit+ must 'e in
writing, otherwise the sale shall 'e void. &n his testimon+, petitioner .deodato Du4ue
confirmed that at the time he LpurchasedL respondents9 propert+ from Pineda, the latter
had no *pecial Power of .uthorit+ to sell the propert+.
. special power of attorne+ is necessar+ to enter into an+ contract '+ which the
ownership of an immova'le is transmitted or ac4uired for a valua'le consideration.
Page | 560
,ithout an authorit+ in writing, petitioner Pineda could not validl+ sell the su'(ect
propert+ to petitioners Du4ue. Hence, an+ LsaleL in favor of petitioners Du4ue is void.
Page | 561
E0IL%ER#O CR$: a.; SIMPLICIO CR$:, (e7)7)o.ers, 5s. %ANCOM
FINANCE CORPORA#ION ?NO9 $NION %AN4 OF #3E P3ILIPPINESH,
res(o.;e.7.
0/8 *2@. F/0
%.2T*:
Brothers @ev. %r. <dil'erto 2ru> and *implicio 2ru>, plaintiffs herein, were the
registered owners of a parcel of agricultural land together with improvements located in
Bulacan
*ometime in Ma+ 1/8H, defendant 1orma *ulit, after 'eing introduced '+ 2andelaria
*anche> to %r. 2ru>, offered to purchase the land. Plaintiffs9 as$ing price for the land
was P800,000.00, 'ut 1orma onl+ had P)!,000.00 which %r. 2ru> accepted as earnest
mone+ with the agreement that titles would 'e transferred to 1orma upon pa+ment of
the 'alance of P"8!,000.00.
1orma succeeded in having the plaintiffs e:ecute a document of sale of the land in favor
of 2andelaria who would then o'tain a 'an$ loan in her name using the plaintiffs9 land
as collateral.
n account of 1orma9s failure to pa+ the amount stipulated in the *pecial .greement
and her su'se4uent disappearance from her usual address, plaintiffs were prompted to
file the herein complaint for the reconve+ance of the land.
&**D<:
,hether or not the Deeds of *ale and Mortgage are valid.
@DG&17:
2learl+, the Deeds of *ale were e:ecuted merel+ to facilitate the use of the propert+ as
collateral to secure a loan from a 'an$. Being merel+ a su'terfuge, these agreements
could not have 'een the source of an+ consideration for the supposed sales. &ndeed, the
e:ecution of the two documents on the same da+ sustains the position of petitioners that
the 2ontracts of *ale were a'solutel+ simulated, and that the+ received no consideration
therefor.
The failure of *ulit to ta$e possession of the propert+ purportedl+ sold to her was a clear
'adge of simulation that rendered the whole transaction void and without force and
effect, pursuant to .rticle 1F0/of the 2ivil 2ode. The fact that she was a'le to secure a
2ertificate of Title to the su'(ect propert+ in her name did not vest her with ownership
over it. . simulated deed of sale has no legal effectJ conse4uentl+ an+ transfer certificate
of title AT2TB issued in conse4uence thereof should 'e cancelled. . simulated contract is
not a recogni>ed mode of ac4uiring ownership.
Page | 562
MANS$E#O C$A#ON, (e7)7)o.er,
5s. RE%ECCA SAL$0 a.; CO$R# OF APPEALS ?S(e1)a* Four7ee.7<
0)5)s)o.H,
7.@. 1o. 1!H0H =anuar+ )8, )00F
%.2T*:
@espondent @e'ecca *alud, (oined '+ her hus'and @olando *alud, instituted a suit for
foreclosure of real estate mortgage with damages against petitioner Mansueto 2uaton
and his mother, 2onchita 2uaton. The trial court rendered a decision declaring the
mortgage constituted on cto'er 01, 1//1 as void, 'ecause it was e:ecuted '+ Mansueto
2uaton in favor of @e'ecca *alud without e:pressl+ stating that he was merel+ acting as
a representative of 2onchita 2uaton, in whose name the mortgaged lot was titled.
The 2ourt of .ppeals rendered the assailed decision affirming the (udgment of the trial
court.
&**D<:
,hether the HE and 10E monthl+ interest rates imposed on the one6million6peso loan
o'ligation of petitioner to respondent @e'ecca *alud are valid.
@DG&17:
*tipulations authori>ing ini4uitous or unconsciona'le interests are contrar+ to morals
Acontra 'onos moresB, if not against the law. Dnder .rticle 1F0/ of the 2ivil 2ode, these
contracts are ine:istent and void from the 'eginning. The+ cannot 'e ratified nor the
right to set up their illegalit+ as a defense 'e waived.
Moreover, the contention regarding the e:cessive interest rates cannot 'e considered as
an issue presented for the first time on appeal. The records show that petitioner raised
the validit+ of the 10E monthl+ interest in his answer filed with the trial court. To
deprive him of his right to assail the imposition of e:cessive interests would 'e to
sacrifice (ustice to technicalit+. %urthermore, an appellate court is clothed with ample
authorit+ to review rulings even if the+ are not assigned as errors. This is especiall+ so if
the court finds that their consideration is necessar+ in arriving at a (ust decision of the
case 'efore it. ,e have consistentl+ held that an unassigned error closel+ related to an
error properl+ assigned, or upon which a determination of the 4uestion raised '+ the
error properl+ assigned is dependent, will 'e considered '+ the appellate court
notwithstanding the failure to assign it as an error. *ince respondents pointed out the
matter of interest in their .ppellants9 Brief 'efore the 2ourt of .ppeals, the fairness of
the imposition thereof was opened to further evaluation. The 2ourt therefore is
empowered to review the same.
Page | 563
INFO#EC3 5s. COMELEC
=anuar+ 10, )00F
%.2T*:
Before us is a PetitionF under @ule "! of the @ules of 2ourt, see$ing A1B to declare null
and void @esolution 1o. "08F of the 2ommission on <lections A2omelecB, which
awarded LPhase && of the Moderni>ation Pro(ect of the 2ommission to Mega Pacific
2onsortium AMP2BJL A)B to en(oin the implementation of an+ further contract that ma+
have 'een entered into '+ 2omelec Leither with Mega Pacific 2onsortium andMor Mega
Pacific e*olutions, &nc. AMP<&BJL and A0B to compel 2omelec to conduct a re6'idding of
the pro(ect.
2ongress passed @epu'lic .ct H0F",! which authori>ed 2omelec to conduct a
nationwide demonstration of a computeri>ed election s+stem and allowed the poll 'od+
to pilot6test the s+stem in the March 1//" elections in the .utonomous @egion in
Muslim Mindanao A.@MMB.
n Decem'er )), 1//8, 2ongress enacted @epu'lic .ct HF0"" authori>ing 2omelec to
use an automated election s+stem A.<*B for the process of voting, counting votes and
canvassingMconsolidating the results of the national and local elections. &t also
mandated the poll 'od+ to ac4uire automated counting machines A.2MsB, computer
e4uipment, devices and materialsJ and to adopt new electoral forms and printing
materials.
&**D<:
,hether the 2ommission on <lections, the agenc+ vested with the e:clusive
constitutional mandate to oversee elections, gravel+ a'used its discretion when, in the
e:ercise of its administrative functions, it awarded to MP2 the contract for the second
phase of the comprehensive .utomated <lection *+stem.
@DG&17:
&n the case of a consortium or (oint venture desirous of participating in the 'idding, it
goes without sa+ing that the <ligi'ilit+ <nvelope would necessaril+ have to include a
cop+ of the (oint venture agreement, the consortium agreement or memorandum of
Page | 564
agreement 66 or a 'usiness plan or some other instrument of similar import 66
esta'lishing the due e:istence, composition and scope of such aggrupation. therwise,
how would 2omelec $now who it was dealing with, and whether these parties are
4ualified and capa'le of delivering the products and services 'eing offered for 'idding.
&n the instant case, no such instrument was su'mitted to 2omelec during the 'idding
process. This fact can 'e conclusivel+ ascertained '+ scrutini>ing the two6inch thic$
L<ligi'ilit+ @e4uirementsL file su'mitted '+ 2omelec last cto'er /, )000, in partial
compliance with this 2ourt;s instructions given during the ral .rgument. This file
purports to replicate the eligi'ilit+ documents originall+ su'mitted to 2omelec '+ MP<&
allegedl+ on 'ehalf of MP2, in connection with the 'idding conducted in March )000.
&ncluded in the file are the incorporation papers and financial statements of the
mem'ers of the supposed consortium and certain certificates, licenses and permits
issued to them.
However, there is no sign whatsoever of an+ (oint venture agreement, consortium
agreement, memorandum of agreement, or 'usiness plan e:ecuted among the mem'ers
of the purported consortium.
2omelec had no 'asis at all for determining that the alleged consortium reall+ e:isted
and was eligi'le and 4ualified, that the arrangements among the mem'ers were
satisfactor+ and sufficient to ensure deliver+ on the 2ontract and to protect the
government9 interest.
Hence, had the proponent MP<& 'een evaluated 'ased solel+ on its own e:perience,
financial and operational trac$ record or lac$ thereof, it would surel+ not have 4ualified
and would have 'een immediatel+ considered ineligi'le to 'id, as respondents readil+
admit.
.t an+ rate, it is clear that 2omelec gravel+ a'used its discretion in ar'itraril+ failing to
o'serve its own rules, policies and guidelines with respect to the 'idding process,
there'+ negating a fair, honest and competitive 'idding.
Page | 565
#E00, G. PA%$GAIS 5. 0AVE P. SA3I-9ANI
G.R. No. 156"46 February ', !!4
4' SCRA 5+6
FAC#S8
Pursuant to an 3.greement .nd Dnderta$ing5 on Decem'er 0, 1//0, petitioner
Tedd+ 7. Pa'ugais, in consideration of the amount of P1!,FH8,!00.00, agreed to sell to
respondent Dave P. *ahi(wani a lot containing 1,)0/ s4uare meters located at =acaranda
*treet, 1orth %or'es Par$, Ma$ati, Metro Manila. @espondent paid petitioner the
amount of P"00,000.00 as optionMreservation fee and the 'alance of P1F,HH8,!00.00 to
'e paid within "0 da+s from the e:ecution of the contract, simultaneous with deliver+ of
the owner9s duplicate Transfer 2ertificate of Title in respondent9s name the Deed of
Page | 566
.'solute *aleJ the 2ertificate of 1on6Ta: Delin4uenc+ on real estate ta:es and 2learance
on Pa+ment of .ssociation Dues. The parties further agreed that failure on the part of
respondent to pa+ the 'alance of the purchase price entitles petitioner to forfeit the
P"00,000.00 optionMreservation feeJ while non6deliver+ '+ the latter of the necessar+
documents o'liges him to return to respondent the said optionMreservation fee with
interest at 1HE per annum.
Petitioner failed to deliver the re4uired documents. &n compliance with their
agreement, he returned to respondent the latter9s P"00,000.00 optionMreservation fee
'+ wa+ of %ar <ast Ban$ P Trust 2ompan+ 2hec$, which was, however, dishonored.
Petitioner claimed that he twice tendered to respondent, through his counsel, the
amount of P"8),/00.00 Arepresenting the P"00,000.00 optionMreservation fee plus 1HE
interest per annum computed from Decem'er 0, 1//0 to .ugust 0, 1//FB in the form of
%ar <ast Ban$ P Trust 2ompan+ Manager9s 2hec$ 1o. 0HHF/H, dated .ugust 0, 1//F,
'ut said counsel refused to accept the same. n .ugust 11, 1//F, petitioner wrote a letter
to respondent sa+ing that he is consigning the amount tendered with the @egional Trial
2ourt of Ma$ati 2it+. n .ugust 1!, 1//F, petitioner filed a complaint for consignation.
@espondent9s counsel, on the other hand, admitted that his office received
petitioner9s letter dated .ugust !, 1//F, 'ut claimed that no chec$ was appended
thereto. He averred that there was no valid tender of pa+ment 'ecause no chec$ was
tendered and the computation of the amount to 'e tendered was insufficient, 'ecause
petitioner ver'all+ promised to pa+ 0E monthl+ interest and )!E attorne+9s fees as
penalt+ for default, in addition to the interest of 1HE per annum on the P"00,000.00
optionMreservation fee.
n 1ovem'er )/, 1//", the trial court rendered a decision declaring the
consignation invalid for failure to prove that petitioner tendered pa+ment to respondent
and that the latter refused to receive the same. Petitioner appealed the decision to the
2ourt of .ppeals. Petitioner9s motion to withdraw the amount consigned was denied '+
the 2ourt of .ppeals and the decision of the trial court was affirmed.
n a motion for reconsideration, the 2ourt of .ppeals declared the consignation as valid
in an .mended Decision dated =anuar+ 1", )000. &t held that the validit+ of the
consignation had the effect of e:tinguishing petitioner9s o'ligation to return the
optionMreservation fee to respondent. Hence, petitioner can no longer withdraw the
same.
Dnfa>ed, petitioner filed the instant petition for review contending that he can withdraw
the amount deposited with the trial court as a matter of right 'ecause at the time he
moved for the withdrawal thereof, the 2ourt of .ppeals has +et to rule on the
consignation9s validit+ and the respondent had not +et accepted the same.
ISS$E8
Page | 567
,hether or not assigning the amount of P"8), /00.00 to .tt+. De 7u>man is
prohi'ited.
R$LING8
The amount consigned with the trial court can no longer 'e withdrawn '+
petitioner 'ecause respondent9s pra+er in his answer that the amount consigned 'e
awarded to him is e4uivalent to an acceptance of the consignation, which has the effect
of e:tinguishing petitioner9s o'ligation.
Moreover, petitioner failed to manifest his intention to compl+ with the
3.greement .nd Dnderta$ing5 '+ delivering the necessar+ documents and the lot
su'(ect of the sale to respondent in e:change for the amount deposited. ,ithdrawal of
the mone+ consigned would enrich petitioner and un(ustl+ pre(udice respondent.
The withdrawal of the amount deposited in order to pa+ attorne+9s fees to
petitioner9s counsel, .tt+. De 7u>man, =r., violates .rticle 1F/1 of the 2ivil 2ode which
for'ids law+ers from ac4uiring '+ assignment, propert+ and rights which are the o'(ect
of an+ litigation in which the+ ma+ ta$e part '+ virtue of their profession. %urthermore,
@ule 10 of the 2anons of Professional <thics provides that 3the law+er should not
purchase an+ interest in the su'(ect matter of the litigation which he is conducting.5
The assailed transaction falls within the prohi'ition 'ecause the Deed assigning the
amount of P"8),/00.00 to .tt+. De 7u>man, =r., as part of his attorne+9s fees was
e:ecuted during the pendenc+ of this case with the 2ourt of .ppeals. &n his Motion to
&ntervene, .tt+. De 7u>man, =r., not onl+ asserted ownership over said amount, 'ut
li$ewise pra+ed that the same 'e released to him. That petitioner $nowingl+ and
voluntaril+ assigned the su'(ect amount to his counsel did not remove their agreement
within the am'it of the prohi'itor+ provisions. To grant the withdrawal would 'e to
sanction a void contract.
The instant petition for review was D<1&<D.
Page | 568
LIG$E: VS. CO$R# OF APPEALS
1! P3IL 577
FAC#S8
Petitioner filed a complaint for the recover+ of parcel of land against the widow
and heirs of *alvador #ope>. Petitioner averred that he is the owner of the
aforementioned parcel of land pursuant to a Deed of Donation e:ecuted in her favor '+
the late owner, *alvador #ope>. The defense interposed that the donation was null and
void for having illicit cause or consideration which was the petitioner9s entering into a
marital relations with *alvador, a married man, and that the propert+ had 'een
ad(udicated to the appellees as heirs of *alvador #ope> '+ the 2ourt of %irst &nstance.
Meanwhile, the 2ourt of .ppeals found that the Deed of Donation was prepared
'+ a =ustice of Peace and was ratified and signed when petitioner #i4ue> was still a
minor, 1" +ears of age. &t was the ascertainment of the 2ourt of .ppeals that the donated
land 'elonged to the con(ugal partnership of *alvador and his wife and that the Deed of
Donation was never recorded. Hence, the 2ourt of .ppeals held that the Deed of
Donation was inoperative and null and void 'ecause the donation was tainted with
illegal cause or consideration.
ISS$E8
,hether or not the Deed of Donation is void for having illicit cause or
consideration.
R$LING8
1. Dnder .rticle 1)8/ of the 2ivil 2ode of 1/H/, which was the governing law
during the e:ecution of the Deed of Donation, the li'eralit+ of the donor is deemed cover
onl+ in those contracts that are pure 'eneficence. &n these contracts, the idea of self
interest is totall+ a'sent in the part of the transferee. Here, the facts as found
demonstrated that in ma$ing the donation, *alvador #ope> was not moved e:clusivel+
'+ the desire to 'enefit the petitioner 'ut also to secure her coha'iting with him.
Petitioner see$s to differentiate 'etween the li'eralit+ of #ope> as cause and his desire as
a motive. However, motive ma+ 'e regarded as cause when it predetermined the
purpose of the contract. The 2ourt of .ppeals re(ected the claim of petitioner on the
ground on the rule on pari delicto em'odied in .rticle 1/1) of the 2ivil 2ode. However,
Page | 569
this rule cannot 'e applied in the case 'ecause it cannot 'e said that 'oth parties had
e4ual guilt where petitioner was a mere minor when the donation was made and that it
was not shown that she was full+ aware of the terms of the said donation.
EPG Co.s7ru17)o. 5s V)6)*ar
7@ 1o. 101!FF. March 1", )001
FAC#S8
&n 1/H0, the Ministr+ of Human *ettlement entered into a Memorandum of
.greement AM.B with the Ministr+ of Pu'lic ,or$s and Highwa+s, where the latter
undertoo$ to develop a housing pro(ect '+ the ministr+ and on the site construct thereon
1F! housing units.
B+ virtue of the M., the Ministr+ of Pu'lic ,or$s and Highwa+s forged
individual contracts with herein petitioners <P7 2onstruction 2o., 2iper <lectrical and
<ngineering, *epta 2onstruction 2o., Phil. Plum'ing 2o., Home 2onstruction &nc.,
,orld Builders &nc., 7lass ,orld &nc., Performance Builders Development 2o. and De
#eon .raneta 2onstruction 2o., for the construction of the housing units. Dnder the
contracts, the scope of construction and funding therefor covered onl+ around 3)M0 of
each housing unit.5 .fter compl+ing with the terms of said contracts, and '+ reason of
the ver'al re4uest and assurance of then DP,H Dndersecretar+ .'er 2anlas that
additional funds would 'e availa'le and forthcoming, petitioners agreed to underta$e
and perform 3additional constructions5 for the completion of the housing units, despite
the a'sence of appropriations and written contracts to cover su'se4uent e:penses for
the 3additional constructions.5
Petitioners received pa+ment for what was originall+ stipulated. However,
petitioners demanded pa+ment for the unpaid 'alance of P!,/1H,01!."0 constituting
pa+ment for the additional constructions which petitioners argued formed an implied
contract. The+ claimed that pa+ment should 'e 'ased on the principle of 4uantum
meruit. DP,H *ecretar+ 7regorio Cigilar denied the su'(ect mone+ claims prompting
herein petitioners to file 'efore the @egional Trial 2ourt of ?ue>on 2it+, Branch ))", a
Petition for Mandamus pra+ing for pa+ment.
Page | 570
ISS$E8
.re petitioners entitled to pa+ment;
R$LING8
.lthough the 2ourt agreed with respondent9s postulation that the 3implied
contracts5, which covered the additional constructions, are void, in view of violation of
applica'le laws, auditing rules and lac$ of legal re4uirements, it nonetheless find the
instant petition laden with merit and uphold, in the interest of su'stantial (ustice,
petitioners6contractors9 right to 'e compensated for the Ladditional constructionsL on
the pu'lic wor$s housing pro(ect, appl+ing the principle of 4uantum meruit.
To 'egin with, petitioners6contractors assented and agreed to underta$e
additional constructions for the completion of the housing units, 'elieving in good faith
and in the interest of the government and, in effect, the pu'lic in general, that
appropriations to cover the additional constructions and completion of the pu'lic wor$s
housing pro(ect would 'e availa'le and forthcoming. n this particular score, the
records reveal that the ver'al re4uest and assurance of then DP,H Dndersecretar+
2anlas led petitioners6contractors to underta$e the completion of the government
housing pro(ect, despite the a'sence of covering appropriations, written contracts, and
certification of availa'ilit+ of funds, as mandated '+ law and pertinent auditing rules
and issuances. To put it differentl+, the 3implied contracts,5 declared void in this case,
covered onl+ the completion and final phase of construction of the housing units, which
structures, concededl+, were alread+ e:isting, al'eit not +et finished in their entiret+ at
the time the 3implied contracts5 were entered into 'etween the government and the
contractors.
GOC3AN VS ,O$NG
GR No. 1'1""+. Mar1< 1, !!1
FAC#S8
%eli: 7ochan *r.9s daughter, .lice, mother of Nherein respondentsO, inherited !0
shares of stoc$ in 7ochan @ealt+ from the former. .lice died in 1/!!, leaving the !0
shares to her hus'and, =ohn -oung, *r. ,hen their all their children reached the age of
ma(orit+, =ohn, *r. re4uested 7ochan @ealt+ to partition the shares of his late wife '+
issuing the shares of stoc$ to Nherein respondentsO and cancelling it in his name.
@espondent corporation refused. n 1//0, =ohn, *r. died, leaving the shares to the
NrespondentsO.
n %e'ruar+ H, 1//F, NrespondentsO 2ecilia 7ochan D+ and Miguel D+ filed a
complaint with the *<2 for issuance of shares of stoc$ to he rightful owners,
nullification of shares of stoc$, reconve+ance of propert+ impressed with rust,
accounting, removal of officers and directors and damages against petitioners.
Petitioners then assert that respondents were not the real parties in interest and had no
Page | 571
capacit+ to sue, and respondents causes of action had alread+ 'een 'arred '+ the *tatute
of limitations.
ISS$E8
Do respondents have legal standing to push through with their complaint;
R$LING8
n 1ovem'er )1, 1/8/, respondents %eli: 7ochan P *ons @ealt+ 2orporation did
not have unrestricted earnings in its 'oo$s to cover the purchase price of the )0H shares
of stoc$ it was then 'u+ing from complainant 2ecilia 7ochan D+, there'+ rendering said
purchase null and void a' initio for 'eing violative of the trust fund doctrine and
contrar+ to law, morals, good customs, pu'lic order, and pu'lic polic+.
Thus, 2ecilia remains a stoc$holder of the corporation in view of the nullit+ of the
2ontract of *ale. 1ecessaril+, petitioner9s contention that the action has prescri'ed
cannot 'e sustained. Prescription cannot 'e invo$ed as a ground if the contract is
alleged to 'e void a' initio. &t is a:iomatic that the action or defense for the declaration
of nullit+ of a contract does not prescri'e.
&n *ection ) of @ule H8, while permitting an e:ecutor or administrator to
represent or to 'ring suits on 'ehalf of the deceased, do not prohi'it the heirs from
representing the deceased. The heirs can thusl+ represent -oung in the present case.
7iven the circumstances, the claim of petitioners was then dismissed and the case
remanded to the @T2 for trial.
FRANCISCO VS 3ERRERA
GR No. 1'++". No5e2ber 1, !!
FAC#S8
<ligio Herrera, *r., father of the respondent, was the owner of two parcels of
land. .t two incidents on 1//1, petitioner 'ought the two parcels of land for
Page | 572
Php1,000,000.00 and PhP8!0,000.00. 2ontending that the purchase price was
inade4uate, the children of <ligio, *r., namel+, =osefina 2avettan+, <ligio Herrera, =r.,
and respondent Pastor Herrera tried to negotiate for an increase of the purchase price.
,hen petitioner refused respondents then filed a complaint for annulment of sale on
the ground that at the time of sale, <ligio *r., was alread+ afflicted with senile dementia,
characteri>ed '+ deteriorating mental and ph+sical condition including loss of memor+.
Both the @T2 and 2. decided in favor of respondent.
ISS$E8
&s the disputed contract void and therefore unenforcea'le;
R$LING8
&n the present case, it was esta'lished that the vendor <ligio, *r., entered into an
agreement with petitioner, 'ut that the former9s capacit+ to consent was vitiated '+
senile dementia. Hence, the assailed contracts are not void or ine:istent per seJ rather,
these are contracts that are valid and 'inding unless annulled through a proper action
filed in court seasona'l+.
.n annulla'le contract ma+ 'e rendered perfectl+ valid '+ ratification which can
'e e:press or implied. &mplied ratification ma+ ta$e the form of accepting and retaining
the 'enefit of a contract. This is what happened in this case. @espondent negotiated for
the increase of the purchase price while receiving the installment pa+ments.
ne cannot negotiate for an increase in the price in one 'reath and in the same
'reath contend that the contract of sale is void.
Page | 573
MEN0E:ONA VS. O:AMI:
GR No. '+75 February 6, !!
FAC#S8
@espondents AMontalvan and >ami>B were granted '+ the court with the
guardianship of properties over the person of 2armen >ami>. .s guardians, the+ filed
the 3inventories and accounts5 of 2armen >ami>9s properties, cash, shares of stoc$s,
vehicles and fi:ed assets, including a propert+ $nown as the #ahug propert+. The sad
propert+ is the same propert+ covered '+ the Deed of .'solute *ale e:ecuted '+ 2armen
>ami> in favor of the petitioners AMende>onaB.
@espondents opposed the petitioner9s claim of ownership of the #ahug propert+
and alleged that the titles issued were defective and illegal. %urther, the+ alleged that at
the time of the sale 2armen was alread+ ailing and not in full possession of her mental
faculties, she was then incapacitated to enter into a contract.
ISS$E8
,hether the propert+ in 4uestion was sold to the petitioners.
R$LING8
&t is significant to note that the Deed of .'solute *ale dated .pril )H, 1/H/ is a
notari>ed document dul+ ac$nowledge 'efore a notar+ pu'lic. .s such, it has in its favor
the presumption of regularit+, and it carries the evidentiar+ weight conferred upon it
with respect to its due e:ecution.
&t has 'een held that a person is not incapacitated to contract merel+ 'ecause of
advanced +ears or '+ reason of ph+sical infirmities. The respondents utterl+ failed to
show ade4uate proof hat at the time of the sale 2armen lost her control of mental
facilities. The+ want to impugn one document, the #ahug propert+, however, there are
nine other important documents that were signed '+ 2armen either 'efore or after .pril
)H, 1/H/.
Thus, the said propert+ in 4uestion was dul+ proven to 'e sold '+ 2armen >ami>
to the petitioners Mende>ona.
Page | 574
MAN:ANILLA VS. CA
GR No. L-75'4 Mar1< 15, 1++!
FAC#S8
*pouses Man>anilla sold on installment an undivided one6half portion of their
residential house and lot. .t the time of the sale, the said propert+ was mortgaged to the
7overnment *ervice &nsurance *+stem A7*&*B, which fact was $nown to the vendees,
spouses Magdaleno and =ustina 2ampo. The 2ampo spouses too$ possession of the
premises upon pa+ment of the first installment. *ome pa+ments were made to
petitioners while some were made directl+ to 7*&*. The 7*&* filed its application to
foreclose the mortgage on the propert+ for failure of the Man>anilla spouses to pa+ their
monthl+ amorti>ations. The propert+ was sold at pu'lic auction where 7*&* was the
highest 'idder. Two months 'efore the e:piration of the period to
redeem, the Man>anilla spouses e:ecuted a Deed of .'solute *ale of the undivided one
half portion of their propert+ in favor of the 2ampo spouses. Dpon the e:piration of the
period to redeem without the Man>anilla spouses e:ercising their right of redemption,
title to the propert+ was consolidated in favor of the 7*&* and a new title issued in its
name. The Man>anilla spouses succeeded in re6ac4uiring the propert+ from the
7*&*. .n .'solute Deed of *ale was e:ecuted '+ 7*&* in favor of the Man>anilla spouses
and a new certificate of title was issued to them.
The Man>anilla spouses mortgaged the propert+ to the BiQan @ural Ban$.
Petitioner &nes 2arpio purchased the propert+ from the Man>anilla spouses and agreed
to assume the mortgage in favor of BiQan @ural Ban$.
Private respondent =ustina 2ampo registered her adverse claim over the said
portion of land with the @egister of Deeds of ?ue>on 2it+. n the other hand, petitioner
&nes 2arpio filed an e(ectment case against private respondent =ustina. Private
respondent =ustina 2ampo filed a case for 4uieting of title against the Man>anilla
spouses and &nes 2arpio pra+ing for the issuance to her of a certificate of title over the
undivided one6half portion of the propert+ in 4uestion.
Page | 575
ISS$E8
,hether petitioners Man>anillas are under an+ legal dut+ to reconve+ the
undivided one6half portion of the propert+ to private respondent =ustina 2ampo.
R$LING8
&n view of the failure of either the Man>anilla spouses or the 2ampo spouses to
redeem the propert+ from 7*&*, title to the propert+ was consolidated in the name of
7*&*. The new title cancelled the old title in the name of the Man>anilla spouses. 7*&*
at this point had a clean title free from an+ lien in favor of an+ person including that of
the 2ampo spouses. .rt. 1F!". &f propert+ is
ac4uired through mista$e or fraud, the person o'taining it is, '+ force of law, considered
a trustee of an implied trust for the 'enefit of the person from whom the propert+
comes. There was no mista$e or fraud on the part of petitioners when the su'(ect
propert+ was re6ac4uired from the 7*&*. The fact that the+ previousl+ sold one6half
portion thereof has no more significance in this re6ac4uisition. Private respondentKs
right over the one6half portion was o'literated when a'solute ownership and title
passed on to the 7*&* after the foreclosure sale. The propert+ as held '+ 7*&* had a
clean title. The propert+ that was passed on to petitioners retained that 4ualit+ of title.
.s regards the rights of private respondent &nes 2arpio, she is a 'u+er in good
faith and for value. There was no showing that at the time of the sale to her of the
su'(ect propert+, she $new of an+ lien on the propert+ e:cept the mortgage in favor of
the BiQan @ural Ban$. 1o other lien was annotated on the certificate of title. *he is also
not re4uired '+ law to go 'e+ond what appears on the face of the title. ,hen there is
nothing on the certificate of title to indicate an+ cloud or vice in the ownership of the
propert+ or an+ encum'rances thereon, the purchaser is not to e:plore further than
what the Torrens Title upon its face indicates in 4uest for an+ hidden defect or inchoate
right thereof. Thus ?uieting of title is dismissed.
Page | 576
Rura* %a.D oE ParaOPJue 5s Re2o*a;o
GR No. L-6!51. Mar1< 1", 1+"5
FAC#S8
This case is a'out the repurchase of mortgage propert+ after the period of
redemption and had e:pired. &sidra @emolado, "F, a widow, and resident of Ma$ati,
@i>al, owned a lot with an area of 00H s4uare meters, with a 'ungalow thereon, which
was leased to Beatri> 2a'agnot. n .pril 18, 1/81 she mortgaged it again to petitioner.
*he eventuall+ secured loans totalling P1H,000 A<:h. .t DB. the loans 'ecome overdue.
The 'an$ foreclosed the mortagage on =ul+ )1, 1/8) and 'ought the propert+ at the
foreclosure sale for P)),1/).80. The one6+ear period of redemption was to e:pire on
.ugust )1, 1/80.
Page | 577
n .ugust /, 1/80 or 1F da+s 'efore the e:piration of the one6+ear redemption
period, the 'an$ gave her a statement showing that she should pa+ P)!,F/1./" for the
redemption of the propert+ on .ugust )0. -o redemption 2as made on that date. n
*eptem'er 0, 1/80 the 'an$ consolidated its ownership over the propert+. @emoladoKs
title was cancelled. @emolado was offered a period until cto'er 01, 1/80 from which
she could repurchase the lot. *he onl+ e:ercised that option on 1ovem'er !. @emolado
then filed an action for reconve+ance which the lower courts granted her.
ISS$E8
&s @emolado entitled to reconve+ance;
R$LING8
There was no 'inding agreement for its repurchase. <ven on the assumption that
the 'an$ should 'e 'ound '+ its commitment to allow repurchase on or 'efore cto'er
01, 1/80, still @emolado had no cause of action 'ecause she did not repurchase the
propert+ on that date.
=ustice is done according to law. .s a rule, e4uit+ follows the law. There ma+ 'e a
moral o'ligation, often regarded as an e4uita'le consideration Ameaning compassionB,
'ut if there is no enforcea'le legal dut+, the action must fail although the disadvantaged
part+ deserves commiseration or s+mpath+.
&n the instant case, the 'an$ acted within its legal rights when it refused to give
@emolado an+ e:tension to repurchase after cto'er 01, 1/80. &t had given her a'out
two +ears to li4uidate her o'ligation. *he failed to do so. The decision of the 2.
affirming the decision of the @T2 was reversed.
RINGOR VS RINGOR
GR No. 147"6'. Au6us7 1', !!4
Page | 578
FAC#S8
=aco'o @ingor and his wife 7avina sired two children, =uan and and 2atalina.
2atalina pre6deceased her father, there'+ leaving =uan as the lone heir of 0 lots owned
'+ =aco'o. =uan married 7avina and sired 8 children with her. ne of the children was
=ose Athe father and predecessors6in6interest of herein petitionersB. =aco'o applied for
the registration of his lands under the Torrens s+stem. He filed three land registration
cases alone, with his son =uan, or his grandson =ose, appl+ing (ointl+ with him.
*u'se4uentl+, in a Compraventa dated 1ovem'er 0, 1/)H, =aco'o allegedl+ sold and
transferred to =ose his one6half undivided interest in Parcel 1 covered '+ ,C1 -o.
.<==<. =aco'oKs thum'mar$ appeared on the Compraventa.
During trial, witnesses attested that even after the decisions in the three land
registration cases and the Compraventas% =aco'o remained in possession of the lands
and continued administering them as he did prior to their registration. .ccording to
witness =ulio Monsis, =aco'o did not partition the lands since the latter said that he still
needed them. ,hen =aco'o died on =une 8, 1/0!, the lands under the three land
registration applications, including those which petitioners sought to partition in their
counterclaim 'efore the trial court, remained undivided. =ose continued to function as
administrator over said land and promised to divide it e4uall+M ,hen he died sometime
on 1/81, @espondents demanded from =oseKs children, herein petitioners, the partition
and deliver+ of their share in the estate left '+ =aco'o and under =oseKs administration.
The petitioners refused and attempts at amica'le settlement failed. n March )8, 1/80,
respondents filed a Co2(*a).7 for partition and reconve+ance
ISS$E8
&s the e:ercise '+ =uan and =ose in the form of trust;
R$LING8
<:press trusts, sometimes referred to as direct trusts, are intentionall+ created '+
the direct and positive acts of the settlor or the trustor '+ some writing, deed, or will, or
ora* ;e1*ara7)o.. 2ontrar+ to the claim of petitioners, oral testimon+ is allowed to
prove that a trust e:ists. &t is not error for the court to rel+ on parol evidence, 6 6 i.e.% the
oral testimonies of witnesses <meteria @ingor, =ulio Monsis and Teofilo .'alos 6 6
which the appellate court also relied on to arrive at the conclusion that an e:press trust
e:ists.
2ontrar+ to the claim of petitioners, oral testimon+ is allowed to prove that a trust
e:ists. &t is not error for the court to rel+ on parol evidence, 6 6 i.e.% the oral testimonies
of witnesses <meteria @ingor, =ulio Monsis and Teofilo .'alos 6 6 which the appellate
court also relied on to arrive at the conclusion that an e:press trust e:ists.
. trustee who o'tains a Torrens title over a propert+ held in trust for him '+
another cannot repudiate the trust '+ rel+ing on the registration. . Torrens 2ertificate
of Title in =oseKs name did not vest ownership of the land upon him. The Torrens s+stem
does not create or vest title. &t onl+ confirms and records title alread+ e:isting and
vested. The *2 upheld the decision of the lower courts in favoring the respondents9
claims.
Page | 579
SALVA0OR VS. CA
'1' P3IL '6+?1++5H
Fa17s8
n 1ovem'er /, 1//1, at around 11:00 o9cloc$ in the evening, along the
Mac.rthur Highwa+ in Calen>uela, Metro Manila, the *u>u$i *upercarr+ Mini6van
driven '+ private respondent *ameul Ging *agaral &&& collided with a passenger 'us
onwed and operated '+ petitioner %ive *tar Bus 2o. and driven '+ co6petitioner &gnacio
Torres.
Private respondent *agaral filed a civil action for damges against petitioner.
To simplif+ the proceedings due to the various motions filed '+ petitioners, =udge
Bautista cancelled the H .ugust 1//" hearing and reset it to )0 .ugust 1//". He also set
for hearing petitioner9s motion for reconsideration on )0 .ugust 1//".
The hearing set for )0 .ugust 1//" was cancelled and the trial court on that da+
issued instead its order den+ing petitioner9s motion for reconsideration of its order
dated 1" =ul+ 1//" which considered the case su'mitted for resolution. The+ applead to
2. 'ut the same was dismissed.
Issue8
,hether or not appellate court erred in affirming the order of the trial court.
3e*;8
. review of the records shows that the trial court had scheduled a total si:
hearing dates for the prosecution of evidence. %rom those repeated resetting, it can 'e
gleaned that the dela+ in the proceedings was largel+, if not mainl+, due to petitioners.
Thus there could 'e no grave a'use of discretion when the trial court finall+ ordered
petitioners9 right to present evidence as waived to put an end to their footdragging.
&ndeed, it is never too often to sa+ that (ustice dela+ed is (ustice denied.
Page | 580
SPO$SES RICAR0O AN0 MILAGROS 3$ANG, (e7)7)o.ers,
5s. CO$R# OF APPELAS, -$0GE, PE0RO N. LAGG$I, Pres);).6 -u;6e,
R#C, MaDa7), %r. 6!, a.; SPO$SES 0OLORES AN0 ANICE#O SAN0OVAL,
7.@. 1o. 10H!)! *eptem'er 10, 1//F
%acts:
@espondent Dolores *andoval purchased #ot )1 and registered it in her name
DasmariQas Cillage, Ma$ati. *he also purchased the ad(acent lot, #ot )0, 'ut heading
the advice of Milagros, the deed of sale was placed in the name of @icardo and
@egistered in his name under T2T 1o. )0F8H0. Thereafter, Dolores constructed a
residential house on#ot )1. @icardo also re4uested her permission to construct a small
residential house on #ot )0 to which she agreed inasmuch as she was then the one
pa+ing for apartment rentals of the Huang spouses. *he also allowed @icardo to
mortgage #ot )0 to the *ocial *ecurit+ *+stem to secure the pa+ment of his loan of
P1/,)00.00 to 'e spent in putting up the house. However, she actual+ financed the
construction of the house, the swimming pool and the fence thereon on the
understanding that the Huang spouses would merel+ hold title in trust for her 'eneficial
interest.
To protect her rights and interests as the lawful owner of #ot )0 and its
improvements, Dolores re4uested the Huangs to e:ecute in her favor a deed of a'solute
sale with assumption of mortgage over the propert+. The letter o'liged.
The Huang spouses leased the house to Deltron6*prague <lectronics 2orporation
for its various e:ecutives as official 4uarters without first securing the permission of
Dolores. Dolores tolerated the lease of the propert+ as she did not need it at that time.
But, after sometime, the lessees started prohi'iting the *andoval famil+ from using the
swimming pool and the Huangs then 'egan challenging the *andovalsK ownership of the
propert+.
@icardo and Milagros Huang filed a complaint against the spouses Dolores and
.niceto *andoval see$ing the nullit+ of the deed of sale with assumption of mortgage
andMor 4uieting of title to #ot )0. The+ alleged that the *andovals made them sign 'lan$
papers which turned out to 'e a deed of sale with assumption of mortgage over #ot )0.
&ssue:
,hether or not the 2ourt of .ppeals erred in stating that there was an implied
trust 'etween them and Dolores is not supported '+ evidence. The e:haustive decision
of the trial court 'ased as it is on a painsta$ing review of the entire records deserves our
affirmance. &ndeed, we find no reason to distur' the factual conclusions therein.
Held:
Trust is a fiduciar+ relationship with respect to propert+ which involves the
e:istence of e4uita'le duties imposed upon the holder of the title to the propert+ to deal
with it for the 'enefit of another. . person who esta'lishes a trust is called the trustorJ
one in whom confidence is reposed as regards propert+ for the 'enefit of another person
is $nown as the trusteeJ and the person for whose 'enefit the trust has 'een created is
referred to as the 'eneficiar+ or cestui 4ue trust.
&n the present case, Dolores provided the mone+ for the purchase of #ot )0 'ut
the corresponding deed of sale and transfer certificate of title were placed in the name of
@icardo Huang 'ecause she was advised that the su'division owner prohi'ited the
ac4uisition of two A)B lots '+ a single individual. 7uided '+ the foregoing definitions, we
Page | 581
are in conformit+ with the common finding of the trial court and respondent court that a
resulting trust was created. @icardo 'ecame the trustee of #ot )0 and its improvements
for the 'enefit of Dolores as owner. The pertinent law is .rt. 1FFH of the 1ew 2ivil 2ode
which provides that there is an implied trust when propert+ is sold and the legal estate is
granted to one part+ 'ut the price is paid '+ another for the purpose of having the
'eneficial interest for the propert+. . resulting trust arises 'ecause of the presumption
that he who pa+s for a thing intends a 'eneficial interest therein for himself. ,herefor
the petition is denied.
V0A. 0E ESCON0E VS. CO$R# OF APPEALS
G.R. No. 1!'6'5. February 1, 1++6
FAC#S8
Petitioner 2atalina Cda. De <sconde received two transfer of certificates of land
from the partition of the estate of the 'rother of her deceased hus'and. The partition
was made in 1/F8, thus, due to the minorit+ of her children of the petitioner e:cept
2onstancia, she divided the land, where the second title containing 2T2 1800 A!F8
*?.MB was given e:clusivel+ to Pedro <sconde while the first lot containing 2T2 1)0H
A)0, )H! *?.MB was given to the co petitioners Ben(amin, <lenita, and 2onstancia.
However, when lot 1800 was given to Pedro <sconde, his 'rother Ben(amin, has
introduced improvements on a portion of the said lot owned '+ Pedro 'ut the latter has
constructed fences over the propert+. Ben(amin noticed that the lot was named onl+ to
his 'rother Pedro 'ut the former 'elieved that all of them as children of 2atalina have
the share to the lot. The action for reconve+ance of the land was made on =une )/, 1/H8
more than 00 +ears after the partition.
ISS$E8
,hether the reconve+ance of the land has alread+ prescri'ed.
R$LING8
-es. The action over immova'le properties prescri'es in thirt+ A00B +ears if the
propert+ was held '+ trust in 'ad faith. Thus, in this case, the action prescri'ed in 1/88,
thirt+ A00B +ears after the partition. The action was alread+ 'ecause there was a
document of partition stating the transfer of the certificate of title to Pedro <sconde, in
which, the propert+ was not given in trust to Pedro 'ut as the e:clusive owner of the lot.
However, he shall indemnif+ his 'rother Ben(amin for the improvement the latter has
introduced to the land.
Page | 582
ANCOG VS. CO$R# OF APPEALS
G.R. No.116!. -u.e '!, 1++7
FAC#S8
Petitioners =ovita -ap6 .ncog and 7regorio -ap, =r. sought for the invalidation
of the e:tra(udicial settlement made '+ their mother for the land the petitioner =ovita
was residing. Her mother set the land as a securit+ for a loan. This action was made
when their mother planned to sell the propert+ which was still a part of the con(ugal
propert+ of their parents.
However, @osario Die>, their mother, contended that petitioners have waived
their rights over the lot 'ecause petitioner =ovita accepted the fact that she was renting
the lot in favor of her mother. However, 7regorio -ap, =r. was still minor when the
e:tra(udicial settlement was made.
ISS$E:
,hether petitioners are entitled to the su'(ect lot.
R$LING:
,ith respect to petitioner =ovita -ap .ncog, she is not entitled to the lot 'ecause
she alread+ waived her right of possession over the propert+ when she rented the lot and
thus, secured the lot for a loan to the Development Ban$ of the Philippines.
Page | 583
%urthermore, she can not alleged that the settlement was void 'ecause she was a
graduate of law and she $new the proper procedure for the ownership of the lot.
However, 7regorio -ap, =r. was not affected '+ laches and prescription of
claiming his rights over the partition of the lot 'ecause he was a minor during the
creation of the e:tra(udicial settlement.
RO0OLFO MORALES, re(rese.7e; by <)s <e)rs, a.; PRISCILA MORALES
5s. CO$R# OF APPEALS, RAN$LFO OR#I:, -R., a.; ERLIN0A OR#I:
7.@. 1o. 118))H 1//8 =un 1
FAC#S8
The Plaintiffs are the a'solute and e:clusive owners of the premises in 4uestion
having purchased the same from 2elso .velino, evidenced '+ a Deed of .'solute *ale.
The+ later caused the transfer of its ta: declaration in the name of the female plaintiff
and paid the realt+ ta:es thereon.
2elso .velino APlaintiffsK predecessor in interestB purchased the land in 4uestion
consisting of two ad(oining parcels while he was still a 'achelor and the 2it+ %iscal of
2al'a+og 2it+ from .le(andra Mendiola and 2elita Bartolome, through a K<scritura de
CentaK. .fter the purchase, he caused the transfer of the ta: declarations of the two
parcels in his name as well as consolidated into one the two ta: declarations in his
Page | 584
name. ,ith the $nowledge of the &ntervenor and the defendant, 2elso .velino caused
the surve+ of the premises in 4uestion, in his name, '+ the Bureau of #ands. He also
'uilt his residential house therein.
,hen the two6store+ residential house was finished, he too$ his parents,
@osendo .velino and =uana @icaforte, and his sister, .urea, who too$ care of the couple,
to live there until their deaths. He also declared this residential house in his ta:
declaration to the premises in 4uestion and paid the corresponding realt+ ta:es, $eeping
intact the receipts which he comes to get or .urea would go to 2e'u to give it to him.
.fter 'eing the 2it+ %iscal of 2al'a+og, his sister, .urea, too$ care of the premises
in 4uestion. ,hile he was alread+ in 2e'u, the defendant, without the $nowledge and
consent of the former, constructed a small 'eaut+ shop in the premises in 4uestion.
&nasmuch as the Plaintiffs are the purchasers of the other real properties of 2elso
.velino, one of which is at .cedillo street, after the+ were offered '+ 2elso .velino to
'u+ the premises in 4uestion, the+ e:amined the premises in 4uestion and tal$ed with
the defendant a'out that fact, the latter encouraged them to purchase the premises in
4uestion rather than the propert+ going to some'od+ else the+ do not $now and that he
will vacate the premises as soon as his uncle will notif+ him to do so. Thus, the+ paid the
purchase price was e:ecuted in their favor. However, despite due notice from his uncle
to vacate the premises in 4uestion, the defendant refused to vacate or demolish the
'eaut+ shop unless he is reim'ursed P0!,000.00 for it although it was valued at less
than P!,000.00. *o, the Plaintiffs demanded, orall+ and in writing to vacate the
premises. The defendant refused.
ISS$ES8
1. ,hether or not 2elso .velino purchase the land in 4uestion as a mere trustee
for his parents and si'lings, and is the propert+ he ac4uired a trust propert+
). ,hether petitioners discharged their 'urden to prove the e:istence of an
implied trust.
R$LING8
. trust is the legal relationship 'etween one person having an e4uita'le
ownership in propert+ and another person owning the legal title to such propert+, the
e4uita'le ownership of the former entitling him to the performance of certain duties and
the e:ercise of certain powers '+ the latter.

Trusts are either e:press or implied. <:press trusts are created '+ the intention of
the trustor or of the parties, while implied trusts come into 'eing '+ operation of law,
either through implication of an intention to create a trust as a matter of law or through
the imposition of the trust irrespective of, and even contrar+ to, an+ such intention.
Page | 585
&n turn, implied trusts are either resulting or constructive trusts. @esulting trusts
are 'ased on the e4uita'le doctrine that valua'le consideration and not legal title
determines the e4uita'le title or interest and are presumed alwa+s to have 'een
contemplated '+ the parties. The+ arise from the nature or circumstances of the
consideration involved in a transaction where'+ one person there'+ 'ecomes invested
with legal title 'ut is o'ligated in e4uit+ to hold his legal title for the 'enefit of another.
n the other hand, constructive trusts are created '+ the construction of e4uit+ in order
to satisf+ the demands of (ustice and prevent un(ust enrichment. The+ arise contrar+ to
intention against one who, '+ fraud, duress or a'use of confidence, o'tains or holds the
legal right to propert+ which he ought not, in e4uit+ and good conscience, to hold.
Based on .rt. 1FFH of the 1ew 2ivil 2ode, there is an implied trust when propert+
is sold, and the legal estate is granted to one part+ 'ut the price is paid '+ another for
the purpose of having the 'eneficial interest of the propert+. The former is the trustee,
while the latter is the 'eneficiar+. However, if the person to whom the title is conve+ed is
a child, legitimate or illegitimate, of the one pa+ing the price of the sale, no trust is
implied '+ law, it 'eing disputa'l+ presumed that there is a gift in favor of the child.
There are recogni>ed e:ceptions to the esta'lishment of an implied resulting
trust. The first is stated in the last part of .rticle 1FFH itself. .nother e:ception is that in
which an actual contrar+ intention is proved. .lso where the purchase is made in
violation of an e:isting statute and in evasion of its e:press provision, no trust can result
in favor of the part+ who is guilt+ of the fraud.
.s a rule, the 'urden of proving the e:istence of a trust is on the part+ asserting
its e:istence, and such proof must 'e clear and satisfactoril+ show the e:istence of the
trust and its elements. ,hile implied trusts ma+ 'e proved '+ oral evidence, the
evidence must 'e trustworth+ and received '+ the courts with e:treme caution, and
should not 'e made to rest on loose, e4uivocal or indefinite declarations. Trustworth+
evidence is re4uired 'ecause oral evidence can easil+ 'e fa'ricated.
&n the case, petitionersK theor+ is that @osendo .velino owned the mone+ for the
purchase of the propert+ and he re4uested 2elso, his son, to 'u+ the propert+ allegedl+
in trust for the former. The fact remains, however, that title to the propert+ was
conve+ed to 2elso. .ccordingl+, the situation is governed '+ or falls within the e:ception
under the third sentence of .rticle 1FFH. The preponderance of evidence, as found '+
the trial court and affirmed '+ the 2ourt of .ppeals, esta'lished positive acts of 2elso
.velino indicating, without dou't, that he considered the propert+ he purchased from
the Mendiolas as his e:clusive propert+. He had its ta: declaration transferred in his
name, caused the propert+ surve+ed for him '+ the Bureau of #ands, and faithfull+ paid
the realt+ ta:es. %inall+, he sold the propert+ to private respondents.
). The petitioners did not discharged their 'urden to prove the e:istence of an
implied trust. PriscilaKs (ustification for her and her sistersK failure to assert co6
ownership of the propert+ 'ased on the theor+ of implied trust is not tena'le. 2elso
.velino did not have actual possession of the propert+ 'ecause he Lwas awa+ from
2al'a+og continuousl+ for more than 00 +ears until he died on cto'er 01, 1/H8, and the
Page | 586
the ta: declarations of the propert+ were in 2elsoKs name and the latter paid the realt+
ta:es thereon, there e:isted no valid and cogent reason wh+ Priscila and her sisters did
not do an+thing to have their respective shares in the propert+ conve+ed to them after
the death of @osendo .velino in 1/H0. 1either is there an+ evidence that during his
lifetime, @osendo demanded from 2elso that the latter conve+ the land to the former,
which @osendo could have done after =uanaKs death on 01 Ma+ 1/"!. The omission was
mute and elo4uent proof of @osendoKs recognition that 2elso was the real 'u+er of the
propert+ in 1/FH and the a'solute and e:clusive owner thereof.
Page | 587
#ALA REAL#, SERVICES CORPORA#ION 5s. %ANCO FILIPINO
SAVINGS AN0 MOR#GAGE %AN4
G.R. No. 1'75''. No5e2ber , !!
FAC#S8
Petitioner Tala @ealt+ *ervices 2orporation alleges that it is the a'solute owner of
nine parcels of land and their improvements '+ virtue of separate Deeds of .'solute
*ale e:ecuted 'etween Tala and the respondent Banco %ilipino *avings and Mortgage
Ban$ on .ugust )!, 1/H1. The Bulacan propert+ is the su'(ect matter of the case.
Thereafter, Tala and the Ban$ entered into separate lease contracts over the nine
properties. The contracts had the same form and terms, e:cept for the description of the
propert+ and the amount of the monthl+ rentals. The contracts provided for twent+6
+ear lease periods renewa'le for another twent+ +ears at the option of the Ban$. The
monthl+ rental for the Bulacan propert+ was P/,H00.00.
#ater that same da+, the parties revised the nine lease contracts. The terms of the
lease were shortened to eleven +ears renewa'le for a period of nine +ears 3at the option
of the lessee under terms and conditions mutuall+ agreea'le to 'oth parties5, 'ut the
monthl+ rental for the Bulacan propert+ remained P/,H00.00.
.lmost eleven +ears after the e:ecution of the nine lease contracts, Tala9s
director, <li>a'eth H. Palma, wrote to the Ban$ reminding the latter that the contracts
were a'out to e:pire on .ugust 01, 1//), and that the Ban$ had earlier signified its
interest to renew the lease contracts. Meantime, Tala would lease the properties to the
Ban$ on a month6to6month 'asis until the agreement was finali>ed. n =anuar+ )0,
1//0, the Ban$ re4uested Tala to send its representative to the Ban$9s office to negotiate
the renewal of the lease. Tala9s director, <li>a'eth Palma, negotiated the renewal and
su'mitted a proposal for increased rental. Tala reiterated the increased rental which was
agreed upon in the previous negotiation. Thus, the new monthl+ rental rate for the
Bulacan propert+ was P01,H00.00.
However, for several months from the time of negotiation, the Ban$ failed to ta$e
action on Tala9s proposed terms for the renewal of the lease contract. Tala also informed
the Ban$ that since it had 'een ten months since the e:piration of the lease contracts in
.ugust 1//) and the Ban$ had not ta$en an+ definite action to renew the contracts
despite 'eing furnished copies of the same in Decem'er 1//), Tala declared itself free to
3lease, dispose, sell andMor in an+ wa+ alienate the 'an$ 'ranch sites su'(ect of the lease
Page | 588
agreement.5 However, the Ban$ clarified that it is the one which had the option to renew
the lease and that it had communicated to Tala it was e:ercising its option to do so.
%rom the time the lease contract over the Bulacan propert+ e:pired in .ugust 1//)
until March 1//F, the Ban$ continued to occup+ the su'(ect Bulacan propert+. &t paid
Tala monthl+ rentals at the old rate of P/,H00.00 from *eptem'er 1, 1//) until March
1//F, 'ut refused to pa+ the P)),000.00 difference 'etween the old monthl+ rate and
the new rate of P01,H00.00. Beginning .pril 1//F until the filing of the, the Ban$ did
not pa+ an+ rent at all. 1or did it pa+ the goodwill mone+ and deposit Tala re4uired for
the renewal of the lease.
n .pril 1F, 1//F, Tala wrote to the Ban$ demanding pa+ment of the latter9s
outstanding o'ligations over the Bulacan propert+, consisting of unpaid rental
ad(ustment, deposit, and goodwill mone+. &t also informed the Ban$ that at the end of
the month, the month6to6month lease would no longer 'e renewed, thus, it should
vacate the premises '+ that time, otherwise, petitioner would resort to legal action. *till,
the Ban$ refused to pa+ its outstanding o'ligations, prompting Tala9s law+er to demand
the latter to vacate the premises and to pa+ its outstanding o'ligation within five da+s
from receipt of the letter, otherwise a legal action would 'e filed against it. The Ban$ still
did not compl+ with Tala9s demands, the latter filed complaints for e(ectment andMor
unlawful detainer.
The Ban$9s li4uidator, on he other hand asserts that the amended 116+ear lease
contracts of .ugust )!, 1/H1 provided for the pa+ment of securit+ deposits and not
advance rentals so that said pa+ment could not 'e used to cover unpaid rentals during
the period that the Ban$ was closed and under receivership and li4uidation. .ccording
to Tala9s law+er, the onl+ time that said securit+ deposits ma+ 'e applied to unpaid rents
is when the rentals for the last +ear of the lease contracts were not paid, 'ut the lease
contracts were still due to e:pire in 1//). The Ban$, therefore, could not appl+ the
securit+ deposits to the pa+ment of rentals and thus had to pa+ its accrued rentals.
The MT2 ruled in favor of the Ban$. Based from the evidences, defendant has a
'etter right of possession over the su'(ect propert+ on the 'asis of a 2ontract of #ease. &t
cannot 'e said that the defendant failed to compl+ with the terms and conditions of the
said 2ontract of #ease 'ecause pa+ment was made to the plaintiff on Decem'er 1H, 1/H1
PFH8,!00.00 as advance rentals, to 'e applied to the rentals due from the eleventh
through the twentieth +ears of the lease or from 1//) through the +ear )001. Thus, the
@T2 dismissed petitioner9s appeal of the decision of the MT2 for lac$ of merit. n
appeal to the 2ourt of .ppeals, the decision of the @T2 of Malolos was affirmed.
ISS$E8
,hether or not the implied trust created under the o'ligation was valid.
R$LING8
Tala9s right to lease the propert+ to the Ban$ proceeds from its ATala9sB claim of
ownership of the propert+ 'ased on a contract of sale e:ecuted 'etween it and the Ban$
on .ugust )!, 1/H1. The Ban$, however, disputes Tala9s ownership 3in fee simple5 as
stated in its )06+ear lease contract with Tala as it Athe Ban$B alleges that there is an
implied trust relationship 'etween the Ban$ as trustor and 'eneficiar+ and Tala as
trustee. Pursuant to this implied trust, the Ban$ in .pril 1//F demanded Tala to
perform its o'ligation as trustee and return the disputed propert+ to the Ban$ as trustor
and 'eneficiar+. The Ban$ is of the view, therefore, that since it had alread+ sought
Page | 589
enforcement of the implied trust and reconve+ance of the su'(ect propert+, the Ban$ had
the right to its possession and Tala did not have a right to e(ect it from the propert+.
The Ban$ alleged that the sale and twent+6+ear lease of the disputed propert+ were
part of a larger implied trust 3warehousing agreement.5 2oncomitant with the 2ourt9s
factual finding that the )06+ear contract governs the relations 'etween the parties, the
court finds the Ban$9s allegation of circumstances surrounding its e:ecution worth+ of
credenceJ the Ban$ and Tala entered into contracts of sale and lease 'ac$ of the disputed
propert+ and created an implied trust 3warehousing agreement5 for the reconve+ance of
the propert+. However, the implied trust is ine:istent and void for 'eing contrar+ to
law.
The Ban$ claims to 'e 'oth the trustor and 'eneficiar+ while Tala is the trustee. &t
alleges the e:istence of an implied trust 'etween it and Tala, relies on .rticles 1FFH and
1F!0 of the 1ew 2ivil 2ode. However, an implied trust could not have 'een formed
'etween the Ban$ and Tala as the 2ourt has held that 3where the purchase is made in
violation of an e:isting statute and in evasion of its e:press provision, no trust can result
in favor of the part+ who is guilt+ of the fraud.5
The Ban$ cannot use the defense of nor see$ enforcement of its alleged implied
trust with Tala since its purpose was contrar+ to law. .s admitted '+ the Ban$, it
3warehoused5 its 'ranch site holdings to Tala to ena'le it to pursue its e:pansion
program and purchase new 'ranch sites including its main 'ranch in Ma$ati, and at the
same time avoid the real propert+ holdings limit under *ections )!AaB and 0F of the
7eneral Ban$ing .ct which it had alread+ reached. The Ban$ stated in its Memorandum
that 3the AnBew 'ranch sites which the @espondent ABan$B will 'e dis4ualified from
'u+ing, '+ reason of the aforecited limitations under e:isting 'an$ing laws and
regulations, will 'e ac4uired for it '+ the Petitioner ATalaB which will forthwith lease
them to the @espondent ABan$B.5 The Ban$ also admitted that the agreement that the
'ranch sites 3will 'e returned to the 'an$ an+time at its pleasure at the same transfer
price5 was differentl+ stated in the lease contracts as a 3first preference to 'u+5 'ecause
the Ban$ was apprehensive that the agreement to return propert+, 3if spelled out as6is in
the documents, might provide 'asis for the 2entral Ban$ to 4uestion the sale and
simultaneous lease 'ac$ of the 'ranch sites as simulated and accordingl+, derail the
e:pansion program of the @espondent.5
2learl+, the Ban$ was well aware of the limitations on its real estate holdings under
the 7eneral Ban$ing .ct and that its 3warehousing agreement5 with Tala was a scheme
to circumvent the limitation. Thus, the Ban$ opted not to put the agreement in writing
and call a spade a spade, 'ut instead phrased its right to reconve+ance of the su'(ect
propert+ at an+ time as a 3first preference to 'u+5 at the 3same transfer price.5 This
arrangement which the Ban$ claims to 'e an implied trust is contrar+ to law. Thus,
while the sale and lease of the su'(ect propert+ genuine and 'inding upon the parties,
the implied trust cannot 'e enforced even assuming the parties intended to create it.
The Ban$ cannot thus demand reconve+ance of the propert+ 'ased on its alleged
implied trust relationship with Tala.
,H<@<%@<, the petition is dismissed.
Page | 590
Page | 591
#3E 3EIRS OF PE0RO ME0INA, re(rese.7e; by MARGARI#A ME0INA 5s.
#3E 3ON. CO$R# OF APPEALS, RES#I#$#A :$R%I#O V0A. 0E ME0INA
a.; AN0RES NAVARRO, -R.
7.@. 1o. #6)"108 1/H1 1ovem'er )8
FAC#S8
n March ", 1/!8, petitioners filed the complaint in the trial court see$ing to
recover from respondents a parcel of land situated in the sitio of ac, municipalit+ of
Milagros, province of Mas'ate, containing an area of 0)1.11!" hectares and pra+ing that
respondents 'e ordered to deliver to them possession and ownership thereof with
accounting, damages and costs and litigation e:penses.
2omplaint alleged that petitioner Margarita Medina as plaintiff inherited with
her sister .na Medina the said parcel of land from their father Pedro Medina. Dpon
their fatherKs death, she and her sister .na Medina 'eing then minors were placed under
the care and custod+ of the spouses *otero Medina and @estituta Rur'ito, as guardians
of their persons and propert+.
The land in dispute was placed under the management of *otero Medina as
administrator thereof, and upon *oteroKs death, under the management of his widow,
@estituta Rur'ito. 2omplainant later discovered that the land in 4uestion was
surreptitiousl+ declared for ta:ation purposes in the name of .ndres 1avarro, =r.,
grandson of @estituta Rur'ito, however, respondents as defendants had without color of
title denied petitionersK ownership and instead had claimed ownership thereof since the
+ear 1/FH and e:ercised acts of possession and ownership thereon to the e:clusion of
petitioners.
Petitioners demanded the respondents to vacate the premises and deliver
possession and ownership thereof, 'ut the latter failed and refused to do so. n the
other hand, respondent .ndres 1avarro, =r. had e:cavated soil from the land in
4uestion and sold the same to the Provincial 7overnment of Mas'ate without the
$nowledge and consent of petitioners and appropriated the proceeds thereof to his
personal 'enefit to the damage and pre(udice of the plaintiff. @espondent @estituta
Rur'ito Cda. de Medina never rendered an accounting of the income of the propert+ in
4uestion in spite of their repeated demands and instead appropriated all the income
therefrom to her personal use and 'enefit. However, the other part+ states otherwise.
&n its decision, the court declared petitioner Margarita Medina with her co6heirs
as the lawful owners of the land in 4uestion and ordered respondents to deliver unto
them the Ltitulo real 1o. 0F/!H1L and to restore to them the actual possession thereofJ
and also ordered them to pa+ them certain amounts representing the produce of the
land. Dpon appeal, respondent 2ourt of .ppeals reversed the trial courtKs decision
sustaining respondentsK defenses of prescription of action and ac4uisitive prescription,
ordered the dismissal of the complaint.
ISS$ES8
Page | 592
1. ,hether or not petitionersK action for recover+ thereof has 'een 'arred '+
prescription.
). ,hether or not an e:press trust over the propert+ in litigation has 'een
constituted '+ petitionersK father Pedro Medina, upon his 'rother *otero and *oteroKs
wife @estituta Rur'ito for the 'enefit of his children, petitioner Margarita Medina and
her deceased sister .na Medina and the latterKs heirs.
R$LING8
1. PetitionersK cause of action had prescri'ed upon the lapse of the ten6+ear
period of ac4uisitive prescription provided '+ the then applica'le statute for
unregistered lands such as the land herein involved.
.s found '+ the 2ourt of .ppeals, the land was sold to *otero Medina on =une )/,
1/)F from which date *otero and his wife too$ open, pu'lic, continuous and adverse
possession of the land in the concept of owner. &n 1/!8 when the present action was
filed, thirt+6three +ears, much more than the 106+ear statutor+ period for ac4uisitive
prescription, had alread+ elapsed.
The appellate court further held that petitionersK action to recover was li$ewise
time6'arred, pointing out that Lthe ten6+ear period under the statute of limitation within
which plaintiffs could file an action for recover+ of real propert+ commenced to run in
1/00 when plaintiff Margarita Medina was informed that the land in dispute 'elonged to
her father Pedro Medina, for in that +ear she could have 'rought an action for
reconve+ance. The period of prescription commences to run from the da+ the action
ma+ 'e 'rought A.rticle 11!0, 2ivil 2ode of the PhilippinesB, and in an action 'ased on
fraud, as is the 'asis of the present action, the period of prescription 'egins from the
discover+ of the fraud the reasons a part+ might have had for not immediatel+ ta$ing
(udicial action is immaterial and does not stop the running of the period.
). . propert+ held in trust cannot 'e ac4uired '+ prescription. *ection 0H of .ct
1/0 provides that the law of prescription does not appl+ Xin the case of continuing and
su'sisting trust.K However,if the prescripti'ilit+ of an action for reconve+ance is 'ased
on constructive trust, prescription ma+ supervene in an implied trust.
Therefore, the appellate court correctl+ held that the facts and evidence of record
do not support petitionersK claim of the creation of an e:press trust and
imprescripti'ilit+ of their claim. .lthough no particular words are re4uired for the
creation of an e:press trust, a clear intention to create a trust must 'e shown, and the
proof of fiduciar+ relationship must 'e clear and convincing.
&n the case, if an e:press trust had 'een constituted upon the occupanc+ of the
propert+ '+ respondents in favor of the petitioners, prescription of action would not lie,
the 'asis of the rule 'eing that the possession of the trustee is not adverse to the
Page | 593
'eneficiar+. But if there were merel+ a constructive or implied trust, the action to
recover ma+ 'e 'arred '+ prescription of action or '+ ac4uisitive prescription '+ virtue
of respondentsK continuous and adverse possession of the propert+ in the concept of
owner6'u+er for thirt+6three +ears.
<:press trusts are those intentionall+ created '+ the direct and positive act of the
trustor, '+ some writing, deed or will, or oral declaration. The creation of an e:press
trust must 'e manifested with reasona'le certaint+ and cannot 'e inferred from loose
and vague declarations or from am'iguous circumstances suscepti'le of other
interpretations. 1owhere in the record is there an+ evidence, and the plaintiffs do not
even raise the pretention, that the original owner of the propert+ Pedro Medina, father
of plaintiff Margarita Medina, appointed, designated or constituted *otero Medina Athe
hus'and of defendant @estituta Rur'ito MedinaB as the trustee of the land in dispute.
Thus, it is concluded that there was real+ no e:press trust.
The circumstances presented '+ the respondents do not ma$e out the creation of
an e:press trust. @espondentsK possession of the *panish title issued in the late Pedro
MedinaKs name ma+ (ust 'e the conse4uence of the sale of the land '+ 1arciso Ato whom
it had 'een ad(udicated in the partitionB to the spouses *otero Medina and @estituta
Rur'ito on =une )/, 1/)F and is '+ no means an evidence of an e:press trust created for
the 'enefit of petitioners. *panish titles are defeasi'le, and although evidences of
ownership ma+ 'e lost through prescription. 1either is the deed of partition Awhich
apparentl+ e:cluded Pedro MedinaB entered into earlier an+ indication of an e:press
creation of a trust. &n fact, the documents are adverse to petitionersK cause, and are
evidences of transfer of ownership of the land from one ownerMowners to another or
others and the+ in fact negate the creation or e:istence of an e:press trust.
1either does the testimon+ of *oteroKs widow, @estituta Rur'ito, to the effect that
her hus'and and then later she herself LadministeredL the land support petitionersK
claim of an e:press trust. There is no showing that the term LadministrationL as used '+
said respondent in her testimon+ is '+ reason of an appointment as such on 'ehalf of
another owner or 'eneficiar+, such as to support the e:istence of an e:press trust. n
the contrar+, it appears clear from the conte:t of her testimon+ that her use of the term
LadministerL was in the concept of an owner6'u+er LadministeringL and managing
hisMher propert+.
Thus, the appealed decision is affirmed.
Page | 594
FILIPINAS POR# SERVICES 5s. GO
7.@. 1o. 1"1HH", March 1", )008
FAC#S8
The case is actuall+ an intra6corporate dispute involving %ilport, a domestic
corporation engaged in stevedoring services with principal office in Davao 2it+. &t was
initiall+ instituted with the *ecurities and <:change 2ommission A*<2B where the case
hi'ernated and remained unresolved for several +ears until it was overta$en '+ the
enactment into law, on 1/ =ul+ )000, of @epu'lic .ct A@...B 1o. H8//, otherwise $nown
as the *ecurities @egulation 2ode. %rom the *<2 and consistent with @... 1o. H8//, the
case was transferred to the @T2 of Manila, Branch 1F, sitting as a corporate court.
*u'se4uentl+, upon respondents9 motion, the case eventuall+ landed at the @T2 of
Davao 2it+ where it was doc$eted as 2ivil 2ase 1o. )H,!!)6)001. @T26Davao 2it+,
Branch 10, ruled in favor of the petitioners prompting respondents to go to the 2. in
2.67.@. 2C 1o. 80H)8.
Page | 595
&n the same petition, doc$eted as *<2 2ase 1o. 0"6/06FF/1, 2ru> alleged that
despite demands made upon the respondent mem'ers of the 'oard of directors to desist
from creating the positions in 4uestion and to account for the amounts incurred in
creating the same, the demands were unheeded. 2ru> thus pra+ed that the respondent
mem'ers of the 'oard of directors 'e made to pa+ %ilport, (ointl+ and severall+, the
sums of mone+ variedl+ representing the damages incurred as a result of the creation of
the officesMpositions complained of and the aggregate amount of the 4uestioned
increased salaries.
&n the same .nswer, respondents further averred that 2ru> and his co6petitioner
Minter'ro, while admittedl+ stoc$holders of %ilport, have no authorit+ nor standing to
'ring the so6called 3derivative suit5 for and in 'ehalf of the corporationJ that respondent
Mar+ =ean D. 2o has alread+ ceased to 'e a corporate director and so with %ortunato C.
de 2astro, one of those holding an assailed positionJ and that no demand to cease and
desist from further committing the acts complained of was made upon the 'oard. B+
wa+ of affirmative defenses, respondents asserted that A1B the petition is not dul+
verified '+ petitioner %ilport which is the real part+6in6interestJ A)B %ilport, as
represented '+ 2ru> and Minter'ro, failed to e:haust remedies for redress within the
corporation 'efore 'ringing the suitJ and A0B the petition does not show that the
stoc$holders 'ringing the suit are (oined as nominal parties. &n support of their
counterclaim, respondents averred that 2ru> filed the alleged derivative suit in 'ad faith
and purel+ for harassment purposes on account of his non6reelection to the 'oard in the
1//1 general stoc$holders9 meeting.
ISS$E8
,hether the 2. erred in holding that %ilport9s Board of Directors acted within its
powers in creating the e:ecutive committee and the positions of .CPs for 2orporate
Planning, perations, %inance and .dministration, and those of the *pecial .ssistants
to the President and the Board 2hairman, each with corresponding remuneration, and
in increasing the salaries of the positions of Board 2hairman, Cice6President, Treasurer
and .ssistant 7eneral Manager
3EL08
&n the present case, the 'oard9s creation of the positions of .ssistant Cice
Presidents for 2orporate Planning, perations, %inance and .dministration, and those
of the *pecial .ssistants to the President and the Board 2hairman, was in accordance
with the regular 'usiness operations of %ilport as it is authori>ed to do so '+ the
corporation9s '+6laws, pursuant to the 2orporation 2ode.
The election of officers of a corporation is provided for under *ection )! of the
2ode which reads:
*ec. )!. 2orporate officers, 4uorum. I &mmediatel+ after their election, the
directors of a corporation must formall+ organi>e '+ the election of a president, who
Page | 596
shall 'e a director, a treasurer who ma+ or ma+ not 'e a director, a secretar+ who shall
'e a resident and citi>en of the Philippines and such other officers as ma+ 'e provided
for in the '+6laws.
.s a matter of fact, it was during the term of appellee 2ru>, as president and
director, that the e:ecutive committee was created. ,hat is more, it was appellee
himself who moved for the creation of the positions of assistant vice presidents for
operations, for finance, and for administration. He should not 'e heard to complain
thereafter for similar corporate acts.
The increase in the salaries of the 'oard chairman, president, treasurer, and
assistant general manager are indeed reasona'le enough in view of the responsi'ilities
assigned to them, and the special $nowledge re4uired, to 'e a'le to effectivel+ discharge
their respective functions and duties.
B+ claiming that %ilport suffered damages 'ecause the directors appointed to the
assailed positions are not doing an+thing to deserve their compensation, petitioners are
saddled with the 'urden of proving that salaries were actuall+ paid. *ince the trial court,
in effect, found that the petitioners successfull+ proved pa+ment of the salaries when it
directed the reim'ursements of the same, respondents necessaril+ have to raise the
issue on appeal. .nd the 2. rightl+ resolved the issue when it found that no evidence of
actual pa+ment of the salaries in 4uestion was actuall+ adduced.

Page | 597
MEN0I:A%EL 5s. APAO
7.@. 1o. 1F01H!, %e'ruar+ )0, )00"
FAC#S8
n )1 March 1/!!, %ernando .pao A3%ernando5B purchased from spouses
.le(andro and Teofila Mag'anua A3vendors5B a parcel of land with an area of "1,"1"
s4uare meters A3propert+5B situated in Malangas, Ram'oanga del *ur. %ernando 'ought
the propert+ for PF00. The vendors e:ecuted a deed of sale which stated inter alia that
the+ could purchase 'ac$ the propert+ within si: months for PF00, failing which, the
sale would 'ecome a'solute. The vendors failed to repurchase the propert+. %ernando
thus too$ possession of the same.
n 1 .pril 1/!H, %ernando had the propert+ surve+ed '+ <ngr. <rnesto 1uval
together with the piece of land ad(acent to it, which he had previousl+ purchased from
one #eopoldo 2arloto. The Bureau of #ands approved the surve+ on ) =ul+ 1/!/
resulting in the issuance of *urve+ Plan Psu61800H0 covering 'oth lots. Dpon receipt of
the approved surve+ plan, %ernando immediatel+ filed an application with the Bureau
of #ands for a free patent over the entiret+ of Psu61800H0. His application was doc$eted
as %.P... 1o. 1H61FH1.
.fter the surve+ of %ernando9s land, the *urve+ Part+ of the Bureau of #ands
surve+ed the same area. This latter surve+ resulted in a su'division of the land into two
separate and distinct lots identified as #ot 1os. F08 and 10H0. %ernando learned that
&gnacio Mendi>a'el A3&gnacio5B had filed prior to the Bureau of #ands9 surve+ a
homestead application over #ot 1o. 10H0. %ernando 'ecame the claimant6protestant
in &gnacio9s application, doc$eted as H... 1o. 1H6H/0! A<61H6H!)1B.
n 11 Ma+ 1/"), the Bureau of #ands @egional ffice in Ram'oanga 2it+ rendered
a decision awarding #ot 1o. 10H0 to &gnacio.
ISS$E8
,hether there is implied trust e:ists in this case
3EL08
The act of petitioners in misrepresenting that the+ were in actual possession and
occupation of the propert+, o'taining patents and original certificates of title in their
namesO created an implied trust in favor of the actual possessors of the propert+. The
2ivil 2ode provides:
Page | 598
.@T. 1F!". &f propert+ is ac4uired through mista$e or fraud, the person o'taining
it is, '+ force of law, considered a trustee of an implied trust for the 'enefit of the person
from whom the propert+ comes.
&n other words, if the registration of the land is fraudulent, the person in whose
name the land is registered holds it as a mere trustee, and the real owner is entitled to
file an action for reconve+ance of the propert+.
Petitioners would nonetheless insist that respondents failed to present an+ proof
of fiduciar+ relation 'etween them and respondents and 3'reach of such trust '+
petitioners. . deeper anal+sis of .rticle 1F!" reveals that it is not a trust in the technical
sense for in a t+pical trust, confidence is reposed in one person who is named a trustee
for the 'enefit of another who is called the cestui 4ue trust, respecting propert+ which is
held '+ the trustee for the 'enefit of the cestui 4ue trust. . constructive trust, unli$e an
e:press trust, does not emanate from, or generate a fiduciar+ relation. ,hile in an
e:press trust, a 'eneficiar+ and a trustee are lin$ed '+ confidential or fiduciar+ relations,
in a constructive trust, there is neither a promise nor an+ fiduciar+ relation to spea$ of
and the so6called trustee neither accepts an+ trust nor intends holding the propert+ for
the 'eneficiar+. &mplied trusts are those which, without 'eing e:pressed, are deduci'le
from the nature of the transaction as matters of intent or which are super induced on
the transaction '+ operation of law as matters of e4uit+, independentl+ of the particular
intention of the parties. &n turn, implied trusts are either resulting or constructive
trusts. 2onstructive trusts are created '+ the construction of e4uit+ in order to satisf+
the demands of (ustice and prevent un(ust enrichment. The+ arise contrar+ to intention
against one who, '+ fraud, duress or a'use of confidence, o'tains or holds the legal right
to propert+ which he ought not, in e4uit+ and good conscience, to hold.
The records show that respondents 'ought the propert+ from spouses .le(andro
and Teofila Mag'anua on )1 March 1/!! as evidenced '+ a deed of sale. %ernando
testified that he was in actual, open, peaceful, and continuous possession of the propert+
at the time he filed his application for a free patent and was then en(o+ing its fruits.
These facts were corro'orated '+ the testimonies of BraQanula and #i>ardo, residents of
Baranga+ Ma'ini, Malangas, Ram'oanga del *ur. Petitioners, however, assert that the
deed of sale, 3although .nne: . of respondents9 complaint,5 should not 'e given weight
for it was not offered in evidence.
Petitioners9 assertion has no merit. .ll documents attached to a complaint, the
due e:ecution and genuineness of which are not denied under oath '+ the defendant,
must 'e considered as part of the complaint without need of introducing evidence. &n
petitioners9 answer, there was no denial under oath of the due e:ecution and
genuineness of the deed of sale. Thus, the deed of sale is not onl+ incorporated into
respondents9 complaint, it is also deemed admitted '+ petitioners. This has the effect of
relieving respondents from the dut+ of e:pressl+ presenting such document as evidence.
The court, for the proper resolution of the case, ma+ and should consider without the
introduction of evidence the facts admitted '+ the parties
Page | 599
V0A. 0E G$AL%ER#O 5s. GO
7.@. 1o. 10/HF0, =ul+ )1, )00!
FAC#S8
Petitioners are the heirs of the late 7eneroso 7ual'erto, former registered owner
of a parcel of land situated at @edor *treet, Baranga+ @edor, *iniloan, #aguna under
Transfer 2ertificate of Title AT2TB 1o. /)00, containing an area of 1"/.!/ s4uare meters,
more or less, and declared for ta:ation purposes under Ta: Declaration 1o. FH"/.
*ometime in 1/"!, the su'(ect parcel of land was sold '+ 7eneroso 7ual'erto and
his wife, herein petitioner 2onsuelo 1atividad Cda. De 7ula'erto A2onsuelo, for
'revit+B, to respondents9 father 7o *. Giang for P/, 000.00, as evidenced '+ a deed
entitled 3Gasulatan ng Bilihang Tulu+an5 dated =anuar+ 1!, 1/"! A3Gasulatan5, for
'revit+B, which deed appears to have 'een dul+ notari>ed '+ then Municipal =udge
Pascual #. *errano of the Municipal 2ourt of *iniloan, #aguna and recorded in his
registr+ as Doc. 1o. /, Page 1o. 1), Boo$ 1o.1), *eries of 1/"!. n .pril 1, 1/80,
petitioner 2onsuelo e:ecuted an .ffidavit attesting to the fact that the aforementioned
parcel of land had trul+ 'een sold '+ her and her hus'and 7eneroso to the spouses 7o *.
Giang and @osa =avier 7o, as 'orne '+ the said 3Gasulatan5. <videntl+, the affidavit was
e:ecuted for purposes of securing a new ta: declaration in the name of the spouses 7o.
Page | 600
&n Decem'er, 1/80, in a case for Dnlawful Detainer filed '+ a certain Demetria
7arcia against herein petitioners, the latter alleged that therein plaintiff 7arcia 3is not a
real part+ in interest and therefore has no legal capacit+ and cause of action to sue the
defendantsJ that the real parties in interest of the parcel of commercial land and the
residential apartment in 4uestion are 7eneroso 7ual'erto and 7o *. Giang respectivel+
as shown '+ T2T 1o. /)00 issued '+ the @egister of Deeds of #aguna. &n a %orci'le
<ntr+ case filed '+ respondents against petitioners 'efore the Municipal 2ircuit Trial
2ourt of *iniloan6%am+, *iniloan, #aguna doc$eted as 2ivil 2ase 1o. 00", a decision was
rendered in favor of respondents, which decision was affirmed in toto '+ the @T2 of
*iniloan, #aguna. ,hen elevated to the 2ourt of .ppeals, that same decision was
affirmed '+ the latter court, sa+ing that 3the 2ourt finds that the (udgment of the court a
4uo affirming the previous (udgment of the municipal court is supported '+ sufficient
and satisfactor+ evidence and there is no reason for the 2ourt to hold otherwise.
ISS$E8
,hether an action for reconve+ance of propert+ 'ased on nullit+ of title
prescri'es
3EL08
Petitioners insist that their action for reconve+ance is imprescripti'le.
.n action for reconve+ance of real propert+ 'ased on implied or constructive
trust is not 'arred '+ the aforementioned 106+ear prescriptive period onl+ if the plaintiff
is in actual, continuous and peaceful possession of the propert+ involved. 7enerall+, an
action for reconve+ance 'ased on an implied or constructive trust, such as the instant
case, prescri'es in 10 +ears from the date of issuance of decree of registration. However,
this rule does not appl+ when the plaintiff is in actual possession of the land. Thus, it
has 'een held:
.n action for reconve+ance of a parcel of land 'ased on implied or constructive
trust prescri'es in ten +ears, the point of reference 'eing the date of registration of the
deed or the date of the issuance of the certificate of title over the propert+, 'ut this rule
applies onl+ when the plaintiff or the person enforcing the trust is not in possession of
the propert+, since if a person claiming to 'e the owner thereof is in actual possession of
the propert+, as the defendants are in the instant case, the right to see$ reconve+ance,
which in effect see$s to 4uiet title to the propert+, does not prescri'e. The reason for this
is that one who is in actual possession of a piece of land claiming to 'e the owner thereof
ma+ wait until his possession is distur'ed or his title is attac$ed 'efore ta$ing steps to
vindicate his right, the reason for the rule 'eing, that his undistur'ed possession gives
him a continuing right to see$ the aid of a court of e4uit+ to ascertain and determine the
nature of the adverse claim of a third part+ and its effect on his own title, which right
can 'e claimed onl+ '+ one who is in possession.5
Here, it was never esta'lished that petitioners remained in actual possession of
the propert+ after their father9s sale thereof to 7o *. Giang in 1/"! and up to the filing of
their complaint in this case on .ugust 10, 1//!. n the contrar+, the trial court9s factual
Page | 601
conclusion is that respondents had actual possession of the su'(ect propert+ ever since.
The action for reconve+ance in the instant case is, therefore, not in the nature of an
action for 4uieting of title, and is not imprescripti'le.
3EIRS OF ,AP V CA
7.@.1o. 1000F8 .ugust 18, 1///
Page | 602
FAC#S
@amon -ap purchased a parcel of land situated at 1)0 Batanes *treet, 7alas,
?ue>on 2it+, covered '+ Transfer 2ertificate of Title 1o. H)001MT6F1F, from the spouses
2arlos and =osefina 1er+. The lot was thereupon registered in the name of @amon -ap
under Transfer 2ertificate of Title 1o. 10)10)J forthwith, he also declared the propert+
in his name for ta: purposes and paid the real estate ta:es due thereon from 1/"" to
1//). &n 1/"8, @amon -ap constructed a two store+ 06door apartment 'uilding for the
use of the -ap famil+. ne6fifth A1M!B of the cost of the construction was defra+ed '+
@amon -ap while the rest was shouldered '+ 2hua Mia, the mother of #oren>o,
Ben(amin and @amon. Dpon its completion, the improvement was declared for real
estate ta: purposes in the name of #oren>o -ap in deference to the wishes of the old
woman.
The controvers+ started when herein petitioners, '+ a letter of 0H =une 1//),
advised respondents of the former9s claim of ownership over the propert+ and
demanded that respondents e:ecute the proper deed necessar+ to transfer the title to
them. .t a'out the same time, petitioners filed a case for e(ectment against one of the
'onafide tenants of the propert+.
ISS$E
,hether or not there was implied trust in the instant case;
R$LING
The court found there was none. The 2ourt of .ppeals, sustaining the court a
4uo, has found the evidence su'mitted '+ petitioners to 'e utterl+ wanting, consisting
mainl+ of the self6serving testimon+ of *all+ -ap. *he herself admitted that the 'usiness
esta'lishment of her hus'and #oren>o was ra>ed '+ fire in 1/"F that would somehow
place to dou't the claim that he indeed had the means to purchase the su'(ect land
a'out two +ears later from the 1er+ spouses. Dpon the other hand, @amon -ap was '+
then an accountant with apparent means to 'u+ the propert+ himself. .t all events,
findings of fact '+ the 2ourt of .ppeals, particularl+ when consistent with those made '+
the trial court, should deserve utmost regard when not devoid of evidentiar+ support.
1o cogent reason had 'een shown '+ petitioners for the 2ourt to now hold otherwise.
ne 'asic distinction 'etween an implied trust and an e:press trust is that while
the former ma+ 'e esta'lished '+ parol evidence, the latter cannot. <ven then, in order
to esta'lish an implied trust in real propert+ '+ parol evidence, the proof should 'e as
full+ convincing as if the acts giving rise to the trust o'ligation are proven '+ an
authentic document. .n implied trust, in fine, cannot 'e esta'lished upon vague and
inconclusive proof.
Page | 603
3EIRS OF 4IONOSALA V 0AC$#
G.R.No. 147'7+ February 7, !!
FAC#S
n 1/ Decem'er 1//! private respondents filed a complaint for declaration of
nullit+ of titles, reconve+ance and damages against petitioners. This complaint involved
) parcels of land $nown as #ot 1o. 1018 and #ot 1o. 101! with areas of 118,8FF s4uare
meters and "/,/8F s4uare meters respectivel+, located in Pongol, #i'ona, Bu$idnon. n
8 *eptem'er 1//0 #ot 1o. 1018 was granted a free patent to petitioners Heirs of
.m'rocio Gionisala under %ree Patent 1o. "000/0, and on 10 1ovem'er 1//1 #ot 101!
was 'estowed upon &sa'el Gionisala, one of the impleaded heirs of .m'rocio Gionisala
under %ree Patent 1o. 1010116/16/0F. Thereafter, on 1/ 1ovem'er 1//0 #ot 1018 was
registered under the Torrens s+stem and was issued riginal 2ertificate of Title 1o. P6
1/H1/ in petitioners9 name, while on ! Decem'er 1//1 #ot 1o. 101! was registered in the
name of &sa'el Gionisala under riginal 2ertificate of Title 1o. P6)0))/.
&n support of their causes of action for declaration of nullit+ of titles and
reconve+ance, private respondents claimed a'solute ownership of #ot 101! and 1018
even prior to the issuance of the corresponding free patents and certificates of title.
ISS$E
,hether or not the action for reconve+ance 'ased on an implied trust of the lots
has prescri'ed;
R$LING
The action for reconve+ance 'ased on implied trust prescri'es onl+ after ten A10B
+ears from 1//0 and 1//1 when the free patents and the certificates of title over #ot 1018
and #ot 101!, respectivel+, were registered. 'viousl+ the action had not prescri'ed
when private respondents filed their complaint against petitioners on 1/ Decem'er
1//!. .t an+ rate, the action for reconve+ance in the case at 'ar is also significantl+
deemed to 'e an action to 4uiet title for purposes of determining the prescriptive period
on account of private respondents9 allegations of actual possession of the disputed lots.
&n such a case, the cause of action is trul+ imprescripti'le.
Page | 604
RAMOS V. RAMOS
G.R. No. L-1+"7 0e1e2ber ', 1+74
FAC#S
The spouses Martin @amos and 2andida Tanate died on cto'er F, 1/0" and
cto'er )", 1HHH, respectivel+. n Decem'er 10, 1/0" a special proceeding was
instituted in the 2ourt of %irst &nstance of 1egros ccidental for the settlement of the
intestate estate of the said spouses. @afael . @amos, a 'rother of Martin, was appointed
administrator. The estate was administered for more than si: +ears. . pro(ect of
partition dated .pril )!, 1/10 was su'mitted. &t was signed '+ the three legitimate
children, =ose, .gustin and 7ranadaJ '+ the two natural children, .tanacia and
Timoteo, and '+ Timoteo Ra+co in representation of the other five natural children who
were minors. &t was sworn to 'efore the (ustice of the peace. Plaintiffs, however, did not
$now of an+ proceedings. The+ never received an+ sum of mone+ in cash the alleged
insignificant sum of P1,8H!.0! each from said alleged guardian as their supposed share
in the estate of their father under an+ alleged pro(ect of partition.
ISS$E
,hether or not a trustee can ac4uire '+ prescription the ownership of propert+
entrusted to him;
R$LING
There is a rule that a trustee cannot ac4uire '+ prescription the ownership of
propert+ entrusted to him, or that an action to compel a trustee to conve+ propert+
registered in his name in trust for the 'enefit of the cestui #ui trust does not prescri'ed
or that the defense of prescription cannot 'e set up in an action to recover propert+ held
'+ a person in trust for the 'enefit of anothe, or that propert+ held in trust can 'e
recovered '+ the 'eneficiar+ regardless of the lapse of time.
Page | 605
That rule applies s4uarel+ to e:press trusts. The 'asis of the rule is that the
possession of a trustee is not adverse. 1ot 'eing adverse, he does not ac4uire '+
prescription the propert+ held in trust. Thus, section 0H of .ct 1/0 provides that the law
of prescription does not appl+ in the case of a continuing and su'sisting trust.
#3E IN#ES#A#E ES#A#E OF #, 5s. CO$R# OF APPEALS
G.R. No. 11"7. APRIL 1+, !!1
FAC#S8
Petitioner *+lvia *. T+ was married to .le:ander T. T+. .le:ander died of
leu$emia on Ma+ 1/, 1/HH and was survived '+ his wife, petitioner *+lvia, and onl+
child, Gri>ia Gatrina. &n the settlement of his estate, petitioner was appointed
administratri: of her late hus'and9s intestate estate. n 1ovem'er F, 1//), petitioner
filed a motion for leave to sell or mortgage estate propert+ in order to generate funds for
the pa+ment of deficienc+ estate ta:es in the sum of PF,81F,!"0.00. Private respondent,
the father of the deceased filed two complaints for the recover+ of said propert+. He
pra+ed for the recover+ of the pieces of propert+ that were placed in the name of
deceased .le:ander '+ private respondent, the same propert+ 'eing sought to 'e sold
out, mortgaged, or disposed of '+ petitioner. Private respondent claimed in 'oth cases
that even if said propert+ were placed in the name of deceased .le:ander, the+ were
ac4uired through private respondent9s mone+, without an+ cause or consideration from
deceased .le:ander.
ISS$E8
Page | 606
&s the petitioner correct in her contention that there was an e:press trust 'etween
the deceased and private respondent;
R$LING8
Petitioner is in error when she contends that an e:press trust was created '+
private respondent when he transferred the propert+ to his son. <:press trust is those
that are created '+ the direct and positive acts of the parties, '+ some writing or deed or
will or '+ words evidencing an intention to create a trust. n the other hand, implied
trusts are those which, without 'eing e:pressed, are deduci'le from the nature of the
transaction '+ operation of law as matters of e4uit+, independentl+ of the particular
intention of the parties. Thus, if the intention to esta'lish a trust is clear, the trust is
e:pressJ if the intent to esta'lish a trust is to 'e ta$en from circumstances or other
matters indicative of such intent, then the trust is implied.
&n the cases at hand, private respondent contends that the pieces of propert+
were transferred in the name of the deceased .le:ander for the purpose of ta$ing care of
the propert+ for him and his si'lings. *uch transfer having 'een effected without cause
of consideration, a resulting trust was created. . resulting trust arises in favor of one
who pa+s the purchase mone+ of an estate and places the title in the name of another,
'ecause of the presumption that he who pa+s for a thing intends a 'eneficial interest
therein for himself. The trust is said to result in law from the acts of the parties. *uch a
trust is implied in fact. Petitioner9s assertion that private respondent9s action is 'arred
'+ the statute of limitations is erroneous. The statue of limitations cannot appl+ in this
case. @esulting trusts generall+ do not prescri'e e:cept when the trustee repudiates the
trust.
V0A. 0E RE#$ER#O 5s. %AR:
G.R. No. 14"1"!. 0ECEM%ER 1+, !!1
FAC#S8
,hen *pouses <ste'an Pere> and #oren>a *anche> died intestate, their rights over the
propert+ were inherited '+ their daughter, =uana Pere>, married to 1umeriano Bar>,
Page | 607
who then declared the properl+, for ta:ation purposes, under her name 'ut with an area
of onl+ 10,1"0 s4uare meters, more or less. n .pril 1", 1/)/, =uana Pere>, widow Bar>,
e:ecuted a deed confirming her e:ecution of a LDeed of .'solute *ale,L in favor of
Panfilo @etuerto, married to 2atalina 2eni>a, over a portion of the LHacienda de
Mandaue.5 However, on .pril )", 1/0!, Panfilo @etuerto purchased the aforementioned
parcel of land, this time, from the .rch'ishop of 2e'u. &n the meantime, the *an 2arlos
*eminar+ in 2e'u filed a Petition with the @egional Trial 2ourt for the issuance of titles
over several parcels of land in LHacienda de Mandaue,L including #ot 1o. H/"6., earlier
purchased '+ Panfilo @etuerto from =uana Pere> and from the .rch'ishop of 2e'u. 1o
such Decree was issued as directed '+ the 2ourt 'ecause the *econd ,orld ,ar ensued
in the Pacific. However, Panfilo @etuerto failed to secure the appropriate decree after
the war.
ISS$E8
,ho has a right of ownership over the su'(ect lot;
R$LING8
2onstructive trusts are created in e4uit+ to prevent un(ust enrichment, arising against
one who, '+ fraud, duress or a'use of confidence, o'tains or holds the legal right to
propert+ which he ought not, in e4uit+ and good conscience, to hold. Petitioners failed
to su'stantiate their allegation that their predecessor6in6interest had ac4uired an+ legal
right to the propert+ su'(ect of the present controvers+. 1or had the+ adduced an+
evidence to show that the certificate of title of Pedro Bar> was o'tained through fraud.
<ven assuming arguendo that Pedro Bar> ac4uired title to the propert+ through mista$e
or fraud, petitioners are nonetheless 'arred from filing their claim of ownership. .n
action for reconve+ance 'ased on an implied or constructive trust prescri'es within ten
+ears from the time of its creation or upon the alleged fraudulent registration of the
propert+. *ince registration of real propert+ is considered a constructive notice to all
persons, then the ten6+ear prescriptive period is rec$oned from the time of such
registering, filing or entering. Thus, petitioners should have filed an action for
reconve+ance within ten +ears from the issuance of 2T 1o. !)1 in 1ovem'er 1", 1/"H.
This, the+ failed to do so. &n the 1/"" decision of the #and @egistration 2ourt in #@2 1o.
!)/, it was found that Pedro Bar>, private respondentsK predecessor6in6interest, was the
lawful owner of the su'(ect propert+ as he and his predecessors6in6interest had 'een in
peaceful, continuous and open possession thereof in the concept of owner since 1/1!.
Page | 608
C3IA LIONG #AN 5. CO$R# OF APPEALS
7.@. 1o. 10")!1, 1ovem'er 11, 1//0
FAC#S8
Petitioner claims to 'e the registered owner of the motor vehicle, <lf van which
was purchased '+ his 'rother Tan Ban -ong, the private respondent. The petitioner
principall+ relies on the fact that the vehicle is registered in his name. He testified that
the said vehicle was purchased, that he sent his 'rother to pa+ for it and the receipt of
pa+ment was placed in petitioner9s name 'ecause it was his mone+ that was used to pa+
for the vehicle, that he allowed his 'rother to use it and that his 'rother refused to
return the same. @T2, as affirmed '+ the 2. ruled that ownership 'elongs to the private
respondent as the testimonies of Tan Pit *in, the one whom he 'orrowed mone+ fro for
the sad purchase and the emplo+ee of the &su>u motors were given weight.
ISS$E8
,hether or not the petitioner has ownership of the propert+ n 4uestion
R$LING8
. certificate of registration of a motor vehicle in one9s name indeed creates a
strong presumption of ownership. The person in whose favor it, has 'een issued is
virtuall+ the owner thereof unless proved otherwise. *uch presumption is re'utta'le '+
competent proof. &t was undenia'le that an implied trust was created when the
certificate of registration of the vehicle was placed in the petitioner9s name although the
price thereof was paid '+ private respondent. . trust, which drives its strength from the
confidence one reposes on another especiall+ 'etween 'rothers, does not lose that
character simpl+ 'ecause of what appears is a legal document.
Petition is denied.
Page | 609
EILIA O&LACO V. CO C3O C3I#
G.R. No. 5"!1!, Mar1< '1, 1++'
FAC#S8
n Ma+ 18, 10"0, private respondent6spouses Calentin 2o 2ho 2hit and #a+
Gia learned fro the newspaper that 9 laco sold the ro4uieta propert+ to the @oman
2atholic arch'ishop for P)00,000. @spondent6spouses sued petitioners to recover the
purchase price, asserting that petitioner $nes that the+ were the real vendees and that
the legal title thereto was merel+ placed in her name. The+ contend that 9 laco
'reached the trust when she sold the land. ,hile petitioners assert that she merel+ left
the certificate of title covering the propert+ with private respondent for safe$eeping.
ISS$E8
,hether a resulting trust 'etween the parties in the ac4uisition of the propert+
has prescri'ed
R$LING8
&t has 'een esta'lished that a resulting trust 'etween the parties occurred.
.lthough the propert+ was 'ought '+ the respondent6spouses, the legal title was placed
n the name of 9 laco. The transfer of the Torrens title in her name was onl+ in
consonance with the deed of sale n her favor. The second re4uisite is a'sent., hence
prescription did not 'egin to run until the sale of the su'(ect propert+ which was clearl+
an act of repudiation.
But immediatel+ after 9 laco sold the propert+ which is a disavowal of the
resulting trust, respondent6spouses instituted the present suit for 'reach of trust.
2orrespondingl+, laches cannot lie against them.
2osts against petitioners.
Page | 610
Page | 611