ANCHETA, ANDRES, BAUZON, BRIONES, CORPUZ, DOMALANTA , FELIPE,

MANOGAN, MILANES, REYNANTE, VILLAMOR [Type here]

Submitted to Atty. Maria Lulu G. Reyes 5/10/16 LLB1-A

 1 Ocampo III v. People 543 SCRA 487
2 Leung Ben v. O'Brien 38 PHIL 182
3 Pelayo v. Lauron 12 PHIL 453
4 Hotel Nikko v. Reyes 452 SCRA 532
5 St. Mary's Academy v. Capitanos February 6 2002
6 Sps. Guanio v. Makati Shangri-La Hotel February 7 2011
7 TSPI, Inc. v. TSPIC Employees Union 545 SCRA 215
8 Regino v. Pangasinan College November 18 2004
9 PSBA v. CA February 4 1992
10 Ayala Corp v. Rosa Diana Realty 346 SCRA 663
11 Bricktown Development v. Amor Tierra Development 239 SCRA 126
12 Locsin v. Mekeni December 9 2013
13 Sarte Flores v. Sps. Lindo April 13 2011
14 Titan-Ikeda Construction v. Primetown Property 544 SCRA 466
15 PADCOM v. Ortigas May 9 2002
16 People v. Nurfrashir Hashim, et al. June 13 2012
17 Abella v. People August 17 2011
18 People v. Malicsi 543 SCRA 93
19 People v. Sia November 21 2001
20 People v. Doctolero August 20 2001
21 People v. Abulencia August 22 2001
22 Bermudez v. Melecio-Herrera February 26 1988
23 People v. Relova March 6 1987
24 Manantan v. CA January 29 2001
25 People v. Bayotas 236 SCRA 239
26 Barredo v. Garcia 73 PHIL 607
27 Del Carmen Jr. v. Geronimo Bacoy April 25 2012
28 Philippine Hawk Corporation v. Lee February 16 2010
29 Dy Teban v. Ching 543 SCRA 560
30 Safeguard Security v. Tangco 511 SCRA 67
31 Villanueva v. Domingo 438 SCRA 485
32 Calalas v. CA May 31 2000
33 Picart v. Smith 37 PHIL 813

Page 1 of 845
34 Durban Apartments v, Pioneer Insurance January 12 2011
35 Lagon v. Hooven Comalco 349 SCRA 363
36 Sps. Francisco v. CA 401 SCRA 594
37 Tanguiling v. CA 266 SCRA 78
38 Periquet v. CA 238 SCRA 697
39 Legaspi Oil v. CA 224 SCRA 213
40 Philippine Charter v. Central Colleges February 22 2012
41 TITAN-IKEDA CONSTRUCTION vs. PRIMETOWN 544 SCRA 466
42 PNB MADECOR vs. GERARDO C. UY 363 SCRA 128
43 Bargaza v. CA 268 SCRA 105
44 Tanguiling v. CA 266 SCRA 78
45 Tayag v. CA 219 SCRA 480
46 Periquet v. CA 238 SCRA 697
47 Raquel-Santos v. CA July 7 2009
48 RCBC v. CA 305 SCRA 449
49 State Investment v. CA 198 SCRA 392
50 Bank of the Philippine Islands v. Court of Appeals 377 SCRA 117
51 Leano v. Court of Appeals 369 SCRA 36
52 Heirs of Bacus v. Court of Appeals 371 SCRA 295
53 Integrated Packing v. Court of Appeals 333 SCRA 170
54 Laforteza v. Machuca 333 SCRA 643
55 Regala v. Carin April 6 2011
56 International Corporate Bank v. Gucco 351 SCRA 516
57 Republic v. Court of Tax Appeals 366 SCRA 489
58 Diaz v. Davao Light April 4 2007
59 Yasonna v. De Ramos 440 SCRA 154
60 Asian Terminals v. Philam July 24 2013
61 Yambao v. Zuniga 418 SCRA 266
62 Smith, Bell Dodwell v. Borja 383 SCRA 341
63 Ilusorio v. Court of Appeals 393 SCRA 89
64 National Power Corporation v. Court of Appeals 161 SCRA 334
65 Muaje-Tuazon v. Wenphil 511 SCRA 521
66 RCPI v. Verchez 481 SCRA 384
67 Victory Liner v. Gammad 444 SCRA 355
68 FGU v. Sarmiento 386 SCRA 312

Page 2 of 845
 69 LRTA v. Natividad 397 SCRA 75
70 Rodzssen v. Far East Bank 357 SCRA 618
71 University of the East v. Jader February 17 2000
72 Bayne Adjusters v. Court of Appeals 323 SCRA 231
73 Delsan Transport v. C & A Consortium October 1 2003
74 PCIB v. Court of Appeals 350 SCRA 446
75 SMC and heirs of Ouana v. Court of Appeals July 4 2002
76 Heirs of Ochoa v. G&S Transport March 9 2011
77 Pacis v. Morales February 25 2010
78 Philippine Hawk Corporation v. Tan Lee February 16 2010
79 Mercury Drug v. Spouses Huang June 22 2007
80 Mendoza v. Soriano June 8 2007
81 Cerezo v. Tuazon 426 SCRA 167
82 Filcar Transports v. Espinas June 20 2012
83 FEB Leasing v. Sps. Baylon June 29 2011
84 Filipinas Synthetic v. De Los Santos March 16 2011
85 Viron v. De los Santos 345 SCRA 509
86 Mercury Drug v. Baking 523 SCRA 184 (2007)
87 Safeguard Security v. Tangco 511 SCRA 67
88 Pleyto v. Lomboy 423 SCRA 329
89 Viron v. De los Santos 345 SCRA 509
90 Sykl v. Begana 414 SCRA 237
91 Yambao v. Zuniga 418 SCRA 266
92 Mindanao Terminal v. Phoenix 587 SCRA 429
93 YHT Realty v. Court of Appeals 451 SCRA 638
94 Ramos v. Court of Appeals 321 SCRA 584 & 380 SCRA 467
95 Reyes v. Sisters of Mercy October 30 2000
96 Dr. Solidum v. People March 10 2014
97 Rosit v. Davao Doctor's Hospital December 7 2015
98 Nogales v. Capitol Medical Center 511 SCRA 204
99 Proffesional Services v. Agana 513 SCRA 478
100 Professional Services v. Court of Appeals 544 SCRA 170 & February 2
2010
101 Cantre v. Sps. Go 522 SCRA 547
102 Rubi Li v. Spouses Soliman June 7 2011

Page 3 of 845
103 People v. Delos Santos 355 SCRA 415
104 L.G. Foods v. Agraviador 503 SCRA 170
105 Magat v. Medialdea April 20 1983
106 Vda. De Mistica v. Naguiat 418 SCRA 73
107 Co v. Court of Appeals August 17 1999
108 Heirs of Quirong v. DBP December 3 2009
109 Heirs of Gaite v. The Plaza January 26 2011
110 Solar Harvest Incorporated v. Davao Corrugated July 26 2010
111 Reyes v. Tuparan June 1 2011
112 G.G. Sportswear Manufacturing v. World Class Properties, Inc. March 2 2010
113 Movido v. Reyes Pastor February 11 2010
114 Sps. Tongson v. Emergency Pawnshop January 15 2010
115 Sanz Maceda v. DBO August 11 2010
116 Raquel-Santos v. CA July 7 2009
117 Serrano v. Court of Appeals 417 SCRA 415
118 Gil v. Court of Appeals 411 SCRA 18
119 Reyes v. Lim 408 SCRA 560
120 Ong v. Tiu February 1 2002
121 Equatorial Realty v. Mayfair Theater 370 SCRA 56
122 Velarde v. Court of Appeals 361 SCRA 56
123 Asuncion v. Evangelista October 13 1999
124 Uy v. Court of Appeals September 9 1999
125 Tamayo, et. al. v. Abad Senora November 15 2010
126 Tan v. OMC Carriers January 12 2011
127 Victory Liner v. Heirs 394 SCRA 341
128 GSIS v. Labung Deang 365 SCRA 341
129 BPI Investment v. D.G. Carreon 371 SCRA 58
130 Khe Kong v. Court of Appeals 355 SCRA 701
131 Philippine Realty and Holding Corp. v. Ley Construction and Devt. June 13 2011
132 Megaworld Globus Asia, Inc. v. Tanseco October 9 2009
133 Sicam v. Jorge August 8 2007
134 Huibonhoa v. Court of Appeals December 14 1999
135 Ace Agro v. Court of Appeals 266 SCRA 429
136 Dioquino v. Laureano 33 SCRA 65
137 Bachelor Express v. Court of Appeals (Wrong SCRA # sa syllabus)

Page 4 of 845
138 Vasquez v. Court of Appeals 138 SCRA 558
139 Yobido v. Court of Appeals October 17 1997
140 Juntilla v. Fontanar 136 SCRA 625
141 Philamgen Insurance v. MGG Marine March 8 2002
142 Mindez v. Morillo March 12 2002
143 NAPOCOR v. Phillip Bros. 369 SCRA 629
144 Ong Genato v. Bayhon, et. al. August 24 2009
145 Union Bank v. Santibanez 452 SCRA 228
146 San Agustin v. Court of Appeals 371 SCRA 348
147 Project Builders, Inc. v. Court of Appeals 358 SCRA 626
148 Hongkong and Shanghai Bank v. Sps. Broqueza November 17 2010
149 Development Bank of the Philippines v. Court of Appeals 262 SCRA 245
150 Tomimbang v. Tomimbang August 4 2009
151 Gonzales v. Heirs 314 SCRA 585
152 Insular Life v. Young 373 SCRA 626
153 Direct Funders v. Lavina 373 SCRA 645
154 Vda. De Mistica v. Naguiat 418 SCRA 73
155 Hermosa v. Longara 93 PHIL 971
156 Trillana v. Quezon Colleges 93 PHIL 383
157 Visayan Sawmill v. Court of Appeals 219 SCRA 378
158 Leano v. Court of Appeals 369 SCRA 36
159 De Leon v. Ong February 2 2010
160 Heirs of Sandejas v. Lim 351 SCRA 183
161 Commissioner of Internal Revenue v. Primetown August 28 2007
162 NAMARCO v. Tecson 139 PHIL 584
163 Berg v. Magdalena Estates 92 PHIL 110
164 Lirag v. Court of Appeals 63 SCRA 375
165 Daguhoy v. Ponce 96 PHIL 15
166 Victoria Planters v. Victoria Milling 97 PHIL 318
167 Jespajo v. Court of Appeals 390 SCRA 27
168 Borromeo v. Court of Appeals 47 SCRA 65
169 Gonzales v. Jose 66 PHIL 369
170 Baluyut v. Poblete 514 SCRA 370
171 Malayan Realty v. Uy November 10 2006
172 Kasapian ng Manggagawa ng Coca-Cola v. Court of Appeals 487 SCRA 487

Page 5 of 845
173 Santos v. Santos 441 SCRA 472
174 Melotindos v. Tobias 391 SCRA 299
175 LL and Company v. Huang 378 SCRA 612
176 Brent School v. Zamora February 5 1990
177 Lim v. People November 21 1984
178 Pacific Banking v. Court of Appeals May 5 1989
179 Agoncillo v. Javier 38 SCRA 424
180 Ong Guan v. Century 46 PHIL 592
181 Legarda v. Miailhe 88 PHIL 673
182 Reyes v. Martinez 55 PHIL 492
183 Quizana v. Redugerio 94 PHIL 922
184 Marsman v. Philippine Geoanalytics June 29 2010
185 Alipio v. Court of Appeals 341 SCRA 441
186 PH Credit Corporation v. Court of Appeals 370 SCRA 155
187 CDCP v. Estrella 501 SCRA 228
188 Republic Glass Corporation v. Qua July 30 2004
189 Industrial Management v. NLRC 331 SCRA 640
190 Metro Manila Transit v. Court of Appeals June 21 1993
191 Inciong v. Court of Appeals 257 SCRA 578
192 Philippine Blooming Mills v. Court of Appeals October 15 2003
193 Queensland-Tokyo v. George September 8 2010
194 Shrimp Specialist, Inc. v. Fuji-Triumph December 7 2009
195 Asset Builders v. Stronghold October 18 2010
196 Esparwa Security v. Liceo de Cagayan 508 SCRA 373
197 Dimayuga v. PCIB August 5 1991
198 Cerna v. Court of Appeals March 30 1993
199 Nazareno v. Court of Appeals 343 SCRA 637
200 Alonzo v. San Juan 451 SCRA 45
201 David v. Court of Appeals 316 SCRA 710
202 Republic v. Thi Thu Thuy de Guzman June 15 2011
203 Marques v. far East Bank January 10 2011
204 Prisma Construction v. Menchavez March 9 2010
205 Macalalag v. People 511 SCRA 400
206 Tan v. Court of Appeals 367 SCRA 571
207 Eastern Shipping v. Court of Appeals 234 SCRA 78

Page 6 of 845
208 PCI v. Ng Sheung Ngor 541 SCRA 223
209 NSBC v. Philippine National Bank 435 SCRA 565
210 Polotan v. Court of Appeals 296 SCRA 247
211 New Sampaguita v. Philippine National Bank 435 SCRA 565
212 Nacar v. Gallery Frames August 13 2013
213 Estores v. Sps. Supangan April 18 2012
214 Hung v. BPI Card July 20 2010
215 Marques v. far East Bank January 10 2011
216 Land Bank v. Ong November 24 2010
217 Mallari v. Prudential June 5 2013
218 RGM Industries v. United Pacific June 27 2012
219 Prisma Construction v. Menchavez March 9 2010
220 Maceda, Jr. v. DBO/DBP August 11 2010
221 Philippine National Bank v. Encina 544 SCRA 508
222 Imperial v. Jaucian 427 SCRA 517
223 Pabugais v. Sahijwani 423 SCRA 596
224 Lo v. Court of Appeals 411 SCRA 523 (Sept. 23 2003)
225 Ligutan v. Court of Appeals February 12 2002
226 Pascual v. Ramos 384 SCRA 105
227 First Metro Investment v. Este del Sol 369 SCRA 99
228 Domel Trading v. Court of Appeals 315 SCRA 13
229 Medel v. Court of Appeals 299 SCRA 481
230 Reformina v. Tomol 139 SCRA 260 (Oct. 11 1985)
231 Lo v. KJH 413 SCRA 182
232 Philippine National Bank v. Court of Appeals 256 SCRA 44
233 Cathay Pacific v. Vasquez 399 SCRA 207
234 Citibank v. Sabentiano 504 SCRA 378
235 Telengton Bros. v. US Lines 483 SCRA 458
236 CF Sharp v. Northwest Airlines 381 SCRA 314
237 Padilla v. Paredes 328 SCRA 434
238 Tibajia v. Court of Appeals 223 SCRA 163
239 Development Bank of the Philippines v. Court of Appeals 494 SCRA 25
240 Vitarich v. Locsin November 15 2010
241 Metrobank v. Cabilzo 510 SCRA 259
242 Almeda v. Bathala Marketing 542 SCRA 470

Page 7 of 845
243 PCI v. Ng Sheung Ngor 541 SCRA 223
244 Palanca v. Guides 452 SCRA 461
245 PCIB v. Court of Appeals 481 SCRA 127
246 Lagon v. Hooven Comalco 349 SCRA 363
247 Bank of the Philippine Islands v. Court of Appeals 232 SCRA 302
248 Republic v. Thi Thu Thuy De Guzman June 15 2011
249 PCIB v. Franco March 5 2014
250 Audio Electric v. NLRC 308 SCRA 340
251 Land Bank of the Philippines v. Ong November 24 2010
252 Binalbagan v. Court of Appeals 256 SCRA 44
253 Lorenzo Shipping v. BJ Marthel 443 SCRA 163
254 Luzon Development Bank v. Enriquez January 12 2011
255 Estanislao v. East-West Banking Corporation 544 SCRA 369
256 Aquintey v. Tibong 511 SCRA 414
257 Lo v. CA 411 SCRA 523 (Sept. 23 2003)
258 ASI Corporation v. Evangelista 545 SCRA 300
259 Paculdo v. Regalado 345 SCRA 134
260 CBC v. Court of Appeals 265 SCRA 327
261 Mobil v. Court of Appeals 272 SCRA 523
262 Sps. Bonrostro v. Sps. Luna July 24 2013
263 Dalton v. FGR Realty and Development Corporation January 19 2011
264 Benos v. Lawilao 509 SCRA 549
265 Peoples Industrial v. Court of Appeals October 24 1997
266 Eternal Gardens v. Court of Appeals December 9 1997
267 Rayos v. Reyes 398 SCRA 24
268 Occena v. Court of Appeals October 29 1976
269 Ortigas v. Feati Bank 94 SCRA 533
270 So v. Food Fest Land, Inc. April 7 2010
271 Magat v. Court of Appeals 337 SCRA 298
272 PNCC v. Court of Appeals 272 SCRA 183
273 NATELCO v. Court of Appeals 230 SCRA 351
274 Reyna v. Commission on Audit February 8 2011
275 Trans Pacific v. CA 235 SCRA 494
276 Dalupan v. Harden November 27 1951
277 Lopez Vito v. Tambunting 33 PHIL 226

Page 8 of 845
278 Estate of Mota v. Serra 47 PHIL 464
279 Yek Ton Lin v. Yusingco 64 PHIL 162
280 EGV Realty v. Court of Appeals July 20 1999
281 Aerospace Chemical v. Court of Appeals September 23 1999
282 Apodaca v. NLRC 172 SCRA 442
283 Spouses Chung v. Ulanday Construction October 11 2010
284 Mondragon v. Sola, Jr. January 21 2013
285 Insular Investment v. Capital One April 25 2012
286 Lao, et. al. v. Special Plans, Inc. June 29 2010
287 United Planters Sugar v. Court of Appeals April 2 2009
288 PNB Management v. R&R Metal 373 SCRA 1
289 Silahis v. IAC December 7 1989
290 Francia v. Court of Appeals June 28 1988
291 Trinidad v. Acapulco 494 SCRA 179
292 Heirs of Franco v. Sps. Gonzales June 27 2012
293 Hernandez-Nievera v. Hernandez February 14 2011
294 St. James College v. Equitable PCI Bank August 9 2010
295 Tomimbang v. Tomimbang August 4 2009
296 Mindanao Savings v. Willkom October 20 2010
297 Aquintey v. Tibong 511 SCRA 414
298 Asian Terminals v. Philam July 24 2013
299 Loadmasters v. Glodel Brokerage January 10 2011
300 Metrobank v. Rural Bank of Gerona July 5 2010
301 Swagman v. Court of Appeals 455 SCRA 175
302 Azolla Farms v. Court of Appeals November 11 2004
303 Bautista v. Pilar Development 312 SCRA 611
304 Evadel Realty v. Soriano 357 SCRA 395
305 Rosario v. De Guzman July 10 2013
306 Vector Shipping v. American Home July 3 2013
307 Villaza v. German Management August 8 2010
308 Insurance of the Philippine Islands v. Sps. Gregorio February 14 2011
309 Mariano v. Petron January 21 2010
310 Sps. Bernales v. Heirs of Sambaan January 15 2010
311 B&I Realty v. Caspe 543 SCRA 1
312 Mersina v. Garcia 509 SCRA 431

Page 9 of 845
313 Heirs of Gaudiane v. Court of Appeals March 11 2004
314 Laureano v. Court of Appeals March 9 2000
315 Banco Filipino v. Court of Appeals May 30 2000
316 Vda. De Delgado v. Court of Appeals August 28 2001
317 Maestrado v. Court of Appeals March 9 2000
318 F.A.T. Kee Computer v. Online Networks February 2 2011
319 Tanay Recreation v. Fausto 455 SCRA 436
320 Mendoza v. Court of Appeals March 9 2000
321 Lim v. Queensland 373 SCRA 31
322 Placewell v. Camote June 26 2006
323 Heirs of Ragua v. Court of Appeals January 31 2000
324 Metrobank v. Court of Appeals June 8 2000
325 Spouses Manuel v. Court of Appeals February 1 2000
326 Cuenco v. Cuenco 458 SCRA 496 (October 13
2004)
327 Laurel v. Desierto 383 SCRA 493
328 Hanopol v. SM 390 SCRA 439
329 Terminal Facilities v. PPA 378 SCRA 82
330 Mendoza v. Court of Appeals June 25 2001
331 Marques v. Far East Bank January 10 2011
332 Roblett Construction v. Court of Appeals 266 SCRA 71
333 Simedarby v. Goodyear June 8 2011
334 Far East Bank v. Borja January 25 1011
335 Kings Properties Corporation, Inc. v. Galido November 27 2009
336 Metrobank v. Cabilzo 510 SCRA 259
337 Mesina v. Garcia 509 SCRA 431
338 Pahamatong v. Philippine National Bank March 31 2005
339 Shoppers Paradise v. Roque January 13 2004
340 Meatmasters v. Lelis Integrated 452 SCRA 626
341 Larena v. Mapili August 7 2003
342 Santos v. Santos October 2 2001
343 Villanueva-Mijares v. Court of Appeals April 12 2000
344 Garcia v. Villar June 27 2012
345 Spouses Edralin v. Philippine Veterans Bank March 9 2011
346 University Physicians Services v. Marian Clinics September 1 2010
347 Martin, et. al. v. DBS Bank Philippines June 16 2010

Page 10 of 845
348 Heirs of Zabala, et. al. v. Court of Appeals May 6 2010
349 Duncan v. Glaxo 438 SCRA 343
350 Star Paper v. Simbol 487 SCRA 228
351 Tiu v. Platinum Plans February 28 2007
352 Avon Cosmetics v. Luna 511 SCRA 376
353 Del Castillo v. Richmond 45 PHIL 679
354 Arwood v. DM Consunji 394 SCRA 11
355 Sps. Tecklo v. Rural Bank of Pamplona June 18 2010
356 Banate v. Phil. Countryside July 13 2010
357 Pascual v. Ramos 384 SCRA 105
358 Chua Tee Dee v. CA 429 SCRA 418 (2004)
359 GQ Garments v. Miranda 495 SCRA 741 (2006)
360 Bercero v. Capitol Development 519 SCRA 484 (2007)
361 Hermedes v. CA October 8 1999
362 PUP v. Golden Horizon March 15 2010
363 Villegas v. Court of Appeals 499 SCRA 276
364 Equatorial Realty v. Carmelo 264 SCRA 483
365 PUP v. Court of Appeals 368 SCRA 691
366 Litonjua v. L&R 320 SCRA 405
367 Josefa v. Zhandong 417 SCRA 269
368 Saludo v. Security Bank October 13 2010
369 PCI v. Ng Sheung Ngor 541 SCRA 223
370 Dio v. St. Ferdinand Memorial 509 SCRA 453
371 PILTEL v. Tecson 428 SCRA 378
372 PAL v. Court of Appeals 255 SCRA 48
373 Ermitano v. Court of Appeals 306 SCRA 218
374 Uniwide v. Titan-Ikeda 511 SCRA 335
375 Heirs of Salas v. Laperal December 13 1999
376 Medrano v. Court of Appeals 452 SCRA 77
377 Tan v. Gullas 393 SCRA 334
378 Gozan v. Mercado 511 SCRA 305
379 Sta. Lucia Realty v. Spouses Buenaventura October 2 2009
380 Chan v. Maceda 402 SCRA 352
381 Baluyot v. Court of Appeals July 22 1999
382 Cuyco v. Cuyco 487 SCRA 693

Page 11 of 845
383 Go v. Cordero May 4 2010
384 Tayag v. Court of Appeals March 25 2004
385 So v. Court of Appeals September 21 1999
386 International Freeport v. Danzas January 26 2011
387 Rockland v. Mid Pasig Development 543 SCRA 596
388 MMDA v. JANCOM 375 SCRA 320
389 Korean Air v. Yuson June 16 2010
390 Rockland v. Mid Pasig Land Development 543 SCRA 596
391 Manila Metal v. PNB 511 SCRA 444
392 Montecillo v. Reynes 385 SCRA 244
393 Soler v. Court of Appeals 358 SCRA 57
394 Palattao v. Court of Appeals May 7 2002
395 ABS-CBN v. Court of Appeals January 21 1999
396 Limson v. Court of Appeals 357 SCRA 209
397 Villanueva v. Philippine National Bank December 6 2006
398 Catalan v. Basa July 31 2007
399 Domingo v. Court of Appeals October 17 2001
400 Heirs of Sevilla v. Sevilla April 30 2003
401 Mendezona v. Ozamiz February 6 2002
402 Lim v. Court of Appeals 229 SCRA 616
403 Ruiz v. Court of Appeals 401 SCRA 594
404 Dela Cruz v. Sison 451 SCRA 754
405 Rural Bank of Sta. Maria v. Court of Appeals 314 SCRA 225
406 Carabeo v. Spouses Dingco April 4 2011
407 Chavez v. PEA 415 SCRA 403
408 Carabeo v. Spouses Dingco April 4 2011
409 Melliza v. City of Ilo-Ilo 23 SCRA 477
410 Catindig v. Vda. De Meneses February 2 2011
411 Orduna, et. al. v. Fuentebella June 29 2010
412 Brobio Mangahas v. Brobio October 20 2010
413 Golden Apple Realty v. Sierra Grande Realty July 28 2010
414 Askay v. Cosalan 46 PHIL 179
415 Heirs of Balite v. Lim 446 SCRA 56
416 Suntay v. Court of Appeals 252 SCRA 430
417 Uy v. Court of Appeals September 9 1999

Page 12 of 845
418 Pentacapital v. Makilito Mahinay July 5 2010
419 Heirs of Gaite v. The Plaza January 26 2011
420 Catly v. Navarro, et. al. May 5 2010
421 Liguez v. Court of Appeals 102 PHIL 577
422 Philbank v. Lui She 21 SCRA 52
423 Londres v. Court of Appeals 393 SCRA 133
424 Spouses Vega v. SSS September 20 2010
425 Balatbat v. Court of Appeals 261 SCRA 128
426 Universal Robina v. Heirs of Teves 389 SCRA 316
427 Sarming v. Dy June 6 2002
428 Cebu v. Court of Appeals 407 SCRA 154
429 ADR Shipping v. Gallardo 389 SCRA 82
430 Movido v. Pastor February 11 2010
431 TSPIC Corp. v. TSPIC Employees Union 545 SCRA 215
432 Estanislao v. East-West Banking Corporation 544 SCRA 369
433 Aquintey v. Tibong 511 SCRA 414
434 Cruz v. Court of Appeals 456 SCRA 165
435 Gonzales v. Court of Appeals 354 SCRA 8
436 Almira v. Court of Appeals 399 SCRA 351
437 Philbank v. Lim 455 SCRA 436
438 Rigor v. Consolidated Leasing 387 SCRA 437
439 Velasquez v. Court of Appeals June 30 1999
440 Heirs of Quirong v. Development Bank of the Philippines December 3 2009
441 Lee v. Bangkok Bank February 9 2011
442 Equatorial Realty v. Mayfair Theater 370 SCRA 56
443 Siguan v. Lim November 19 1999
444 Khe Kong v. Court of Appeals 355 SCRA 701
445 Suntay v. Court of Appeals 251 SCRA 430
446 Brobio Mangahas v. Brobio October 20 2010
447 Hernandez v. Hernandez March 9 2011
448 Fuentes, et. al. v. Roca April 21 2010
449 Associated Bank v. Spouses Montano October 16 2010
450 Miailhe v. Court of Appeals 354 SCRA 675
451 First Philippine Holdings v. Trans Middle East Equities, Inc. December 4 2009
452 Sanchez v. Malapad Realty 541 SCRA 397

Page 13 of 845
453 Oesmer v. PDC 514 SCRA 228
454 Vda. De Ape v. Court of Appeals 456 SCRA 193
455 Francisco v. Herrera 392 SCRA 317
456 Braganza v. Villa Abrille 105 PHIL 456
457 Katipunan v. Katipunan January 30 2002
458 Jumalon v. Court of Appeals January 30 2002
459 Cabales, et. al. v. Court of Appeals August 31 2007
460 Vda. De Ouano, et. al. v. Republic February 9 2011
461 Orduna, et. al. v. Fuentebella June 29 2010
462 Municipality of Hagonoy v. Hon. Dumdum March 22 2010
463 Shoemaker v. La Tondena 68 PHIL 24
464 PNB v. Philippine Vegetable Oil Company 49 PHIL 897
465 Vda. De Ouano, et. al. v. Republic February 9 2011
466 Municipality of Hagonoy v. Dumdum March 22 2010
467 Tan v. Villapaz 475 SCRA 720
468 Spouses David v. Tiongson August 25 1999
469 Cordial v. Miranda December 14 2000
470 Villanueva-Mijares v. Court of Appeals April 12 2000
471 Rosencor v. Inquing 354 SCRA 119
472 Firme v. Buka 414 SCRA 190
473 Querubin v. COMELEC December 8 2015
474 Golden Apple Realty v. Sierra Grande Realty July 28 2010
475 Heirs of M. Doronio v. Heirs of F. Doronio 541 SCRA 479
476 Sps. Bernales v. Heirs of Sambaan January 15 2010
477 Heirs of Liwagon v. Heirs of Liwagon November 26 2014
478 Campos v. Pastrana December 8 2009
479 Gurrea v. Suplico 488 SCRA 332
480 Frenzel v. Catito 406 SCRA 55
481 La Bugal Blaan v. Ramos December 1 2004
482 Agan v. PIATCO January 21 2004
483 Jaworski v. PAGCOR January 14 2004
484 Heirs of Balite v. Lim 446 SCRA 56
485 Pineda v. Court of Appeals 376 SCRA 222
486 Cruz v. Bancom 379 SCRA 490
487 Cauton v. Salud January 27 2004

Page 14 of 845
488 Hadja Fatima v. Hadji Abubacar August 2 2010
489 Infotech v. COMELEC January 13 2004
490 Pabugais v. Sahijwani 423 SCRA 596
491 Liguez v. Court of Appeals 102 PHIL 577
492 Philbank v. Lui She 21 SCRA 52
493 Vigilar v. Aquino January 18 2011
494 EPG Construction v. Vigilar 354 SCRA 566
495 Go Chan v. Young 354 SCRA 2076
496 Francisco v. Herrera 392 SCRA 317
497 Mendezona v. Ozamiz 376 SCRA 482
498 Manzanilla v. Court of Appeals March 15 1990
499 Rural Bank of Paranaque v. Remolado March 18 1985
500 Cojuangco v. Republic April 12 2011
501 Ringor v. Ringor 436 SCRA 484 (August 13 2004)
502 Salvador v. Court of Appeals 313 SCRA 369 (1995)
503 Huang v. Court of Appeals 236 SCRA 420
504 Vda. De Esconde v. Court of Appeals 253 SCRA 66
505 Tala Realty v. Banco Filipino 392 SCRA 506
506 Medina v. Court of Appeals 196 PHIL 205 (1981)
507 Filipinas Port v. Go March 16 2007
508 Mendizabel v. Apao February 20 2006
509 Vda. De Alberto v. Go July 21 2005
510 Heirs of Yap v. Court of Appeals 371 PHIL 523 (1999)
511 Heirs of Kionisala v. Heirs of Dacut 378 SCRA 206
512 Ramos v. Ramos 61 SCRA 284
513 Intestate Estate of Ty v. Court of Appeals 356 SCRA 661
514 Vda. De Reterto v. Barz 372 SCRA 712
515 Chia Long Tan v. Cour of Appeals 228 SCRA 75
516 Olaco v. Co Cho Chit 220 SCRA 656

Page 15 of 845
 G.R Nos. 156547-51
February 4, 2008
Mariano Un Ocampo III, petitioner, vs. People of the Philippines, respondent.

FACTS:

During the incumbency of President Corazon C. Aquino, Tarlac Province was chosen as
one of the four provinces that would serve as a test case on decentralization of local government
administration. For this purpose, the Department of Budget and Management (DBM) released
National Aid for Local Government Units (NALGU) funds in the total amount of P100 million
to the Province of Tarlac. Petitioner Ocampo, provincial governor of Tarlac loaned out P56.6
million of the P100 million to the Lingkod Tarlac Foundation, Inc. (LTFI) for the
implementation of various livelihood projects. The loan was made pursuant to a Memorandum of
Agreement (MOA) entered into by the Province of Tarlac, represented by petitioner Ocampo,
and LTFI, represented by petitioner Flores, on August 8, 1988. The P56.6 million released to
LTFI was utilized became the subject matter of 25 criminal cases.

The Sandiganbayan convicted the petitioner of the crime of malversation of public funds.
According to the Sandiganbayan, Sec. 203(t) of the Local Government Code obligated provincial
governors to adopt measures to safeguard all the lands, buildings, records, monies, credits and
other property rights of the province. However, petitioner Ocampo, as governor of Tarlac,
neglected to set up safeguards for the proper handling of the NALGU funds in the hands of LTFI
which resulted in the disappearance of P1,132,739 and P58,000 of the said funds. However, the
petitioner contended that the loan was private in character since it was a loan contracted with the
Taralc Foundation.

ISSUE:

Whether the amount loaned out was private in nature.

HELD:

The MOA shows that LTFI is allowed to borrow funds directly from the Provincial
Government to fund Lingkod Tarlac Foundation projects provided the projects are livelihood
projects under the Rural Industrialization Can Happen Program. Moreover, the agreement
stipulates under the Conditions for Release of Funds that the Province of Tarlac shall release in
lump sum the appropriate funds for the approved projects covered by individual loan documents
upon signing of the respective loan agreement.

Art. 1953 of the Civil Code provides that a person who receives a loan of money or any
other fungible thing acquires the ownership thereof, and is bound to pay to the creditor an equal
amount of the same kind and quality. Hence, petitioner Ocampo correctly argued that the
NALGU funds shed their public character when they were lent to LTFI as it acquired ownership
of the funds with an obligation to repay the Province of Tarlac the amount borrowed. The
relationship between the Province of Tarlac and the LTFI is that of a creditor and debtor. Failure
to pay the indebtedness would give rise to a collection suit.

Page 16 of 845
Page 17 of 845
 G.R. No. L-13602
April 6, 1918
Leung Ben, plaintiff, vs. P. J. O'Brien, James A. Ostrand and Geo. R. Harvey, Judges of
First Instance of City of Manila, defendants.

FACTS:

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

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

ISSUE:

Whether or not the statutory obligation to restore money won at gaming is an obligation
from contract, express or implied

HELD:

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

Page 18 of 845
 G.R. No. L-4089
January 12, 1909
Arturo Pelayo, plaintiff-appellant, vs. Marcelo Lauron, et al., defendants-appellees.

FACTS:

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

ISSUE:

Whether or not the parents-in-law are under any obligation to pay the fees claimed by the
plaintiff

HELD:

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

Page 19 of 845
 G.R. No. 154259
February 28, 2005
Nikko Hotel Manila Garden and Ruby Lim, petitioners, vs. Roberto Reyes, a.k.a. Amay
Bisaya, respondent.
FACTS:

Respondent herein Roberto Reyes, more popularly known by the screen name Amay
Bisaya, alleged that while he was having coffee at the lobby of Hotel Nikko. He was spotted by
Dr. Violeta Filart, his friend of several years, who invited him to join her in a party at the hotels
penthouse in celebration of the natal day of the hotels manager, Mr. Masakazu Tsuruoka. Reyes
then went up with the party of Dr. Filart carrying the basket of fruits which was the latters
present for the celebrant. At the penthouse, they first had their picture taken with the celebrant
after which Reyes sat with the party of Dr. Filart. After a couple of hours, when the buffet dinner
was ready, Mr. Reyes lined-up at the buffet table but, to his great shock, shame and
embarrassment, he was stopped by Ruby Lim, the Executive Secretary of Hotel Nikko. Reyes
alleged that Ruby Lim, in a loud voice and within the presence and hearing of the other guests
who were making a queue at the buffet table, told him to leave the party because he was not
invited. Mr. Reyes tried to explain that he was invited by Dr. Filart but the latter, who was within
hearing distance, completely ignored him thus adding to his shame and humiliation. Afterwards,
while he was still recovering from the traumatic experience, a Makati policeman approached and
asked him to step out of the hotel. Like a common criminal, he was escorted out of the party by
the policeman. Claiming damages, Mr. Reyes asked for P1 million actual damages, P1 million
moral and/or exemplary damages and P200, 000 attorneys fees.

ISSUE:

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

HELD:

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

The Supreme Court agreed with the lower courts ruling that Ms. Lim did not abuse her
right to ask Mr. Reyes to leave the party as she talked to him politely and discreetly. Considering
the closeness of defendant Lim to plaintiff when the request for the latter to leave the party was
made such that they nearly kissed each other, the request was meant to be heard by him only and
there could have been no intention on her part to cause embarrassment to him. In the absence of
any proof of motive on the part of Ms. Lim to humiliate Mr. Reyes and expose him to ridicule
and shame, it is highly unlikely that she would shout at him from a very close distance. Ms. Lim
having been in the hotel business for twenty years wherein being polite and discreet are virtues to
be emulated, the testimony of Mr. Reyes that she acted to the contrary does not inspire belief and

Page 20 of 845
is indeed incredible. Ms. Lim, not having abused her right to ask Mr. Reyes to leave the party to
which he was not invited, cannot be made liable to pay for damages under Articles 19 and 21 of
the Civil Code. Necessarily, neither can her employer, Hotel Nikko, be held liable as its liability
springs from that of its employee. Had respondent simply left the party as requested, there was
no need for the police to take him out.

Page 21 of 845
 G.R. No. 143363
February 6, 2002
St. Marys Academy, petitioner, vs. William Carpitanos and Lucia S. Carpitanos, Guada
Daniel, James Daniel Ii, James Daniel, Sr., and Vivencio Villanueva, respondents.

FACTS:

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

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

ISSUE:

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

HELD:

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

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

Page 22 of 845
 GR No. 190601
February 7, 2011
Spouses Luigi M. Guanio and Anna Hernandez-Guanio, petitioners, vs. Makati Shangri-La
Hotel and Resort, Inc., also doing business under the name of Shangri-La Hotel Manila,
respondent.

FACTS:

For their wedding reception on July 28, 2001, spouses Luigi M. Guanio and Anna
Hernandez-Guanio booked at the Shangri-la Hotel Makati. Prior to the event, Makati Shangri-La
Hotel & Resort, Inc. scheduled an initial and final food tasting. The parties eventually agreed on
a final price P1,150 per person. On July 27, 2001, the parties finalized and signed their
contract. Petitioners claim that during the reception, respondents representatives, Catering
Director Bea Marquez and Sales Manager Tessa Alvarez, did not show up despite their assurance
that they would; their guests complained of the delay in the service of the dinner; certain items
listed in the published menu were unavailable; the hotels waiters were rude and unapologetic
when confronted about the delay; and despite Alvarezs promise that there would be no charge
for the extension of the reception beyond 12:00 midnight, they were billed and paid P8,000 per
hour for the three-hour extension of the event up to 4:00 A.M. the next day. They further claim
that they brought wine and liquor in accordance with their open bar arrangement, but these were
not served to the guests who were forced to pay for their drinks.

Petitioners thus sent a letter-complaint to the Makati Shangri-la Hotel and Resort, Inc.and
received an apologetic reply from Krister Svensson, the hotels Executive Assistant Manager in
charge of Food and Beverage. They nevertheless filed a complaint for breach of contract and
damages before the RTC of Makati City. Respondents averred that it was the increase in number
of the unexpected guests that led to the shortage claimed by the petitioners. The RTC rendered a
decision in favor of the plaintiffs and was reversed by the CA, upon appeal, the latter holding
that the proximate cause of petitioners injury was an unexpected increase in their guests.

ISSUE:

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

HELD:

The Court finds that since petitioners complaint arose from a contract, the doctrine of
proximate cause finds no application to it, the latter applicable only to actions for quasi-delicts,
not in actions involving breach of contract. Breach of contract is defined as the failure without
legal reason to comply with the terms of a contract. It is also defined as the failure, without legal
excuse, to perform any promise which forms the whole or part of the contract. The appellate
court, and even the trial court, observed that petitioners were remiss in their obligation to inform
respondent of the change in the expected number of guests. The observation is reflected in the

Page 23 of 845
records of the case. Petitioners failure to discharge such obligation thus excused respondent
from liability for any damage or inconvenience occasioned thereby.

Page 24 of 845
 G.R No. 163419
February 13, 2008
TSPIC Corporation, petitioner, vs. TSPIC Employees Union (FFW), representing Maria Fe
Flores, et al., respondents.

FACTS:

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

ISSUE:

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

HELD:

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

unions and their employers are binding upon the parties and be acted in strict compliance
therewith. Thus, the CBA in this case is the law between the employers and their employees.
Therefore, there was no overpayment when there was an increase of salary for the members of
the union simultaneous with the increasing of minimum wage for workers in the National Capital
Region. The CBA should be followed thus, the senior employees who were first promoted as
regular employees shall be entitled for the increase in their salaries and the same with lower rank
workers.

Page 25 of 845
 G.R. No. 156109
November 18, 2004
Khristine Rea M. Regino, Assisted and Represented by Armando Regino, petitioner, vs.
Pangasinan Colleges Of Science And Technology, Rachelle A. Gamurot And Elissa
Baladad, respondents.

FACTS:

Petitioner Khristine Rea M. Regino was a first year computer science student of
Pangasinan Colleges of Science and Technology (PCST). Reared in a poor family, Regino went
to college mainly through the financial support of her relatives. She enrolled Logic and Statistics
subjects under Rachelle Gamurot and Elissa Baladad, respectively as teachers. In February 2002,
PCST held a fund raising campaign dubbed The Rave Party and Dance Revolution the
proceeds which were to go to the construction of the schools tennis and volleyball courts. Each
student was required to pay for two tickets at the price of P100.00 each. The project was
allegedly implemented by recompensing students who purchased tickets with additional points in
their test scores; those who refused to pay were denied the opportunity to take the final
examinations.

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

ISSUES:

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

HELD:

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

PCST imposed the assailed revenue-raising measure belatedly in the middle of the
semester, It exacted the dance party fee as a condition for students in taking the final

Page 26 of 845
examinations and ultimately for recognition of their ability to finish a course. The fee, however,
was not part of the school-student contract entered into at the start of the school year.

Page 27 of 845
 G.R. No. 84698
February 4, 1992
Philippine School Of Business Administration, et al, petitioners, vs. Court Of Appeals, et
al., respondents.

FACTS:

A stabbing incident on 30 August 1985 which caused the death of Carlitos Bautista while
on the second-floor premises of the Philippine School of Business Administration (PSBA)
prompted the parents of the deceased to file suit in the Regional Trial Court of Manila for
damages against the said PSBA and its corporate officers. At the time of his death, Carlitos was
enrolled in the third year commerce course at the PSBA. It was established that his assailants
were not members of the school's academic community but were elements from outside the
school. Substantially, the private respondents sought to adjudge them liable for the victim's
untimely demise due to their alleged negligence, recklessness and lack of security precautions,
means and methods before, during and after the attack on the victim. Petitioners sought to have
the suit dismissed, alleging that since they are presumably sued under Article 2180 of the Civil
Code, the complaint states no cause of action against them, as jurisprudence on the subject is to
the effect that academic institutions, such as the PSBA, are beyond the ambit of the rule in the
afore-stated article. The respondent trial court, however, overruled petitioners contention and
thru an order dated 8 December 1987, denied their motion to dismiss. Said decision of the
respondent appellate court was primarily anchored on the law of quasi-delicts, as enunciated in
Articles 2176 and 2180 of the Civil Code.

ISSUE:

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

HELD:

It does not necessarily follow. When an academic institution accepts students for
enrollment, there is established a contract between them, resulting in bilateral obligations which
both parties are bound to comply with. For its part, the school undertakes to provide the student
with an education that would presumably suffice to equip him with the necessary tools and skills
to pursue higher education or a profession. On the other hand, the student covenants to abide by
the school's academic requirements and observe its rules and regulations. Institutions of learning
must also meet the implicit or "built-in" obligation of providing their students with an
atmosphere that promotes or assists in attaining its primary undertaking of imparting knowledge.
Certainly, no student can absorb the intricacies of physics or higher mathematics or explore the
realm of the arts and other sciences where there looms around the school premises a constant
threat to life and limb. Necessarily, the school must ensure that adequate steps are taken to
maintain peace and order within the campus premises and to prevent the breakdown thereof.
Because the circumstances of the present case evince a contractual relation between the PSBA
and Carlitos Bautista, the rules on quasi-delict do not apply.

Page 28 of 845
 However, there is, as yet, no finding that the contract between the school and Bautista
had been breached thru the former's negligence in providing proper security measures. Even if
there be a finding of negligence, the same could give rise generally to a breach of contractual
obligation only. Using the test of Cangco, supra, the negligence of the school would not be
relevant absent a contract. In fact, that negligence becomes material only because of the
contractual relation between PSBA and Bautista. In other words, a contractual relation is a
condition sine qua non to the school's liability. The negligence of the school cannot exist
independently of the contract, unless the negligence occurs under the circumstances set out in
Article 21 of the Civil Code.

Page 29 of 845
 G.R. No. 134284
December 1, 2000
Ayala Corporation, petitioner, vs. Rosa-Diana Realty And Development Corporation,
respondent.

FACTS:

Petitioner Ayala Corporation was the registered owner of a parcel of land located in
Alfaro Street, Salcedo Village, Makati City with an area of 840 square meters more or less and
covered by TCT no. 233435 of the Register of Deeds of Rizal. On April 20, 1976, Ayala sold the
lot to Manuel Sy married to Vilma Po and Sy Ka Kieng married to Rosa Chan. The Deed of Sale
executed between Ayala and the buyers contained Special Conditions of Sale and Deed
Restrictions. Manuel Sy and Sy Ka Kieng failed to construct the building in violation of the
Special Conditions of Sale. Notwithstanding the violation, Manuel Sy and Sy Ka Kieng were
able to sell the lot to respondent Rosa-Diana Realty and Development Corp. with Ayalas
approval. As a consideration for Ayala to release the certificate of title of the subject property,
Rosa-Diana, executed an undertaking promising to abide by said Special Condition of Sale
executed between Ayala and the original vendees. Upon the submission of the undertaking,
together with the building plans for a condominium project, known as the Peak, Ayala released
title to the lot, thereby enabling Rosa-Diana to register the Deed of Sale on its favor and obtain
certificate of Title in its name.

Thereafter, Rosa-Diana submitted to the building official of Makati another set of

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

ISSUE:

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

HELD:

Contractual obligations between parties have the force of law between them and absent
any allegation that the same are contrary to law, morals, good customs, public order or public

Page 30 of 845
policy, they must be complied with in good faith. Hence, Article 1159 of the new Civil Code
provides obligations arising from contracts have the force of law between the contracting
parties and should be complied with in good faith. It bears emphasis that as complainant, Ayala
had the prerogative to initiate an action against violators of the deed restrictions. That Rosa-
Diana had acted in bad faith is manifested by the fact that it submitted two sets of building plans,
one which was in conformity with the deed restrictions submitted to Ayala and MACEA, and the
other, which exceeded the height requirement in the deed restrictions to the Makati building
official for the purpose of procuring a building permit from the latter. Moreover, the violation of
the deed restrictions committed by respondent can hardly be denominated as a minor violation.
Hence, respondent Rosa-Diana has the obligation to enforce the Deed of Restrictions contained
in the contract it entered with Ayala.

Page 31 of 845
 G.R. No. 112182
December 12, 1994
Bricktown Development Corp. (its new corporate name Multinational Realty Development
Corporation) and Mariano Z. Veralde, petitioners, vs. Amor Tierra Development
Corporation and the Hon. Court Of Appeals, respondents.

FACTS:

On 31 March 1981, petitioner Bricktown Development Corporation executed two

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

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

private respondent on account of the latters continued failure to pay the installment due 30 June
1981 and interest on the unpaid balance of the stipulated initial payment. On 26 September 1983,
private respondent demanded the refund of its various payment to petitioner amounting to P2,
445, 497.71. However, petitioner did not heed the demand, so private respondent filed an action
with the court a quo.

ISSUE:

Whether or not the contracts to sell were validly rescinded or cancelled by Petitioner
Corporation

HELD:

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

Page 32 of 845
 G.R. No. 192105
December 09, 2013
Antonio Locsin II, petitioner, v. Mekeni Food Corporation, respondent.

FACTS:

In February 2004, respondent offered petitioner the position of Regional Sales Manager
to oversee Mekenis National Capital Region Supermarket/Food Service and South Luzon
operations. In addition to a compensation and benefit package, Mekeni offered petitioner a car
plan, under which one-half of the cost of the vehicle is to be paid by the company and the other
half to be deducted from petitioners salary. Mekenis offer was contained in an Offer Sheet
which was presented to petitioner. To be able to effectively cover his appointed sales territory,
Mekeni furnished petitioner with a used Honda Civic car valued at P280,000.00, which used to
be the service vehicle of petitioners immediate supervisor. Petitioner paid for his 50% share
through salary deductions of P5,000.00 each month. Subsequently, Locsin resigned effective
February 25, 2006. By then, a total of P112,500.00 had been deducted from his monthly salary
and applied as part of the employees share in the car plan. In his resignation letter, petitioner
made an offer to purchase his service vehicle by paying the outstanding balance thereon. The
parties negotiated, but could not agree on the terms of the proposed purchase. Petitioner thus
returned the vehicle to Mekeni on May 2, 2006.

Petitioner made personal and written follow-ups regarding his unpaid salaries,
commissions, benefits, and offer to purchase his service vehicle. Mekeni replied that the
company car plan benefit applied only to employees who have been with the company for five
years; for this reason, the balance that petitioner should pay on his service vehicle stood at
P116,380.00 if he opts to purchase the same.

ISSUE:

Whether or not the car plan privilege is part of the compensation package offered to
petitioner at the inception of his employment

HELD:

There is no evidence to suggest that if petitioner failed to completely cover one-half of

the cost of the vehicle, then all the deductions from his salary going to the cost of the vehicle will
be treated as rentals for his use thereof while working with Mekeni, and shall not be refunded.
Indeed, there is no such stipulation or arrangement between them. Indeed, the Court cannot allow
that payments made on the car plan should be forfeited by Mekeni and treated simply as rentals
for petitioners use of the company service vehicle. Nor may they be retained by it as purported
loan payments, as it would have this Court believe. In the first place, there is precisely no
stipulation to such effect in their agreement. Secondly, it may not be said that the car plan
arrangement between the parties was a benefit that the petitioner enjoyed; on the contrary, it was
an absolute necessity in Mekenis business operations, which benefited it to the fullest extent:
without the service vehicle, petitioner would have been unable to rapidly cover the vast sales

Page 33 of 845
territory assigned to him, and sales or marketing of Mekenis products could not have been
booked or made fast enough to move Mekenis inventory.

Any benefit or privilege enjoyed by petitioner from using the service vehicle was merely
incidental and insignificant, because for the most part the vehicle was under Mekenis control
and supervision. Free and complete disposal is given to the petitioner only after the vehicles cost
is covered or paid in full. Until then, the vehicle remains at the beck and call of Mekeni.

Page 34 of 845
 G.R. No. 183984
April 13, 2011
Arturo Sarte Flores, petitioner, vs. Spouses Enrico L. Lindo, Jr. and Edna C. Lindo,
respondents.

FACTS:

Edna Lindo obtained a loan from Arturo Flores amounting to P 400,000 with monthly
interest and surcharge in case of late payment. Edna executed a deed of real mortgage and
promissory note to secure the said loan. Edna issued three checks as partial payments which were
dishonored later for insufficiency of funds. This prompted petitioner to file a complaint for the
foreclosure of mortgage with damages against the respondents. RTC branch 33 held that Flores
was not entitled to judicial foreclosure of the mortgage because it found out that the Deed was
executed by Edna without her husbands consent. Special Power of Attorney by Enrico was only
constituted days after the Deed. However, it further ruled that petitioner Flores was not precluded
from recovering the loan from Edna as he could file a personal action against her. Petitioner then
filed a complaint for Sum of Money with damages against respondents. Respondents admitted
their loan but in the tune of Php340,000.00 and prayed for dismissal on the grounds of improper
venue, res judicata, and forum shopping. The RTC denied the motion to dismiss. The CA ruled
in general that the creditor may institute two alternative remedies: either a personal action for the
collection of debt or a real action to foreclose the mortgage, but not both.

ISSUE:

Whether or not petitioner can no longer file complaint for collection of sum of money on
the ground of multiplicity of suits

HELD:

The Court ruled that generally, it is true that the mortgage-creditor has the option of
either filing a personal action for collection of sum of money or instituting a real action to
foreclose on the mortgage security. An election of the first bars recourse to the second, otherwise
there would be multiplicity of suits in which the debtor would be tossed from one venue to
another depending on the location of the mortgaged properties and the residence of the parties.
In this case, however, there are circumstances that the Court takes into consideration.

Accordingly since the Deed was executed by respondent Edna without the consent and
authority of her husband, it is void pursuant to Article 96 of the Family Code. Any disposition or
encumbrance without the written consent shall be void. However, both provisions also state that
the transaction shall be construed as a continuing offer on the part of the consenting spouse and
the third person, and may be perfected as a binding contract upon the acceptance by the other
spouse before the offer is withdrawn by either or both offerors. The execution of the SPA is the
acceptance by the other spouse that perfected the continuing offer as a binding contract between
the parties, making the Deed of Real Estate Mortgage a valid contract.

Page 35 of 845
 G.R No. 158768
February 12, 2008
Titan-Ikeda Construction & Development Corporation, petitioner, vs. Primetown Property
Group, Inc., respondent.

FACTS:

The respondent Primetown Property Corporation entered into contract with the petitioner
Titan-Ikeda Construction Corporation for the structural works of a 32-storey prime tower. After
the construction of the tower, respondent again awarded to the petitioner the amount of P
130,000,000.00 for the towers architectural design and structure. However, in 1994, the
respondent entered into a contract of sale of the tower in favor of the petitioner in a manner
called full-swapping. On June 30, 1994, respondent executed a deed of sale (covering 114
condominium units and 20 parking slots of the MPT collectively valued by the parties at
P112,416,716.88) in favor of petitioner pursuant to the full-swapping payment provision of the
supplemental agreement. In September 1995, respondent engaged the services of Integratech,
Inc. (ITI), an engineering consultancy firm, to evaluate the progress of the project. In its
September 7, 1995 report, ITI informed respondent that petitioner, at that point, had only
accomplished 31.89% of the project (or was 11 months and six days behind schedule). On
November 22, 1996, petitioner demanded from respondent the delivery of MPT's management
certificate and the keys to the condominium units and the payment of its (respondent's) balance.
Because respondent ignored petitioner's demand, petitioner, on December 9, 1996, filed a
complaint for specific performance in the Housing and Land Use Regulatory Board (HLURB).

ISSUE:

Whether or not the CA erred in giving weight to ITI's report because the project
evaluation was commissioned only by respondent, in disregard of industry practice

HELD:

The parties first entered into a contract for a piece of work when they executed the
supplemental agreement. Petitioner as contractor bound itself to execute the project for
respondent, the owner/developer, in consideration of a price certain (P130,000,000). The
supplemental agreement was reciprocal in nature because the obligation of respondent to pay the
entire contract price depended on the obligation of petitioner to complete the project (and vice
versa). Thereafter, the parties entered into a second contract. They agreed to extinguish the
supplemental agreement as evidenced by the October 12, 1995 letter-agreement which was duly
acknowledged by their respective representatives.

Because the parties agreed to extinguish the supplemental agreement, they were no
longer required to fully perform their respective obligations. Petitioner was relieved of its
obligation to complete the project while respondent was freed of its obligation to pay the entire
contract price. However, respondent, by executing the June 30, 1994 deed of absolute sale, was
deemed to have paid P112,416,716.88. Nevertheless, because petitioner applied part of what it
received to respondents outstanding liabilities, it admitted overpayment.

Page 36 of 845
 G.R. No. 146807
May 9, 2002
Padcom Condominium Corporation, petitioner, vs. Ortigas Center Association, Inc.,
respondent.

FACTS:

Petitioner Padcom Condominium Corporation owns and manages the Padilla Office
Condominium Building located at Emerald Avenue, Ortigas Center, Pasig City. The land on
which the building stands was originally acquired from the Ortigas & Company, Limited
Partnership (OCLP), by Tierra Development Corporation (TDC) under a Deed of Sale dated 4
September 1974. Among the terms and conditions in the deed of sale was the requirement that
the transferee and its successor-in-interest must become members of an association for realty
owners and long-term lessees in the area later known as the Ortigas Center.

In 1982, respondent Ortigas Center Association, Inc. was organized to advance the
interests and promote the general welfare of the real estate owners and long-term lessees of lots
in the Ortigas Center. It sought the collection of membership dues in the amount of P2, 724.40
per month from PADCOM. The corporate books showed that PADCOM owed the Association
P639, 961.47, representing membership dues, interests and penalty charges from April 1983 to
June 1993. The letters exchanged between the parties through the years showed repeated
demands for payment, requests for extensions of payment, and even a settlement scheme
proposed by PADCOM in September 1990. In view of PADCOM's failure and refusal to pay its
arrears in monthly dues, including interests and penalties thereon, the Association filed a
complaint for collection of sum of money before the trial court. The Association averred that
purchasers of lands within the Ortigas Center complex from OCLP are obligated under their
contracts of sale to become members of the Association. This obligation was allegedly passed
on to PADCOM when it bought the lot from TDC, its predecessor-in-interest.

ISSUE:

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

HELD:

As a lot owner, PADCOM is a regular member of the Association. No application for

membership is necessary. If at all, acceptance by the Board of Directors is a ministerial function
considering that PADCOM is deemed to be a regular member upon the acquisition of the lot
pursuant to the automatic membership clause annotated in the Certificate of Title of the property
and the Deed of Transfer. PADCOMs contention that the automatic membership clause is a
violation of its freedom of association because it was never forced to join the association is
likewise untenable. Nobody forced it to buy the land when it bought the building with the
annotation of the condition or lien on the Certificate of Title thereof and accepted the Deed.
PADCOM voluntarily agreed to be bound by and respect the condition, and thus to join the
Association.

Page 37 of 845
 Having ruled that PADCOM is a member of the Association, it is obligated to pay its
dues incidental thereto as mandated by Article 1159 of the Civil Code which states that
obligations arising from contracts have the force of law between the contracting parties and
should be complied with in good faith. Assuming in gratis argumenti that PADCOM is not a
member of the Association, it cannot evade payment without violating the equitable principles
underlying quasi-contracts. Article 2142 of the Civil Code provides that certain lawful,
voluntary and unilateral acts give rise to the juridical relation of quasi-contract to the end that no
one shall be unjustly enriched or benefited at the expense of another.

Page 38 of 845
 G.R. No. 194255
June 13, 2012
THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. NURFRASIR HASHIM y
SARABAN a.k.a FRANZ/FRANS, et al., accused.

FACTS:

The accused were charged as having been engaged in the recruitment and deployment of
workers without having previously obtained from the POEA a license or authority to do so. They
promised employment abroad particularly in Brunei and Malaysia, thus causing and prompting
the persons of BBB and AAA to apply which employment however did not materialize because
in truth and in fact, the promised employment is non-existent, in flagrant violation of the above-
mentioned law and causing damage and prejudice to said complainants. Instead of getting decent
jobs, they were forced to become sex workers to earn money and became prostitutes. The lower
court found the accused guilty of illegal recruitment defined under Section 6 and penalized under
Section 7(b) of Republic Act No. 8042 otherwise known as the Migrant Workers and Overseas
Filipinos Act of 1995, as principals by direct participation, committed by a syndicate, against
BBB and AAA, and SENTENCES each of said accused to suffer the penalty of life
imprisonment and to pay a fine of P1,000,000 each; to pay each of the above victims P50,000 as
moral damages; P300,000 as exemplary damages, and to pay the costs. The Court of Appeals
affirmed with modification that the amount of exemplary damages in favor of the victims to be
reduced to P25,000 each.

ISSUE:

Whether or not the award of damages was proper

HELD:

The Supreme Court modified the ruling of the Court of Appeals. It held that Congress
passed R.A. 9208 or the Anti-Trafficking in Persons Act. Such law was approved on 26 May
2003. Ironically, only a few days after, victims found themselves in a situation that the law had
sought to prevent. In Lalli, the Supreme Court increased the amount of moral and exemplary
damages from P50,000 to P500,000 and from P50,000 to P100,000, respectively, having
convicted the accused therein of the crime of trafficking in persons. The payment of P500,000 as
moral damages and P100,000 as exemplary damages for the crime of Trafficking in Persons as a
Prostitute finds basis in Article 2219 of the Civil Code, which states:
Art. 2219. Moral damages may be recovered in the following and analogous cases: (1) A
criminal offense resulting in physical injuries; (2) Quasi-delicts causing physical injuries;
(3) Seduction, abduction, rape, or other lascivious acts.

The criminal case of Trafficking in Persons as a Prostitute is an analogous case to the

crimes of seduction, abduction, rape, or other lascivious acts. In fact, it is worse. To be trafficked
as a prostitute without ones consent and to be sexually violated four to five times a day by
different strangers is horrendous and atrocious. There is no doubt that Lolita experienced

Page 39 of 845
physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, and social humiliation when she was trafficked as a prostitute in
Malaysia. Since the crime of Trafficking in Persons was aggravated, being committed by a
syndicate, the award of exemplary damages is likewise justified.

Page 40 of 845
 G.R. No. 174654
August 17, 2011
Felixberto A. Abellana, petitioner, vs. People Of The Philippines and Spouses Saapia B.
Alonto And Diaga Alonto, respondents.

FACTS:

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

Diaga and Saapia Alonto, secured by a Deed of Real Estate Mortgage over Lot Nos. 6471 and
6472 located in Cebu City. Subsequently, or in 1987, petitioner prepared a Deed of Absolute
Sale conveying said lots to him. The Deed of Absolute Sale was signed by spouses Alonto in
Manila. However, it was notarized in Cebu City allegedly without the spouses Alonto appearing
before the notary public. Thereafter, petitioner caused the transfer of the titles to his name and
sold the lots to third persons. On August 12, 1999, respondent spouses filed a complaint charging
petitioner with Estafa through Falsification of Public Document. The RTC found that petitioner
did not intend to defraud the spouses Alonto and that petitioner can only be held guilty of
Falsification of a Public Document by a private individual under Article 172(1)in relation to
Article 171(2) of the Revised Penal Code and not Estafa through falsification of public document
as charged in the Information.

The CA held that petitioner who was charged with and arraigned for estafa through
falsification of public document under Article 171(1) of the RPC could not be convicted of
Falsification of Public Document by a Private Individual under Article 172(1) in relation to
Article 171(2).

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

HELD:

It is an established rule in criminal procedure that a judgment of acquittal shall state

whether the evidence of the prosecution absolutely failed to prove the guilt of the accused or
merely failed to prove his guilt beyond reasonable doubt. The "extinction of the penal action
does not carry with it the extinction of civil liability unless the extinction proceeds from a
declaration in a final judgment that the fact from which the civil liability might arise did not
exist."
Hence, for petitioner to be civilly liable to spouses Alonto, it must be proven that the acts
he committed had caused damage to the spouses. Based on the records of the case, we find that
the acts allegedly committed by the petitioner did not cause any damage to spouses Alonto. Even
assuming that the spouses Alonto did not personally appear before the notary public for the
notarization of the Deed of Absolute Sale, the same does not necessarily nullify or render void ab
initio the parties' transaction. Such non-appearance is not sufficient to overcome the presumption
of the truthfulness of the statements contained in the deed. And since the defective notarization
does not ipso facto invalidate the Deed of Absolute Sale, the transfer of said properties from
spouses Alonto to petitioner remains valid.

Page 41 of 845
 G.R No. 175833
January 29, 2008
People of the Philippines, appellee, vs. Edwin Malicsi, appellant.

FACTS:

The accused-appellant was accused for the crime of rape against his niece. The incident
was repeated thrice by the appellant. The appellant contended that he and the victim were
sweethearts but the trial court did not give weight to that theory. The trial court found appellant
guilty of the crime of four counts of qualified rape and was sentenced to suffer the penalty of
death for each count of rape, to pay P300,000.00 as civil indemnity (P75,000.00 for each count),
and P200,000.00 as moral damages (P50,000.00 for each count). The CA however modified the
findings of the RTC declaring that appellant is guilty of four counts of simple rape and to suffer
the penalty of reclusion perpetua.

ISSUE:

Whether or not the award of damages was properly made

HELD:

No, because the Supreme Court declared that the crime committed was four count of
simple rape only and not qualified rape because the special aggravating circumstances of
minority and relationship must be alleged in the information but the prosecution failed to do so.
Since it is not included, four counts of simple rape should be undertaken. The penalty imposed
then should be reclusion perpetua. The appellate court also correctly affirmed the award by the
trial court of P200,000 for moral damages. Moral damages are automatically granted to rape
victim. However, the award of civil indemnity is reduced to P200,000 in the amount of
P50,000.00 for each count of simple rape is automatically granted.

Page 42 of 845
 G.R. No. 137457
November 21, 2001
People of the Philippines, plaintiff-appellee, vs. Rosauro Sia y Dichoso, et al., accused-
appellants.

FACTS:

This is an automatic review of a decision of the Regional Trial Court finding the accused
Johnny Balalio y Deza and Jimmy Ponce y Tol guilty beyond reasonable doubt as principals by
conspiracy for violation of RA 6539 (Anti- Carnapping law) as amended, and sentenced them to
suffer the penalty of death. Accused are likewise adjudged jointly and severally liable to pay
Agripina Bermudez, the mother of the deceased Christian Bermudez the sums of: (a) P50, 000.00
as compensatory damages for the death of Christian Bermudez; (b) P200, 000.00 as burial and
other expenses incurred in connection with the death of Christian; and (c) P3, 307,199.60 (2/3 x
[80-27] x 300 per day x 26 days (excluding Sundays) x 12 months) representing the loss of
earning capacity of Christian Bermudez as taxi driver.

ISSUE:

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

HELD:

The decision is partly correct. The Court finds the amount of P50, 000.00 as death
indemnity proper, following prevailing jurisprudence, and in line with controlling policy. The
award of civil indemnity may be granted without any need of proof other than the death of the
victim. Though not awarded by the trial court, the victims heirs are likewise entitled to moral
damages, pegged at P50, 000.00 by controlling case law, taking into consideration the pain and
anguish of the victims family brought about by his death. However, the award of P200, 000.00
as burial and other expenses incurred in connection with the death of the victim must be deleted.
The records are bereft of any receipt or voucher to justify the trial courts award of burial and
other expenses incurred in connection with the victims death. The rule is that every pecuniary
loss must be established by credible evidence before it may be awarded. Credence can be given
only to claims, which are duly supported, by receipts or other credible evidence.

In determining the amount of lost income, the following must be taken into account: (1)
the number of years for which the victim would otherwise have lived; and (2) the rate of the loss
sustained by the heirs of the deceased. The second variable is computed by multiplying the life
expectancy by the net earnings of the deceased meaning total earnings less expenses necessary in
the creation of such earnings or income less living and other incidental expenses considering that
there is no proof of living expenses of the deceased, net earnings are computed at fifty percent of
the gross earnings. In this case, the court notes that the victim was 27 years old at the time of his
death and his mother testified that as a driver of the Tamaraw FX taxi, he was earning P650.00 a
day. Based on the foregoing computation, the award of the trial court with regard to lost income
is thus modified accordingly.

Page 43 of 845
The court ordered the accused to pay the heirs of the victim Christian Bermudez the sum of P50,
000.000 as civil indemnity, the sum of P50, 000.00 as moral damages, and the sum of P2,
996,867.20 representing lost earnings. The award of P200, 000.00 as burial and other expenses is
deleted for lack of substantial proof.

Page 44 of 845
 G.R. No. 131866
August 20, 2001
People of the Philippines, plaintiff-appellee, vs. Carlos Doctolero, Sr., accused-appellant.

FACTS:

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

Prosecution evidence showed that on November 20, 1996, Vicente Ganongan Jr. and
Roderick Litorco went to their friends boarding house on Honeymoon Road, Baguio City.
Thereat, Ganongan and the others agreed to drink gin in Sangatan Store, which is about 20
meters from the boarding house. After two hours they went down Honeymoon road towards
Rimando road to get a taxi for Litorco. As the latter four neared the Garcia store along
Honeymoon road, Carlos Garcia, with three companions, told them to stop, pointing a gun at
them. Hearing the commotion, Dagson who was walking about 5 to 7 meters ahead with Litorco
rushed to the boarding house and sought help. When Dagson came back, he was with Oliver
Alimani, Arman Alimani and Dexter Daggay. When they arrived, they saw Garcia pointing a
gun at the group of Ganongan, Daodaoan, Tabanganay and Jeffrey Alimani. Oliver Alimani
approached Garcia who in turn pointed his gun at Oliver and identified himself as barangay
kagawad. At this time, Carlos Doctolero Sr. was standing at the edge of Honeymoon road. He
then put his arm over Daodaoans shoulder. Daoadaoan shoved Doctoleros hand and retreated.
Doctolero stepped back and fired twice at Daodaoan but missed. When Ganongan turned around
to run, Doctolero fired at him, hitting him twice. Oliver Alimani came to Ganongans aid when
the latter yelled that he was hit. Thereafter, they hailed a taxi and rushed Ganongan to Saint
Louis University Hospital where he expired.

ISSUE:

Whether or not the trial courts award of damages is proper

HELD:

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

Page 45 of 845
 G.R. No. 138403
August 22, 2001
People of the Philippines, plaintiff-appellee, vs. Rolly Abulencia y Coyos, defendant-
appellant.

FACTS:

On August 4, 1998, a cold-blooded ravager, Rolly Abulencia y Coyos, preyed on ten-year

old Rebelyn Garcia. In the early morning of the following day, Rebelyns lifeless, naked body
was found floating at the Colobong creek in San Manuel, Pangasinan, with marks of bruises,
burns and injuries manifesting that she was defiled and later drowned to death.

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

ISSUE:

Whether or not the trial courts award for damages is proper

HELD:

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

The trial court did not award moral damages to the victims family. Based on prevailing
jurisprudence, moral damages may be awarded to the heirs of the victim without need for
pleading or proof of its basis for their mental, physical and psychological sufferings are too
obvious to still require their recital at the trial. Hence, moral damages in the amount of P50, 000
must be awarded. In People v. Lagarto, the court held that attendant circumstances may be
considered to determine civil liability. Thus, in view of the evident cruelty inflicted upon the
victim, as shown by the multiple burns and contusions on her body, the court granted the award
of exemplary damages in the amount of P25, 000.00.

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

Page 46 of 845
 G.R. No. L-32055
February 26, 1988
Reynaldo Bermudez, Sr., and, Adonita Yabut Bermudez petitioners-appellants, vs. Hon.
Judge A. Melencio-Herrera, Domingo Pontino Y Tacorda and Cordova Ng Sun Kwan,
respondents-appellees.

FACTS:

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

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

ISSUE:

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

HELD:

According to the Supreme Court, in case of negligence, the injured party or his heirs has
a right to choose between an action to enforce civil liability arising from crime under Article 100
of the Revised Penal Code and an action for quasi-delict under Article 2176-2194 of the Civil
Code. If the party chooses the latter, he may hold the employer solidarily liable for the negligent
act of his employee, subject to the employers defense of exercise of the diligence of a good
father of the family. In the case at bar, the action filed by appellant was an action for damages
based on quasi-delict. The fact that appellants reserved their right in the criminal case to file an
independent civil action did not preclude them from choosing to file a civil action for quasi-
delict.

Page 47 of 845
 G.R. No. L-45129
March 6, 1987
People of the Philippines, petitioner, vs. The Honorable Benjamin Relova, in his capacity as
Presiding Judge of the Court of First Instance of Batangas, Second Branch, and Manuel
Opulencia, respondents.

FACTS:

On February 1, 1975, members of the Batangas City Police together with personnel of the
Batangas Electric Light System, equipped with a search warrant, searched the premises of the
Opulencia Carpena Ice Plant and Cold Storage owned and operated by private respondent
Manuel Opulencia. The police discovered that electric wiring devices and contraptions had been
installed without the necessary authority from the city government. These electric devices were
designed purposely to lower or decrease the readings of electric consumption in the electric
meter of the said electric and cold storage ice plant. Consequently, an Assistant City Fiscal of
Batangas filed an information against Opulencia for violation of Ordinance No. 1 Series of 1974,
Batangas City. However, subsequently, the accused filed a motion to dismiss the information
upon the grounds that the crime there charged had already prescribed.

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

ISSUE:

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

HELD:

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

Page 48 of 845
 G.R. No. 107125
January 29, 2001
George Manantan, petitioner, vs. The Court of Appeals, Spouses Marcelino Nicolas and
Maria Nicolas, respondents.

FACTS:

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

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

ISSUES:

Whether or not petitioners acquittal did extinguished his civil liability

HELD:

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

The decision in Criminal Case No 066 supports the conclusions of the appellate court that
the acquittal was based on reasonable doubt; hence, the civil liability was not extinguished by his
discharge. It clearly shows that petitioners acquittal was predicated on the conclusion that his
guilt had not been established with moral centainty.
At the time of the filing of the information in 1983, the implied institution of civil actions with
criminal actions was governed by Rule III, Section 1 of the 1964 Rules of Court. Where the civil
action is impliedly instituted together with the criminal action, the actual damages claimed by the
offended parties, as in this case, are not included in the computation of the filing fees. Filing
fees are to be paid only if other items of damages such as moral, nominal, temperate or
exemplary damages are alleged in the complaint or information, or if they are not so alleged,
shall constitute a first lien on the judgment. The filing fees are deemed paid from the filing of
the criminal complaint or information.

Page 49 of 845
 G.R. No. 102007
September 2, 1994
People of the Philippines, plaintiff-appellee, vs. Rogelio Bayotas y Cordova, accused-
appellant.

FACTS:

Rogelio Bayotas was charged with rape and eventually convicted thereof on June 19,
1991 in a decision penned by Judge Manuel Autajay. Pending appeal of his conviction, Bayotas
died on February 4, 1992 at the National Bilibid Hospital due to cardio respiratory arrest.
Consequently, the Supreme Court in its resolution of May 20, 1992, dismissed the criminal
aspect of the appeal. However, it required the Solicitor General to file its comment with regard to
Bayotas civil liability arising from his commission of the offense charged. In his comment, the
Solicitor General expressed his view that the death of the accused did not extinguish his civil
liability as a result of his commission of the offense charged. The Solicitor General insists that
the appeal should still be resolved for the purpose of reviewing his conviction by the lower court
on which the civil liability is based.

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

ISSUE:

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

HELD:

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

This also brings to mind Section 7, Rule 116 of the Rules of Court which states that the judgment
in a criminal case becomes final after the lapse of the period for perfecting an appeal or when the
sentence has been partially or totally satisfied or served, or the defendant has expressly waived in
writing his right to appeal. Since the death of the accused occurred while his appeal is pending,
the decision has not yet become final and executory; thus, his civil liability together with his
criminal liability is extinguished. However, if the civil obligation arises from other sources of
obligation other than the crime complained of, the civil liability of the accused survived in spite
of his death pending his appeal. A preponderance of evidence is sufficient to prove his civil
liability.

Page 50 of 845
 G.R. No. L-48006
July 8, 1942
Fausto Barredo, petitioner, vs. Severino Garcia and Timotea Almario, respondents.

FACTS:

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

ISSUE:

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

HELD:

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

To hold that there is only one way to make the employers liability effective, and that is,
to sue the driver and exhaust his properties is tantamount to compelling the plaintiff to follow a
devious and cumbersome method of obtaining relief. True, there is such a remedy under our
laws, but there is also an expeditious way, which is based on the primary and direct
responsibility of the employer under Article 1903 of the Civil Code. At this juncture, it should be
said that the primary and direct responsibility of employers and presumed negligence are
principles calculated to protect society. Workmen and employees should be carefully chosen and
supervised in order to avoid injury to the public. It is the masters or employers who principally
reap the profits resulting from the services of their servants. It is but right that they should
guarantee the latters careful conduct for the personnel and patrimonial safety of the others.

Page 51 of 845
 G.R. No. 173870
April 25, 2012
Oscar Del Carmen, Jr., petitioner, vs. Geronimo Bacoy, Guardian and representing the
children, namely: Mary Marjorie B. Monsalud, et al., respondents.

FACTS:

Emilia Bacoy Monsalud, along with her spouse Leonardo Monsalud, Sr. and their
daughter Glenda Monsalud, were on their way home from a Christmas party they attended in
Poblacion, Sominot, Zamboanga Del Sur. Upon reaching Purok Paglaom in Sominot, they were
run over by a Fuso passenger jeep bearing plate number UV-PEK-600 that was being driven by
Allan Maglasang. The jeep was registered in the name of petitioner Oscar del Carmen, Jr. and
used as a public utility vehicle plying the Molave, Zamboanga del Sur to Sominot, Zamboanga
del Sur and vice versa route. Because of the unfortunate incident, a case for Reckless
Imprudence Resulting in Multiple Homicide was filed against Allan before the RTC. In a
Decision dated March 13, 1997, said court declared Allan guilty beyond reasonable doubt of the
crime charged. During the pendency of said criminal case, Emilias father, Geronimo Bacoy, in
behalf of the six minor children of the Monsaluds, filed Civil Case No. 96-20219, an independent
civil action for damages based on culpa aquiliana. Aside from Allan, also impleaded therein were
his alleged employers, namely, the spouses Oscar del Carmen, Sr. and Norma del Carmen and
the registered owner of the jeep, their son Oscar Jr. Geronimo prayed for the reimbursement of
funeral and burial expenses, as well as the award of attorneys fees, moral and exemplary
damages resulting from the death of the three victims, and loss of net income earnings of Emilia
who was employed as a public school teacher at the time of her death.

ISSUE:

Whether or not whether there was an employer-employee relationship between Oscar Jr.
and Allan at the time of the accident, thus holding Oscar Jr. liable

HELD:

Under the doctrine of res ipsa loquitur, where the thing that caused the injury
complained of is shown to be under the management of the defendant or his servants; and the
accident, in the ordinary course of things, would not happen if those who had management or
control used proper care, it affords reasonable evidence in the absence of a sufficient,
reasonable and logical explanation by defendant that the accident arose from or was caused by
the defendants want of care. The aforementioned requisites having been met, there now arises a
presumption of negligence which he could have overcome by evidence that he exercised due care
and diligence in preventing strangers from using his jeep. Unfortunately, he failed to do so.
The operator on record of a vehicle is primarily responsible to third persons for the deaths or
injuries consequent to its operation, regardless of whether the employee drove the registered
owners vehicle in connection with his employment. Absent the circumstance of unauthorized
use or that the subject vehicle was stolen which are valid defenses available to a registered
owner, he cannot escape liability for quasi-delict resulting from his jeeps use.

Page 52 of 845
 G.R. No. 166869
February 16, 2010
Philippine Hawk Corporation, petitioner, vs. Vivian Tan Lee, respondent.

FACTS:

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

On June 18, 1992, respondent filed an Amended Complaint, in her own behalf and in
behalf of her children, in the civil case for damages against petitioner. Respondent sought the
payment of indemnity for the death of Silvino Tan, moral and exemplary damages, funeral and
interment expenses, medical and hospitalization expenses, the cost of the motorcycle's repair,
attorney's fees, and other just and equitable reliefs. The trial court rendered judgment against
petitioner and defendant Margarito Avila, wherein it adjudged guilty of simple negligence. It
further held petitioner bus company liable for failing to exercise the diligence of a good father of
the family in the selection and supervision of Avila, having failed to sufficiently inculcate in him
discipline and correct behavior on the road. The CA affirmed the decision of the trial court with
modification in the award of damages.

ISSUE:

Whether or not petitioner is liable to respondent for damages

HELD:

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

Page 53 of 845
 G.R No. 161803
February 4, 2008
Dy Teban Trading, Inc., petitioner, vs. Jose Ching and/or Liberty Forest, Inc. and Cresilito
M. Limbaga, respondents.

FACTS:

A Prime Mover Trailer suffered a tire blow out during the night of its travel at a national
highway. The trailer was owned by the respondent Liberty Forest. He parked the prime mover
with trailer at the shoulder of the road. The prime mover was not equipped with triangular,
collapsible reflectorized plates, the early warning device required under Letter of Instruction No.
229. As substitute, Limbaga placed a banana trunk with leaves on the front and the rear portion
of the prime mover to warn incoming motorists. It is alleged that Limbaga likewise placed
kerosene lighted tin cans on the front and rear of the trailer. Since the car was placed at the right
wing of the road, thus it cause the swerving of a Nissan van owned by the petitioner when a
passenger bus was coming in between the trailer. The Nissan van owner claimed for damages
against the respondent. The trial court found that the proximate cause of the three way accident
is the negligence and carelessness of driver of the respondent.

ISSUE:

Whether there was negligence on the part of the respondent.

HELD:

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

Page 54 of 845
 G.R No. 165732
December 14, 2006
Safeguard Security Agency, Inc., and Admer Pajarillo, petitioners, vs. Lauro Tangco, et al.,
respondents.

FACTS:

On November 3, 1997, at about 2:50 p.m., Evangeline Tangco went to Ecology Bank,
Katipunan Branch, Quezon City, to renew her time deposit per advise of the banks cashier as she
would sign a specimen card. Evangeline, a duly licensed firearm holder with corresponding
permit to carry the same outside her residence, approached security guard Pajarillo, who was
stationed outside the bank, and pulled out her firearm from her bag to deposit the same for
safekeeping. Suddenly, Pajarillo shot Evangeline with his service shotgun hitting her in the
abdomen instantly causing her death. On January 14, 1998, respondents filed a complaint for
damages against Pajarillo for negligently shooting Evangeline and against Safeguard for failing
to observe the diligence of a good father of a family to prevent the damage committed by its
security guard. Respondents prayed for actual, moral and exemplary damages and attorneys
fees.

ISSUE:

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

HELD:

The law presumes that any injury committed either by fault or omission of an employee
reflects the negligence of the employer. In quasi-delicts cases, in order to overcome this
presumption, the employer must prove that there was no negligence on his part in the supervision
of his employees. It was declared that in the selection of employees and agents, employers are
required to examine them as to their qualifications, experience and service records. Thus, due
diligence on the supervision and operation of employees includes the formulation of suitable
rules and regulations for the guidance of employees and the issuance of proper instructions
intended for the protection of the public and persons with whom the employer has relations
through his employees. Thus, in this case, Safeguard Security committed negligence in
identifying the qualifications and ability of its agents.

Page 55 of 845
 G.R No. 144274
September 20, 2004
Nostradamus Villanueva, petitioner, vs. Priscilla R. Domingo and Leandro Luis R.
Domingo, respondents.

FACTS:

On 22 October 1991, Priscilla Domingos silver Lancer car then driven by Leandro Luis
R. Domingo was cruising along the middle lane of South Superhighway at moderate speed from
north to south. Suddenly, a green Mitsubishi Lancer driven by Renato Dela Cruz Ocfemia darted
from Vito Cruz Street towards the South Superhighway directly into the path of Domingos car
thereby hitting and bumping its left front portion. As a result of the impact, it hit two (2) parked
vehicles at the roadside, the second hitting another parked car in front of it. Per Traffic Accident
Report prepared by Traffic Investigator Patrocinio N. Acido, Ocfemia was driving with expired
license and positive for alcoholic breath. Hence, the Assistant City recommended the filing of
information for reckless imprudence resulting in damage to property and physical injuries. The
original complaint was amended twice: first, impleading Auto Palace Car Exchange as
commercial agent and/or buyer-seller and second, impleading Albert Jaucian as principal
defendant doing business under the name and style of Auto Palace Car Exchange.

ISSUE:

Whether the owner Villanueva be held liable for the mishap.

HELD:

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

Page 56 of 845
 G.R No. 122039
May 31, 2000
Vicente Calalas, petitioner, vs. Court Of Appeals, Eliza Jujeurche Sunga and Francisco
Salva, respondents.

FACTS:

Eliza Sunga was a passenger of a jeepney owned and operated by the petitioner Calalas.
Private respondent Sunga sat in the rear protion of the jeepney where the conductor gave Sunga
an extension seat. When the jeep stopped, Sunga gave way to a passenger going outside the jeep.
However, an Isuzu Truck driven by Verene and owned by Salva, accidentally hit Sunga causing
the latter to suffer physical injuries where the attending physician ordered a three months of rest.
Sunga filed an action for damages against the petitioner for breach of contract of common
carriage by the petitioner. On the other hand, the petitioner Calalas filed an action against Salva,
being the owner of the truck. The lower court ruled in favor of ther petitioner, thus the truck
owner is liable for the damage to the jeep of the petitioner.

ISSUE:

Whether or not bumping of the jeepney by the truck owned by Salva was a caso fortuito

HELD:

The petitioner is liable for the injury suffered by Sunga. Under Article 1756 of the New
Civil Code, it provides that common carriers are presumed to have been at fault or to have acted
negligently unless they prove that they observed extraordinary diligence as defined in Arts. 1733
and 1755 of the Code. This provision necessarily shifts to the common carrier the burden of
proof. In this case, the law presumes that any injury suffered by a passenger of the jeep is
deemed to be due to the negligence of the driver. This is a case on culpa contractual where there
was pre-existing obligations and that the fault is incidental to the performance of the obligation.
Thus, it was clearly observed that the petitioner has negligence in the conduct of his duty when
he allowed Sunga to seat in the rear portion of the jeep which is prone to accident.

Page 57 of 845
 G.R. No. L-12219
March 15, 1918
Amado Picart, plaintiff-appellant, vs. Frank Smith, Jr., defendant-appellee.

FACTS:

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

ISSUE:

Whether or not the defendant is guilty of negligence

HELD:

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

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

Page 58 of 845
 G.R. No. 179419
January 12, 2011
Durban Apartments Corporation, doing business under the name and style of City Garden
Hotel, petitioner, vs. Pioneer Insurance and Surety Corporation, respondent.

FACTS:

On July 22, 2003, Pioneer Insurance and Surety Corp, by right of subrogation, filed with
the RTC of Makati a Complaint for Recovery of Damages against Durban ApartmentsCorp (or
City Garden Hotel) and defendant before the RTC, Vicente Justimbaste. Respondent averred that
it is the insurer for loss and damage of Jeffrey S. Sees 2001 Suzuki Grand Vitara in the amount
of P1,175,000.00. On April 30, 2002, See arrived and checked in at the City Garden Hotel before
midnight, and its parking attendant, Justimbaste, got the key to said Vitara from See to park it.
On May 1,2002, at about 1:00 am, See received a phone call where the Hotel Chief Security
Officer informed him that his Vitara was carnapped while it was parked unattended at the
parking area of Equitable PCI Bank. See went to see the Security Officer, thereafter reported the
incident to the Operations Division of the Makati City Police Anti-Carnapping Unit, and a flash
alarm was issued. The police investigated Hotel Security Officer, Ernesto T. Horlador, Jr. and
Justimbaste. See gave his Sinumpaang Salaysay to the police investigator, and filed a Complaint
Sheet with the PNP Traffic Management Group in Camp Crame. It paid the P1,163,250.00
money claim of See and mortgagee ABN AMRO Savings Bank, Inc. as indemnity for the loss of
the Vitara.

ISSUE:

Whether or not Durban Apartments is liable for damages

HELD:

Article 1962, in relation to Article 1998, of the Civil Code defines a contract of deposit
and a necessary deposit made by persons in hotels or inns:

Art. 1962. A deposit is constituted from the moment a person receives a thing belonging to
another, with the obligation of safely keeping it and returning the same. If the safekeeping of the
thing delivered is not the principal purpose of the contract, there is no deposit but some other
contract.

Art. 1998. The deposit of effects made by travelers in hotels or inns shall also be regarded as
necessary. The keepers of hotels or inns shall be responsible for them as depositaries, provided
that notice was given to them, or to their employees, of the effects brought by the guests and that,
on the part of the latter, they take the precautions which said hotel-keepers or their substitutes
advised relative to the care and vigilance of their effects.

Plainly, from the facts found by the lower courts, the insured See deposited his vehicle
for safekeeping with petitioner, through the latters employee, Justimbaste. In turn, Justimbaste
issued a claim stub to See. Thus, the contract of deposit was perfected from Sees delivery, when

Page 59 of 845
he handed over to Justimbaste the keys to his vehicle, which Justimbaste received with the
obligation of safely keeping and returning it. Ultimately, petitioner is liable for the loss of Sees
vehicle.

Page 60 of 845
 G.R. No. 135657
January 17, 2001
Jose V. Lagon, petitioner, vs. Hooven Comalco Industries, Inc., respondent.

FACTS:

Sometime in April 1981, Lagon, a businessman and HOOVEN entered into two
contracts, whereby for a total consideration of P104,870, HOOVEN agreed to sell and install
various aluminum materials in Lagons commercial building in Tacurong, Sultan Kudarat. On 24
February 1987, HOOVEN filed an action against Lagon claiming that the latter failed to pay his
due despite HOOVENs performance of its obligation. Lagon, in his answer, denied liability and
averred that HOOVEN was the party guilty of breach of contract by failing to deliver and install
some of the materials specified in the proposals; that as a consequence he was compelled to
procure the undelivered materials from other sources; that as regards the materials duly delivered
and installed by HOOVEN, they were fully paid.

ISSUE:

Whether or not all the materials specified in the contracts had been delivered and
installed by respondent in petitioners commercial building

HELD:

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

Page 61 of 845
 G.R. No. 118749
April 25, 2003
Spouses Lorenzo G. Francisco and Lorenza D. Francisco, petitioners, vs. Honorable Court
of Appeals, and Bienvenido C. Mercado, respondents.

FACTS:

On 3 February 1984, the spouses Lorenzo and Lorenza Francisco and Engineer
Bienvenido C. Mercado entered into a Contract of Development for the development into a
subdivision of several parcels of land in Pampanga. Under the Contract, respondent agreed to
undertake at his expense the development work for the Franda Village Subdivision. Respondent
committed to complete the construction within 27 months. Respondent also advanced
P200,000.00 for the initial expenses of the development work. In return, respondent would
receive 50% of the total gross sales of the subdivision lots and other income of the subdivision.
Respondent also enjoyed the exclusive and irrevocable authority to manage, control and
supervise the sales of the lots within the subdivision. The Contract required respondent to submit
to petitioners, within the first 15 days of every month, a report on payments collected from lot
buyers with copies of all the contracts to sell. However, respondent failed to submit the monthly
report. On 27 February 1987, respondent filed with the trial court an action to rescind the
Contract with a prayer for damages. Petitioners countered that respondent breached the Contract
by failing to finish the subdivision within the 27 months agreed upon, and therefore respondent
was in delay.

ISSUE:
Whether or not respondent Mercado incurred delay

HELD:

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

Moreover, since petitioners stopped respondent from selling lots and collecting payments
from lot buyers, which was the primary source of development funds, they in effect, rendered
respondent incapable, or at least made it difficult for him, to develop the subdivision within the

Page 62 of 845
allotted period. In reciprocal obligations, neither party incurs in delay if the other does not
comply or is not ready to comply with what is incumbent upon him. It is only when one of the
parties fulfills his obligation that delay by the other begins.

Page 63 of 845
 G.R. No. 117190
January 2, 1997
Jacinto Tanguilig doing business under the name and style J.M.T. Engineering And
General Merchandising, petitioner, vs. Court of Appeals and Vicente Herce Jr.,
respondents.

FACTS:

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

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

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

ISSUE:

(1) Whether or not the payment for the deep well is part of the contract price

(2) Whether or not Tanguilig is liable to reconstruct the damaged windmill considering
that its collapse is due to a typhoon.

HELD:

There is absolutely no mention in the two documents that a deep well pump is a
component of the proposed windmill system. The contract prices fixed in both proposals cover
only the features specifically described therein and no other. Respondent is directed to pay
petitioner Tanguilig the balance of P15,000 plus legal interest.

Regarding the second issue, the Supreme Court has consistently held that in order for a
party to claim exemption from liability by reason of fortuitous event under Art. 1174 of the Civil
Code four (4) requisites must concur: (a) the cause of the breach of the obligation must be
independent of the will of the debtor; (b) the event must be either unforeseeable or unavoidable;
(c) the event must be such as to render it impossible for the debtor to fulfill his obligation in a
normal manner; and, (d) the debtor must be free from any participation in or aggravation of the
injury to the creditor. Petitioner failed to show that the collapse of the windmill was due solely to

Page 64 of 845
a fortuitous event. Petitioner merely stated that there was a "strong wind." But a strong wind in
this case cannot be fortuitous. On the contrary, a strong wind should be present in places where
windmills are constructed. Petitioner is ordered to "reconstruct subject defective windmill
system, in accordance with the one-year guaranty".

Page 65 of 845
 G.R. No. L-69996
December 5, 1994
Dr. Fernando Periquet, Jr., petitioner, vs. Honorable Fourth Civil Cases Division of the
Intermediate Appellate Court and the Heirs Of The Late Felix R. Francisco, respondents.

FACTS:

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

ISSUE:

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

HELD:

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

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

Page 66 of 845
 G.R. No. 96505
July 1, 1993
Legaspi Oil Co., Inc., petitioner, vs. The Court of Appeals and Bernard Oseraos,
respondent.

FACTS:

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

ISSUE:

Whether or not private respondent is guilty of breach of contact

HELD:

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

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

Page 67 of 845
 G.R. Nos. 180631-33
February 22, 2012
Philippine Charter Insurance Corporation, petitioner, vs. Central Colleges Of The
Philippines and Dynamic Planners And Construction Corporation, respondents.

FACTS:

Petitioner Central Colleges of the Philippines (CCP), an educational institution,

contracted the services of respondents Dynamic planners and Construction Corporation (DPCC)
to be its general contractor for the construction of its five (5)-storey school building with a total
contract price of P248,000,000. The construction of the entire building would be done in two
phases with each phase valued at P124,000,000. To guarantee the fulfillment of the obligation,
DPCC posted three (3) bonds, all issued by the Philippine Charter Insurance Corporation. The
Phase 1 of the project was completed without issue. A down payment for the Phase 2 of the
project was thereafter made. However, Phase 2 of the project encountered numerous delays.
Only 47% of the work to be done was actually finished. CCP wrote DPCC and PCIC informing
them of the breach in the contract and its plan to claim on the construction bonds. DPCC wrote
PCIC confirming the delay, at the same time, requesting for the extension of its performance and
surety bonds because the supposed revision of the plans would require more days. PCIC
approved DPCCs request for extension of the bonds. However, negotiations to continue on with
the construction between CCP and DPCC reached a dead end. CCP hired another contractor to
work on the school site. CCP sent a letter to PCIC of its final demand for the payment of
P13,924,351.47 as indicated in the bonds. The latter denied formers claims against the three
bonds.

ISSUE:

Whether or not the CA grossly erred in sustaining the CIAC award finding petitioner
liable to respondent CCP under the performance bonds and the surety bond

HELD:

It is clear from the testimony of Crispino P. Reyes, CCPs President, that the school no
longer wants to collect on Performance Bond PCIC 46172 (with a value of P692,890.74). A
party may make judicial admissions in (a) the pleadings; (b) during the trial, either by verbal or
written manifestations or stipulations; or (c) in other stages of the judicial proceeding.[38] It is an
established principle that judicial admissions cannot be contradicted by the admitter who is the
party himself and binds the person who makes the same, and absent any showing that this was
made thru palpable mistake, no amount of rationalization can offset it. Since CCP, through its
President, judicially admitted that it is no longer interested in pursuing PCIC-46172, the scope of
its claim will just be confined to Surety Bond No. PCIC-45542 and Performance Bond No.
PCIC-45541.

The civil law concept of delay or default commences from the time the obligor demands,
judicially or extrajudicially, the fulfillment of the obligation from the obligee. In legal parlance,
demand is the assertion of a legal or procedural right. Hence, DPCC incurred delay from the time

Page 68 of 845
CCP called its attention that it had breached the contract and extrajudicially demanded the
fulfillment of its commitment against the bonds. It is the obligors culpable delay, not merely the
time element, which gives the obligee the right to seek the performance of the obligation. As
such, CCPs cause of action accrued from the time that DPCC became in culpable delay as
contemplated in the surety and performance bonds.

Thus, DPCC became in default on October 29, 2003 when CCP informed it in writing of
the breach of the contract agreement and demanded the fulfillment of its obligation against the
bonds. Consequently, the November 6, 2003 letter that CCP sent to PCIC properly complied
with the notice of claim requirement set forth in the said bonds. Upon notice of default of obligor
DPCC, PCICs liability, as surety, was already attached.

Page 69 of 845
 G.R. No. 158768
February 12, 2008
Titan-Ikeda Construction & Development Corporation, petitioner, vs. Primetown Property
Group, Inc., respondent.

FACTS:

In 1992, respondent Primetown Property Group, Inc. awarded the contract for the
structural works of its 32-storey Makati Prime Tower (MPT) to petitioner Titan-Ikeda
Construction and Development Corporation. In September 1995, respondent engaged the
services of Integratech, Inc. (ITI), an engineering consultancy firm, to evaluate the progress of
the project. In its report, ITI informed respondent that petitioner, at that point, had only
accomplished 31.89% of the project (or was 11 months and six days behind schedule).
Meanwhile, petitioner and respondent were discussing the possibility of the latters takeover of
the projects supervision. Despite ongoing negotiations, respondent did not obtain petitioners
consent in hiring ITI as the projects construction manager. Neither did it inform petitioner of
ITIs September 7, 1995 report. Subsequently, both parties agreed that Primetown will take over
the project. Petitioner then demanded for the payment due him in relation to its partial
performance of its obligation. For failure of Primetown to pay despite repeated demands,
petitioner filed a case for specific performance against Primetown. Meanwhile, Primetown
demanded reimbursement for the amount it spent in having the project completed.

ISSUE:

Whether or not Titan-Ikeda is responsible for the projects delay

HELD:

It was found that because respondent modified the MPT's architectural design, petitioner
had to adjust the scope of work. Moreover, respondent belatedly informed petitioner of those
modifications. It also failed to deliver the concrete mix and rebars according to schedule. For this
reason, petitioner was not responsible for the project's delay. Mora or delay is the failure to
perform the obligation in due time because of dolo (malice) or culpa (negligence). A debtor is
deemed to have violated his obligation to the creditor from the time the latter makes a demand.
Once the creditor makes a demand, the debtor incurs mora or delay. Respondent never sent
petitioner a written demand asking it to accelerate work on the project and reduce, if not
eliminate, slippage. Because the parties agreed to extinguish the supplemental agreement, they
were no longer required to fully perform their respective obligations. Petitioner was relieved of
its obligation to complete the project while respondent was freed of its obligation to pay the
entire contract price. However, respondent, by executing the June 30, 1994 deed of absolute sale,
was deemed to have paid P112,416,716.88. Nevertheless, because petitioner applied part of what
it received to respondents outstanding liabilities, it admitted overpayment. Because petitioner
acknowledged that it had been overpaid, it was obliged to return the excess to respondent.

Page 70 of 845
 G.R. No. 129598
August 15, 2001
PNB Madecor, petitioner, vs. Gerardo C. Uy, respondent.

FACTS:

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

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

ISSUE:

Whether or not PNB MADECOR is correct in its contention that compensation is

applicable to its receivables from and its payables to PNEI

HELD:

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

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

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

Page 71 of 845
 G.R. No. 115129
February 12, 1997
Ignacio Barzaga, petitioner, vs. Court Of Appeals and Angelito Alviar, respondents.

FACTS:

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

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

ISSUE:

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

HELD:

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

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

purchase and sale, petitioner had already complied fully with what was required of him as
purchaser, i.e., the payment of the purchase price of P2,110. It was incumbent upon respondent
to immediately fulfill his obligation to deliver the goods otherwise delay would attach.

Page 72 of 845
 G.R. No. 117190
January 2, 1997
Jacinto Tanguilig doing business under the name and style J.M.T. Engineering And
General Merchandising, petitioner, vs. Court Of Appeals and Vicente Herce Jr.,
respondents.

FACTS:

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

windmill system for him. After some negotiations they agreed on the construction of the
windmill for a consideration of P60,000. On 14 March 1988, due to the refusal and failure of
respondent to pay the balance, petitioner filed a complaint to collect the amount. Respondent
denied the claim saying that he had already paid this amount to the San Pedro General
Merchandising Inc. (SPGMI) which constructed the deep well to which the windmill system was
to be connected. According to respondent, since the deep well formed part of the system the
payment he tendered to SPGMI should be credited to his account by petitioner. Moreover,
assuming that he owed petitioner a balance of P15,000, this should be offset by the defects in the
windmill system which caused the structure to collapse after a strong wind hit their place.
Petitioner refused to pay and argued that private respondent was already in default in the
payment of his outstanding balance of P15,000 and hence should bear his own loss.

ISSUE:

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

HELD:

Petitioner's argument that private respondent was already in default in the payment of his
outstanding balance of P15,000 and hence should bear his own loss, is untenable. In reciprocal
obligations, neither party incurs in delay if the other does not comply or is not ready to comply in
a proper manner with what is incumbent upon him. When the windmill failed to function
properly it became incumbent upon petitioner to institute the proper repairs in accordance with
the guaranty stated in the contract. Thus, respondent cannot be said to have incurred in delay;
instead, it is petitioner who should bear the expenses for the reconstruction of the windmill.
Article 1167 of the Civil Code is explicit on this point that if a person obliged to do something
fails to do it, the same shall be executed at his cost.

Page 73 of 845
 G.R. No. 96053
March 3, 1993
Josefina Tayag, et al., petitioners, vs. Court Of Appeals and Albrigido Leyva, respondents.

FACTS:

Juan Galicia, Sr. executed a deed of conveyance, prior to his demise in 1979 in favor of
Albrigido Leyva involving the undivided one-half portion of a piece of land situated at
Poblacion, Guimba, Nueva Ecija for the sum of P50,000. There is no dispute that the first
installment was received by Juan Galicia, Sr. And according to petitioners, of the P10,000 to be
paid within ten days from execution of the instrument, only P9,707 was tendered to, and received
by, them on numerous occasions from May 29, 1975, up to November 3, 1979. It was also
agreed upon that private respondent will assume the vendors' obligation to the Philippine
Veterans Bank, however, he paid only the sum of P6,926.41 while the difference of the
indebtedness was paid by Juan Galicia, Sr.s sister. Moreover, petitioners claimed that not a
single centavo of the P27,000 representing the remaining balance was paid to them. Petitioners
averred that private respondents failure to pay full consideration of the agreement to sell gave
them the right to have the contract rescinded.

ISSUE:

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

HELD:

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

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

Page 74 of 845
 G.R. No. L-69996
December 5, 1994
Dr. Fernando Periquet, Jr., petitioner, vs. Honorable Fourth Civil Cases Division of the
Intermediate Appellate Court and the Heirs Of The Late Felix R. Francisco, respondents.

FACTS:

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

ISSUE:

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

HELD:

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

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

Page 75 of 845
 G.R. No. 174986
July 7, 2009
Armand O. Raquel-Santos and Annalissa Mallari, petitioners, vs. Court of Appeals and
Finvest Securities Co., Inc., respondents.

FACTS:

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

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

ISSUE:

Whether or not Finvest incurred delay in its obligations

HELD:

Under the law on contracts, mora solvendi or debtors default is defined as a delay in the
fulfillment of an obligation, by reason of a cause imputable to the debtor. There are three
requisites necessary for a finding of default. First, the obligation is demandable and liquidated;
second, the debtor delays performance; and third, the creditor judicially or extrajudicially
requires the debtors performance. In the present petition, PSE insists that Finvests liability for
fines, penalties and charges has been established, determined and substantiated, hence,

Page 76 of 845
liquidated. However, both trial court and CA have ruled otherwise. The findings of fact of both
the trial court and the CA are fully supported by the records and that they plainly show that the
parties were negotiating to determine the exact amount of Finvests obligations to PSE, during
which period PSE repeatedly moved the deadlines it imposed for Finvest to pay the fines,
penalties and charges, apparently to allow for more time to thresh out the details of the
computation of said penalties.

A debt is liquidated when the amount is known or is determinable by inspection of the

terms and conditions of relevant documents. Under the attendant circumstances, it cannot be said
that Finvests debt is liquidated. At the time PSE left the negotiating table, the exact amount of
Finvests fines, penalties and charges was still in dispute and as yet undetermined. Consequently,
Finvest cannot be deemed to have incurred in delay in the payment of its bligations to PSE. It
cannot be made to pay an obligation the amount of which was not fully explained to it. The
public sale of the pledged seat would, thus, be premature.

Page 77 of 845
Page 78 of 845
 G.R. No. 133107

March 25, 1999

Rizal Commercial Banking Corporation (RCBC) v. Court of Appeals (CA)

Facts:

The private respondent Atty. Felipe Lustre purchased a car from Toyota Shaw, Inc. for
which he made a downpayment, the balance of which is to be paid in twenty-four (24) equal
monthly installments. To secure the balance, Lustre executed a promissory note and a contract of
chattel mortgage over the vehicle in favor of Toyota Shaw. The said contract provided for an
acceleration clause, stating that if there be default on the part of the mortgagor to pay any of the
installments, the whole amount remaining shall become due.

Toyota Shaw then assigned all its rights and interest in the Chattel Mortgage to RCBC. The
problem arose when a check was not signed by Lustre. On the theory that he defaulted in his
payments, RCBC demanded the payment of the debt, including liquidated damages. When he
refused, RCBC filed an action for replevin and damages.

Issue:

Whether or not Lustre should be held in default

Ruling:

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

Page 79 of 845
 G.R. No. 115548

March 5, 1996

State Investment House, Inc. v. Court of Appeals (CA)

Facts:

Spouses Oreta and Solid Homes, Inc. (SOLID) entered into a contract to sell involving a
parcel of land for P39,347. Upon signing the contract, the spouses paid the downpayment with the
agreement that the balance shall be payable in monthly installments of P451.70, at 12% interest
per annum.

On November 4, 1976, SOLID executed several real estate mortgage contracts in favor of
State Investment House Inc. (STATE) over its subdivided parcels of land, one of which is the
subject lot of the aforementioned contract.

On April 6, 1983, for failure of SOLID to comply with its obligations, STATE extra-
judicially foreclosed the mortgaged properties, including the subject lot. As a result, the spouses
filed a complaint against SOLID and STATE for SOLIDs failure to execute the absolute deed of
sale despite full payment of the purchase price as of 1981.

Issue:

Who has the better right over the subject lot?

Ruling:

STATE admits the superior rights of the spouses over the subject property as it did not pray
for the nullification of the contract between SOLID and the spouses, but instead asked for the
payment of the release value of the property in question, plus interest, attorneys fees and costs of
suit against SOLID or, in case of its inability to pay, against the spouses, before it can be required
to release the title in their favor. The unrecorded sale between SOLID and the spouses is preferred

Page 80 of 845
for the reason that if the original owner, in this case SOLID, had parted with the ownership of the
thing sold, then he no longer had free disposal of that thing so as to be able to mortgage it again.

G.R. No. 133632

February 15, 2002

Bank of the Philippine Islands Investment Corporation (BPIIC) v. Court of Appeals (CA)

Facts:

Frank Roa obtained a loan at an interest rate of 16.25% per annum from Ayala Investment
and Development Corporation (AIDC), the predecessor of BPIIC, for the construction of a house
on his lot. To secure the loan, the said house and lot were mortgaged to AIDC.

Sometime in 1980, Roa sold the house and lot to the private respondents ALS Management
and Development Corporation (ALS) and Antonio Litonjua, who paid P350,000 in cash and
assumed the P500,000 balance of Roas indebtedness with AIDC, which, however, proposed to
grant them a new loan of P500,000 to be applied to Roas debt and secured by the same property,
at an interest rate of 20% per annum.

In June 1984, BPIIC instituted foreclosure proceedings against ALS and Litonjua on the
ground that they failed to pay the mortgage indebtedness. They, on the other hand, alleged that
they were not in arrears in their payment, but in fact made an overpayment.

Issue:

Whether or not BPIIC may be held liable for moral and exemplary damages

Ruling:

Page 81 of 845
 BPIIC claims that it should not be held liable for moral and exemplary damages. It did not
act maliciously when it initiated the foreclosure proceedings. It merely exercised its right under
the mortgage contract because the private respondents were irregular in the payment of their
monthly amortization.

The private respondents counter that BPIIC acted in bad faith, because it insisted on the
payment of the amortization on the loan even before it was released. Further, it did not make the
corresponding deduction in the monthly amortization to conform to the actual amount of loan
released.

As admitted by the private respondents themselves, they were irregular in the payment of
their monthly amortization. Thus, BPIIC cannot be declared in bad faith and, consequently, the
award of moral and exemplary damages should be ruled out.

However, the Court finds BPIIC negligent in relying merely on the entries found in the
deed of mortgage, without checking and correspondingly adjusting its records on the release. Such
negligence resulted in damage to the private respondents, for which an award of nominal damages
in the amount of P25,000 should be given in recognition of their rights violated by BPIIC. Lastly,
the award of P50,000 is sustained in favor of the private respondents as attorneys fees since they
were compelled to litigate.

Page 82 of 845
 G.R. No. 129018

November 15, 2001

Carmelita Leao v. Court of Appeals (CA)

Facts:

Hermogenes Fernando, the vendor, and Carmelita Leao, the vendee, executed a contract
to sell involving a piece of land. In the contract, Leao bound herself to pay Fernando P10,775
upon the signing of the contract, with the balance of P96,975 to be paid within a period of ten (10)
years at a monthly amortization of P1,747.30. The contract also provided for a grace period of one
(1) month within which to make payments. Should it expire without the installments for both
months, an interest of 18% per annum will be charged on the unpaid installments.

Page 83 of 845
Issue:

Whether or not Leao should be held in default

Ruling:

While the contract provided that the total purchase price was payable within a period of
ten (10) years, the same contract provided that it shall be paid in monthly installments for which
the corresponding penalty shall be imposed in case of default. Leao cannot ignore the monthly
installments by claiming that the ten (10) years has not yet elapsed.

Article 1169 of the Civil Code states that in reciprocal obligations, neither party incurs in
delay if the other does not comply or is not ready to comply in a proper manner with what is
incumbent upon him. From the moment one of the parties fulfills his obligation, delay by the other
begins.

In the case at bar, Fernando performed his part of the obligation by allowing Leao to
continue in the use and possession of the property. However, the Court agrees with the trial court
that Leaos default in respect of the obligation could be compensated by the interest and
surcharges imposed upon her under the contract.

G.R. No. 127695

December 3, 2001

Heirs of Luis Bacus v. Court of Appeals (CA)

Facts:

Page 84 of 845
 Luis Bacus leased to the private respondent Faustino Duray a parcel of agricultural land.
The contract contained an option to buy clause, under which the lessee had the exclusive and
irrevocable right to buy 2,000 square meters of the property within five (5) years from a year after
the effectivity of the contract. Close to the expiration of the contract, Luis Bacus died. Thereafter,
the spouses Duray informed one of the petitioners, that they were willing and ready to purchase
the property under the option to buy clause. Due to the refusal of the petitioners to sell the property,
Duray filed a complaint for specific performance. On the other hand, the petitioners alleged that
before Luis Bacus death, the spouses conveyed to them their lack of interest to exercise their
option due to insufficiency of funds. They further alleged that the spouses presented a bank
certification which cannot be deemed legal tender, and not deposited the money required by the
Lupong Tagapamayapa.

Issue:

Whether or not the spouses Duray should be held in default when they did not deliver the
purchase price or consign it in court on or before the expiration of the contract

Ruling:

Obligations under an option to buy are reciprocal: the performance of an obligation is

conditioned on the simultaneous performance of the other. In other words, in an option to buy, the
payment of the purchase price by the creditor is conditioned on the execution and delivery of the
deed of sale by the debtor. In this case, when the spouses Duray opted to buy the property, their
obligation was to advise the petitioners of their decision and readiness to pay. Consequently, since
the obligation was not yet due, consignation in court of the purchase price was not yet required.

G.R. No. 115117

June 8, 2000

Page 85 of 845
 Integrated Packaging Corp. vs. Court of Appeals (CA)

Facts:

The petitioner and the private respondent executed an order agreement whereby the latter
bound itself to deliver to the former 3,450 reams of printing paper under specified schedule of
delivery. As of July 30, 1979, the private respondent had delivered to the petitioner 1,097 reams
of printing paper. From June 5, 1980 to July 23, 1981, the private respondent delivered to the
petitioner various quantities of printing paper amounting to P766,101.70. However, the petitioner
encountered difficulties paying the private respondent the said amount. Accordingly, the private
respondent made a formal demand upon the petitioner in a collection suit. In its answer, the
petitioner alleged that the private respondent was able to deliver only 1,097 reams of printing paper
which was short of 2,875 reams, in total disregard of their agreement; that the private respondent
failed to deliver the balance of the printing paper despite demand therefor, hence, petitioner
suffered actual damages and failed to realize expected profits.

Issue:

Whether or not the private respondent violated the order agreement

Ruling:

No, the private respondent did not violate the order agreement. The transaction between
the parties is a contract of sale whereby the private respondent, as the seller, obligates itself to
deliver the printing paper to the petitioner, as the buyer, which, in turn, obligates itself to pay its
purchase price. Reciprocal obligations are to be performed simultaneously, so that the performance
of one is conditioned upon the simultaneous performance of the other. Thus, the private respondent
obligates to deliver printing paper of various quantities subject to the petitioners corresponding
obligation to pay, on a maximum 90-day credit. Clearly, the petitioner did not fulfill his side of the
contract since his last payment in August 1981 covers only the materials of the delivery invoices
dated September and October 1980.

Page 86 of 845
 G.R. No. 137552

June 16, 2000

Laforteza v. Machuca

Facts:

In the exercise of the Special Power of Attorney (SPA) executed by their co-heirs, Gonzalo
and Roberto Laforteza. entered into a Contract to Sell with the plaintiff over the subject house and
lot for P630,000.00. On September 18, 1998, the defendant heirs, through their counsel, wrote a
letter to the plaintiff, advising him that he had thirty (30) days to produce the balance of
P600,000.00 under the Memorandum of Agreement and furnishing him a copy of the reconstituted
title to the subject property. The plaintiff requested a 30-day extension, granted by Roberto but not
by Gonzalo.

On November 15, 1989, the plaintiff informed the defendant heirs, through their counsel
Roberto, that he has the money. However, the defendants told him that the subject property was
no longer for sale and insisted on rescission. Thereafter,the plaintiff filed the instant action for
specific performance.

Issue:

Whether or not the defendants may rescind the contract

Ruling:

Admittedly, the failure of Machuca to pay the balance of the purchase price was a breach
of the contract and a ground for rescission thereof. The extension of thirty (30) days allegedly
granted to him by Roberto was correctly found by the Court of Appeals to be ineffective inasmuch
as the signature of Gonzalo did not appear thereon as required by the SPA.

Page 87 of 845
 However, the evidence reveals that the petitioners were not ready to comply with their
obligation, i.e. the delivery of the reconstituted title of the house and lot. Machuca could not
therefore be considered in delay for in reciprocal obligations, neither party incurs in delay if the
other party does not comply or is not ready to comply in a proper manner with what was incumbent
upon him.

Even assuming for the sake of argument that the petitioners were ready to comply with
their obligation, rescission will still not prosper. The thirty-day delay in payment, a mere casual
breach, was caused by the Machucas justified but mistaken belief that an extension was granted
to him. Rescission of a contract will not be permitted for a casual breach, but only for such
substantial breach as would defeat the very object of the parties in making the agreement.

Page 88 of 845
 G.R. No. 188715

April 6, 2011

Regala v. Carin

Facts:

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

In the course of the construction of the second floor, the respondent and his wife Marietta
suffered from the dust and dirt which fell on their property. As Regala failed to address the
problem, on June 9, 1998, Carin filed a letter-complaint with the Office of the City Engineer and
Building Official of Las Pias City.
Page 89 of 845
Issue:

Whether or not the injuries sustained by Carin were done maliciously

Ruling:

Malice or bad faith implies a conscious and intentional design to do a wrongful act for a
dishonest purpose. While the Court harbors no doubt that the incidents which gave rise to this
dispute have brought anxiety and anguish to Carin, it is unconvinced that the damage inflicted
upon his property was malicious or willful, an element crucial to merit an award of moral damages
under Article 2220 of the Civil Code. Necessarily, the Court is not inclined to award exemplary
damages. Regala, however, cannot steer clear from any liability whatsoever. Nominal damages
may thus be adjudicated in order that Carins right, which has been violated or invaded by the
Regala may be recognized.

G.R. No. 141968

February 12, 2001

International Corporate Bank (now Union Bank of the Philippines) v. Spouses Gueco

Facts:

The spouses Gueco obtained a loan from the International Corporate Bank (now the Union
Bank of the Philippines) to purchase a car. In consideration thereof, they executed promissory
notes payable in monthly installments and a chattel mortgage over the car as security for the notes.
They defaulted, and after some negotiations, the car loan was lowered. Finally, Dr. Gueco
delivered a managers check, but the car was not released because of his refusal to sign the Joint

Page 90 of 845
Motion to Dismiss. The International Corporate Bank, however, insisted that it is standard
operating procedure (SOP) in their bank to effect a compromise and to preclude future filing of
claims, counterclaims or suits for damages.

Issue:

Whether or not there was fraud on the part of the International Corporate Bank

Ruling:

Fraud has been defined as the deliberate intention to cause damage or prejudice. The Court
failed to see how the act of the International Corporate Bank in requiring the spouses Gueco to
sign could constitute as fraud. In fact, the motion was for the benefit of Dr. Gueco. The whole
point of the compromise agreement was in order that Dr. Gueco would pay his outstanding account
and in return, the International Corporate Bank would return the car and drop the case for money
and replevin before the Metropolitan Trial Court.

G.R. No. 139050

October 2, 2001

Republic of the Philippines v. Court of Tax Appeals (CTA)

Page 91 of 845
Facts:

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

Issue:

Whether or not the private respondent AGFHA, Inc. is guilty of fraud in relation to the
subject shipment

Ruling:

The petitioner asserts that all the requisites for forfeiture proceedings under the Tariff and
Customs Code are present. AGFHA, Inc., on the other hand, maintains that there has only been
an inadvertent error and not an intentional wrongful declaration by the shipper to evade payment
of any tax due.

Fraud must be proved to justify forfeiture. It must be actual, amounting to intentional

wrong-doing with the clear purpose of avoiding the tax. The case involved an honest mistake, not
even directly attributable to AGFHA, Inc., which will not deprive the government of its right to
collect the proper tax. The conclusion of the appellate court, being consistent with the evidence
on record and not contrary to law and jurisprudence, can hardly be overturned by the Court.

G.R. No. 146173

Page 92 of 845
 December 11, 2003

Yambao v. Herminigildo Zuiga

Facts:

In the afternoon of May 6, 1992, the bus owned by the petitioner Yambao was being driven
by her employee Ceferino G. Venturina along the northbound lane of Epifanio delos Santos
Avenue (EDSA) when it bumped the pedestrian Zuiga. The private respondents, the heirs of the
victim, filed a Complaint against Yambao and Venturina for damages. The complaint alleged that
Venturina drove the bus in a reckless, careless and imprudent manner, in violation of traffic rules
and regulations, without due regard to public safety, thus resulting in the Zuigas premature death.
In her Answer, Yambao denied the allegations, trying to shift the blame to Zuiga, theorizing that
he bumped into her bus, while avoiding an unidentified woman chasing him. She further alleged
that she was not liable for any damages because as an employer, she exercised the proper diligence
of a good father of a family, both in the selection and supervision of Venturina.

Issue:

Whether or not Yambao exercised the diligence of a good father of a family in the selection
and supervision of her Venturina thus absolving her from any liability

Ruling:

Her allegation that before she hired him, he was required to submit his drivers license and
clearances is worthless, in view of her failure to offer in evidence certified true copies. Moreover,
petitioner contradicted herself. Venturina applied in January 1992 and submitted the said
requirements only on May 6, 1992, or on the very day of the fatal accident itself.

Yambao also failed to present convincing proof that she went to the extent of verifying
Venturinas qualifications, safety record, and driving history, and implementing training programs
and periodic seminars on road safety and traffic efficiency for her employees. Hence, Yambao

Page 93 of 845
cannot claim exemption from any liability arising from the recklessness or negligence of
Venturina.

G.R. No. 143008

June 10, 2002

Smith Bell Dodwell v. Catalino Borja

Facts:

Dodwell filed a written request with the Bureau of Customs (BOC) for the attendance of
its inspection team on vessel M/T King Family due to arrive at Manila on September 24, 1987. In
the morning of that day, while the vessel was unloading chemicals unto two (2) barges owned by
the respondent ITTC, a sudden explosion occurred setting the vessels afire. Upon hearing the
explosion, Borja, inside the cabin preparing reports, ran outside to check what happened. Again,
another explosion was heard. Seeing the fire, Borja hurriedly jumped over board to save himself.
However, the water was likewise on fire due mainly to the spilled chemicals. Despite the
tremendous heat, Borja swam his way until he was rescued by the people living in the squatters
area and sent to San Juan De Dios Hospital. After weeks at the hospital, Borja was diagnosed to
be permanently disabled due to the incident. Thus, he made demands against Dodwell and ITTC
for damages caused by the explosion. However, both denied liabilities and attributed to each other
negligence.

Issue:

Who, if any, is liable for Borjas injuries?

Ruling:

Both the trial and the appellate courts ruled that the explosion and the fire had originated
from Dodwells vessel. His attempts to shift the blame on ITTC were all for naught, there is
nothing in the record to support petitioners contention.
Page 94 of 845
 The three elements of quasi-delict are: (a) damages suffered by the plaintiff, (b) fault or
negligence of the defendant, and (c) the connection of cause and effect between the fault or
negligence of the defendant and the damages inflicted on the plaintiff. All these elements were
established in this case. Knowing that the vessel was carrying dangerous chemicals, Dodwell was
negligent in not taking all the necessary precautions in transporting the cargo.

G.R. No. 139130

November 27, 2002

Ramon K. Ilusorio v. Court of Appeals (CA)

Facts:

Ilusorio is a prominent businessman and a depositor in good standing of the respondent

bank, the Manila Banking Corporation. Running about twenty (20) corporations and going out of
the country a number of times, Ilusorio entrusted to his secretary Katherine E. Eugenio his credit
cards and checkbook with blank checks. Eugenio was able to encash and deposit to her personal
account about seventeen (17) checks drawn against Ilusorios account at the respondent bank, with
an aggregate amount of P119,634.34. He did not bother to check his statement of account until a
business partner apprised him that he saw Eugenio use his credit cards. Ilusorio fired her
immediately, and instituted a criminal action for estafa thru falsification against her. Ilusorio then
requested the respondent bank to restore to his account the value of the checks which were
wrongfully encashed but respondent bank refused. Hence, petitioner filed the instant case.

Issue:

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

Ruling:
Page 95 of 845
 Ilusorios contention that Manila Bank was remiss in the exercise of its duty as drawee
lacks factual basis. Manila Bank employees exercised due diligence in cashing the checks. Its
verifiers first verified the drawers signatures thereon as against his specimen signature cards, and
when in doubt, the verifier went further, such as by referring to a more experienced verifier for
further verification. In some instances the verifier made a confirmation by calling the depositor
by phone. It is only after taking such precautionary measures that the subject checks were given
to the teller for payment.

As borne by the records, it was Illusorio, not the bank, who was negligent. Negligence is
the omission to do something which a reasonable man, guided by those considerations which
ordinarily regulate the conduct of human affairs, would do, or the doing of something which a
prudent and reasonable man would do.

Page 96 of 845
 G.R. No. 160959

April 3, 2007

Diaz and Co., Inc. v. Davao Light and Power Co., Inc. (DLPC)

Facts:

Davao Light and Power Co., Inc. (DLPC) sent a Notice of Disconnection to Diaz and Co.,
Inc. informing it that, as of June 13, 1983, the hotels unpaid electric consumption bill amounted
to P190,111.02 and warning that if not paid, DLPC would be impelled to discontinue its service.

Page 97 of 845
 Since Diaz and Co., Inc. ignored the letter, Meter No. 36510 was disconnected on July 29,
1983. DLPC then filed a complaint for collection before.

Meanwhile, in 1984, the National Food Authority (NFA) established its KADIWA and
leased a portion of the ground floor of the Imperial Hotel Building from Diaz and Co., Inc.

NFA/KADIWA also applied for electricity service with DLPC, and a contract was later
executed between the parties.

The Kadiwa Center IV closed, and NFA/KADIWA vacated the Dona Segunda Building.
DLPC was informed that the light and power connection of NFA/KADIWA would be left behind;
its right to the connection would be transferred to Diaz.

Diaz and Co., Inc. informed that it had assumed the electrical bills of NFA/KADIWA and
requested that the monthly bills/statements be sent to it. In its reply, DLPC rejected the request
and declared that it was not aware that Diaz and Co., Inc. had refunded the NFA/KADIWA its
P1,020.00 deposit.

The portion of the building formerly leased by NFA/KADIWA was leased to Matias
Mendiola. Because he needed more electricity than what could be provided by the existing
electrical wirings, DLPC and Mendiola executed a service contract for electricity service.

In the end, plaintiff asks for damages for defendants alleged malicious prosecution of a
criminal case of theft of electricity against him, for plaintiffs filing of a charge of violation of P.D.
401 as amended after dismissal of the theft case, the filing of a damage suit against him before the
RTC of Cebu City which was dismissed and the filing of another damage suit before the same
Cebu RTC which is still pending. Damages are also being sought for defendants removal of
Electric Meter.

Issue:

Whether or not there was malicious prosecution in this case.

Ruling:

Page 98 of 845
 There was none. Malicious prosecution has been defined as an action for damages brought
by or against whom a criminal prosecution, civil suit or other legal proceeding has been instituted
maliciously and without probable cause, after the termination of such prosecution, suit, or other
proceeding in favor of the defendant therein.

It is an established rule that in order for malicious prosecution to prosper, the following
requisites must be proven by petitioner: (1) the fact of prosecution and the further fact that the
defendant (respondent) was himself the prosecutor, and that the action finally terminated with an
acquittal; (2) that in bringing the action, the prosecutor acted without probable cause; and (3) that
the prosecutor was actuated or impelled by legal malice, that is, by improper or sinister motive.

Said requisites are not attendant in this case. First. Although respondent DLPC initiated
before the prosecutors office Inv. Sheet No. 593 July/1988 for theft of electricity, and I.S. No. 92-
4590 for Violation of P.D. 401, as amended by B.P. Blg. 876, no information was ever filed in
court. The cases were eventually dropped or dismissed before they could be filed in court.
Ultimately, both actions could not end in an acquittal.

Second. It cannot be concluded that respondent DLPC acted without probable cause when
it instituted the actions. The events which led to the filing of the complaints are undisputed, and
respondent DLPC cannot be faulted for filing them. In the early case of Buchanan v. Esteban, this
Court had already stressed that one cannot be held liable in damages for maliciously instituting a
prosecution where he acted with probable cause.

Page 99 of 845
 G.R. No. 156339

October 6, 2004

Violeta Yasoa v. Rodencio and De Ramos

Facts:

In November 1971, Aurea Yasoa and her son, Saturnino, went to the house of Jovencio de
Ramos to ask for financial assistance in paying their loans to Philippine National Bank (PNB),
otherwise their residential house and lot, covered by TCT No. T-32810, would be foreclosed.
Inasmuch as Aurea was his aunt, Jovencio acceded to the request. They agreed that, upon payment
by Jovencio of the loan to PNB, half of Yasoas subject property would be sold to him.

On December 29, 1971, Jovencio paid Aureas bank loan. As agreed upon, Aurea executed
a deed of absolute sale in favor of Jovencio over half of the lot consisting of 123 square meters.
Thereafter, the lot was surveyed and separate titles were issued by the Register of Deeds of Sta.
Cruz, Laguna in the names of Aurea (TCT No. 73252) and Jovencio (TCT No. 73251).

Twenty-two years later, in August 1993, Aurea filed an estafa complaint against brothers
Jovencio and Rodencio de Ramos on the ground that she was deceived by them when she asked
for their assistance in 1971 concerning her mortgaged property. In her complaint, Aurea alleged
that Rodencio asked her to sign a blank paper on the pretext that it would be used in the redemption
of the mortgaged property. Aurea signed the blank paper without further inquiry because she
trusted her nephew, Rodencio. Thereafter, they heard nothing from Rodencio and this prompted
Nimpha Yasoa Bondoc to confront Rodencio but she was told that the title was still with the
Register of Deeds. However, when Nimpha inquired from the Register of Deeds, she was shocked
to find out that the lot had been divided into two, pursuant to a deed of sale apparently executed
by Aurea in favor of Jovencio. Aurea averred that she never sold any portion of her property to

Page 100 of 845

Jovencio and never executed a deed of sale. Aurea was thus forced to seek the advice of Judge
Enrique Almario, another relative, who suggested filing a complaint for estafa.

On February 21, 1994, Assistant Provincial Prosecutor Rodrigo B. Zayenis dismissed the
criminal complaint for estafa for lack of evidence. On account of this dismissal, Jovencio and
Rodencio filed a complaint for damages on the ground of malicious prosecution with the Regional
Trial Court of Sta. Cruz, Laguna, Branch 91,[2] which was docketed as Civil Case No. SC-3230.
They alleged that the filing of the estafa complaint against them was done with malice and it caused
irreparable injury to their reputation, as Aurea knew fully well that she had already sold half of the
property to Jovencio.

Issue:

Whether or not the filing of the criminal complaint for estafa constituted malicious
prosecution

Ruling:

We agree with the appellate court that the remedy availed of by petitioners was
inappropriate as Rule 65 of the Rules of Court cannot be a substitute for a lost appeal, and that, in
any event, petitioners are liable for malicious prosecution.

In this jurisdiction, the term malicious prosecution has been defined as an action for
damages brought by one against whom a criminal prosecution, civil suit, or other legal proceeding
has been instituted maliciously and without probable cause, after the termination of such
prosecution, suit, or other proceeding in favor of the defendant therein. To constitute malicious
prosecution, there must be proof that the prosecution was prompted by a sinister design to vex or
humiliate a person, and that it was initiated deliberately by the defendant knowing that his charges
were false and groundless. Concededly, the mere act of submitting a case to the authorities for
prosecution does not make one liable for malicious prosecution.

In this case, however, there is reason to believe that a malicious intent was behind the filing
of the complaint for estafa against respondents. The records show that the sale of the property was

Page 101 of 845

evidenced by a deed of sale duly notarized and registered with the local Register of Deeds. After
the execution of the deed of sale, the property was surveyed and divided into two portions. Separate
titles were then issued in the names of Aurea Yasoa (TCT No. 73252) and Jovencio de Ramos
(TCT No. 73251). Since 1973, Jovencio had been paying the realty taxes of the portion registered
in his name. In 1974, Aurea even requested Jovencio to use his portion as bond for the temporary
release of her son who was charged with malicious mischief. Also, when Aurea borrowed money
from the Rural Bank of Lumban in 1973 and the PNB in 1979, only her portion covered by TCT
No. 73252 was mortgaged.

All these pieces of evidence indicate that Aurea had long acknowledged Jovencios
ownership of half of the property. Furthermore, it was only in 1993 when petitioners decided to
file the estafa complaint against respondents. If petitioners had honestly believed that they still
owned the entire property, it would not have taken them 22 years to question Jovencios ownership
of half of the property. The only conclusion that can be drawn from the circumstances is that Aurea
knew all along that she was no longer the owner of Jovencios portion after having sold it to him
way back in 1971. Likewise, other than petitioners bare allegations, no other evidence was
presented by them to substantiate their claim.

Malicious prosecution, both in criminal and civil cases, requires the elements of (1) malice
and (2) absence of probable cause.[7] These two elements are present in the present controversy.
Petitioners were completely aware that Jovencio was the rightful owner of the lot covered by TCT
No. 73251, clearly signifying that they were impelled by malice and avarice in bringing the
unfounded action. That there was no probable cause at all for the filing of the estafa case against
respondents led to the dismissal of the charges filed by petitioners with the Provincial Prosecutors
Office in Siniloan, Laguna.

Page 102 of 845

 G.R. Nos. 181163, 181262, and 181319

July 24, 2013

Asian Terminals, Inc. (ATI) v. Philam Insurance Co., Inc

Facts:

On April 15, 1995, Nichimen Corporation shipped to Universal Motors Corporation 219
packages containing 120 units of brand new Nissan Pickup Truck Double Cab 42 model, without
engine, tires and batteries, on board the vessel S/S Calayan Iris from Japan to Manila. The
shipment, which had a declared value of US$81,368 or P29,400,000, was insured with Philam
against all risks under the marine Policy no. 708-8006717-4.

Page 103 of 845

 The carrying vessel arrived at the port of manila on April 20, 1995, and when the shipment
was unloaded by the staff of ATI, it was found that the package marked as 03-245-42K/1 was in
bad order. The Turn Over Survey of bad order cargoes dated April 21, 1995 identified two
packages, labelled 03-245-42K/1 and 03/237/7CK/2, as being dented and broken. Thereafter, the
cargoes were stored for temporary safekeeping inside CFS Warehouse in Pier No. 5.

On May 11, 1995, the shipment was withdrawn by R.F. Revilla Customs Brokerage, Inc.,
the authorized broker of Universal Motors, and delivered to the latters warehouse in Mandaluyong
City. Upon the request of Universal Motors, a bad order survey was conducted on the cargoes and
it was found that one Frame Axle Sub without LWR was deeply dented on the buffle plate while
six Frame Assembly with Bush were deformed and misaligned. Owing to the extent of the damage
to said cargoes, Universal Motors declared them a total loss.

On August 4, 1995, Universal Motors filed a formal claim for damages in the amount of
P643,963.84 against Westwind, ATI and R.F. Revilla Customs Brokerage, Inc. When Universal
Motors demands remained unheeded, it sought reparation from and was compensated in the sum
of P633,957.15 by Philam. Accordingly, Universal Motors issued a Subrogation Receipt dated
November 15, 1995 in favor of Philam.

On January 18, 1996, Philam, as subrogee of Universal Motors, filed a Complaint for
damages against Westwind, ATI and R.F. Revilla Customs Brokerage, Inc. before the Regional
Trial Court of Makati City. The trial court rendered judgment in favour of Philam which ruling
was affirmed by the Court of Appeals modifying the amount to be paid by Westwind and ATI.

Issue:

Whether or not Philam may claim against Westwind and ATI as a subrogee

Ruling:

YES. The Court holds that petitioner Philam has adequately established the basis of its
claim against petitioners ATI and Westwind. Philam, as insurer, was subrogated to the rights of
the consignee, Universal Motors Corporation, pursuant to the Subrogation receipt executed by the

Page 104 of 845

latter in favour of the former. The right of subrogation accrues simply upon payment by the
insurance company of the insurance claim.

Petitioner Philams action finds support in Article 2207 of the Civil Code which provides
that if the plaintiffs property has been insured, and he has received indemnity from the insurance
company for the injury or loss arising out of the wrong or breach of contract complained of, the
insurance company shall be subrogated to the rights of the insured against the wrongdoer or the
person who has violated the contract.

Page 105 of 845

 G.R. No. 124378

March 8, 2005

National Power Corporation (NPC) v. Court of Appeals (CA)

Facts:

On November 15, 1973, the Office of the President of the Philippines issued Memorandum
Order No. 398 instructing the National Power Corporation (NPC) to build the Agus Regulation
Dam at the mouth of Agus River in Lanao del Sur, at a normal maximum water level of Lake
Lanao at 702 meters elevation. Pursuant thereto, the petitioner built and operated the said dam in
1978. The private respondents Hadji Abdul Carim Abdullah, Caris Abdullah, Hadji Ali Langco
and Diamael Pangcatan own fishponds along the Lake Lanao shore. In October and November
1986, all the improvements were washed away when the water level of the lake escalated and the
subject lakeshore area was flooded. The private respondents theorized that NPC failed to increase
the outflow of water even as the water level of the lake rose due to the heavy rains.

Issue:

Whether or not the Court of Appeals (CA) erred in affirming the trial courts verdict that
the NPC was legally answerable for the damages endured by the private respondents

Ruling:

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

Page 106 of 845

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

Page 107 of 845

 G.R. No. 162447

December 27, 2006

Annabelle Muaje-Tuazon v. Wenphil

Facts:

The petitioners Annabelle M. Tuazon and Almer R. Abing worked as branch managers of
the Wendy's food chains. In the said restaurants Biggie Size It! Crew Challenge" promotion
contest, the branches they managed won first and second places, respectively. Because of its
success, the respondent had a second run of the contest from April 26 to July 4, 1999. Before the
announcement of the third round winners, the management received reports that as early as the
first round of the contest, some branches cheated. An internal investigation ensued and the
petitioners were summoned to the main office regarding the reported anomaly. Immediately

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thereafter, the petitioners were notified, in writing, of hearings and of their immediate suspension,
and they were dismissed.

Issue:

Whether or not Wenphil is guilty of illegal suspension and dismissal in the case at bench

Ruling:

Under Article 212 (m) of the Labor Code, a managerial employee as one who is vested
with powers or prerogatives to lay down and execute management policies and/or hire, transfer,
suspend, lay-off, recall, discharge, assign or discipline employees. Consequently, as managerial
employees, as in the case of petitioners, the mere existence of grounds for the loss of trust and
confidence justify their dismissal.

In the present case, the tape receipts presented by Wenphil showed that there were
anomalies committed in the branches they managed. On the principle of respondeat superior or
command responsibility alone, they may be held liable for negligence in the performance of their
managerial duties, unless they can positively show that they were not involved. Additionally, some
employees declared in their affidavits that the cheating was actually the idea of the managers.

G.R. No. 164349

January 31, 2006

RCPI v. Verchez

Facts:

Editha Verchez was confined in the hospital due to an ailment. Her daughter Grace
immediately went to the Sorsogon Branch of RCPI whose services she engaged to send a telegram
to her sister Zenaida. Three (3) days without a response received from Zenaida, Grace sent another

Page 109 of 845

letter, this time thru the JRS Delivery Service, reprimanding her for not sending any financial aid.
Immediately after she received the letter, Zenaida with her husband, left for Sorsogon. The
telegram was finally delivered to Zenaida twenty-five (25) days later.

Issue:

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

Ruling:

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

Considering the public utility of the business and its contractual obligation to transmit
messages, RCPI should exercise due diligence to ascertain that messages are delivered to the
persons at the given address and provide a system whereby in cases of undelivered messages the
sender is given notice of non-delivery.

G.R. No. 159636

November 25, 2004

Victory Liner, Inc. v. Gammad

Page 110 of 845

Facts:

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

Issue:

Whether or not the Victory Liner, Inc. should be held liable for breach of the contract of
carriage.

RULING:

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

Page 111 of 845

 G.R. No. 141910

August 6, 2002

FGU Insurance Corp. (FGU) vs. G.P. Sarmiento Trucking Corporation (GPS)

Facts:

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

Issue:

Whether or not the GPS is liable for damages arising from negligence

Ruling:

In culpa contractual, upon which the action of FGU rests as the subrogee of Concepcion
Industries, Inc., the mere proof of the existence of the contract and the failure of its compliance
justify a corresponding right of relief. GPS recognizes the existence of a contract of carriage
between it and FGU, and admits that the cargoes have been lost or damaged while in its custody.

Page 112 of 845

 Eroles, on the other hand, without concrete proof of his negligence or fault, may not himself
be ordered to pay FGU, him not being a party to the contract of carriage. A contract can only bind
the parties who have entered into it or their successors who have assumed their personality or their
juridical position. FGUs civil action against Eroles can only be based on culpa aquiliana.

G.R. No. 145804

February 6, 2003

LRTA vs. Navidad

Facts:

In the evening of October 14, 1993, Nicanor Navidad, then drunk, entered the EDSA LRT
station. While standing on the platform near the tracks, Navidad was approached by the security
guard assigned Junelito Escartin. A misunderstanding between them apparently ensued that led to
a fist fight. The moment Navidad fell, an LRT train, operated by the petitioner Rodolfo Roman,
was coming in, killing Navidad instantaneously. His widow and their children, filed a complaint
for damages against Escartin, the LRTA, Roman, the Metro Transit Organization, Inc. (Metro
Transit), and Prudent for the death of Navidad. The LRTA and Roman filed a counterclaim against
Navidad and a cross-claim against Escartin and Prudent. Prudent, in its answer, denied liability
and averred that it had exercised due diligence in the selection and supervision of its security
guards.

Issue:

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

Ruling:

Page 113 of 845

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

The Court is concluded by the factual finding of the Court of Appeals (CA) that there is
nothing to link Prudent to the death of Navidad, for the reason that the negligence of its employee
Escartin has not been duly proven. There being, similarly, no showing that the petitioner Roman
himself is guilty of any culpability, he must also be absolved from liability.

G.R. No. 109087

May 9, 2001

Rodzssen Supply Co., Inc. v. Far East Bank & Trust Co.

Facts:

Rodzssen Supply opened with the Far East Bank and Trust a 30-day domestic letter of
credit in the amount of P190,000.00 in favor of Ekman and Company, Inc. for the purchase from
the latter of five (5) units of hydraulic loaders, to expire on February 15, 1979. Rodzssen Supply
refused to pay without any valid reason. To absolve Rodzssen Supply from liability for the price
of the same," the Court of Appeals (CA) explained, "is to allow it to get away with its unjust
enrichment at the expense of the Far East Bank."

Issue:

Whether or not Rodzssen Supply is liable to the Far East Bank and Trust

Page 114 of 845

Ruling:

Rodzssen Supply claims that it accepted the late delivery of the equipment, only because
it was bound to accept it under the companys trust receipt arrangement with the Far East Bank
and Trust.

Granting that it was bound under such arrangement to accept, the Court notes its
unexplained inaction for almost four (4) years with regard to the status of the ownership or
possession of the loaders. Significant too is the fact that it formalized its offer to return the two
pieces of equipment only after respondents demand for payment, which came more than three
years after it accepted delivery.

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

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

GR. No. 132344

February 17, 2000

University of the East v. Jader

Facts:

Jader was enrolled in the University of the East College of Law from 1984 to 1988. In the
first semester of his last year, he failed to take the regular final examinations in Practice Court I,
for which he was given an incomplete grade. He enrolled for the second semester, and on February
1, 1988, he filed an application for the removal of the incomplete grade given him by Professor
Carlos Ortega, which was approved by Dean Celedonio Tiongson, after payment of the required
fee. On March 28, 1988, he took the examination and on May 30, 1988, Professor Carlos Ortega

Page 115 of 845

submitted his grade of five (5). In the meantime, the Dean and the Faculty Members met to
deliberate on who among the fourth year students should be allowed to graduate. Jader's name
appeared in the Tentative List of Candidates for graduation for the Degree of Bachelor of Laws
(LL.B) as of Second Semester (1987-1988). He attended the investiture ceremonies at F. dela Cruz
Quadrangle, U.E., Recto Campus, during the program of which he went up the stage when his
name was called.

He took a leave of absence without pay from his job from April 20, 1988 to September 30,
1988 and enrolled at the pre-bar review class in Far Eastern University. Having learned of the
deficiency, he dropped his review class and was not able to take the bar examination.

Issue:

Whether or not the University of the East is liable for damages under culpa contractual

Ruling:

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

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

Page 116 of 845

 The University of the East, in belatedly informing Jader of the result of the removal
examination, particularly at a time when he had already commenced preparing for the bar exams,
cannot be said to have acted in good faith.

Wherefore, the University of the East is ordered to pay Jader the sum of thirty-five thousand
four hundred seventy pesos (P35,470.00), with legal interest of 6% per annum computed from the
date of filing of the complaint until fully paid; the amount of five thousand pesos (P5,000.00) as
attorney's fees; and the costs of the suit. The award of moral damages is deleted.

G.R. No. 116332

January 25, 2000

Bayne Adjusters and Surveyors Inc. v. Court of Appeals (CA

Page 117 of 845

Facts:

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

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

Issue:

Whether or not the Bayne Adjusters and Surveyors Inc. is liable for the damages incurred
arising from culpa contractual

Page 118 of 845

Ruling:

The fault or negligence of the obligor in the performance of the obligation renders him
liable for damages for the resulting loss suffered by the obligee. It consists of his failure to exercise
due care and prudence as the nature of the obligation so demands. Both parties agree that the Bayne
Adjusters and Surveyors Inc. is bound to supervise the proper discharge of the liquid cargo from
the chemical tanker to the receiving barge and from the latter to the consignees shore tank. Under
the Standard Operating Procedure, the surveyor is required to seal all covers to avoid unsupervised
discharge of the liquid cargo and to avert the contamination or loss thereof.

Page 119 of 845

 G.R. No. 156034

October 1, 2003

Delsan Transport Lines, Inc. v. C & A Consortium

Facts:

On October 9, 1994, M/V Delsan Express, a ship owned and operated by the Delsan
Transport Lines, Inc., anchored at the Navotas Fish Port for the purpose of installing a cargo pump
and clearing the cargo oil tank. At around midnight of October 20, 1994, Captain Demetrio T.
Jusep of the aforementioned ship received a report from his radio head operator in Japan that a
typhoon was going to hit Manila in about eight (8) hours. At approximately 8:35 in the morning
of October 21, 1994, Capt. Jusep tried to seek shelter at the North Harbor, but could not because
it was already congested. He decided to drop anchor four (4) miles away from a power barge of
the National Power Corporation (NAPOCOR) when the waves were already reaching eight (8) to
ten (10) feet high. He succeeded in avoiding collision, Capt. Jusep ordered a full stop of the vessel,
but when the engine was re-started and the ship hit the deflector wall constructed by C & A
Consortium.

Issues:

Whether or not Capt. Jusep was negligent

Page 120 of 845

 If yes, whether or not Delsan Transport Lines, Inc. is solidarily liable under for the quasi-
delict committed by Capt. Jusep

Ruling:

The Court of Appeals (CA) was correct in holding that Capt. Jusep was negligent. It is not
the speculative success or failure of a decision that determines the existence of negligence in the
present case, but the failure to take immediate and appropriate action under the circumstances.
Capt. Jusep, thinking that the typhoon might change direction, did not transfer as soon as the sun
rose because, according to him, it was not very cloudy and there was no weather disturbance yet.

Anent the second issue, the Court finds Delsan Transport Lines, Inc. vicariously liable for
the negligent act of Capt. Jusep, pursuant to Article 2180 of the Civil Code. To avoid liability for
a quasi-delict committed by his employee, an employer must overcome the presumption by
presenting convincing proof that he exercised the care and diligence of a good father of a family
in the selection and supervision of his employee.

Page 121 of 845

 G.R. No. 121413

January 29, 2001

PCIB v. Court of Appeals (CA)

Facts:

Page 122 of 845

 The plaintiff Ford drew and issued its Citibank Check No. SN-04867 in the amount of
P4,746,114.41, in favor of the Commissioner of Internal Revenue as payment of plaintiffs
percentage or manufacturers sales taxes for the third quarter of 1977. The aforesaid check was
deposited with the defendant IBAA (now PCIBank) and was subsequently cleared at the Central
Bank. Upon presentment with the defendant Citibank, the proceeds of the check was paid to IBAA
as collecting or depository bank. The proceeds of the same Citibank check of the plaintiff was
never paid to or received by the payee thereof, the Commissioner of Internal Revenue. As a
consequence, upon demand of the Bureau and/or Commissioner of Internal Revenue, the plaintiff
was compelled to make a second payment to the Bureau of Internal Revenue of its
percentage/manufacturers sales taxes for the third quarter of 1977 and that said second payment
of plaintiff in the amount of P4,746,114.41 was duly received by the Bureau of Internal Revenue.

The Acting Commissioner of Internal Revenue addressed to the plaintiff that its check in
the amount of P4,746,114.41 was not paid to the government or its authorized agent and instead
encashed by unauthorized persons, hence, plaintiff has to pay the said amount within fifteen days
from receipt of the letter. Upon advice of the plaintiffs lawyers, plaintiff paid to the Bureau of
Internal Revenue, the amount of P4,746,114.41, representing payment of plaintiffs percentage tax
for the third quarter of 1977. Plaintiff demanded defendant to reimburse him of the said amount
paid for the second time to BIR but the latter refused.

Issue:

Whether or not the PCIB is liable to Ford Philippines for the amount of several checks
allegedly embezzled by a syndicate group

Ruling:

The general rule is that if the master is injured by the negligence of a third person and by
the concurring contributory negligence of his own servant or agent, the latters negligence is
imputed to his superior and will defeat the superiors action against the third person, assuming, of

Page 123 of 845

course that the contributory negligence was the proximate cause of the injury of which complaint
is made.

It appears that although the employees of Ford initiated the transactions attributable to an
organized syndicate, in our view, their actions were not the proximate cause of encashing the
checks payable to the CIR. The degree of Fords negligence, if any, could not be characterized as
the proximate cause of the injury to the parties.

Citibank should have scrutinized Citibank Check before paying the amount of the proceeds
thereof to the collecting bank of the BIR. One thing is clear from the record: the clearing stamps
at the back of Citibank Check Nos. SN 10597 and 16508 do not bear any initials. Citibank failed
to notice and verify the absence of the clearing stamps. Had this been duly examined, the switching
of the worthless checks to Citibank Check Nos. 10597 and 16508 would have been discovered in
time. For this reason, Citibank had indeed failed to perform what was incumbent upon it, which is
to ensure that the amount of the checks should be paid only to its designated payee. The fact that
the drawee bank did not discover the irregularity seasonably, in our view, constitutes negligence
in carrying out the banks duty to its depositors. The point is that as a business affected with public
interest and because of the nature of its functions, the bank is under obligation to treat the accounts
of its depositors with meticulous care, always having in mind the fiduciary nature of their
relationship.

Citibank must likewise answer for the damages incurred by Ford on Citibank Checks
because of the contractual relationship existing between the two. Citibank, as the drawee bank
breached its contractual obligation with Ford and such degree of culpability contributed to the
damage caused to the latter.

Page 124 of 845

 G.R. No. 141716

July 4, 2002

San Miguel Corporation and Heirs of Ouana v. Court of Appeals (CA)

Facts:

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

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a.m. of November 13, 1990, the M/V Doa Roberta sank. Out of the 25 officers and crew on board
the vessel, only five survived.

Issue:

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

Ruling:

A charter party is a contract by virtue of which the owner or the agent of a vessel binds
himself to transport merchandise or persons for a fixed price. It has also been defined as a contract
by virtue of which the owner or the agent of the vessel leases for a certain price the whole or a
portion of the vessel for the transportation of goods or persons from one port to another. If the
charter is a contract of affreightment, which leaves the general owner in possession of the ship as
owner for the voyage, the rights and the responsibilities of ownership rest on the owner. The
charterer is free from liability to third persons in respect of the ship. SC concur with the findings
of the Court of Appeals that the charter party in these cases was a contract of affreightment,
contrary to petitioner Ouanos protestation that it was a demise charter.

It appearing that Ouano was the employer of the captain and crew of the M/V Doa Roberta
during the term of the charter, he therefore had command and control over the vessel. His son,
Rico Ouano, even testified that during the period that the vessel was under charter to SMC, the
Captain thereof had control of the navigation of all voyages. Under the foregoing definitions, as
well as the clear terms of the Charter Party Agreement between the parties, the charterer, SMC,
should be free from liability for any loss or damage sustained during the voyage, unless it be shown
that the same was due to its fault or negligence.

The evidence does not show that SMC or its employees were amiss in their duties. In the
assailed decision, the Court of Appeals found that the proximate cause of the sinking of the vessel
was the negligence of Captain Sabiniano Inguito. SC likewise agrees with the CA that Ouano is
vicariously liable for the negligent acts of his employee, Captain Inguito. Under Articles 2176 and
2180 of the Civil Code, owners and managers are responsible for damages caused by the

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negligence of a servant or an employee, the master or employer is presumed to be negligent either
in the selection or in the supervision of that employee.

G.R. No. 169467

February 25, 2010

Pacis v. Morales

Facts:

On 17 January 1995, petitioners Alfredo P. Pacis and Cleopatra D. Pacis (petitioners) filed
with the trial court a civil case for damages against respondent Jerome Jovanne Morales
(respondent). Petitioners are the parents of Alfred Dennis Pacis, Jr, a 17-year old student who died
in a shooting incident inside the Top Gun Firearms and Ammunitions Store in Baguio City.
Respondent is the owner of the gun store. The bullet which killed Alfred Dennis Pacis was fired
from a gun brought in by a customer of the gun store for repair. The gun, an AMT Automag II Cal.
22 Rimfire Magnum with Serial No. SN-H34194, was left by defendant Morales in a drawer of a
table located inside the gun store.

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

Page 127 of 845

gun. The latter followed and handed the gun to Matibag. It went off, the bullet hitting the young
Alfred in the head.

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

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

Issue:

Whether or not Morales, as the employer is subsidiary liable

Ruling:

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

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

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

Page 128 of 845

 G.R. No. 166869

February 16, 2010

Philippine Hawk Corp. v. Tan Lee

Facts:

Page 129 of 845

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

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

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

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

Issue:

Whether or not petitioner is liable to respondent for damages

Ruling:

Page 130 of 845

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

Page 131 of 845

 G.R. No. 172122

June 22, 2007

Mercury Drug Corporation v. Huang

Facts:

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

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

Issue:

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

Page 132 of 845

Ruling:

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

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

Page 133 of 845

 G.R. No. 164012

June 8, 2007

Mendoza v. Soriano

Facts:

Sonny Soriano, while crossing Commonwealth Avenue near Luzon Avenue, was hit by a
speeding Tamaraw FX driven by Lomer Macasasa. Soriano was thrown five meters away, while

Page 134 of 845

the vehicle stopped some 25 meters from the point of impact. Gerard Villaspin, one of Sorianos
companions, asked Macasasa to bring Soriano to the hospital, but the first flee. Respondents wife
and daughter filed a complaint for damages against Macasasa and petitioner Flordeliza Mendoza,
the registered owner of the vehicle.

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

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

Issue:

Whether or not petitioner is liable for damages

Ruling:

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

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

Further, under Article 2180, employers are liable for the damages caused by their
employees acting within the scope of their assigned tasks. The liability arises due to the presumed
negligence of the employers in supervising their employees unless they prove that they observed

Page 135 of 845

all the diligence of a good father of a family to prevent the damage. In this case petitioner is held
primarily and solidarily liable for the damages caused by Macasasa.

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

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

Page 136 of 845

 G.R. No. 141538

March 23, 2004

Cerezo v. Tuazon

Facts:

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

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

Issue:

Whether or not petitioner is solidarily liable

Ruling:

Contrary to Mrs. Cerezos assertion, Foronda is not an indispensable party to the case. An
indispensable party is one whose interest is affected by the courts action in the litigation, and
without whom no final resolution of the case is possible. However, Mrs. Cerezos liability as an

Page 137 of 845

employer in an action for a quasi-delict is not only solidary, it is also primary and direct. Foronda
is not an indispensable party to the final resolution of Tuazons action for damages against Mrs.
Cerezo.

The responsibility of two or more persons who are liable for a quasi-delict is solidary.
Where there is a solidary obligation on the part of debtors, as in this case, each debtor is liable for
the entire obligation. Hence, each debtor is liable to pay for the entire obligation in full. There is
no merger or renunciation of rights, but only mutual representation. Where the obligation of the
parties is solidary, either of the parties is indispensable, and the other is not even a necessary party
because complete relief is available from either. Therefore, jurisdiction over Foronda is not even
necessary as Tuazon may collect damages from Mrs. Cerezo alone.

Moreover, an employers liability based on a quasi-delict is primary and direct, while the
employers liability based on a delict is merely subsidiary. The words primary and direct, as
contrasted with subsidiary, refer to the remedy provided by law for enforcing the obligation
rather than to the character and limits of the obligation. Although liability under Article 2180
originates from the negligent act of the employee, the aggrieved party may sue the employer
directly.

When an employee causes damage, the law presumes that the employer has himself
committed an act of negligence in not preventing or avoiding the damage. This is the fault that
the law condemns. While the employer is civilly liable in a subsidiary capacity for the employees
criminal negligence, the employer is also civilly liable directly and separately for his own civil
negligence in failing to exercise due diligence in selecting and supervising his employee. The idea
that the employers liability is solely subsidiary is wrong.

To hold the employer liable in a subsidiary capacity under a delict, the aggrieved party
must initiate a criminal action where the employees delict and corresponding primary liability are
established. If the present action proceeds from a delict, then the trial courts jurisdiction over
Foronda is necessary.

However, the present action is clearly for the quasi-delict of Mrs. Cerezo and not for the
delict of Foronda.

Thus, the petition was denied ordering the defendant Hermana Cerezo to pay the plaintiff.

Page 138 of 845

 G.R. No. 152033

March 16, 2011

Filipinas Synthetic v. De Los Santos

Facts:

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

Around 11:30 p.m., while travelling along the Katipunan Road (White Plains), the Galant
Sigma collided with the shuttle bus owned by petitioner and driven by Alfredo S. Mejia (Mejia),

Page 139 of 845

an employee of petitioner. The Galant Sigma was dragged about 12 meters from the point of
impact, across the White Plains Road landing near the perimeter fence of Camp Aguinaldo, where
the Galant Sigma burst into flames and burned to death beyond recognition all four occupants of
the car.

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

Issue:

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

Ruling:

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

As the negligence of the employee gives rise to the presumption of negligence on the part
of the employer, the latter has the burden of proving that it has been diligent not only in the
selection of employees but also in the actual supervision of their work. In order that the defense of
due diligence in the selection and supervision of employees may be deemed sufficient and
plausible, it is not enough to emptily invoke the existence of said company guidelines and policies
on hiring and supervision The mere allegation of the existence of hiring procedures and

Page 140 of 845

supervisory policies, without anything more, is decidedly not sufficient to overcome such
presumption.

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

G.R. No. 54080

November 22, 2000

Viron Transportation Co., Inc. v. Delos Santos

Facts:
Page 141 of 845
 Defendant Alberto delos Santos was the driver of defendant Rudy Samidan of the latters
vehicle, a Forward Cargo Truck. At about 12:30 in the afternoon, he was driving said truck along
the National Highway within the vicinity of Gerona, Tarlac. The Viron Bus, driven by Wilfredo
Villanueva, tried to overtake his truck, and he swerved to the right shoulder of the highway, but as
soon as he occupied the right lane of the road, the cargo truck which he was driving was hit by the
Viron bus on its left front side, as the bus swerved to his lane to avoid an incoming bus on its
opposite direction. With the driver of another truck dealing likewise in vegetables, Dulnuan, the
two of them and the driver of the Viron bus proceeded to report the incident to the Police Station.

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

Issue:

Whether or not the employer is liable to the negligence of his employee

Ruling:

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

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

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

Page 142 of 845

Page 143 of 845
 G.R. No. 57435

May 25, 2007

Mercury Drug Corporation v. Baking

Facts:

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

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

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

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

Page 144 of 845

Issue:

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

Ruling:

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

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

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

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

Page 145 of 845

 G.R. No.. 165732

December 14, 2006

Safeguard Security v. Tangco

Facts:

Evangeline Tangco (Evangeline) went to Ecology Bank, Katipunan Branch, Quezon City,
to renew her time deposit per advise of the bank's cashier as she would sign a specimen card.
Evangeline, a duly licensed firearm holder with corresponding permit to carry the same outside

Page 146 of 845

her residence, approached security guard Pajarillo, who was stationed outside the bank, and pulled
out her firearm from her bag to deposit the same for safekeeping. Suddenly, Pajarillo shot
Evangeline with his service shotgun hitting her in the abdomen instantly causing her death.
Respondent filed a complaint for damages against Pajarillo for negligently shooting Evangeline
and against Safeguard for failing to observe the diligence of a good father of a family to prevent
the damage committed by its security guard.

Petitioners denied the material allegations in the complaint and alleged that Safeguard
exercised the diligence of a good father of a family in the selection and supervision of Pajarillo;
that Evangeline's death was not due to Pajarillo's negligence as the latter acted only in self-defense.

Issues:

1. Whether Pajarillo is guilty of negligence in shooting Evangeline; and

2. Whether Safeguard should be held solidarily liable for the damages awarded to
respondents.

Ruling:

Safeguard contends that it cannot be jointly held liable since it had adequately shown that
it had exercised the diligence required in the selection and supervision of its employees. It claims
that it had required the guards to undergo the necessary training and to submit the requisite
qualifications and credentials which even the RTC found to have been complied with; that the
RTC erroneously found that it did not exercise the diligence required in the supervision of its
employee. Safeguard further claims that it conducts monitoring of the activities of its personnel,
wherein supervisors are assigned to routinely check the activities of the security guards which
include among others, whether or not they are in their proper post and with proper equipment, as
well as regular evaluations of the employees' performances; that the fact that Pajarillo loaded his
firearm contrary to Safeguard's operating procedure is not sufficient basis to say that Safeguard
had failed its duty of proper supervision; that it was likewise error to say that Safeguard was
negligent in seeing to it that the procedures and policies were not properly implemented by reason

Page 147 of 845

of one unfortunate event. The Supreme Court was not convinced. Article 2180 of the Civil Code
provides: The obligation imposed by Article 2176 is demandable not only for one's own acts or
omissions, but also for those of persons for whom one is responsible.

As the employer of Pajarillo, Safeguard is primarily and solidarily liable for the quasi-
delict committed by the former. Safeguard is presumed to be negligent in the selection and
supervision of his employee by operation of law. This presumption may be overcome only by
satisfactorily showing that the employer exercised the care and the diligence of a good father of a
family in the selection and the supervision of its employee. In the selection of prospective
employees, employers are required to examine them as to their qualifications, experience, and
service records. On the other hand, due diligence in the supervision of employees includes the
formulation of suitable rules and regulations for the guidance of employees and the issuance of
proper instructions intended for the protection of the public and persons with whom the employer
has relations through his or its employees and the imposition of necessary disciplinary measures
upon employees in case of breach or as may be warranted to ensure the performance of acts
indispensable to the business of and beneficial to their employer.

G.R. No.. 148737

Page 148 of 845

 December 16, 2004

Pleyto v. Lomboy

Facts:

Respondent Maria D. Lomboy of Calasiao, Pangasinan, is the surviving spouse of the late
Ricardo Lomboy, who died in Pasolingan, Gerona, Tarlac, in a vehicular accident. The accident
was a head-on collision between the PRBL bus driven by petitioner Pleyto and the car where
Ricardo was a passenger. Carmela suffered injuries requiring hospitalization in the same accident
which resulted in her fathers death.

According to Rolly Orpilla, a witness and one of the bus passengers, Pleyto tried to
overtake Esguerras tricycle but hit it instead. Pleyto then swerved into the left opposite lane.
Coming down the lane, some fifty meters away, was a southbound Mitsubishi Lancer car, driven
by Arnulfo Asuncion. The car was headed for Manila with some passengers. Seated beside
Arnulfo was his brother-in-law, Ricardo Lomboy, while in the back seat were Ricardos 18-year
old daughter Carmela and her friend, one Rhino Daba. PRBL Bus No. 1539 smashed head-on the
car, killing Arnulfo and Ricardo instantly. Carmela and Rhino suffered injuries, but only Carmela
required hospitalization.

The Court of Appeals found PRBL liable for Pleytos negligence pursuant to Article 2180
in relation to Article 2176 of the Civil Code. Under Article 2180, when an injury is caused by the
negligence of a servant or an employee, the master or employer is presumed to be negligent either
in the selection or in the supervision of that employee. This presumption may be overcome only
by satisfactorily showing that the employer exercised the care and the diligence of a good father
of a family in the selection and the supervision of its employee.

Issue:

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

Page 149 of 845

Ruling:

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

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

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

Page 150 of 845

 G.R. No. 54080

November 22, 2000

Viron Transportation Co., Inc. v. Delos Santos

Facts:

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

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

Issue:

Whether or not the employer is liable to the negligence of his employee

Ruling:
Page 151 of 845
 As employers of the bus driver, the petitioner is, under Article 2180 of the Civil Code,
directly and primarily liable for the resulting damages. The presumption that they are negligent
flows from the negligence of their employee. That presumption, however, is only jusris tantum,
not juris et de jure. Their only possible defense is that they exercised all the diligence of a good
father of a family to prevent the damage.

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

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

Page 152 of 845

 G.R. No.. 149149

October 23, 2003

Syki v. Begasa

Facts:

Page 153 of 845

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

After hearing, the trial court dismissed the complaint against Aurora Pisuena, the owner
and operator of the passenger jeepney, but ordered petitioner Ernesto Syki and his truck driver,
Elizalde Sablayan, to pay respondent Salvador Begasa, jointly and severally

Issue:

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

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

Ruling:

Employers shall be liable for the damages caused by their employees and household helpers
acting within the scope of their assigned tasks, even though the former are not engaged in any
business or industry.

From the above provision, when an injury is caused by the negligence of an employee, a
legal presumption instantly arises that the employer was negligent, either or both, in the selection
and/or supervision of his said employee duties. The said presumption may be rebutted only by a
clear showing on the part of the employer that he had exercised the diligence of a good father of a
family in the selection and supervision of his employee. If the employer successfully overcomes
the legal presumption of negligence, he is relieved of liability. In other words, the burden of proof
is on the employer.

Page 154 of 845

 In the case at bar, while there is no rule which requires that testimonial evidence, to hold
sway, must be corroborated by documentary evidence, inasmuch as the witnesses testimonies
dwelt on mere generalities, we cannot consider the same as sufficiently persuasive proof that there
was observance of due diligence in the selection and supervision of employees. Petitioners
attempt to prove its deligentissimi patris familias in the selection and supervision of employees
through oral evidence must fail as it was unable to buttress the same with any other evidence,
object or documentary, which might obviate the apparent biased nature of the testimony.

In the selection of prospective employees, employers are required to examine them as to

their qualifications, experience, and service records. On the other hand, with respect to the
supervision of employees, employers should formulate standard operating procedures, monitor
their implementation, and impose disciplinary measures for breaches thereof. To establish these
factors in a trial involving the issue of vicarious liability, employers must submit concrete proof,
including documentary evidence.The employer must not merely present testimonial evidence to
prove that he had observed the diligence of a good father of a family in the selection and
supervision of his employee, but he must also support such testimonial evidence with concrete or
documentary evidence. The reason for this is to obviate the biased nature of the employers
testimony or that of his witnesses.

In sum, the sole and proximate cause of the accident was the negligence of petitioners
driver who, as found by the lower courts, did not slow down even when he was already
approaching a busy intersection within the city proper. Since the negligence of petitioners driver
was the sole and proximate cause of the accident, in the present case, petitioner is liable, under
Article 2180 of the Civil Code, to pay damages to respondent Begasa for the injuries sustained by
latter.

Page 155 of 845

 G.R. No.. 146173

December 11, 2003

Yambao v. Zuniga

FACTS:

The bus owned by the petitioner was being driven by her driver, one Ceferino G. Venturina
along the northbound lane of Epifanio delos Santos Avenue (EDSA). With Venturina was the bus
conductor, Fernando Dumaliang. Suddenly, the bus bumped Herminigildo Zuiga, a pedestrian.
Such was the force of the impact that the left side of the front windshield of the bus was cracked.
Zuiga was rushed to the Quezon City General Hospital where he was given medical attention,
but due to the massive injuries sustained, he succumbed shortly thereafter.

Private respondents, as heirs of the victim, filed a Complaint against petitioner and her
driver, Venturina, for damages. The complaint essentially alleged that Venturina drove the bus in
a reckless, careless and imprudent manner, in violation of traffic rules and regulations, without due
regard to public safety, thus resulting in the victims premature death.

The petitioner vehemently denied the material allegations of the complaint. She tried to
shift the blame for the accident upon the victim, theorizing that Herminigildo bumped into her bus,
while avoiding an unidentified woman who was chasing him. She further alleged that she was not
liable for any damages because as an employer, she exercised the proper diligence of a good father
of a family, both in the selection and supervision of her bus driver.

ISSUE:

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

Page 156 of 845

RULING:

It held that this was a case of quasi-delict, there being no pre-existing contractual
relationship between the parties. The court a quo then found the petitioner directly and primarily
liable as Venturinas employer pursuant to Article 2180 of the Civil Code as she failed to present
evidence to prove that she has observed the diligence of a good father of a family in the selection
and supervision of her employees.

Employers shall be liable for the damages caused by their employees and household helpers
acting within the scope of their assigned tasks, even though the former are not engaged in any
business or industry.

Petitioner contends that as an employer, she observed the proper diligence of a good father
of a family, both in the selection and supervision of her driver and therefore, is relieved from any
liability for the latters misdeed. To support her claim, she points out that when Venturina applied
with her as a driver in January 1992, she required him to produce not just his drivers license, but
also clearances from the National Bureau of Investigation (NBI), the Philippine National Police,
and the barangay where he resides. She also required him to present his Social Security System
(SSS) Number prior to accepting him for employment. She likewise stresses that she inquired
from Venturinas previous employer about his employment record, and only hired him after it was
shown to her satisfaction that he had no blot upon his record.

In sum, petitioners liability to private respondents for the negligent and imprudent acts of
her driver, Venturina, under Article 2180 of the Civil Code is both manifest and clear. Petitioner,
having failed to rebut the legal presumption of negligence in the selection and supervision of her
driver, is responsible for damages, the basis of the liability being the relationship of pater familias
or on the employers own negligence.

Page 157 of 845

G.R. No.. 156109

November 18, 2004

Regino v. Pangasinan Colleges

Facts:

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

Page 158 of 845

Issue:

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

Ruling:

The school-student relationship is also reciprocal. Thus, it has consequences appurtenant

to and inherent in all contracts of such kind -- it gives rise to bilateral or reciprocal rights and
obligations. The school undertakes to provide students with education sufficient to enable them to
pursue higher education or a profession. On the other hand, the students agree to abide by the
academic requirements of the school and to observe its rules and regulations.

The terms of the school-student contract are defined at the moment of its inception -- upon
enrolment of the student. Standards of academic performance and the code of behavior and
discipline are usually set forth in manuals distributed to new students at the start of every school
year. Further, schools inform prospective enrollees the amount of fees and the terms of payment.

In practice, students are normally required to make a down payment upon enrollment, with
the balance to be paid before every preliminary, midterm and final examination. Their failure to
pay their financial obligation is regarded as a valid ground for the school to deny them the
opportunity to take these examinations.

The foregoing practice does not merely ensure compliance with financial obligations; it
also underlines the importance of major examinations. Failure to take a major examination is
usually fatal to the students promotion to the next grade or to graduation. Examination results
form a significant basis for their final grades. These tests are usually a primary and an
indispensable requisite to their elevation to the next educational level and, ultimately, to their
completion of a course.

Thus, students expect that upon their payment of tuition fees, satisfaction of the set
academic standards, completion of academic requirements and observance of school rules and

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regulations, the school would reward them by recognizing their completion of the course
enrolled in.

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

GR. No. 126780

February 17, 2005

YHT Realty v. Court of Appeals (CA)

Facts:

Page 160 of 845

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

However, when he returned coming from a trip, he noticed that his money in the envelope
was lacking and that the jewelries were gone.

Issue:

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

Ruling:

Under Article 1170 of the New Civil Code, those who, in the performance of their
obligations, are guilty of negligence, are liable for damages. Article 2180 provides that the owners
and managers of an establishment or enterprise are likewise responsible for damages caused by
their employees in the service of the branches in which the latter are employed or on the occasion
of their functions. Also, this Court has ruled that if an employee is found negligent, it is presumed
that the employer was negligent in selecting and/or supervising him for it is hard for the victim to
prove the negligence of such employer. Thus, given the fact that the loss of McLoughlins
money was consummated through the negligence of Tropicanas employees in allowing Tan to
open the safety deposit box without the guests consent, both the assisting employees and YHT
Realty Corporation itself, as owner and operator of Tropicana, should be held solidarily liable.

The hotel business like the common carriers business is imbued with public interest. The
twin duty constitutes the essence of the business. The law in turn does not allow such duty to the

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public to be negated or diluted by any contrary stipulation in so-called undertakings that
ordinarily appear in prepared forms imposed by hotel keepers on guests for their signature.

In the case at bar, the responsibility of securing the safety deposit box was shared not
only by the guest himself but also by the management since two keys are necessary to open the
safety deposit box. Without the assistance of hotel employees, the loss would not have occurred.

Thus, Tropicana was guilty of concurrent negligence in allowing Tan, who was not the
registered guest, to open the safety deposit box of McLoughlin, even assuming that the latter was
also guilty of negligence in allowing another person to use his key. To rule otherwise would result
in undermining the safety of the safety deposit boxes in hotels for the management will be given
imprimatur to allow any person, under the pretense of being a family member or a visitor of the
guest, to have access to the safety deposit box without fear of any liability that will attach thereafter
in case such person turns out to be a complete stranger. This will allow the hotel to evade
responsibility for any liability incurred by its employees in conspiracy with the guests relatives
and visitors.

Page 162 of 845

 G.R. No. 124354

December 29, 1999

Erlinda Ramos v. Court of Appeals (CA)

Facts:

Ramos was a robust woman Except for occasional complaints of discomfort due to pains
allegedly caused by the presence of a stone in her gall bladder. Because the discomforts somehow
interfered with her normal ways, she sought professional advice. She was advised to undergo an
operation for the removal of a stone in her gall bladder. At around 7:30 A.M. of June 17, 1985
and while still in her room, she was prepared for the operation by the hospital staff. Her sister-in-
law, Herminda Cruz, who was the Dean of the College of Nursing at the Capitol Medical Center,
was also there for moral support. Herminda was allowed to stay inside the operating room.

At around 9:30 A.M., Dr. Gutierrez reached a nearby phone to look for Dr. Hosaka who
was not yet in Dr. Gutierrez thereafter informed Herminda Cruz about the prospect of a delay in
the arrival of Dr. Hosaka. Herminda then went back to the patient who asked, "Mindy, wala pa ba
ang Doctor"? The former replied, "Huwag kang mag-alaala, darating na iyon. Thereafter,
Herminda went out of the operating room and informed the patient's husband, Rogelio, that the
doctor was not yet around.

At about 12:15 P.M., Herminda Cruz, who was inside the operating room with the patient,
heard somebody say that "Dr. Hosaka is already here." She then saw people inside the operating
room "moving, doing this and that, preparing the patient for the operation" As she held the hand
of Ramos, she then saw Dr. Gutierrez intubating the hapless patient. She thereafter heard Dr.
Gutierrez say, "ang hirap ma-intubate nito, mali yata ang pagkakapasok. O lumalaki ang tiyan",
because of the remarks of Dra. Gutierrez, she focused her attention on what Dr. Gutierrez was
doing. She thereafter noticed bluish discoloration of the nailbeds of the left hand of the hapless
Ramos even as Dr. Hosaka approached her. She then heard Dr. Hosaka issue an order for someone
to call Dr. Calderon, another anesthesiologist.

Page 163 of 845

Issue:

Whether or not the respondent doctors are negligent

Ruling:

Res ipsa loquitur is a Latin phrase which literally means "the thing or the transaction speaks
for itself", for the rule that the fact of the occurrence of an injury, taken with the surrounding
circumstances, may permit an inference or raise a presumption of negligence, or make out a
plaintiff's prima facie case, and present a question of fact for defendant to meet with an explanation

At the time of submission, Ramos was neurologically sound and, except for a few minor
discomforts, was likewise physically fit in mind and body. However, during the administration of
anesthesia and prior to the performance of cholecystectomy she suffered irreparable damage to her
brain. Thus, without undergoing surgery, she went out of the operating room already decerebrate
and totally incapacitated. Obviously, brain damage, which Ramos sustained, is an injury which
does not normally occur in the process of a gall bladder operation. In fact, this kind of situation
does not happen in the absence of negligence of someone in the administration of anesthesia and
in the use of endotracheal tube. Normally, a person being put under anesthesia is not rendered
decerebrate as a consequence of administering such anesthesia if the proper procedure was
followed. Furthermore, the instruments used in the administration of anesthesia, including the
endotracheal tube, were all under the exclusive control of private respondents, who are the
physicians-in-charge. Likewise, Ramos could not have been guilty of contributory negligence
because she was under the influence of anesthetics which rendered her unconscious.

Page 164 of 845

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

FACTS:

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

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

RULING:
Petitioners action is for medical malpractice. It is a form of negligence which consists in the
failure of the physician or surgeon to apply to his practice of medicine that degree of care and skill which
is ordinarily employed by the profession. Four elements involve in medical negligence cases, namely:
duty, breach, injury, and proximate causation. In this case, there is no doubt that physician-patient
relationship existed between respondent doctors and Jorge Reyes. It is breach of this duty which
constitutes actionable malpractice. As to this aspect of medical malpractice, the determination of
reasonable level of care and breach thereof, expert testimony is essential.
The petitioner presented Dr. Vacalares, Chief Pathologist of the Northern Mindanao Training
Hospital, Cagayan de Oro, who performed the autopsy of Jorge. He testified that Jorge did not die of
typhoid fever but of shock undetermined, which could be due to allergic reaction or chloromycetin
overdose. The court was not persuaded. Although Dr. Vacalares may have had extensive experience in
performing autopsies, he admitted that he had yet to do one on the body of a typhoid victim at the time he
conducted the post mortem of Jorge. It is also plain from his testimony that he treated only about three
cases of typhoid fever. On the other hand, the two doctors presented by respondents clearly were experts
on the subject. They vouched for the correctness of Dr. Ricos diagnosis. Dr. Gotiong, a diplomate whose
specialization is infectious diseases and microbiology and an associate professor at the Southern

Page 165 of 845

University College of Medicine and the Gullas College of Medicine, testified that he has already treated
over a thousand cases of typhoid fever. According to him a case of typhoid fever is suspected using the
widal test, if the 1:320 results of the said test has been presented to him. As to the treatment of the
disease, he stated that chloromycetin was the drug of choice. He also explained that despite the measures
taken by respondents and the intravenous administration of the two doses of chloromycetin,
complications of the disease could not be discounted.
Dr. Marilyn did not depart from the reasonable standard recommended by the experts as she in
fact observed the due care required under the circumstances. Though the widal test is not conclusive, it
remains a standard diagnostic test for typhoid fever and, in the present case, a greater accuracy through
repeated testing was rendered unobtainable by the early death of the patient. The results of the widal test
and the patients history of fever with chills for five days, taken with the fact that typhoid fever was then
prevalent, were sufficient to give upon any doctor of reasonable skill the impression that the patient had
typhoid fever.

DR. FERNANDO P. SOLIDUM, Petitioner, v. PEOPLE OF THE PHILIPPINES, Respondent.

G.R. No. 192123 : March 10, 2014

FACTS:

On June 2, 1992, Gerald Albert Gercayo (Gerald) was born with an imperforate anus. Hence, two days
after his birth, he underwentcolostomy which enabled him to excrete through a colostomy bag attached to
the side of his body.

Three years later or on May 17, 1995, he was admitted at the Ospital ng Maynila for a pull-through
operation. The surgical team consisted of Dr. Resurreccion, Dr. Luceo, Dr. Valea, and Dr. Tibio. The
anesthesiologists included Dr. Abella, Dr. Razon and herein Petitioner Dr. Solidum. It was during the said
operation that Gerald experienced bradycardia or an abnormally slow heart rate of less than 60 beats per
minute. He subsequently went into a coma which lasted for two weeks. When he regained consciousness
after a month, he could no longer see, hear, or move. Ma. Luz Gercayo (Luz) lodged a complaint for
reckless imprudence resulting in serious physical injuries against the attending physicians.

The RTC found Dr. Solidum guilty beyond reasonable doubt of reckless imprudence resulting to serious
physical injuries. The CA affirmed the conviction of Dr. Solidum.

ISSUES: Whether or not the doctrine of res ipsa loquitur applies in this case? Whether the CA correctly
affirmed the conviction of Dr. Solidum for criminal negligence?

RULING:

The Court held that the application the doctrine of res ipsa loquitur in the case at bar is inappropriate. Res
ipsa loquitur is literally translated as he thing or the transaction speaks for itself.Jarcia, Jr. v. People, G.R.
No. 187926 laid down that, here the thing which causes injury is shown to be under the management of
the defendant, and the accident is such as in the ordinary course of things does not happen if those who
have the management use proper care, it affords reasonable evidence, in the absence of an explanation by
the defendant, that the accident arose from want of care.Hence, the requisites for the doctrine to apply are

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as follows: (1) the accident was of the kind that does not ordinarily occur unless someone is negligent; (2)
the instrumentality or agency that caused the injury was under the exclusive control of the person
charged; and (3) the injury suffered must not have been due to any voluntary action or contribution of the
person injured.
Elements 2 and 3 were present in the case at bar. However, the first element was undeniably wanting.

The Prosecution failed to prove the existence of the elements of reckless imprudence beyond reasonable
doubt. Gaid v. People, G.R. No. 171636 defined negligence as the failure to observe for the protection of
the interests of another person that degree of care, precaution, and vigilance that the circumstances justly
demand, whereby such other person suffers injury.

The following are the elements of medical negligence: (1) the duty owed by the physician to the patient,
as created by the physician-patient relationship, to act in accordance with the specific norms or standards
established by his profession; (2) the breach of the duty by the physician failing to act in accordance with
the applicable standard of care; (3) the causation, i.e., there must be a reasonably close and causal
connection between the negligent act or omission and the resulting injury; and (4) the damages suffered
by the patient.

Most medical malpractice cases are highly technical, therefore, witnesses with special medical
qualifications must impart the knowledge necessary to render a fair and just verdict. In the case at bar,
there were no witnesses with special medical qualifications in anesthesia presented. Hence, it is difficult
to assess whether the first three elements of medical negligence were present.
NILO ROSIT V. AND DR. ROLANDO G. GESTUVO,
GR NO. 210445 DECEMBER 7, 2015

FACTS:

On January 15, 1999, Rosit figured in a motorcycle accident. The X-ray soon taken the next day at the
Davao Doctors Hospital (DDH) showed that he fractured his jaw. Rosit was then referred to Dr. Gestuvo,
a specialist in mandibular injuries, who, on January 19, 1999, operated on Rosit. 1 Rollo, pp. 56-67.
Penned by Associate During the operation, Dr. Gestuvo used a metal plate fastened to the jaw with metal
screws to immobilize the mandible. As the operation required the smallest screws available, Dr.
Gestuvo cut the screws on hand to make them smaller. Dr. Gestuvo knew that there were smaller titanium
screws available in Manila, but did not so inform Rosit supposing that the latter would not be able to
afford the same.Following the procedure, Rosit could not properly open and close his mouth and was in
pain. X-rays done on Rosit two (2) days after the operation showed that the fracture in his jaw was
aligned but the screws used on him touched his molar. Given the X-ray results, Dr. Gestuvo referred Rosit
to a dentist. The dentist who checked Rosit, Dr. Pangan, opined that another operation is necessary and
that it is to be performed in Cebu. Alleging that the dentist told him that the operation conducted on his
mandible was improperly done, Rosit went back to Dr. Gestuvo to demand a loan to defray the cost of the
additional operation as well as the expenses of the trip to Cebu. Dr. Gestuvo gave Rosit 4,500. Rosit
went to Cebu on February 19, 1999, still suffering from pain and could hardly open his mouth.

Page 167 of 845

In Cebu, Dr. Pangan removed the plate and screws thus installed by Dr. Gestuvo and replaced them with
smaller titanium plate and screws. Dr. Pangan also extracted Rosits molar that was hit with a screw and
some bone fragments. Three days after the operation, Rosit was able to eat and speak well and could open
and close his mouth normally.7On his return to Davao, Rosit demanded that Dr. Gestuvo reimburse him
for the cost of the operation and the expenses he incurred in Cebu amounting to 140,000, as well as for
the 50,000 that Rosit would have to spend for the removal of the plate and screws that Dr. Pangan
installed. Dr. Gestuvo refused to pay.

ISSUE :

Whether the appellate court correctly absolved Dr. Gestuvo from liability.

RULING:

The essential requisites for the application of the doctrine of res ipsa loquitur are present. The first
element was sufficiently established when Rosit proved that one of the screws installed by Dr. Gestuvo
struck his molar. It was for this issue that Dr. Gestuvo himself referred Rosit to Dr. Pangan. In fact, the
affidavit of Dr. Pangan presented by Dr. Gestuvo himself before the trial court narrated that the same
molar struck with the screw installed by Dr. Gestuvo was examined and eventually operated on by
Dr. Pangan. Dr. Gestuvo cannot now go back and say that Dr. Pangan treated a molar different
from that which was affected by the first operation. Clearly, had Dr. Gestuvo used the proper size and
length of screws and placed the same in the proper locations, these would not have struck Rosits teeth
causing him pain and requiring him to undergo a corrective surgery. Dr. Gestuvo knew that the screws he
used on Rosit were too large as, in fact, he cut the same with a saw.14 He also stated during trial that
common sense dictated that the smallest screws available should be used. More importantly, he also
knew that these screws were available locally at the time of the operation.15 Yet, he did not avail of such
items and went ahead with the larger screws and merely sawed them off. Even assuming that the screws
were already at the proper length after Dr. Gestuvo cut the same, it is apparent that he negligently placed
one of the screws in the wrong area thereby striking one of Rosits teeth. In any event, whether the screw
hit Rosits molar because it was too long or improperly placed, both facts are the product of Dr.
Gestuvos negligence. An average man of common intelligence would know that striking a tooth with
any foreign object much less a screw would cause severe pain. Thus, the first essential requisite is present
in this case. Anent the second element for the res ipsa loquitur doctrine application, it is sufficient that
the operation which resulted in the screw hitting Rosits molar was, indeed, performed by Dr. Gestuvo.
No other doctor caused such fact. The CA finds that Rosit is guilty of contributory negligence in having
Dr. Pangan operate on him during the healing period of his fractured mandible. What the CA
overlooked is that it was Dr. Gestuvo himself who referred Rosit to Dr. Pangan. Nevertheless, Dr.
Pangans participation could not have contributed to the reality that the screw that Dr. Gestuvo installed
hit Rosits molar. Lastly, the third element that the injury suffered must not have been due to any
voluntary action or contribution of the person injured was satisfied in this case. It was not shown
that Rosits lung disease could have contributed to the pain. What is clear is that he suffered because one
of the screws that Dr. Gestuvo installed hit Rosits molar.

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Clearly then, the res ipsa loquitur doctrine finds application in the instant case and no expert testimony
is required to establish the negligence of defendant Dr. Gestuvo.Petitioner was deprived of the
opportunity to make an informed consent What is more damning for Dr. Gestuvo is his failure to inform
Rosit that such smaller screws were available in Manila, albeit at a higher price.

Page 169 of 845

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

FACTS:

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

Page 170 of 845

to the inclement weather, arrived about an hour late. he examined the patient but despite his efforts
Corazon died. Petitioners filed a case against CMC personnel and physicians on the ground that they were
negligent in the treatment and management of Corazons condition and charged CMC with negligence in
the selection and supervision of defendant physicians and hospital staff. After more than 11 years the
Trial Court rendered its judgment finding Dr. Estrada solely liable for damages.

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

RULING:
Under the doctrine of apparent authority a hospital can be held vicariously liable for the negligent
act of a physician providing care at eh hospital, regardless of whether the physician is an independent
contractor, unless the patient knows, or should have known, that the physician is an independent
contractor. The doctrine of apparent authority involves two factors to determine the liability of an
independent contractor-physician. First factor focuses on the hospitals manifestations and is sometimes
described as an inquiry whether the hospital acted in a manner which would lead a responsible person to
conclude that the individual who was alleged to be negligent was an employee or agent of the hospital.
The second factor focuses on the patients reliance. It is sometimes characterized as an inquiry on whether
the plaintiff acted in reliance upon the conduct of the hospital or its agent, consistent with ordinary care
and prudence.
In this case, CMC impliedly held out Dr. Estrada as a member of its medical staff. First, CMC
granted staff privileges to Dr. Estrada when it extended its medical staff and facilities. Upon request to
admit Corazon, through its personnel, readily accommodated the patient and updated Dr. Estrada of the
patients condition. Second, CMC made Rogelio sign a consent forms printed in CMC letterhead. And
third, Dr. Estradas referral to Dr. Espinola, who then was the Head of the Obstetrics and Gynecology
Department of CMC. Wherefore the court finds respondent Capitol Medical Center vicariously liable for
the negligence of Dr. Oscar Estrada.
PROFESSIONAL SERVICES VS. AGANA
GR No. 126467 February 11, 2008

FACTS:

On April 04, 1984, Natividad Agana was admitted at the Medical City General Hospital because
of difficulty of bowel movement and bloody anal discharge. Dr. Ampil diagnosed her to be suffering from
cancer of the sigmoid. Thus, Dr. Ampil, assisted by the medical staff of Medical City, performed a
surgery upon her. During the surgery, he found that the malignancy in her sigmoid area had spread to her
left ovary, necessitating the removal of certain portions of it. Thus, Dr. Ampil obtained the consent of
Natividads husband to permit Dr. Fuentes to perform hysterectomy upon Natividad. Dr. Fuentes
performed and completed the hysterectomy. Afterwards, Dr. Ampil took over, completed the operation

Page 171 of 845

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

ISSUE:

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

RULING:

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

Page 172 of 845

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

FACTS:

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

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

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

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

RULING:

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 In general, a hospital is not liable for the negligence of an independent contractor-physician.
However, the hospital may be held liable if the physician is the ostensible agent of the hospital. This
exception is also known as the doctrine of apparent authority. The doctrine of apparent authority
involves two factors to determine the liability of an independent contractor-physician. First factor focuses
on the hospitals manifestations and is sometimes described as an inquiry whether the hospital acted in a
manner which would lead a responsible person to conclude that the individual who was alleged to be
negligent was an employee or agent of the hospital. The second factor focuses on the patients reliance. It
is sometimes characterized as an inquiry on whether the plaintiff acted in reliance upon the conduct of the
hospital or its agent, consistent with ordinary care and prudence. In this case, it has been proven that the
two factors were present. The hospital indeed made it appear that Dr. Ampil was its employee when they
advertise and displayed his name in the directory at the lobby of the said hospital and that Natividad relied
on such knowledge that Dr. Ampil was indeed an employee of the hospital.

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

DR. MILAGROS CANTRE V. SPS. JOHN DAVID AND NORA GO

522 SCRA 547

FACTS:

Nora Go gave birth to her 4th child. Two hours later, she suffered profuse bleeding inside her womb due to
some placenta parts which were not completely expelled after delivery. She then suffered hypovolemic
shock, so her BP dropped to 40/0. Dr. Milagros Cantre, an Ob-Gyne specialist and Nora's attending
physician, together with an assisting resident physician, performed various medical procedures to stop the
bleeding and to restore Nora's BP. While Dr. Cantre was massaging Nora's uterus for it to contract and stop
bleeding, she ordered a droplight to warm Nora and her baby. At that time, she was unconscious.

While in the recovery room, Nora's husband John David noticed a fresh gaping wound (2 1/2 x 3 1/2 in) in
the inner portion of her left arm near the armpit. When he asked the nurses about the cause of the injury, he
was informed that it was due to a burn. John David filed a request for investigation. Dr. Cantre said that
what caused the injury was the blood pressure cuff. John David brought Nora to the NBI for a physical
examination. The medico-legal said that the injury appeared to be a burn and that a droplight when placed
near the skin for about 10 minutes could cause such burn. He dismissed the likelihood that the wound was
caused by a blood pressure cuff since the scar was not around the arm, but just on one side of the arm. Nora's
injury was referred to a plastic surgeon for skin grafting. However, her arm would never be the same--the
surgery left an unsightly scar, her movements are restricted, and the injured arm aches at the slightest touch.

Sps. Go filed a complaint for damages against Dr. Cantre, the medical director, and the hospital. In the
RTC, parties have rested their respective cases, but the court admitted additional exhibits [consist mostly
of medical records produced by the hospital during trial pursuant to a subpoena duces tecum] offered by

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Sps. Go, which were not testified to by any witness. RTC ruled in favor of the spouses. CA affirmed RTC
with modification (complaint dismissed with respect to the medical director and the hospital; only moral
damages awarded).

ISSUE:

Whether or not Dr. Cantre is liable for the injury suffered by Nora Go. YES

RULING:

Backgrounder
The Hippocratic Oath mandates physicians to give primordial consideration to their patients' well-being,
and if a doctor fails to live up to this precept, he is accountable for his acts. This notwithstanding, courts
face a unique restraint in adjudicating medical negligence cases because physicians are not guarantors of
care, and they never set out to intentionally cause injury to their patients. HOWEVER, intent is
immaterial in these cases because where negligence exists and is proven, it automatically gives the injured
a right to reparation for the damage caused.

In medical negligence cases, the doctrine of res ipsa loquitur allows the mere existence of an injury to
justify a presumption of negligence on the part of the person who controls the instrument causing the
injury, provided that the following requisites concur:
1. Accident is of a kind which ordinarily does not occur absent someone's negligence
Wound not an ordinary occurrence in the act of delivering a baby; could not have happened
unless negligence set in somewhere
2. Caused by an instrumentality within defendant's exclusive control
It doesn't matter WON the injury was caused by the droplight or by the blood pressure cuff,
since both are within the exclusive control of the physician in charge [Dr. Cantre] under the captain
of the ship doctrine [surgeon in charge of an operation is held liable for his assistants' negligence
during the time when they are under the surgeon's control].
3. Possibility of contributing conduct which would make plaintiff responsible is eliminated
Wound could only be caused by something external to and outside the control of Nora since
she was unconscious while in hypervolemic shock.

BP cuff defense does not afford her an escape. The medical practice is to deflate the cuff immediately after
use, or else, it could cause an injury similar to what happened to Nora. If the wound was caused by the
constant taking of BP, it must have been done so negligently as to inflict a gaping wound.The argument
that the failed plastic surgery was a measure to prevent complication (and not intended as a cosmetic
procedure) does not negate negligence on Dr. Cantre's part. Dr. Cantre has been Nora's ob-gyne for her past
3 deliveries, and this is the first time that Dr. Cantre is being held liable for damages due to negligence in

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the practice of her profession. She promptly took care of the wound before infection set in. Since Nora was
in a critical condition at that time, saving her life became Dr. Cantre's elemental concern. Still, her good
intentions characteristics do not justify negligence.
The New Civil Code provisions applies: NCC 2176. Whoever by act or omission causes damage to
another, there being fault or negligence, is obliged to pay for the damage done. NCC 2217. Moral damages
include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation, and similar injury. Though incapable of pecuniary computation,
moral damages may be recovered if they are the proximate result of the defendant's wrongful act or
omission.

DR. RUBI LI v. SPS. SOLIMAN

G.R. No. 165279, June 07, 2011

FACTS:

On July 7, 1993, respondents' 11-year old daughter, Angelica Soliman, underwent a biopsy of the
mass located in her lower extremity at the St. Luke's Medical Center (SLMC). Results showed that
Angelica was suffering from osteosarcoma, osteoblastic type, a high-grade cancer of the bone which
usually afflicts teenage children. Following this diagnosis and as primary intervention, Angelica's right
leg was amputated by Dr. Jaime Tamayo in order to remove the tumor. As adjuvant treatment to
eliminate any remaining cancer cells, and hence minimize the chances of recurrence and prevent the
disease from spreading to other parts of the patient's body (metastasis), chemotherapy was suggested by

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Dr. Tamayo. Dr. Tamayo referred Angelica to another doctor at SLMC, herein petitioner Dr. Rubi Li, a
medical oncologist.

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

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

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

RULING:

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

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

PEOPLE VS. DELOS SANTOS

GR No. 131588 March 27, 2001

FACTS:

Page 177 of 845

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

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

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

Page 178 of 845

 LG FOODS V. AGRAVIADOR (2006)
503 SCRA 170

FACTS:

On February 26, 1996, Charles Vallereja, a 7-year old son of the Vallejera spouses, was hit by a Ford
Fiera van owned by LG Foods Corporation (LG Foods) and driven by their employee, Vincent Norman
Yeneza y Ferrer. Charles died as a result of the accident. An information for reckless imprudence
resulting to homicide was filed against the driver before the Bacolod MTCC. Before the trial could be
concluded, however, the accused driver committed suicide. The case was then dismissed. On June 23,
1999, the spouses Vallejera filed a complaint for damages against LG Foods alleging that as employers,
they failed to exercise due diligence in the selection and supervision of their employees. In their defense,
LG Foods denied liability by claiming to have exercised such diligence and prayed for dismissal for lack
of cause of action. Also in their motion to dismiss, they argued that the complaint was a claim for
subsidiary liability against an employer under A1035, RPC and, as such, there must first be a judgment of
conviction against their driver to hold them liable. Since such condition was not fulfilled due to the
latters death, they argued, the spouses had no cause of action. The trial court denied the motion for lack
of merit. Also, it denied the motion for reconsideration of the matter. LG Foods then went on certiorari to
the CA alleging grave abuse of discretion of the part of the trial judge. The CA, however, affirmed the
RTC decision ruling that the complaint by the spouses does not purport to be based on subsidiary liability
since the basic elements of such liability, such as conviction and insolvency of the accused employee,
were not even alleged in said complaint. It then said that the complaint purports to exact responsibility for
fault or negligence under A2176, CC, which is entirely separate and distinct from civil liability arising
from negligence under the A103, RPC. Liability under A2180, CC is direct and immediate, and not
conditioned upon prior recourse against the negligent employee or showing of insolvency.

ISSUE :

Whether the cause of action of the Vallejera spouses is founded on CC or RPC.

RULING:

The case is a negligence suit brought under A2176, CC to recover damages primarily from LG Foods as
employers responsible for their negligent driver pursuant to A2180, CC. The obligation imposed by
A2176 is demandable not only for one's own acts or omissions, but also for those of persons for whom
one is responsible. Thus, the employer is liable for damages caused by his employees. Nothing in the
allegations in the complaint suggests that the LG Foods are being made to account for their subsidiary
liability under Article 103 of the Revised Penal Code. Plus, the complaint did not even aver the basic
elements for the subsidiary liability of an employer under said provision. While not explicitly stated that
the suit was for damages based on quasi-delict, it alleged gross fault and negligence on the part of the

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driver and the failure of LG Foods, as employers, to exercise due diligence in the selection and
supervision of their employees. It was further alleged that LG Foods is civilly liable for the
negligence/imprudence of their driver since they failed to exercise the necessary diligence required of a
good father of the family in the selection and supervision of their employees, which diligence, if
exercised, could have prevented the vehicular accident that resulted to the death of their 7-year old son.
LG Foods has been alleging that "they had exercised due diligence in the selection and supervision of
[their] employees." This defense is an admission that indeed the petitioners acknowledged the private
respondents' cause of action as one for quasi-delict under A2180, CC. Since it is as if there was no
criminal case to speak of due to its premature termination, the fact that there was no prior reservation
made to institute a separate civil action is of no moment.

MAGAT VS. MEDIALDEA

L-37120 April 20, 1983
FACTS:

That sometime in September 1972, the defendant entered into a contract with the U.S. Navy
Exchange, Subic Bay, Philippines, for the operation of a fleet of taxicabs, each taxicab to be provided with the
necessary taximeter and a radio transceiver for receiving and sending of messages from mobile taxicab to fixed
base stations within the Naval Base at Subic Bay, Philippines. Isidro Q. Aligada, acting as agent of the
defendant herein conducted the necessary project studies on how best the defendant may meet the requirements
of his contract with the U.S. Navy Exchange, Subic Bay, Philippines, and because of the experience of the
plaintiff in connection with his various, contracts with the U.S. Navy, Subic Bay, Philippines, and his goodwill
already established with the Naval personnel of Subic Bay, Philippines, especially in providing the U.S. Navy
with needed materials or goods on time as specified by the U.S. Navy, be they of local origin or imported
either from the United States or from Japan, the said Isidro Q. Aligada approached the plaintiff herein in behalf
of the defendant and proposed to import from Japan thru the plaintiff herein or thru plaintiff's Japanese
business associates, all taximeters and radio transceivers needed by the defendant in connection with his
contract with the U.S. Navy Exchange, Subic Bay, Philippines; That the defendant herein and his aforesaid
agent Isidro Q. Aligada were able to import from Japan with the assistance of the plaintiff and his Japanese
business associates the necessary taximeters for defendant's taxicabs in partial fulfillment of defendant's
commitments with the U.S. Navy Exchange, Subic Bay, Philippines, the plaintiff's assistance in this matter
having been given to the defendant gratis et amore;
That Isidro Q. Aligada, also acting as agent of the defendant, made representations with the plaintiff herein to
the effect that defendant desired to procure from Japan thru the plaintiff herein the needed radio transceivers
and to this end, Isidro Q. Aligada secured a firm offer in writing dated September 25, 1972, a copy of which is
hereto attached marked as Annex 'A' and made an integral part of this complaint,

ISSUE:
Whether or not there is contravention of the terms.

RULING:
We find the test of legal sufficiency of the cause of action adequately satisfied. In a methodical and logical
sequence, the complaint recites the circumstances that led to the perfection of the contract entered into by the
parties. It further avers that while petitioner had fulfilled his part of the bargain, private respondent failed to

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comply with his correlative obligation by refusing to open a letter of credit to cover payment of the goods
ordered by him and that consequently, petitioner suffered not only loss of his expected profits, but moral and
exemplary damages as well. From these allegations, the essential elements of a cause of action are present, to
wit: the existence of a legal right to the plaintiff; a correlative duty of the defendant and an act or omission of
the defendant in violation of the plaintiff's right, with consequent injury or damage to the latter for which he
may maintain an action for recovery of damages or other appropriate relief. Indisputably, the parties, both
businessmen, entered into the aforesaid contract with the evident intention of deriving some profits therefrom.
Upon breach of the contract by either of them, the other would necessarily suffer loss of his expected profits.
Since the loss comes into being at the very moment of breach, such loss is real, "fixed and vested" and,
therefore, recoverable under the law.

Article 1170 of the Civil Code provides:

"Those who in the performance of their obligation are guilty of fraud, negligence, or delay, and those
who in any manner contravene the tenor thereof are liable for damages."
The phrase "in any manner contravene the tenor" of the obligation includes any illicit act or omission which
impairs the strict and faithful fulfillment of the obligation and every kind of defective performance.
The damages which the obligor is liable for includes not only the value of the loss suffered by the obligee
[dao emergente] but also the profits which the latter failed to obtain [lucro cesante]. If the obligor acted in
good faith, he shall be liable for those damages that are the natural and probable consequences of the breach of
the obligation and which the parties have foreseen or could have reasonably foreseen at the time the obligation
was constituted; and in case of fraud, bad faith, malice or wanton attitude, he shall be liable for all damages
which may be reasonably attributed to the nonperformance of the obligation.
VDA. DE MISTICA VS. NAGUIAT
GR. No 137909 December 11, 2003

FACTS:

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

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

Pursuant to said agreement, Respondent Bernardino Naguiat gave a downpayment of P2,000.00.

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

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

ISSUE:

Page 181 of 845

 Whether petitioner may rescind the contract.

RULING:

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

Moreover, rescission would be unjust to respondents, because they had already transferred the
land title to their names. The proper recourse, the CA held, was to order them to pay the balance of the
purchase price, with 12 percent interest.

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

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

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

FACTS:

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

ISSUE:

Page 182 of 845

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

RULING:

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

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

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

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

HEIRS OF SOFIA QUIRONG, Represented by ROMEO P.

QUIRONGv. DEVELOPMENT BANK OF
THE PHILIPPINES,
G.R. No. 173441 December 3, 2009

FACTS:

When the late Emilio Dalope died, he left a 589-square meter untitled lot in Sta. Barbara, Pangasinan, to his wife, Felisa Dalope
(Felisa) and their nine children, one of whom was Rosa Dalope-Funcion.To enable Rosa and her husband Antonio Funcion (the
Funcions) get a loan from respondent Development Bank of the Philippines (DBP), Felisa sold the whole lot to the Funcions. With
the deed of sale in their favor and the tax declaration transferred in their names, the Funcions mortgaged the lot with the DBP.
On February 12, 1979, after the Funcions failed to pay their loan, the DBP foreclosed the mortgage on the lot and consolidated
ownership in its name on June 17, 1981.Four years later or on September 20, 1983 the DBP conditionally sold the lot to Sofia
Quirong\ for the price of P78,000.00. In their contract of sale, Sofia Quirong waived any warranty against eviction. The contract
provided that the DBP did not guarantee possession of the property and that it would not be liable for any lien or encumbrance on

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the same. Quirong gave a down payment of P14,000.00. Two months after that sale or on November 28, 1983 Felisa and her eight
children (collectively, the Dalopes) filed an action for partition and declaration of nullity of documents with damages against the
DBP and the Funcions before the Regional Trial Court (RTC) of Dagupan City, Branch 42, in Civil Case D-7159.On December
27, 1984, notwithstanding the suit, the DBP executed a deed of absolute sale of the subject lot in Sofia Quirongs favor. The deed
of sale carried substantially the same waiver of warranty against eviction and of any adverse lien or encumbrance.

On May 11, 1985, Sofia Quirong having since died, her heirs (petitioner Quirong heirs) filed an answer in intervention [ in Civil
Case D-7159 in which they asked the RTC to award the lot to them and, should it instead be given to the Dalopes, to allow the
Quirong heirs to recover the lots value from the DBP. But, because the heirs failed to file a formal offer of evidence, the trial court
did not rule on the merits of their claim to the lot and, alternatively, to relief from the DBP.

ISSUE:

Whether or not the heirs of Quirong were entitled to the rescission of the DBPs sale of the subject lot to the late Sofia Quirong as
a consequence of her heirs having been evicted from it.

RULING:

The remedy of rescission is not confined to the rescissible contracts enumerated under Article 1381.
Article 1191 of the Civil Code gives the injured party in reciprocal obligations, such as what contracts are
about, the option to choose between fulfillment and rescission. Here, the Quirong heirs alleged in their
complaint that they were entitled to the rescission of the contract of sale of the lot between the DBP and
Sofia Quirong because the decision in Civil Case D-7159 deprived her heirs of nearly the whole of that
lot. , that contract of sale had already been fully performed when Sofia Quirong paid the full price for the
lot and when, in exchange, the DBP executed the deed of absolute sale in her favor. There was a turnover
of control of the property from DBP to Sofia Quirong since she assumed under their contract, the
ejectment of squatters and/or occupants on the lot, at her own expense. Actually, the cause of action of the
Quirong heirs stems from their having been ousted by final judgment from the ownership of the lot that
the DBP sold to Sofia Quirong, their predecessor, in violation of the warranty against eviction that comes
with every sale of property or thing. Article 1548 of the Civil Code. The CA acted correctly in reversing
the RTC decision and dismissing their action.This point is of course entirely academic but it shows that
the Quirong heirs have themselves to blame for the loss of whatever right they may have in the case.
HEIRS OF RAMON C. GAITE, CYNTHIA GOROSTIZA GAITE and RHOGEN BUILDERS,
petitioners, vs. THE PLAZA, INC. and FGU INSURANCE CORPORATION, respondents.
G.R. No. 177685, January 26, 2011

FACTS:

The Plaza, through its president, Jose C. Reyes, entered into a contract with Rhogen Builders, represented by Ramon C. Gaite, for
the construction of a restaurant building in Greenbelt, Makati for the price of PhP7,600,00.00. To secure Rhogen's compliance with
its obligation, Gaite and FGU Insurance corporation executed a surety bond in favor of the Plaza.

Subsequently, Gaite was ordered by Engineer Gonzales to stop construction due to violations of the National Building Code. This
was referred to the Plaza's Project Manager, Tayzon.

Later, the permit for the construction of the restaurant was revoked for non-compliance with the National Building Code.
Gaiterequested that they fix the problem with cooperation from the Plaza but the Reyes, on behalf of the Plaza, said that it was not
their responsibility to help Rhogen after its failure to comply with the construction requirements. Because Reyes would neither
cooperate with Rhogen to fix the problem nor compensate Rhogen for the percentage of work done, Gaite informed the Plaza that
he would be terminating their contract based on the Contractor's Right to Stop Work or Terminate Contracts as provided for in their
agreement.

Later, the Plaza filed a case against Gaite and FGU for breach of contract, sum of money and damages and also a separate case for
nullification of the project development contract. The RTC ruled in favor of the Plaza saying that instead of rectifying the
violations,Rhogen continued with the construction work thereby causing more damage. The trial court pointed out that Rhogen is
not only expected to be aware of standard requirements and pertinent regulations on construction work, but also expressly bound

Page 184 of 845

itself under the General Construction Contract to comply with all the laws, city and municipal ordinances and all government
regulations.Having failed to complete the project within the stipulated period and comply with its obligations, Rhogen was thus
declared guilty of breaching the Construction Contract and is liable for damages under Articles 1170 and 1167 of the Civil Code.

The CA affirmed the RTC decision saying that the Plaza cannot now be demanded to comply with its obligation under the contract
since Rhogen has already failed to comply with its own contractual obligation. Thus, The Plaza had every reason not to pay the
progress billing as a result of Rhogens inability to perform its obligations under the contract. Further, the stoppage and revocation
orders were issued on account of Rhogens own violations involving the construction as found by the local building official.
Clearly,Rhogen cannot blame The Plaza for its own failure to comply with its contractual obligations. The CA stressed that Rhogen
obliged itself to comply with "all the laws, city and municipal ordinances and all government regulations insofar as they are binding
upon or affect the parties to the contract, the work or those engaged thereon.

ISSUE:

Whether the CA erred in not holding that there were valid and legal grounds for Rhogen to terminate the contract pursuant to Article
1191 of the Civil Code and its agreement with the Plaza.

RULING: The petition is unmeritorious.

Reciprocal obligations are those which arise from the same cause, and in which each party is a debtor and a creditor of the other,
such that the obligation of one is dependent upon the obligation of the other. They are to be performed simultaneously such that
the performance of one is conditioned upon the simultaneous fulfillment of the other. Respondent The Plaza predicated its action
on Article 1191 of the Civil Code, which provides for the remedy of "rescission" or more properly resolution, a principal action
based on breach of faith by the other party who violates the reciprocity between them. The breach contemplated in the provision is
the obligors failure to comply with an existing obligation. Thus, the power to rescind is given only to the injured party. The injured
party is the party who has faithfully fulfilled his obligation or is ready and willing to perform his obligation.

The construction contract between Rhogen and The Plaza provides for reciprocal obligations whereby the latters obligation to pay
the contract price or progress billing is conditioned on the formers performance of its undertaking to complete the works within the
stipulated period and in accordance with approved plans and other specifications by the owner. Pursuant to its contractual
obligation, The Plaza furnished materials and paid the agreed down payment. It also exercised the option of furnishing and
delivering construction materials at the jobsite pursuant to Article III of the Construction Contract. However, just two months after
commencement of the project, construction works were ordered stopped by the local building official and the building permit
subsequently revoked on account of several violations of the National Building Code and other regulations of the municipal
authorities.

Since Rhogen had already breached its contractual obligation by not complying with the National Building Code, it had no right to
terminate the contract based on the Plaza's refusal to compensate it for the percentage of work done.

Petition is DENIED.

Page 185 of 845

 SOLAR HARVEST, INC. VS. DAVAO CORRUGATED CARTON CORPORATION
G.R. No. 176868 : July 26, 2010
FACTS:

In the first quarter of 1998, petitioner, Solar Harvest, Inc., entered into an agreement with Davao
Corrugated Carton Corporation, for the purchase of corrugated carton boxes, specifically designed for
petitioner's business of exporting fresh bananas, at US$1.10 each. The agreement was not reduced into
writing. To get the production underway, petitioner deposited, on March 31, 1998, US$40,150.00 in
respondent's US Dollar Savings Account with Westmont Bank, as full payment for the ordered boxes.

Despite full payment, it did not receive any boxes. It made repeated follow-ups but respondent only
showed samples, and promised to deliver the boxes 30 days from completion, as they had agreed.
Because of the non-delivery of the boxes, its transaction with China Zero Food for the delivery of bananas
to China did not push through.
Thus, on January 3, 2001, petitioner wrote a demand letter for reimbursement of the amount paid.
Eventually, it filed a complaint for sum of money (refund of the $40k) and damages against respondent.
Petitioner also claims that the agreement was that it would be respondent who would deliver the boxes to
TADECO (Tagum Agricultural Dvpt Corp; one who delivered the bananas to be put on the boxes) During
the trial, sole witness Que, the representative of Solar Harvest, testified that when he visited respondents
factory, he saw that the boxes had no print of petitioners logo. He followed up the order a few months
later, yet respondent said it had full production, thus promised that the production of the order would be
rushed. He told respondent that it should indeed rush because the need for the boxes was urgent.
Thereafter, he asked his partner, Alfred Ong, to cancel the order because it was already too late for them
to meet their commitment to ship the bananas to China. During cross-examination, Que admitted that he
was not the one who personally placed the order to Jamie Tan (president of respondent); and that he did
not give authority to respondent to deliver the boxes to TADECO because he claims that the same were
not yet complete. Que denied that Solar Harvest made an additional order of 24k boxes.

ISSUE:

Page 186 of 845

Whether or not Solar Harvest may be allowed to rescind the contract?

RULING:

None, thus, Solar Harvest cannot demand for the refund of its payment, which in essence is actually a
claim for rescission.
Based on Art. 1191, in reciprocal obligations, the right to rescind a contract arises once the other party
defaults in the performance of his obligation. In determining when default occurs, Art. 1191 should be
taken in conjunction with Art. 1169 which provides as to when delay is incurred.
In reciprocal obligations, as in a contract of sale, the general rule is that the fulfillment of the parties'
respective obligations should be simultaneous. Hence, no demand is generally necessary because, once a
party fulfills his obligation and the other party does not fulfill his, the latter automatically incurs in delay.
But when different dates for performance of the obligations are fixed, the default for each obligation must
be determined by the rules given in the first paragraph of Art. 1169, that is, the other party would incur in
delay only from the moment the other party demands fulfillment of the former's obligation. Thus, even in
reciprocal obligations, if the period for the fulfillment of the obligation is fixed, demand upon the obligee
is still necessary before the obligor can be considered in default and before a cause of action for rescission
will accrue.

Evident from the records and even from the allegations in the complaint was the lack of demand by
petitioner upon respondent to fulfill its obligation to manufacture and deliver the boxes. The Complaint
only alleged that petitioner made a "follow-up" upon respondent, which, however, would not qualify as a
demand for the fulfillment of the obligation. Even assuming that a demand had been previously made
before filing the present case, petitioner's claim for reimbursement would still fail, as the circumstances
would show that respondent was not guilty of breach of contract.
The existence of a breach of contract is a factual matter. As correctly observed by the CA, there is ample
showing that the boxes had already been manufactured by respondent. We also believe that the agreement
between the parties was for petitioner to pick up the boxes from respondent's warehouse, contrary to
petitioner's allegation. Thus, it was due to petitioner's fault that the boxes were not delivered to TADECO.
In sum, the Court finds that petitioner failed to establish a cause of action for rescission, the evidence
having shown that respondent did not commit any breach of its contractual obligation. As previously
stated, the subject boxes are still within respondent's premises. To put a rest to this dispute, we therefore
relieve respondent from the burden of having to keep the boxes within its premises and, consequently,
give it the right to dispose of them, after petitioner is given 30 days within which to remove them from
the premises.

Page 187 of 845

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

FACTS:

In December 1989, respondent leased from petitioner a space on the ground floor of
the RBJ Building for her pawnshop business for a monthly rental of 4,000.00. A close friendship
developed between the two which led to the respondent investing thousands of pesos in petitioners
financing/lending business from February 7, 1990 to May 27, 1990, with interest at the rate of 6% a month.
On June 20, 1988, petitioner mortgaged the subject real properties to the Farmers Savings Bank
and Loan Bank, Inc. to secure a loan of 2,000,000.00 payable in installments. On November 15, 1990,

Page 188 of 845

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

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

RULING:

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

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

G.G. SPORTSWEAR MFG. CORP. v.WORLD CLASS PROPERTIES, INC.

G.R. No. 182720 March 2, 2010

FACTS:

Page 189 of 845

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

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

RULING:

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

Page 190 of 845

 MOVIDO v. REYES PASTOR
GR NO. 172279 FEBRUARY 11, 2010

FACTS:

Pastor alleged that he and Movido executed a contract to sell where Movido agreed to sell a
parcel of his land in Cavite. Pastor also alleged that the contract provided that if a Napocor
power line transvered the subject lot, the purchase price would be lowered. He also claimed that
Movido undertook the cause of the survey of the property in order to determine the portion
affected by the Napocor power line. The petitioner also alleged that he already paid more than
half of the price and that he was willing and ready to pay the balance of the purchase price but
due to petitioners refusal to have the property surveyed despite incessant demands, his unpaid
balance could not be determined with certainty. Movido alleged that there original negotiation
for the sale of his property involved a smaller lot area and that Pastor was in delay in paying
several installments and that this is a material breach because they agreed that the survery of the
property would only be done after Pastor would have paid the 7 th installment.

ISSUE:
Whether or not the validity of a contract will depend on certain stipulations in it

RULING:

No, the validity of a contract will not depend on certain stipulations in it. In this case, the 2
contracts that were executed by the parties would reveal that the payment of the purchase price
does not depend on the survey of the property. In other words, the purchase price should be paid
whether or not the property is surveyed. The survey of the property is important only insofar as
the right of respondent to the reduction of the purchase price is concerned. On the other hand, the
survey of the property to determine the metes and bounds of the 1,731 sq. m. portion that is
excluded from the contract as well as the portions covered by the kasunduan which will be
subject to reduction of the purchase price, is also not conditioned on the payment of any
installment.

Page 191 of 845

 SPOUSES TONGSON VS EMERGENCY PAWNSHOP BULA, INC.
GR. 167874 JANUARY 15, 2010

FACTS:

In May 1992, Napala offered to purchase from the Spouses Tongson their 364-square meter
parcel of land, situated in Davao City and covered by Transfer Certificate of Title (TCT) No.
143020, for P3,000,000. Finding the offer acceptable, the Spouses Tongson executed with
Napala a Memorandum of Agreement dated 8 May 1992.

On 2 December 1992, respondents lawyer Atty. Petronilo A. Raganas, Jr. prepared a Deed of
Absolute Sale indicating the consideration as only P400,000. When Carmen Tongson noticed
that the consideration was very low, she [complained] and called the attention of Napala but the
latter told her not to worry as he would be the one to pay for the taxes and she would receive the
net amount of P3,000,000. To conform with the consideration stated in the Deed of Absolute
Sale, the parties executed another Memorandum of Agreement, which allegedly replaced the first
Memorandum of Agreement, showing that the selling price of the land was only P400,000. Upon
signing the Deed of Absolute Sale, Napala paid P200,000 in cash to the Spouses Tongson and
issued a postdated Philippine National Bank (PNB) check in the amount
ofP2,800,000, representing the remaining balance of the purchase price of the subject
property. Thereafter, TCT No. 143020 was cancelled and TCT No. T-186128 was issued in the
name of EPBI.

When presented for payment, the PNB check was dishonored for the reason Drawn Against
Insufficient Funds. Despite the Spouses Tongson's repeated demands to either pay the full value
of the check or to return the subject parcel of land, Napala failed to do either. Left with no other
recourse, the Spouses Tongson filed with the Regional Trial Court, Branch 16, Davao City a
Complaint for Annulment of Contract and Damages with a Prayer for the Issuance of a
Temporary Restraining Order and a Writ of Preliminary Injunction.

ISSUE:

Whether or Not Napala employed fraud which induces the spouses to enter in the sale.

RULING:

Page 192 of 845

The issuance of PNB check and fraudulently representation made by Napalacould not be
considered as determining cause for the sale of the subject parcel of land. A valid contract
requires occurrence of three elements. In the present, there is nodispute as regards the presence
of two requisites; namely, (a) determinate subjectmatter, and (b) price certain in money. As
regards the requisite which is the consent ofthe parties, it is clearly shown for the record that the
spouses agreed to sell the land toNapala who offered to pay the price. The fraud was not
employed during the negotiationand perfection stages of the sale, but existed in the
consummation when the parties arein the process of their respective obligations.

BONIFACIO SANZ MACEDA v. DEVELOPMENT BANK OF THE PHILIPPINES

G.R. No. 174979 August 11, 2010

FACTS:

It appears that on July 28, 1976 plaintiff Bonifacio Maceda, Jr. (Maceda) obtained a loan from the
defendant DBP in the amount of P7.3 million to finance the expansion of the Old Gran Hotel in
Leyte. Upon approval of said loan, plaintiff Maceda executed a promissory note and a mortgage of
real estate. Project cost of the New Gran Hotel was P10.5M. DBP fixed a debt-equity ratio of 70%-
30%, corresponding to DBP and Macedas respective infusion in the hotel project. Macedas equity
infusion was P2.93M, or 30% of P10.5M. The DBP Governor at that time, RecioGarcia, in-charge of
loans for hotels, allegedly imposed the condition that DBP would choose the building contractor,
namely, Moreman Builders Co. (Moreman). The contractor would directly receive the loan releases
from DBP, after verification by DBP of the construction progress. The period of loan availment was
360 days from date of initial release of the loan. Similarly, suppliers of equipment and furnishings for
the hotel were also to be paid directly by DBP. The construction deadline was set for December 22,
1977. Maceda filed a complaint for Rescission of the building contract with Damages against the
contractor Moreman, before the then Manila Court of First Instance Branch 39, which was docketed as
Civil Case No. 113498.

In effect, it was alleged that despite only a 15% accomplishment which should have cost
only P700,000.00, the contractor, thru the active connivance of the DBP, was able to rake in a total
ofP3,174,358.38 or 60% of the cost of the projected hotel building. When plaintiff Maceda himself tried
to resume the completion and construction of the hotel project, after the building contract
with Moreman was already rescinded by the CFI Manila, defendant allegedly blocked efforts of the
plaintiff by delaying the release of funds from his loan with the DBP and imposing onerous conditions
which made it difficult for plaintiff to pursue the construction of the New Gran Hotel. It was further
alleged that due to such delays on the part of the DBP, the period of availment of the loan expired
without the plaintiffs [sic] having availed of the total approved amount of their loan. The construction
of the hotel was never finished.

Page 193 of 845

Issue:
Whether the Honorable Court of Appeals was correct in holding DBP liable for the acts
of Moreman Builders;

RULING:

We find credit in the finding that DBP actively connived with the contractor in the anomalous loan releases.
DBP falsely argues that releases on the loan were coursed thru the plaintiff-appellant and the checks were
drawn jointly in the names of Maceda and Moreman. As found by the RTC, the records show that checks were
drawn only in the name of Moreman and plaintiffs conformity to fund releases were solicited by DBP after the
fact of release, not before. Direct releases to the plaintiff, instead of Moreman, began only after Moreman was
discharged as contractor. Further, it was agreed that payment to Moreman Builders would be assessed against
actual construction of the project upon DBPs verification. Thus, DBP contributed in the swindling perpetrated
by Moreman against the plaintiff because it improperly discharged its duty as verifier of the construction
project.

DBP was also at fault in not releasing the amount of P1.003 Million which had already been approved for
release as early as January 1978. We agree with the RTC that it is apparent that such delay in the release of
plaintiffs loan is directly attributable to DBP and contributed to the construction delay, such that radical rise in
construction cost and prices of materials had already caught up with the hotel project. In releasing other sums
but not the P1.003 million, and in failing to release the bigger sum of P1,952,489.10 which is the total
unreleased balance of the loan, DBP treated its prestation according to its likes and dislikes.

ARMAND O. RAQUEL-SANTOS v. COURT OF APPEALS

G.R. No. 174986 July 7, 2009

FACTS:

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

ISSUE:

Page 194 of 845

 Whether or not rescission is the proper remedy.

RULING:

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

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

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

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

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

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

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

Page 195 of 845

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

FACTS:

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

ISSUE:

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

RULING:

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

Page 196 of 845

given the loan in good faith and was not a "fence" for stolen articles and had not conspired with the
faithless Josefina Rocco or with Tomasa de Leon.

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

PERLA PALMA GIL v. HON. COURT OF APPEALS

G.R. No. 127206 September 12, 2003

FACTS:

Concepcion Palma Gil, and her sister, Nieves Palma Gil, married to Angel Villarica, were the co-
owners of a parcel of commercial land with an area of 829 square meters, identified as Lot No. 59-C, covered
by Transfer Certificate of Title (TCT) No. 432 located in Davao City. The spouses Angel and Nieves Villarica
had constructed a two-storey commercial building on the property. On October 13, 1953, Concepcion filed a
complaint against her sister Nieves for specific performance, to compel the defendant to cede and deliver to
her an undivided portion of the said property with an area of 256.2 square meters. After due proceedings, the
court rendered judgment on April 7, 1954 in favor of Concepcion, ordering the defendant to deliver to the
plaintiff an undivided portion of the said property with an area of 256.2 square meters.

Nieves appealed to the Court of Appeals which affirmed the assailed decision. In due course, the
decision became final and executory. On motion of the plaintiff (Concepcion), the court issued a writ of
execution. Nieves, however, refused to execute the requisite deed in favor of her sister. In the interim, the
spouses Angel and Nieves Villarica executed a real estate mortgage over Lot 59-C-4 in favor of Prudential
Bank as security for a loan. On August 4, 1959, Concepcion died intestate and was survived by Nieves
Villarica and her nephews and nieces. Iluminada filed a motion for her substitution as party-plaintiff in lieu of
the deceased Concepcion. On August 2, 1961, the court issued an order granting the motion.

Page 197 of 845

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

RULING:

Under the last paragraph of Article 1169 of the New Civil Code, in reciprocal obligations, neither
party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is
incumbent upon him. From the moment one of the parties fulfills his obligation, delay in the other begins.
Thus, reciprocal obligations are to be performed simultaneously so that the performance of one is conditioned
upon the simultaneous fulfillment of the other. The right of rescission of a party to an obligation under Article
1191 of the New Civil Code is predicated on a breach of faith by the other party that violates the reciprocity
between them. The deed of absolute sale executed by Concepcion Gil in favor of Iluminada Pacetes is an
executory contract and not an executed contract is a settled matter. In a perfected contract of sale of realty, the
right to rescind the said contract depends upon the fulfillment or non-fulfillment of the prescribed condition.
The court ruled that the condition pertains in reality to the compliance by one party of an undertaking the
fulfillment of which would give rise to the demandability of the reciprocal obligation pertaining to the other
party. The reciprocal obligation envisaged would normally be, in the case of the vendee, the payment by the
vendee of the agreed purchase price and in the case of the vendor, the fulfillment of certain express warranties.

The vendee paid the downpayment of P7,500.00. By the terms of the contract, the obligation of the
vendee to pay the balance of the purchase price ensued only upon the issuance of the certificate of title by the
Register of Deeds over the property sold to and under the name of the vendee, and the delivery thereof by the
vendor Concepcion Gil to the latter. Concepcion failed to secure a certificate of title over the property. When
she died intestate on August 4, 1959, her obligation to deliver the said title to the vendee devolved upon her
heirs, including the petitioners. The said heirs, including the petitioners failed to do so, despite the lapse of
eighteen years since Concepcions death.The petitioners, as successors-in-interest of the vendor, are not the
injured parties entitled to a rescission of the deed of absolute sale. It was Concepcions heirs, including the
petitioners, who were obliged to deliver to the vendee a certificate of title over the property under the latters
name, free from all liens and encumbrances within 120 days from the execution of the deed of absolute sale on
October 24, 1956, but had failed to comply with the obligation.The consignation by the vendee of the purchase
price of the property is sufficient to defeat the right of the petitioners to demand for a rescission of the said
deed of absolute sale.

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

FACTS:

Page 198 of 845

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

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

RULING:

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

Page 199 of 845

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

ONG YONG et al., vs. DAVID S. TIU et al.

G.R. No. 144476 2002 Feb 1

FACTS:

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

ISSUE:

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

RULING:

Page 200 of 845

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

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

EQUATORIAL REALTY DEVELOPMENT, Inc. vs. MAYFAIR THEATER, Inc.,

G.R. No. 133879 2001 Nov 21

FACTS:

Carmelo & Bauermann, Inc. (Carmelo) used to own a parcel of land, together with two 2-storey
buildings constructed thereon, located at Claro M. Recto Avenue, Manila, and covered by TCT No. 18529
issued in its name by the Register of Deeds of Manila. On June 1, 1967, Carmelo entered into a Contract
of Lease with Mayfair Theater Inc. (Mayfair) for a period of 20 years. Two years later, on March 31,
1969, Mayfair entered into a second Contract of Lease with Carmelo for the lease of another portion of
the latters property -- namely, a part of the second floor of the two-storey building, and two store spaces
on the ground floor and the mezzanine. In that space, Mayfair put up another movie house known as
Miramar Theater. The Contract of Lease was likewise for a period of 20 years. Both leases contained a
provision granting Mayfair a right of first refusal to purchase the subject properties. However, on July 30,

Page 201 of 845

1978 - within the 20-year-lease term -- the subject properties were sold by Carmelo to Equatorial Realty
Development, Inc. (Equatorial) for the total sum of P11,300,000, without their first being offered to
Mayfair.

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

ISSUES:

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

RULING:

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

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

Page 202 of 845

SPOUSES MARIANO Z. VELARDE AND AVELINA D. VELARDE VS. COURT OF APPEALS,
DAVID A. RAYMUNDO AND GEORGE RAYMUNDO
G.R. NO. 108346 2001 JUL 11

FACTS:

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

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

RULING:
A substantial breach of a reciprocal obligation entitles the injured party to rescind the obligation.
Rescission abrogates the contract from its inception and requires a mutual restitution of benefits received.
The breach committed by petitioners was not so much their nonpayment of the mortgage
obligations, as their nonperformance of their reciprocal obligation to pay the purchase price under the
contract of sale. Private respondents right to rescind the contract finds basis in Article 1191 of the Civil
Code.

Page 203 of 845

 The right of rescission of a party to an obligation under Article 1191 of the Civil Code is
predicated on a breach of faith by the other party who violates the reciprocity between them. The breach
contemplated in the said provision is the obligors failure to comply with an existing obligation. When the
obligor cannot comply with what is incumbent upon it, the obligee may seek rescission and, in the
absence of any just cause for the court to determine the period of compliance, the court shall decree the
rescission. The private respondents therefore validly exercised their right to rescind the contract, because
of the failure of petitioners to comply with their obligation to pay the balance of the purchase price.
The breach committed by petitioners was the nonperformance of a reciprocal obligation, not a
violation of the terms and conditions of the mortgage contract. Therefore, the automatic rescission and
forfeiture of payment clauses stipulated in the contract does not apply. Instead, Civil Code provisions
shall govern and regulate the resolution of this controversy. Considering that the rescission of the contract
is based on Article 1191 of the Civil Code, mutual restitution is required to bring back the parties to their
original situation prior to the inception of the contract.
ALEXANDER G. ASUNCION vs. EDUARDO B. EVANGELISTA and COURT OF APPEALS
G.R. No. 133491 1999 Oct 13

FACTS:

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

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

ISSUE:

Page 204 of 845

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

RULING:

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

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

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

WILLIAM UY VS. COURT OF APPEALS

G.R. NO. 120465, SEPTEMBER 9, 1999
314 SCRA 69

FACTS:

Petitioners William Uy and Rodel Roxas are agents authorized to sell eight parcels of land by
owners thereof. By virtue of such authority, they entered the contract of sale to respondent National

Page 205 of 845

Housing Authority to be utilized in developing as a housing project. However, due to the report of the
DENR the three (3) parcels are located at an active landslide area and not suitable for housing project,
NHA issued a resolution canceling the sale of the three (3) parcels of land but it offered the amount of
P1.225 million to the land owners as danos perjuicious.

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

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

HELD:

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

Page 206 of 845

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

FACTS:

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

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

ISSUE:

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

Page 207 of 845

RULING:

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

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

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

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

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

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

LETICIA TAN, MYRNA MEDINA, MARILOU SPOONER, ROSALINDA TAN, and MARY
JANE TAN, MARY LYN TAN, CELEDONIO TAN, JR., MARY OY TAN, and MARK ALLAN
AN, represented herein by their mother, LETICIA TAN,Petitioners vs. OMC CARRIERS, INC.
and BONIFACIO ARAMBALA, Respondents.

G.R. No. 190521: January 12, 2011

Page 208 of 845

FACTS:

Respondent OMC Carriers owned a truck, driven by respondent Arambala, which crashed into the home
of petitioners Tan when its braking mechanism failed. This caused the death of the head of the family,
Celedonio Tan. The Tans went to court to demand damages due to the negligence of OMC. OMC
counters that the truck went out of control because of motor oil spilled on the road. The RTC found OMC
to be liable, that the brake of the truck malfunctioned, and that there was no motor oil which caused the
accident. The driver, Aramballa, abandoned the truck when the brakes did not work which caused the
truck to slam into the home of the Tans. The RTC awarded actual damages, both on the loss of property
and earning capacity of Celedonio. Exemplary damages were also awarded. Upon appeal to the Court of
Appeals, the actual damages for loss of property was reduced as they were insufficiently substantiated.
The damages for loss of earning capacity was deleted for being totally unsubstantiated. The Tans were
unable to present documents to ascertain the amount of earning capacity lost. Exemplary damages were
also reduced.

ISSUES:

Whether or not: a) the reduction of actual damages for loss of property was proper; b) the removal of
actual damages for loss of earning capacity was proper; and c) whether or not the reduction of exemplary
damages was proper.

HELD:

The petition is partly meritorious.

Temperate damages are awarded when the exact amount of damages is unknown. The petitioners clearly
suffered damages. Their home and property were damaged. The provider of the family passed away. It is
clear and undisputed that they did suffer losses. However, since the value of the properties damaged could
not be determined with certainty because of the nature of the property, temperate damages are in order.
Also, even if there are no documents supporting the earning capacity of the deceased, the damage caused
is still undisputed. Temperate damages must be awarded. The reduction of exemplary damages are proper
as exemplary damages are not meant to enrich or reduce another party to poverty.

Page 209 of 845

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

FACTS:

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

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

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

RULING:

Page 210 of 845

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

GSIS VS. LABUNG-DEANG

G.R. NO. 135644, SEPTEMBER 17, 2001
365 SCRA 431

FACTS:

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

Page 211 of 845

found in favor of the petitioner, which was affirmed by the Court of Appeals on appeal by the
petitioner herein.

ISSUE:

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

HELD:

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

Page 212 of 845

 BPI INVESTMENT CORPORATION VS. D. G. CARREON COMMERCIAL CORP.
G.R. NO. 126524, NOVEMBER 29, 2001
371 SCRA 58
FACTS:

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

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

Page 213 of 845

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

Khe Hong Cheng vs. Court of Appeals

G.R. No. 144169, March 28, 2001
355 SCRA 701

FACTS:

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

While the case was pending, Khe Hong Cheng executed deeds of donations of parcels of land in
favor of his children. As a consequence of a favorable judgment for American Home, a writ of execution
to garnish Khe Hong Chengs property was issued but the sheriff failed to implement the same for
Chengs property were already transferred to his children. Consequently, American home filed a case for

Page 214 of 845

the rescission of the deeds of donation executed by petitioner in favor of children for such were made in
fraud of his creditors. Petitioner answered saying that the action should be dismissed for it already
prescribed. Petitioner posited that the registration of the donation was on December 27, 1989 and such
constituted constructive notice. And since the complaint was filed only in 1997, more than four years after
registration, the action is thereby barred by prescription.

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

HELD:

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

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

PHILIPPINE REALTY and HOLDING CORP. v. LEY CONST. and DEV. CORP.

Page 215 of 845

 G. R. No. 165548, June 13, 2011

FACTS:

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

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

RULING:

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

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

Page 216 of 845

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

MEGAWORLD GLOBUS ASIA, INC. v .MILA S. TANSECO

G.R. No. 181206 October 9, 2009

FACTS:

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

A few days shy of three years later, Megaworld, by notice dated April 23, 2002 (notice of turnover),
informed Tanseco that the unit was ready for inspection preparatory to delivery. Tanseco replied through
counsel, by letter of May 6, 2002, that in view of Megaworlds failure to deliver the unit on time, she was

Page 217 of 845

demanding the return of P14,281,731.70 representing the total installment payment she had made, with
interest at 12% per annum from April 30, 1999, the expiration of the six-month grace period. Tanseco
pointed out that none of the excepted causes of delay existed.

ISSUE:

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

RULING:

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

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

Article 1174 of the Civil Code provides:

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

The Court cannot generalize the 1997 Asian financial crisis to be unforeseeable and beyond the control of
a business corporation. A real estate enterprise engaged in the pre-selling of condominium units is
concededly a master in projections on commodities and currency movements, as well as business risks.
The fluctuating movement of the Philippine peso in the foreign exchange market is an everyday
occurrence, hence, not an instance of caso fortuito. Megaworlds excuse for its delay does not thus lie.
ROBERTO C. SICAM and AGENCIA de R.C. SICAM, INC. versus LULU V. JORGE and
CESAR JORGE
G.R. NO. 159617 August 8, 2007
FACTS:

Page 218 of 845

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

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

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

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

Page 219 of 845

 Robbery per se, just like carnapping, is not a fortuitous event. It does not foreclose the possibility of
negligence on the part of herein petitioners. The presentation of the police report of the Paraaque Police
Station on the robbery committed based on the report of petitioners' employees is not sufficient to
establish robbery. Such report also does not prove that petitioners were not at fault. Also, the robbery in
this case took place in 1987 when robbery was already prevalent and petitioners in fact had already
foreseen it as they wanted to deposit the pawn with a nearby bank for safekeeping. Thus, petitioners are
negligent in securing their pawnshop.
Florencia Huibonhoa vs. Court of Appeals
G.R. No. 95897, December 14, 1999
320 SCRA 625

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

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

HELD:
A fortuitous event is that which could not be foreseen, or even if foreseen, was inevitable. To
exempt the obligor from liability for breach of an obligation due to an act of God, the following must
concur: first, the cause of breach must be independent of the will of the obligor. Second, the event must
be unforeseeable or inevitable. Third, the event must be such as to render it impossible for the debtor to
fulfill his obligation in a normal manner. And fourth, the debtor must be free from any participation in, or
aggravation of, the injury to the creditor. Further, inflation per se, does not account that a fortuitous event

Page 220 of 845

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

ACE AGRO DEVELOPMENT CORPORATION VS. COURT OF APPEALS

G.R. NO. 119729, JANUARY 21, 1997
266 SCRA 429

FACTS:

Petitioner Ace-Agro Development Corporation and private respondent Cosmos Bottling

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

ISSUE:

Page 221 of 845

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

RULING:

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

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

PEDRO DIOQUINO VS. FEDERICO LAUREANO

Page 222 of 845

 G.R. NO. L-25906, MAY 28, 1970
33 SCRA 65

FACTS:

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

ISSUE:

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

HELD:

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

Page 223 of 845

 BACHELOR EXPRESS, INCORPORATED VS. COURT OF APPEALS
G.R. NO. 85691, JULY 31, 1990
193 SCRA 216

FACTS:

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

Page 224 of 845

Beter and Narcisa Rautraut, private respondents herein (Ricardo Beter and Sergia Beter are the parents of
Ornominio while Teofilo Rautraut and Zoetera [should be Zotera] Rautraut are the parents of Narcisa)
filed a complaint for "sum of money" against Bachelor Express, Inc. its alleged owner Samson Yasay and
the driver Rivera.

ISSUE:

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

RULING:

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

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

Page 225 of 845

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

FACTS:

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

ISSUE:

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

RULING:

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

Under the circumstances, while, indeed, the typhoon was an inevitable occurrence, yet, having
been kept posted on the course of the typhoon by weather bulletins at intervals of six hours, the captain
and crew were well aware of the risk they were taking as they hopped from island to island from
Romblon up to Tanguingui. They held frequent conferences, and oblivious of the utmost diligence
required of very cautious persons, they decided to take a calculated risk. In so doing, they failed to
observe that extraordinary diligence required of them explicitly by law for the safety of the passengers

Page 226 of 845

transported by them with due regard for all circumstances and unnecessarily exposed the vessel and
passengers to the tragic mishap. They failed to overcome that presumption of fault or negligence that
arises in cases of death or injuries to passengers.

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

ALBERTA YOBIDO vs. COURT OF APPEALS

G.R. No. 113003 1997 Oct 17

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

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

Page 227 of 845

RULING:

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

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

Moral damages are generally not recoverable in culpa contractual except when bad faith had been
proven. However, the same damages may be recovered when breach of contract of carriage results in the
death of a passenger, as in this case. Exemplary damages, awarded by way of example or correction for
the public good when moral damages are awarded, may likewise be recovered in contractual obligations if
the defendant acted in wanton, fraudulent, reckless, oppressive, or malevolent manner. Because
petitioners failed to exercise the extraordinary diligence required of a common carrier, which resulted in
the death of Tito Tumboy, it is deemed to have acted recklessly. As such, private respondents shall be
entitled to exemplary damages.
ROBERTO JUNTILLA vs. CLEMENTE FONTANAR
G.R. No. L-45637 1985 May 31

FACTS:

Page 228 of 845

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

ISSUE:

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

RULING:

The Court of First Instance of Cebu erred when it absolved the carrier from any liability upon a
finding that the tire blow out is a fortuitous event for there are specific acts of negligence on the part of
the respondents. The records show that the passenger jeepney turned turtle and jumped into a ditch
immediately after its right rear tire exploded. The evidence shows that the passenger jeepney was running
at a very fast speed before the accident. We agree with the observation of the petitioner that a public
utility jeep running at a regular and safe speed will not jump into a ditch when its right rear tire blows up.
There is also evidence to show that the passenger jeepney was overloaded at the time of the accident.

The preponderance of authority is in favor of the doctrine that a passenger is entitled to recover
damages from a carrier for an injury resulting from a defect in an appliance purchased from a
manufacturer, whenever it appears that the defect would have been discovered by the carrier if it had
exercised the degree of care which under the circumstances was incumbent upon it, with regard to
inspection and application of the necessary tests. For the purposes of this doctrine, the manufacturer is
considered as being in law the agent or servant of the carrier, as far as regards the work of constructing
the appliance. According to this theory, the good repute of the manufacturer will not relieve the carrier
from liability.

The rationale of the carrier's liability is the fact that the passenger has neither choice nor control
over the carrier in the selection and use of the equipment and appliances in use by the carrier. Having no
privity whatever with the manufacturer or vendor of the defective equipment, the passenger has no

Page 229 of 845

remedy against him, while the carrier usually has. It is but logical, therefore, that the carrier, while not an
insurer of the safety of his passengers, should nevertheless be held to answer for the flaws of his
equipment if such flaws were at all discoverable.

The source of a common carrier's legal liability is the contract of carriage, and by entering into the
said contract, it binds itself to carry the passengers safely as far as human care and foresight can provide,
using the utmost diligence of a very cautious person, with a due regard for all the circumstances. The
records show that this obligation was not met by the respondents.
THE PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC. vs. MGG MARINE
SERVICES, INC. and DOROTEO GAERLAN
G.R. No. 135645 2002 Mar 8

FACTS:

On March 1, 1987, San Miguel Corporation insured several beer bottle cases with petitioner
Philippine American General Insurance Company. The cargo were loaded on board the M/V Peatheray
Patrick-G to be transported from Mandaue City to Bislig, Surigao del Sur. After having been cleared by
the Coast Guard Station in Cebu the previous day, the vessel left the port of Mandaue City for Bislig,
Surigao del Sur on March 2, 1987. The following day, March 3, 1987, M/V Peatheray Patrick-G listed
and subsequently sunk off Cawit Point, Cortes, Surigao del Sur. As a consequence thereof, the cargo
belonging to San Miguel Corporation was lost. Subsequently, San Miguel Corporation claimed the
amount of its loss from petitioner.

The Board of Marine Inquiry conducted its own investigation of the sinking of the M/V Peatheray
Patrick-G to determine whether or not the captain and crew of the vessel should be held responsible for
the incident. On May 11, 1989, the Board rendered its decision exonerating the captain and crew of the
ill-fated vessel for any administrative liability. It found that the cause of the sinking of the vessel was the
existence of strong winds and enormous waves in Surigao del Sur, a fortuitous event that could not have
been forseen at the time the M/V Peatheray Patrick-G left the port of Mandaue City. It was further held by
the Board that said fortuitous event was the proximate and only cause of the vessels sinking.

ISSUE:

Whether the cargo was lost due to a fortuitous event and whether respondents exercised due
diligence to prevent the loss of the cargo.

RULING:

Page 230 of 845

 Common carriers, from the nature of their business and for reasons of public policy, are mandated to
observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers
transported by them. Owing to this high degree of diligence required of them, common carriers, as a
general rule, are presumed to have been at fault or negligent if the goods transported by them are lost,
destroyed or if the same deteriorated.

However, this presumption of fault or negligence does not arise in the cases enumerated under
Article 1734 of the Civil Code:

Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the
same is due to any of the following causes only:(1) Flood, storm, earthquake, lightning or other natural
disaster or calamity;(2) Act of the public enemy in war, whether international or civil;(3) Act or omission
of the shipper or owner of the goods;(4) The character of the goods or defects in the packing or in the
containers;(5) Order or act of competent public authority.

The findings of the Board of Marine Inquiry indicate that the attendance of strong winds and huge
waves while the M/V Peatheray Patrick-G was sailing through Cortes, Surigao del Norte on March 3,
1987 was indeed fortuitous. Thus, the Caprain could not be expected to have foreseen the unfavorable
weather condition that awaited the vessel in Cortes, Surigao del Sur. It was the presence of the strong
winds and enormous waves which caused the vessel to list, keel over, and consequently lose the cargo
contained therein. The appellate court likewise found that there was no negligence on the part of the crew
of the M/V Peatheray Patrick-G. Hence, private respondents cannot be held liable for the said loss.

Page 231 of 845

 G.R. No. 138123
March 12, 2002
MINDEX RESOURCES DEVELOPMENT, petitioner vs. EPHRAIM MORILLO, respondent

Facts:
A verbal agreement was entered into between respondent and petitioner for the lease of the
formers 6 x 6 ten-wheeler cargo truck for use in the latters mining operations. Subsequently, and
unknown to respondent, the truck was burned by unidentified persons while it was parked
unattended, due to mechanical trouble. When respondent found out about the same, he offered to
sell the truck to petitioner but the latter refused. Instead, it replaced the vehicles burned tires and
had it towed to a shop for repair and overhauling. Both parties exchanged several offers, the gist
of which is that the respondent was offering to sell the truck but demanding for the payment of the
unpaid rentals and the valued cost of truck. The petitioner on the other hand, due to financial
constraints, refused to buy the said truck and offered instead to pay the rentals, repair the truck at
their own expense, after which they will return the same in good working condition. None yielded,
hence, respondent pulled out the truck from the repair shop of petitioner and had it repaired
elsewhere, from his own expense.

Issue:
Whether the burning of the truck was a fortuitous event?

Held:
No, Both the RTC and the CA found petitioner negligent and thus liable for the loss or
destruction of the leased truck. True, both parties may have suffered from the burning of the truck;
however, as found by both lower courts, the negligence of petitioner makes it responsible for the
loss.
In order for a fortuitous event to exempt one from liability, it is necessary that one has
committed no negligence or misconduct that may have occasioned the loss. An act of God cannot
be invoked to protect a person who has failed to take steps to forestall the possible adverse
consequences of such a loss. A review of the records clearly shows that petitioner failed to exercise
reasonable care and caution that an ordinarily prudent person would have used in the same
situation. A witness testified how petitioner fell short of ordinary diligence in safeguarding the
leased truck against the accident, which could have been avoided in the first place. Petitioner failed
to employ reasonable foresight, diligence and care that would have exempted it from liability
resulting from the burning of the truck.

Page 232 of 845

 G.R. No. 126204
November 20, 2001
NATIONAL POWER CORPORATION, petitioner, vs. PHILIPP BROTHERS, respondent

Facts:
PHIBRO won in a bid by NAPOCOR bid for the supply and delivery of 120,000 metric
tons of imported coal for its Batangas Coal-Fired Thermal Power Plant. They stipulated that
PHIBRO will arrange and provide gearless bulk carrier for the shipment of coal to arrive at
discharging port on or before thirty (30) calendar days after receipt of the Letter of Credit.
Subsequently, PHIBRO sent word to NAPOCOR that industrial disputes might soon plague
Australia, the shipments point of origin, which could seriously hamper PHIBROs ability to supply
the needed coal. Consequently, PHIBRO delivered the coal supply beyond the prescribed time.
NAPOCOR once more advertised for the delivery of coal to its Calaca thermal
plant. PHIBRO participated anew in this subsequent bidding, however its application was
disapproved by NAPOCOR due to its purported failure to satisfy NAPOCORs demand for
damages due to the delay in the delivery of the first coal shipment.

Issue:
Whether the delay in the delivery of imported coal was due to force majeure?

Held:
Yes, it was clearly established from the evidence, testimonial and documentary, that what
prevented PHIBRO from complying with its obligation under the contract was the industrial
disputes which besieged Australia during that time. Extant in our Civil Code is the rule that no
person shall be responsible for those events which could not be foreseeen, or which, though
foreseen, were inevitable. This means that when an obligor is unable to fulfill his obligation
because of a fortuitous event or force majeure, he cannot be held liable for damages for non-
performance.
Also, PHIBRO and NAPOCOR explicitly agreed in the Bidding Terms and
Specifications that neither seller (PHIBRO) nor buyer (NAPOCOR) shall be liable for any delay
in or failure of the performance of its obligations, other than the payment of money due, if any
such delay or failure is due to Force Majeure. Specifically, they defined force majeure as any
disabling cause beyond the control of and without fault or negligence of the party, which causes
may include but are not restricted to Acts of God or of the public enemy; acts of the Government
in either its sovereign or contractual capacity; governmental restrictions; strikes, fires, floods,
wars, typhoons, storms, epidemics and quarantine restrictions.
The law is clear and so is the contract between NAPOCOR and PHIBRO. Therefore, there is no
reason to rule otherwise.

Page 233 of 845

 G.R. No. 171035
August 24, 2009
ONG GENATO, petitioner vs. BENJAMIN BAYHON, ET AL., respondents

Facts:
Respondent filed an action before the RTC seeking for the nullification of a dacion en
pago allegedly executed by respondent Bayhon in favor of petitioner. Allegedly, the former
obtained from the petitioner a loan; that to cover the loan, he executed a Deed of Real Estate
Mortgage over a property; that, however, the execution of the Deed of Real Estate Mortgage was
conditioned upon the personal assurance of the petitioner that the said instrument is only a private
memorandum of indebtedness and that it would neither be notarized nor enforced according to its
tenor. Respondent also assailed the dacion en pago as a forgery alleging that neither he nor his
wife, who had died 3 years earlier, had executed it. The petitioner however alleged that on the date
that the real estate mortgage was to be signed, respondent introduced to him a woman as his wife
who signed the dacion en pago. While the case was pending in the CA, respondent Bayhon died.

Issue:
Whether the obligation of Respondent Bayhon is transmissible to his heirs?

Held:
No. As a general rule, obligations derived from a contract are transmissible. The loan in
this case was contracted by respondent. He died while the case was pending before the Court of
Appeals. While he may no longer be compelled to pay the loan, the debt subsists against his estate.
No property or portion of the inheritance may be transmitted to his heirs unless the debt has first
been satisfied. Notably, throughout the appellate stage of this case, the estate has been amply
represented by the heirs of the deceased, who are also his co-parties.
The procedure in vindicating monetary claims involving a defendant who dies before final
judgment is to file a claim against the estate of the deceased respondent.

Page 234 of 845

 G.R. No. 149926
February 23, 2005
UNION BANK OF THE PHILIPPINES, petitioner, vs. EDMUND SANTIBAEZ and
FLORENCE SANTIBAEZ ARIOLA, respondents

Facts:
FCCC and Santibaez entered into a loan agreement to which the latter together with his
son, executed a promissory note in favor of the FCCC. Subsequently, the parties entered into
another loan agreement, to wit they also executed another promissory note and a Continuing
Guaranty Agreement for the loan. Both loans were used to buy 2 tractors. Subsequently, however,
Efraim died, leaving a holographic will. After the testate proceedings, it was agreed that the two
children of Santibanez will divide the tractors among them such that each of them was to assume
the indebtedness of their late father to FCCC, corresponding to the tractor respectively taken by
them.
Subsequently, FCC assigned all its assets and liabilities to the petitioner. Demand letters for
the settlement of his account were sent by petitioner but the respondent failed to heed the same
and refused to pay.

Issue:
Whether the heirs assumption of the indebtedness of the deceased is valid?

Held:
No. Perusing the joint agreement, it provides that the heirs as parties thereto have agreed
to divide between themselves and take possession and use the above-described chattel and each of
them to assume the indebtedness corresponding to the chattel taken as herein after stated which is
in favor of First Countryside Credit Corp. The assumption of liability was conditioned upon the
happening of an event, that is, that each heir shall take possession and use of their respective share
under the agreement. It was made dependent on the validity of the partition, and that they were to
assume the indebtedness corresponding to the chattel that they were each to receive. The partition
being invalid as earlier discussed, the heirs in effect did not receive any such tractor. It follows
then that the assumption of liability cannot be given any force and effect.
Also, it had not been sufficiently shown that petitioner is the successor-in-interest of the
Union Savings and Mortgage Bank to which the FCCC assigned its assets and liabilities. The
petitioner in its complaint alleged that by virtue of the Deed of Assignment dated August 20, 1981
executed by and between First Countryside Credit Corporation and Union Bank of the
Philippines[34] However, the documentary evidence clearly reflects that the parties in the deed of
assignment with assumption of liabilities were the FCCC, and the Union Savings and Mortgage
Bank, with the conformity of Bancom Philippine Holdings, Inc. This being the case, the
petitioners personality to file the complaint is wanting. Consequently, it failed to establish its
cause of action. Thus, the trial court did not err in dismissing the complaint, and the CA in
affirming the same.

Page 235 of 845

 G.R. No. 121940
December 4, 2001
JESUS SAN AGUSTIN, petitioner, vs. HON. COURT OF APPEALS and MAXIMO MENEZ,
JR., respondents

Facts:
The GSIS sold to a certain Macaria, a parcel of residential land of the GSIS Low Cost
Housing Project. The sale is evidenced by a Deed of Absolute Sale, which was, however, subject
to certain encumbrances. A day after the issuance of the TCT, Macaria sold the subject lot to
private respondent as evidenced by a Deed of Absolute Sale. This deed was notarized but was not
registered immediately upon its execution in because GSIS prohibited him from registering the
same in view of the five-year prohibition to sell. Sometime in 1979, for being suspected as a
subversive, an ASSO was issued against private respondent. Upon learning that he was wanted by
the military, he voluntarily surrendered and was detained and eventually released.
Subsequently, he discovered that the subject TCT was missing. An Affidavit of Loss was
filed with the Register of Deeds of Pasig and a certified copy of TCT was issued to him.
Respondent then filed a petition with the RTC for the issuance of owners duplicate copy of TCT
to replace the lost one. To show he was the owner of the contested lot, he presented the Deed of
Absolute Sale. During the hearing, the Register of Deeds was not served notice, and the Office of
the Solicitor General and the Provincial Prosecutor who were notified did not attend. There being
no opposition, the trial court granted his petition. Subsequently, petitioner received a copy of the
decision. Claiming that he was the present occupant of the property and the heir of Macaria, he
filed his Motion to Reopen Reconstitution Proceedings. The RTC and CA denied the same, hence
this petition.

Issue:
Whether the petitioner is entitled to notice?
Held:
No. Consequently, it is sufficient that the notice, under Section 109 of PD 1529, is sent to
the Register of Deeds and to those persons who are known to have, or appear to have, an interest
in the property as shown in the Memorandum of encumbrances at the back of the original or
transfer certificate of title on file in the office of the Register of Deeds. From a legal standpoint,
there are no other interested parties who should be notified, except those mentioned since they are
the only ones who may be deemed to have a claim to the property involved. A person dealing with
registered property is not charged with notice of encumbrances not annotated on the back of the
title. Here, petitioner does not appear to have an interest in the property based on the memorandum
of encumbrances annotated at the back of the title. His claim that he is an heir (nephew) of the
original owner of the lot covered by the disputed lot and the present occupant is not annotated in
the said memorandum of encumbrances. Neither was his claim entered on the Certificate of Titles
in the name of their original/former owners on file with the Register of Deeds at the time of the
filing or pendency of the land registration case. Clearly, petitioner is not entitled to notice. The
fact that respondent complied with the order of publication of the petition in a newspaper of general
circulation, such is sufficient notice of the petition to the public at large.

Page 236 of 845

 G. R. No. 99433
June 19, 2001
PROJECT BUILDERS, INC., GALICANO A. CALAPATIA, JR., and LEANDRO
ENRIQUEZ, petitioners, vs. THE COURT OF APPEALS and INDUSTRIAL FINANCE
CORPORATION, respondents

Facts:
This collection suit was filed by IFC against petitioners, arising from an alleged deficiency
of P1,323,053.08, after the extrajudicial foreclosure of the real estate mortgage. The petitioners
deny liability and in their answer they allege that respondent has no cause or right of action because
the obligation is already fully paid out of the proceeds of foreclosure sale of petitioners
property. Further, they alleged that a proper accounting of the transaction between the parties will
show that it is the private respondent who is liable to the petitioners.

Issue:
Whether the petitioners should still answer for any deficiency after the mortgage with
which they guaranty the collection of the assigned credit, had been foreclosed?

Held:
Yes. An assignment of credit is an act of transferring, either onerously or gratuitously, the
right of an assignor to an assignee who would then be capable of proceeding against the debtor for
enforcement or satisfaction of the credit. The transfer of rights takes place upon perfection of the
contract and ownership of the right, including all appurtenant accessory rights, is thereupon
acquired by the assignee. The assignment binds the debtor only upon acquiring knowledge of the
assignment but he is entitled, even then, to raise against the assignee the same defenses he could
set up against the assignor. Where the assignment is on account of pure liberality on the part of the
assignor, the rules on donation would likewise be pertinent; where valuable consideration is
involved, the assignment partakes of the nature of a contract of sale or purchase. Upon an
assignment of a contract to sell, the assignee is effectively subrogated in place of the assignor and
in a position to enforce the contract to sell to the same extent as the assignor could.
The assignment was with recourse, and default in the payment of installments had been
duly established when petitioner corporation foreclosed on the mortgaged parcels of land. The
resort to foreclosure of the mortgaged properties did not preclude private respondent from
collecting interest from the assigned Contracts To Sell from the time of foreclosure to the
redemption of the foreclosed property. The imposition of interest was a mere enforcement or
exercise of the right to the ownership of the credit or receivables which the parties stipulated in
the financing agreement.

Page 237 of 845

 G.R. No. 178610
November 17, 2010
HONGKONG AND SHANGHAI BANKING CORP., LTD. STAFF RETIREMENT PLAN
(Now HSBC Retirement Trust Fund, Inc.), petitioner, vs. SPOUSES BIENVENIDO AND
EDITHA BROQUEZA, respondents

Facts:
Petitioners are employees of HSBC, and are also members of respondent trust fund. The
HSBCL-SRP is a retirement plan established by HSBC through its Board of Trustees for the benefit
of the employees. Petitioner Editha obtained a car loan and an appliance loan. On the other hand,
petitioner Gerong applied and was granted an emergency loan. These loans are paid through
automatic salary deduction.
Subsequently, a labor dispute arose between HSBC and its employees. Majority of HSBCs
employees were terminated, among whom are petitioners. The employees then filed an illegal
dismissal case before the NLRC against HSBC. Because of their dismissal, petitioners were not
able to pay the monthly amortizations of their respective loans. Thus, respondent HSBCL-SRP
considered the accounts of petitioners delinquent. Demands to pay the respective obligations were
made upon petitioners, but they failed to pay. Hence a civil action for recovery and collection of
sums of money was initiated.

Issue:
Whether the obligation is a pure obligation?

Held:
Yes. There is no date of payment indicated in the Promissory Notes. The RTC is correct
in ruling that since the Promissory Notes do not contain a period, HSBCL-SRP has the right to
demand immediate payment. The spouses Broquezas obligation to pay HSBCL-SRP is a pure
obligation. The fact that HSBCL-SRP was content with the prior monthly check-off from Editha
Broquezas salary is of no moment. Once Editha Broqueza defaulted in her monthly payment,
HSBCL-SRP made a demand to enforce a pure obligation. The HSBCL-SRP never agreed that the
loans will be paid only through salary deductions. Neither did HSBCL-SRP agree that if Editha
Broqueza ceases to be an employee of HSBC, her obligation to pay the loans will be
suspended. HSBCL-SRP can immediately demand payment of the loans at anytime because the
obligation to pay has no period. Moreover, the spouses Broqueza have already incurred in default
in paying the monthly installments.

Page 238 of 845

 G.R. No. 118180
September 20, 1996
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs. COURT OF APPEALS, ET
AL., respondents

Facts:
Private respondents were the original owners of a parcel of agricultural land covered by
TCT No. T-1432. The former then mortgaged said land to petitioner. When private respondents
defaulted on their obligation, petitioner foreclosed the mortgage on the land and emerged as sole
bidder in the ensuing auction sale. Consequently, a TCT was eventually issued in petitioner's name.
Subsequently, petitioner and private respondents entered into a Deed of Conditional Sale wherein
petitioner agreed to reconvey the foreclosed property to private respondents. Upon completing the
payment of the full repurchase price, private respondents demanded from petitioner the execution
of a Deed of Conveyance in their favor.
Petitioner then informed private respondents that the prestation to execute and deliver a
deed of conveyance in their favor had become legally impossible in view of Sec. 6 of Rep. Act
6657 (the Comprehensive Agrarian Reform Law or CARL) approved 10 June 1988, and Sec. 1 of
E.O. 407 issued 10 June 1990. Aggrieved, private respondents filed a complaint for specific
performance with damages against petitioner.

Issue:
Whether Rep. Act 6657, E.O. 407 and DBP Circular No. 11 rendered its obligation to
execute a Deed of Sale to private respondents "a legal impossibility."

Held:
No. In conditional obligations, the acquisition of rights, as well as the extinguishment or
loss of those already acquired, shall depend upon the happening of the event which constitutes the
condition. The deed of conditional sale between petitioner and private respondents was executed
and since then, private respondents had religiously paid the agreed installments on the property
until they completed payment. Petitioner, in fact, allowed private respondents to fulfill the
condition of effecting full payment, and invoked Section 6 of Rep. Act 6657 only after private
respondents, having fully paid the repurchase price, demanded the execution of a Deed of Sale in
their favor.
Petitioner cannot invoke the last paragraph of Sec. 6 of Rep. Act 6657 to set aside its
obligations already existing prior to its enactment. The CARL (Rep. Act 6657) was not intended
to take away property without due process of law. Nor is it intended to impair the obligation of
contracts. In the same manner must E.O. 407 be regarded. It was enacted two (2) months after
private respondents had legally fulfilled the condition in the contract of conditional sale by the
payment of all installments on their due dates. These laws cannot have retroactive effect unless
there is an express provision in them to that effect.

Page 239 of 845

 G.R. No. 165116
August 4, 2009
MARIA SOLIDAD TOMIMBANG, petitioner, vs. ATTY. JOSE TOMIMBANG,
respondent

Facts:
Petitioner and respondent are siblings. Their parents donated to petitioner an eight-door
apartment with the condition that during the parents' lifetime, they shall retain control over the
property and petitioner shall be the administrator thereof. Subsequently, petitioner applied for a
loan from PAG-IBIG Fund to finance the renovations on Unit H, of said apartment which she
intended to use as her residence. Petitioner failed to obtain a loan from PAG-IBIG Fund, hence,
respondent offered to extend a credit line to petitioner, subject to certain conditions. Petitioner
accepted respondent's offer of a credit line and work on the apartment units began. Renovations
on Units B to G were completed, and the work has just started on Unit A when an altercation broke
out between herein parties to the end that petitioner left Unit H and could no longer be
found. Petitioner being the owner of the apartments, renovations on Unit A were discontinued
when her whereabouts could not be located. She also stopped making monthly payments and
ignored the demand letter sent by respondent's counsel.

Issue:
Whether the loan between petitioner and respondent is already due and demandable?

Held:
Yes. It is undisputed that herein parties entered into a valid loan contract. Also, the evidence
on record clearly shows that after renovation of seven out of the eight apartment units had been
completed, petitioner and respondent agreed that the former shall already start making monthly
payments on the loan even if renovation on the last unit (Unit A) was still pending. It was also
testified that when respondent demanded payment of the loan, and petitioner agreed to pay, and
indeed, petitioner began to make monthly payments.
Evidently, by virtue of the subsequent agreement, the parties mutually dispensed with the
condition that petitioner shall only begin paying after the completion of all renovations. There was,
in effect, a modificatory or partial novation, of petitioner's obligation.

Page 240 of 845

 G.R. No. 131784
September 16, 1999
FELIX L. GONZALES, petitioner, vs. THE HEIRS OF THOMAS and PAULA CRUZ, herein
represented by ELENA C. TALENS, respondents

Facts:
Respondents entered into a Contract of Lease/Purchase with the petitioner. After paying
the annual rental on the half-portion of the property covered by TCT, in accordance with the second
provision of the Contract of Lease/Purchas, the petitioner thereafter took possession of the
property, installing thereon Jesus Sambrano as his caretaker. The petitioner Gonzales did not,
however, exercise his option to purchase the property immediately after the expiration of the one-
year lease. He remained in possession of the property without paying the purchase price and
without paying any further rentals thereon. A letter was sent by one of the respondent-heirs
informing petitioner of the lessors decision to rescind the Contract of Lease/Purchase due to a
breach thereof committed by the defendant. The letter also served as a demand on the defendant
to vacate the premises within 10 days from receipt of said letter. The defendant Gonzales refused
to vacate the property and continued possession thereof.

Issue:
Whether the plaintiff can rescind or terminate the Contract of Lease after the one-year
period?

Held:
No. Because the ninth clause required respondents to obtain a separate and distinct TCT in
their names and not in the name of petitioner, it logically follows that such undertaking was
a condition precedent to the latters obligation to purchase and pay for the land. Put differently,
petitioners obligation to purchase the land is a conditional one and is governed by Article 1181
of the Civil Code.
In this case, the obligation of the petitioner to buy the land cannot be enforced unless
respondents comply with the suspensive condition that they acquire first a separate and distinct
TCT in their names. The suspensive condition not having been fulfilled, then the obligation of the
petitioner to purchase the land has not arisen. Hence, respondents cannot rescind the contract,
because they have not caused the transfer of the TCT to their names, which is a condition precedent
to petitioners obligation. This Court has held that there can be no rescission (or more properly,
resolution) of an obligation as yet non-existent, because the suspensive condition has not
happened.

Page 241 of 845

 G.R. No. 140964
January 16, 2002
INSULAR LIFE ASSURANCE COMPANY, LTD., ET AL., petitioners, vs. ROBERT YOUNG,
ET AL., respondents

Facts:
Respondent, together with his associates and co-respondents, acquired by purchase Home
Bankers Savings and Trust Co., now petitioner Insular Savings Bank, from the Licaros family.
Young and his group obtained 55% equity in the Bank, while Jorge Go and his group owned the
remaining 45%.
Subsequently, the Bank granted respondents and others individual loans, secured by
promissory notes. After, a stockholder of the bank signified his intention to purchase 99.82% of
its outstanding capital stock, subject to the condition that the ownership of all the shares will be
consolidated in Young's name, he also paid Young a downpayment. In order to carry out the
intended sale, Young bought from Jorge Go and his group their 45% equity in the Bank. In order
to pay this amount, Young obtained a short-term loan from Interbank. However, the stockholder
backed out from the intended sale and demanded the return of his downpayment. Meanwhile,
Young's loan from Interbank became due, causing his serious financial problem. It was to the end
that Insular Life and Young MOA, wherein Insular Life and its Pension Fund agreed to purchase
the common shares, subject to certain condition precedents. A due diligence audit was then done
on the bank, pursuant to said MOA, where it was found that Young committed misrepresentations
against the terms and conditions of said MOA.

Issue:
Whether the MOA is valid and enforceable between the parties despite respondent Young's
failure to comply with the terms and conditions thereof?

Held:
No. The provisions of the MOA negate the existence of a perfected contract of sale. The
MOA is merely a contract to sell since the parties therein specifically undertook to enter into a
contract of sale if the stipulated conditions are met and the representation and warranties given by
Young prove to be true. The obligation of petitioner Insular Life to purchase, as well as
the concomitant obligation of Young to convey to it the shares, are subject to the fulfillment of the
conditions contained in the MOA. Once the conditions, representation and warranties are satisfied,
then it is incumbent upon the parties to perform their respective obligations under the
contract. Conversely, in the event that these conditions are not met or complied with, no obligation
on the part of either party arises.

Page 242 of 845

 G. R. No. 141851
January 16, 2002
DIRECT FUNDERS HOLDINGS CORPORATION, petitioner, vs. JUDGE CELSO D. LAVIA,
and KAMBIAK Y. CHAN, JR., respondents

Facts:
The action a quo is for annulment of documents, reconveyance, recovery of possession,
damages with application for the issuance of a writ of preliminary mandatory injunction and
temporary restraining order. During the hearing for the issuance of temporary restraining order, it
was made clear to the respondent Judge that the property in question was occupied by the petitioner
by virtue of a writ of possession in a petition for the issuance of writ of possession thereof. Despite
the lawful order of a coordinate and co-equal court, the respondent Judge, issued the questioned
orders to restore possession to private respondent Chan, alleging an obviously grave abuse of
discretion, tantamount to lack of jurisdiction. On the same date, the TRO was issued, and the court
sheriff implemented the TRO and submitted the Return. Subsequently, the motion for inhibition
and the motion to dissolve the writ of preliminary injunction were also denied. Petitioner then filed
with the CA a petition for certiorari and prohibition assailing the trial courts issuance of a writ of
preliminary injunction, which was dismissed. Hence, this appeal.

Issue:
Who between petitioner and respondent has a better right to the possession of the subject
property?

Held:
The petitioner. The conditional sale agreement, which was the only document presented by
the respondent, is officious and ineffectual. First, it was not consummated. Second, it was not
registered and duly annotated on the Transfer Certificate of Title (No. 12357) covering the subject
property. Third, it was executed about eight (8) years after the execution of the real estate mortgage
over the subject property. To emphasize, the mortgagee (United Savings Bank) did not give its
consent to the change of debtor. It is a fundamental axiom in the law on contracts that a person not
a party to an agreement cannot be affected thereby. Worse, not only was the conditional sale
agreement executed without the consent of the mortgagee-creditor, United Savings Bank, the same
was also a material breach of the stipulations of the real estate mortgage over the subject
property. The conditions of the conditional sale agreement were not fulfilled, hence, respondents
claim to the subject property was as heretofore stated ineffectual.

Page 243 of 845

 G.R. No. 137909
December 11, 2003
FIDELA DEL CASTILLO Vda. DE MISTICA, petitioner, vs. Spouses BERNARDINO
NAGUIAT and MARIA PAULINA GERONA-NAGUIAT, respondents

Facts:
Eulalio Mistica, the predecessor-in-interest of petitioner, is the owner of a parcel of land, a
portion thereof was leased to respondent. The two entered into a contract to sell over a portion of
the aforementioned lot. This agreement was reduced to writing in a document entitled Kasulatan
sa Pagbibilihan. Pursuant to said agreement, respondent gave two partial payments but failed to
make any payments thereafter. Eulalio Mistica died sometime after.
Subsequently, petitioner filed a complaint for rescission due to the respondents failure to
pay the balance of the purchase price.

Issue:
Whether there was a breach of obligation?

Held:
No. The transaction between Eulalio Mistica and respondents, as evidenced by
the Kasulatan, was clearly a Contract of Sale. A deed of sale is considered absolute in nature when
there is neither a stipulation in the deed that title to the property sold is reserved to the seller until
the full payment of the price; nor a stipulation giving the vendor the right to unilaterally resolve
the contract the moment the buyer fails to pay within a fixed period. In a contract of sale, the
remedy of an unpaid seller is either specific performance or rescission. Rescission, however, is
allowed only where the breach is substantial and fundamental to the fulfillment of the obligation.
In the present case, the failure of respondents to pay the balance of the purchase price within ten
years from the execution of the Deed did not amount to a substantial breach. In the Kasulatan, it
was stipulated that payment could be made even after ten years from the execution of the Contract,
provided the vendee paid 12 percent interest. The stipulations of the contract constitute the law
between the parties; thus, courts have no alternative but to enforce them as agreed upon and
written.
Moreover, it is undisputed that during the ten-year period, petitioner and her deceased
husband never made any demand for the balance of the purchase price. Petitioner even refused the
payment tendered by respondents during her husbands funeral, thus showing that she was not
exactly blameless for the lapse of the ten-year period. Had she accepted the tender, payment would
have been made well within the agreed period.

Page 244 of 845

 G.R. No. L-5267
October 27, 1953
LUZ HERMOSA, and FERNANDO HERMOSA, JR., petitioners, vs. EPIFANIO M.
LONGARA, respondent

Facts:
The case is an appeal against a decision of the CA approving certain claims presented by
respondent against the testate estate of Fernando Hermosa, Sr. The claimant presented evidence
that the intestate had asked for the said credit advances for himself and for the members of his
family "on condition that their payment should be made by Fernando Hermosa, Sr. as soon as he
receive funds derived from the sale of his property in Spain."
Upon authorization of the probate court, the same was paid for subsequently. It is
contended on this appeal that the obligation contracted by the intestate was subject to a condition
exclusively dependent upon the will of the debtor (a condicion potestativa) and therefore null and
void.

Issue:
Whether the condition upon which payment of the sums advanced was made to dependent
exclusively upon the debtors will or discretion?

Held:
No. In the form that the condition was found by the CA, the condition implies that the
intestate had already decided to sell his house, or at least that he had made his creditors believe
that he had done so, and that all that we needed to make his obligation (to pay his indebtedness)
demandable is that the sale be consummated and the price thereof remitted to the islands. Had the
intestate prevented the consummation of the sale voluntarily, the condition would be or would
have been deemed or considered complied with. The will to sell on the part of the intestate was,
therefore, present in fact, or presumed legally to exist, although the price and other conditions
thereof were still within his discretion and final approval.
But in addition of the sale to him (the intestate-vendor), there were still other conditions
that had no concur to effect the sale, mainly that of the presence of a buyer, ready, able and willing
to purchase the property under the conditions demanded by the intestate. Without such a buyer the
sale could not be carried out or the proceeds thereof sent to the islands. It is evident, therefore sent
to the islands. It is evident, therefore, that the condition of the obligation was not a purely
protestative one, depending exclusively upon the will of the intestate, but a mixed one, depending
partly upon the will of intestate and partly upon chance, i.e., the presence of a buyer of the property
for the price and under the conditions desired by the intestate. The condition is, besides, a
suspensive condition, upon the happening of which the obligation to pay is made dependent. And
upon the happening of the condition, the debt became immediately due and demandable.

Page 245 of 845

 G.R. No. L-5003
June 27, 1953
NAZARIO TRILLANA, administrator-appellee, vs. QUEZON COLLEGE, INC., claimant-
appellant

Facts:
Damasa Crisostomo sent a letter to the Board of Trustees of the Quezon Collee asking to
enter her subscription of 200 shares of the capital stock with a par value of P100 each, to which
she will give her initial payment and the balance payable when she is able to cause fish to be
caught. The former subsequently died without any payment being made on the subscriptions.
Hence, the appellant presented a claim before the CFI in her testate proceeding, for the collection
of the sum of P20,000, representing the value of the subscription to the capital stock of the Quezon
College, Inc. This claim was dismissed.

Issue:
Whether the claimant can demand for the payment of the subscription?

Held:
No, it cannot. There is nothing in the record to show that the Quezon College, Inc. accepted
the term of payment suggested by Damasa Crisostomo, or that if there was any acceptance the
same came to her knowledge during her lifetime. As the application of Damasa Crisostomo is
obviously at variance with the terms evidenced in the form letter issued by the Quezon College,
Inc., there was absolute necessity on the part of the College to express its agreement to Damasa's
offer in order to bind the latter. Conversely, said acceptance was essential, because it would be
unfair to immediately obligate the Quezon College, Inc. under Damasa's promise to pay the price
of the subscription after she had caused fish to be caught. In other words, the relation between
Damasa Crisostomo and the Quezon College, Inc. had only thus reached the preliminary stage
whereby the latter offered its stock for subscription on the terms stated in the form letter, and
Damasa applied for subscription fixing her own plan of payment, a relation, in the absence as
in the present case of acceptance by the Quezon College, Inc. of the counter offer of Damasa
Crisostomo, that had not ripened into an enforceable contract.
Indeed, the need for express acceptance on the part of the Quezon College, Inc. becomes
the more imperative, in view of the proposal of Damasa Crisostomo to pay the value of the
subscription after she has harvested fish, a condition obviously dependent upon her sole will and,
therefore, facultative in nature, rendering the obligation void.

Page 246 of 845

 G.R. No. 83851
March 3, 1993
VISAYAN SAWMILL COMPANY, INC., and ANG TAY, petitioners, vs. THE HONORABLE
COURT OF APPEALS and RJH TRADING, respondents

Facts:
The parties entered into a sale involving scrap iron located at the stockyard of appellant
corporation, subject to the condition that the appellee will open a letter of credit in the amount of
P250,000.00 in favor of appellant corporation on or before May 15, 1983. This was evidenced by
a contract entitled `Purchase and Sale of Scrap Iron' duly signed by both parties. Subsequently,
appellee through his man, started to dig and gather and scrap iron at the appellant's premises,
proceeding with such endeavor until May 30 when appellants allegedly directed appellee's men to
desist from pursuing the work in view of an alleged case filed against appellee by a certain Alberto
Pursuelo. This, however, is denied by appellants who allege that on May 23, 1983, they sent a
telegram to appellee cancelling the contract of sale because of failure of the latter to comply with
the conditions thereof. On May 24, 1983, appellee informed appellants by telegram that the letter
of credit was opened May 12, 1983 at the BPI main office in Ayala, but then the transmittal was
delayed. On May 26, 1983, a letter of credit was opened in favor of the appellants in the Dumaguete
Branch of BPI. Consequently, the appellants' lawyer informed appellee's lawyer that appellant
corporation was unwilling to continue with the sale due to appellee's failure to comply with
essential pre-conditions of the contract.

Issue:
Whether there is a breach in the contract?

Held:
No. The petitioner corporation's obligation to sell is unequivocally subject to a positive
suspensive condition, i.e., the private respondent's opening, making or indorsing of an irrevocable
and unconditional letter of credit. The former agreed to deliver the scrap iron only upon payment
of the purchase price by means of an irrevocable and unconditional letter of credit. Otherwise
stated, the contract is not one of sale where the buyer acquired ownership over the property subject
to the resolutory condition that the purchase price would be paid after delivery. Thus, there was to
be no actual sale until the opening, making or indorsing of the irrevocable and unconditional letter
of credit. Since what obtains in the case at bar is a mere promise to sell, the failure of the private
respondent to comply with the positive suspensive condition cannot even be considered a breach
casual or serious but simply an event that prevented the obligation of petitioner corporation
to convey title from acquiring binding force. Consequently, the obligation of the petitioner
corporation to sell did not arise; it therefore cannot be compelled by specific performance to
comply with its prestation.

Page 247 of 845

 G.R. No. 129018
November 15, 2001
CARMELITA LEAO, assisted by her husband GREGORIO CUACHON, petitioner, vs.
COURT OF APPEALS and HERMOGENES FERNANDO, respondents

Facts:
The petitioner and private respondent executed a contract to sell involving a piece of land.
In the contract, petitioner bound herself to pay respondent P107,750.00 as the total purchase price
of the lot. A down payment was to be paid at the signing of the contract, and the balance to be paid
within a period of ten years with a monthly amortization. The contract also provided for a grace
period of one month within which to make payments, together with the one corresponding to the
month of grace. Should a period of ninety (90) days elapse from the expiration of the grace period
without the overdue and unpaid installments having been paid with the corresponding interests up
to that date, respondent Fernando, as vendor, was authorized to declare the contract cancelled and
to dispose of the parcel of land, as if the contract had not been entered into. The payments made,
together with all the improvements made on the premises, shall be considered as rents paid for the
use and occupation of the premises and as liquidated damages.
After the same was made, petitioner made several payments in lump sum. She thereafter
constructed a house on said lot. Subsequently, the court rendered a decision ordering petitioner to
vacate the premises and to pay compensation for the use and occupation of the property.

Issue:
Whether the transaction between the parties in an absolute sale or a conditional sale?

Held:
The transaction between the parties was a conditional sale not an absolute sale. The
intention of the parties was to reserve the ownership of the land in the seller until the buyer has
paid the total purchase price. In a contract to sell real property on installments, the full payment of
the purchase price is a positive suspensive condition, the failure of which is not considered a
breach, casual or serious, but simply an event that prevented the obligation of the vendor to convey
title from acquiring any obligatory force. The transfer of ownership and title would occur after full
payment of the price.
In the case at bar, petitioner Leao's non-payment of the installments after April 1, 1989,
prevented the obligation of respondent Fernando to convey the property from arising. In fact, it
brought into effect the provision of the contract on cancellation.

Page 248 of 845

 G.R. No. 170405
February 2, 2010
RAYMUNDO S. DE LEON, petitioner, vs. BENITA T. ONG, respondent

Facts:
Petitioner sold three parcels of land with improvements to respondent. As these properties
were mortgaged to Real Savings and Loan Association, Incorporated (RSLAI), petitioner and
respondent executed a notarized deed of absolute sale with assumption of mortgage. Pursuant to
this deed, respondent gave petitioner a partial payment, and petitioner, on the other hand, handed
the keys to the properties and wrote a letter informing RSLAI of the sale and authorizing it to
accept payment from respondent and release the certificates of title. Thereafter, respondent
undertook repairs and made improvements on the properties. Respondent likewise informed
RSLAI of her agreement with petitioner for her to assume petitioners outstanding loan. RSLAI
required her to undergo credit investigation.
Subsequently, respondent learned that petitioner again sold the same properties to one
Leona Viloria after March 10, 1993 and changed the locks, rendering the keys he gave her useless.
Respondent thus proceeded to RSLAI to inquire about the credit investigation. However, she was
informed that petitioner had already paid the amount due and had taken back the certificates of
title.

Issue:
Whether the parties entered into a contract of sale or a contract to sell?

Held:
The deed executed by the parties stated that petitioner sold the properties to respondent "in
a manner absolute and irrevocable" for a sum of P1.1 million. With regard to the manner of
payment, it required respondent to pay P415,500 in cash to petitioner upon the execution of the
deed, with the balance payable directly to RSLAI (on behalf of petitioner) within a reasonable
time. Nothing in said instrument implied that petitioner reserved ownership of the properties until
the full payment of the purchase price. On the contrary, the terms and conditions of the deed only
affected the manner of payment, not the immediate transfer of ownership (upon the execution of
the notarized contract) from petitioner as seller to respondent as buyer. Otherwise stated, the said
terms and conditions pertained to the performance of the contract, not the perfection thereof nor
the transfer of ownership.
In this instance, petitioner executed a notarized deed of absolute sale in favor of respondent.
Moreover, not only did petitioner turn over the keys to the properties to respondent, he also
authorized RSLAI to receive payment from respondent and release his certificates of title to her.
The totality of petitioners acts clearly indicates that he had unqualifiedly delivered and transferred
ownership of the properties to respondent. Clearly, it was a contract of sale the parties entered into.

Page 249 of 845

 G.R. No. 141634
February 5, 2001
Heirs of Spouses REMEDIOS R. SANDEJAS, ET AL., petitioners, vs. ALEX A.
LINA, respondent

Facts:
Eliodoro Sandejas, Sr. was appointed by the lower court as the administrator of the estate
of his late wife, Remedios Sandejas. After, the 4th floor of Manila City Hall was burned and among
the records burned were the records of the Court where Sandejas filed his petition.
Subsequently, an Omnibus Pleading for motion to intervene was filed by Alex A. Lina
alleging that Sandejas, in his capacity as seller, obligated to sell to Lina 4 parcels of land. Eliodoro
died sometime thereafter. Consequently, Alex was appointed by the lower court as the new
administrator of the Intestate Estate of Remedios despite the heirs choosing Sixto Sandejas as new
administrator. After such, the respondent filed a motion asking the court to approve the deed of
conditional sale executed between Alex A. Lina and Elidioro and to compel the heirs to execute a
deed of absolute sale in favor of Alex. The lower court granted Alexs motion.

Issue:
Whether the petitioners are obligated to sell 3/5 of the disputed properties to respondent,
even if the suspensive condition had not been fulfilled?

Held:
No. The agreement between Eliodoro Sr. and respondent is subject to a suspensive
condition -- the procurement of a court approval, not full payment. There was no reservation of
ownership in the agreement. In accordance with paragraph 1 of the Receipt, petitioners were
supposed to deed the disputed lots over to respondent. This they could do upon the courts approval,
even before full payment. Hence, their contract was a conditional sale.
When a contract is subject to a suspensive condition, its birth or effectivity can take place
only if and when the condition happens or is fulfilled. Thus, the intestate courts grant of the Motion
for Approval of the sale filed by respondent resulted in petitioners obligation to execute the Deed
of Sale of the disputed lots in his favor. The condition having been satisfied, the contract was
perfected. Henceforth, the parties were bound to fulfill what they had expressly agreed upon.
Court approval is required in any disposition of the decedents estate per Rule 89 of the Rules of
Court. Reference to judicial approval, however, cannot adversely affect the substantive rights of
heirs to dispose of their own pro indiviso shares in the co-heirship or co-ownership. In other words,
they can sell their rights, interests or participation in the property under administration. A
stipulation requiring court approval does not affect the validity and the effectivity of the sale as
regards the selling heirs. It merely implies that the property may be taken out of custodia legis, but
only with the courts permission. It would seem that the suspensive condition in the present
conditional sale was imposed only for this reason.
In addition, because petitioners did not consent to the sale of their ideal shares in the
disputed lots, the scope of the Receipt is only to the extent of the pro-indiviso share of Eliodoro
Sr.

Page 250 of 845

 G.R. No. 162155
August 28, 2007
CIR and ARTURO V.
PARCERO, petitioners, vs. PRIMETOWN PROPERTY GROUP, INC., respondent

Facts:
Gilbert Yap, vice chair of respondent corporation, applied for the refund or credit of income
tax respondent paid in 1997. He explained that the increase in the cost of labor and materials and
difficulty in obtaining financing for projects and collecting receivables caused the real estate
industry to slowdown. As a consequence, while business was good during the first quarter of 1997,
respondent suffered losses amounting to P71,879,228 that year. Accordingly, because respondent
suffered losses, it was not liable for income taxes. Nevertheless, respondent paid its quarterly
corporate income tax and remitted creditable withholding tax from real estate sales to the BIR in
the total amount. Therefore, respondent was entitled to tax refund or tax credit.
Consequently, a revenue officer required respondent to submit additional documents to
support its claim. The same was complied with but the same was not acted upon. Thus, respondent
file a petition for review before the CTA. The CTA dismissed the petition as it was filed beyond
the two-year prescriptive period for filing a judicial claim for tax refund or tax credit. It found that
respondent filed its final adjusted return on April 14, 1998. Thus, its right to claim a refund or
credit commenced on that date.

Issue:
How should the two-year prescriptive period be computed?

Held:
A calendar month is a month designated in the calendar without regard to the number of
days it may contain. It is the period of time running from the beginning of a certain numbered day
up to, but not including, the corresponding numbered day of the next month, and if there is not a
sufficient number of days in the next month, then up to and including the last day of that month.
Applying Section 31, Chapter VIII, Book I of the Administrative Code of 1987 to this case,
the two-year prescriptive period (reckoned from the time respondent filed its final adjusted
return on April 14, 1998) consisted of 24 calendar months. Hence, respondent's petition was filed
on the last day of the 24th calendar month from the day respondent filed its final adjusted return.
Hence, it was filed within the reglementary period.

Page 251 of 845

 G.R. No. L-29131
August 27, 1969
NATIONAL MARKETING CORPORATION, plaintiff-appellant, vs. MIGUEL D.
TECSON, defendant-appellee

Facts:
The CFI rendered judgment, in a civil case, entitled "Price Stabilization Corporation vs.
Miguel D. Tecson and Alto Surety and Insurance Co., Inc.," which ordered appellee to pay Alto
Surety Insurance Co., Inc. , and to indemnify the same on the cross-claim for all the amounts it
would be made to pay in this decision, in case defendant Alto Surety & Insurance Co., Inc. pay the
amount adjudged to plaintiff in this decision.
A copy of this decision was served upon the defendants in said case. Subsequently,
NAMARCO, as successor to all the properties, assets, rights, and choses in action of the Price
Stabilization Corporation, as plaintiff in that case and judgment creditor therein, filed, with the
same court, a complaint against the same defendants, for the revival of the judgment rendered.
Defendant Tecson moved to dismiss said complaint, upon the ground of lack of jurisdiction over
the subject matter thereof and prescription of action.

Issue:
Whether or not the present action for the revival of a judgment is barred by the statute of
limitations?

Held:
Yes. Pursuant to Art. 1144(3) of our Civil Code, an action upon a judgment "must be
brought within ten years from the time the right of action accrues," which, in the language of Art.
1152 of the same Code, "commences from the time the judgment sought to be revived has become
final." This, in turn, took place on December 21, 1955, or thirty (30) days from notice of the
judgment which was received by the defendants herein on November 21, 1955 no appeal
having been taken therefrom. The issue is thus confined to the date on which ten (10) years from
December 21, 1955 expired.
Pursuant to Section 13 of the Revised Administrative Code, "month shall be understood to
refer to a calendar month." In the language of this Court, in People vs. Del Rosario, with the
approval of the Civil Code of the Philippines (Republic Act 386) ... we have reverted to the
provisions of the Spanish Civil Code in accordance with which a month is to be considered as the
regular 30-day month ... and not the solar or civil month," with the particularity that, whereas the
Spanish Code merely mentioned "months, days or nights," ours has added thereto the term
"years" and explicitly ordains that "it shall be understood that years are of three hundred sixty-five
days."

Page 252 of 845

 G.R. No. L-3784
October 17, 1952
ERNEST BERG, plaintiff-appellee, vs. MAGDALENA ESTATE, INC., defendant-appellant

Facts:
This is an action for partition of the property known as Crystal Arcade situated in the City
of Manila. The complaint avers that plaintiff and defendant are co-owners of said property, the
former being the owner of one-third interest and the latter of the remaining two-thirds. The division
is asked because plaintiff and defendant are unable to agree upon the management of the property
and upon the partition thereof.
Defendant claims that it sold to plaintiff one-third of the property in litigation subject to
the express condition that should either vendor or vendee decide to sell his or its undivided share,
the party selling would grant to the other part first an irrevocable option to purchase the same at
the seller's price.. Defendant claims that, in spite of the acceptance of the offer, plaintiff refused to
accept the payment of the price, and for this refusal defendant suffered damages for these reasons,
defendant asks for specific performance.

Issue:
Whether an agreement to sell has actually been reached between plaintiff and defendant?

Held:
Yes. The applications marked exhibits "3" and "4", whether considered separately or
jointly, satisfy all the requirements of the statute as to contents and signature and, as such, they
constitute sufficient proof to evidence the agreement in question. Such is so because in both
applications all the requirements of a contract are present, namely, the parties, the price or
consideration, and the subject-matter. In the application exhibit "3", Ernest Berg appears as the
seller and the Magdalena Estate Inc. as the purchaser, the former's interest in the Crystal Arcade
as the subject-matter, and the sum of P200,000 as the consideration. As the application appears
signed by Ernest Berg, the party sought to be charged by the obligation. In other words, it can
clearly be implied that between Ernest Berg and the Magdalena Estate Inc. there has been a clear
agreement to sell said property for P200,000.
Viewing in this light the clause on which defendant relies for the enforcement of its right
to buy the property, it would seem that it is not a term, but a condition. Considering the first
alternative, that is, until defendant shall have obtained a loan from the National City Bank of New
York, it is clear that the granting of such loans is not definite and cannot be held to come within
the terms "day certain" provided for in the Civil code, for it may or it may not happen. As a matter
of fact, the loan did not materialize. And if we consider that the period given was until such time
as defendant could raise money from other sources, we also find it to be indefinite and contingent
and so it is also a condition and not a term within the meaning of the law. In any event it is apparent
that the fulfillment of the condition contained in this second alternative is made to depend upon
the defendant's exclusive will, and viewed in this light, we are of the opinion that plaintiff's
obligation to sell did not arise, for, under Article 1115 of the old Civil Code, "when the fulfillment
of the condition depends upon the exclusive will of the debtor the conditional obligation shall be
void."

Page 253 of 845

 G.R. No. L-30736
April 14, 1975
LIRAG TEXTILE MILLS, INC. and FELIX K. LIRAG, petitioners, vs. COURT OF APPEALS
and CRISTAN ALCANTARA, respondents

Facts:
Petitioners Lirag Textile Mills, Inc. and Felix K. Lirag seek a review by certiorari of the
decision of the respondent Court of Appeals in its C. A. G.R. No. 33116-R, entitled "Cristan
Alcantara, plaintiff-appellee vs. Lirag Textile Mills, Inc. and Felix Lirag, defendants-appellants",
which affirmed with costs against the appellants the decision dated September 19, 1963, of the
Court of First Instance of Rizal (Branch VI) in its Civil Case No. 6884, in favor of respondent
Cristan Alcantara (plaintiff in Civil Case No. 6884 and appellee in C. A. G.R. No. 33116-R), which
states that respondent was dismissed without cause in violation of the contract of employment.

Issue:
Whether there was a breach in the contract?

Held:
Yes. The contract of employment was for an indefinite period as it shall continue without
ending, subject to a resolutory period, unless sooner terminated by reason of voluntary resignation
or by virtue of a valid cause or causes (the resolutory period). There is an indefinite period of time
for employment agreed upon by and between petitioners and the private respondent, subject only
to the resolutory period agreed upon which may end the indeterminate period of employment,
namely voluntary resignation on the part of private respondent Alcantara or termination of
employment at the option of petitioner Lirag Textile Mills, but for a "valid cause or causes". It
necessarily follows that if the petitioner-employer Lirag Textile Mills terminates the employment
without a "valid cause or causes", as it admittedly did, it committed a breach of the contract of
employment executed by and between the parties.
A "period" has been defined "as a space of time which has an influence on obligation as a
result of a juridical act, and either suspends their demandableness or produces their
extinguishment." Obligations with a period are those whose consequences are subjected in one
way or another to the expiration of said period or term.

Page 254 of 845

 G.R. No. L-6515
October 18, 1954
DAGUHOY ENTERPRISES, INC., plaintiff-appellee,
vs.
RITA L. PONCE, with whom is joined her husband, DOMINGO PONCE,
defendants-appellants

Facts:
The Daguhoy Enterprises, Inc., a local corporation, filed in the CFI a civil case against
defendants for the collection of a loan. Defendant filed an answer admitting practically all the
allegations of the complaint, set up affirmative defenses, and a counterclaim asking for the
cancellation of the mortgage which secured the payment of the loan. They also filed a petition for
the inclusion of Potenciano Gapol as a third party litigant, at the same time filing a third party
complaint against him asking for damages. The plaintiff corporation answered the counterclaim
and opposed the petition for the inclusion of a third party litigant. Thereafter, plaintiff corporation
filed a motion for judgment on the pleadings which petition was opposed by the defendants.

Issue:
Was there a breach?

Held:
Yes. Although the original loan of P5,000.00 including the increase of P1,190 was payable
within six years from June 1950, and so did not become due and payable until 1956, the trial court
held that under article 1198 of the new Civil Code, the debtor lost the benefit of the period by
reason of her failure to give the security in the form of the two deeds of mortgage and register
them, including the defendants' act in withdrawing said two deeds from the office of the register
of deeds and then mortgaging the same property in favor of the RFC; and so the obligation became
pure and without any condition and consequently, the loan became due and immediately
demandable.

Page 255 of 845

 G.R. No. L-6648
July 25, 1955
VICTORIAS PLANTERS ASSOCIATION, INC., ET AL., petitioners-appellees, vs.
VICTORIAS MILLING CO., INC., respondent-appellant

Facts:
This is an action for declaratory judgment under Rule 66. The relief prayed for calls for an
interpretation of contracts entered into by and between the sugar cane planters in the districts of
Manapla, Cadiz and Victorias, Occidental Negros, and the Victorias Milling Company, Inc.

Issue:
Whether there was a breach I the contract?

Held:
Yes. The appellant contends that the term stipulated in the contracts is thirty milling years
and not thirty calendar years and postulates that the planters fulfill their obligation the six
installments of their indebtedness--which they failed to perform during the six milling years from
1941-42 to 1946-47. The reason the planters failed to deliver the sugar cane was the war or a
fortuitous event. The appellant ceased to run its mill due to the same cause.
Fortuitous event relieves the obligor from fulfilling a contractual obligation. The fact that
the contracts make reference to "first milling" does not make the period of thirty years one of thirty
milling years. The term "first milling" used in the contracts under consideration was for the purpose
of reckoning the thirty-year period stipulated therein. Even if the thirty-year period provided for
in the contracts be construed as milling years, the deduction or extension of six years would not
be justified. At most on the last year of the thirty-year period stipulated in the contracts the delivery
of sugar cane could be extended up to a time when all the amount of sugar cane raised and
harvested should have been delivered to the appellant's mill as agreed upon. The seventh paragraph
of Annex "C", not found in the earlier contracts (Annexes "A", "B", and "B-1"), quoted by the
appellant in its brief, where the parties stipulated that in the event of flood, typhoon, earthquake,
or other force majeure, war, insurrection, civil commotion, organized strike, etc., the contract shall
be deemed suspended during said period, does not mean that the happening of any of those events
stops the running of the period agreed upon. It only relieves the parties from the fulfillment of their
respective obligations during that time the planters from delivering sugar cane and the central
from milling it. In order that the central, the herein appellant, may be entitled to demand from the
other parties the fulfillment of their part in the contracts, the latter must have been able to perform
it but failed or refused to do so and not when they were prevented by force majeure such as war.
To require the planters to deliver the sugar cane which they failed to deliver during the four years
of the Japanese occupation and the two years after liberation when the mill was being rebuilt is to
demand from the obligors the fulfillment of an obligation which was impossible of performance
at the time it became due. Nemo tenetur ad impossibilia. The obligee not being entitled to demand
from the obligors the performance of the latters' part of the contracts under those circumstances
cannot later on demand its fulfillment. The performance of what the law has written off cannot be
demanded and required. The prayer that the plaintiffs be compelled to deliver sugar cane to the
appellant for six more years to make up for what they failed to deliver during those trying years,
the fulfillment of which was impossible, if granted, would in effect be an extension of the term of
the contracts entered into by and between the parties.

Page 256 of 845

 Jespajo Realty Corp vs. CA
G.R. No. 113626
September 27, 2002
JESPAJO REALTY CORPORATION, petitioner, vs. HON. COURT OF APPEALS, TAN TE
GUTIERREZ and CO TONG, respondents

Facts:
Petitioner executed a contract of lease with herein respondents Tan Te and Co Tong.
Pursuant to the said contract, Tan Te occupied rm. no. 217 of the said building at a monthly rate
of P814 while Tong occupied the penthouse at a monthly rate of P917. The contract of lease
explicitly stipulated that the lessees may occupy the said premises as long as that payment for
monthly rental is updated. The lessees may terminate the contract anytime provided that they give
a 60 day prior written notice. The lessor may terminate the contract anytime should the lessees
commit any violation of the terms of agreement.
For 5 years, the lessees were able to pay petitioner-corporation religiously. However, as of
Jan. 1990, the petitioner sent them a letter asking for an increase in the monthly rent. In reply to
the said proposal, the respondents through their counsel, sent a letter of opposition to the said
proposal. Due to the opposition, the petitioner-corporation, filed an ejectment case against the
respondents. Respondents gave extra efforts to pay the petitioner according to the original price
agreed in the contract. However, it refused.

Issue:
Whether the stipulation in the contract shall subsist for an indefinite period provided the
lessee is up-to-date in the payment of his monthly rentals?

Held:
Yes. The lease contract between petitioner and respondents is with a period subject to a
resolutory condition. The wording of the agreement is unequivocal: The lease period xxx shall
continue for an indefinite period provided the lessee is up-to-date in the payment of his monthly
rentals. The condition imposed in order that the contract shall remain effective is that the lessee is
up-to-date in his monthly payments. The agreement between the lessor and the lessees are therefore
still subsisting, with the original terms and conditions agreed upon, when the petitioner unilaterally
increased the rental payment to more than 20% or P3,500.00 a month.
The contention of the petitioner that a provision in a contract that the lease period shall
subsist for an indefinite period provided the lessee is up-to-date in the payment of his monthly
rentals is contrary to Art. 1308 of the Civil Code is not plausible.
The fact that such option is binding only on the lessor and can be exercised only by the
lessee does not render it void for lack of mutuality. After all, the lessor is free to give or not to give
the option to the lessee. And while the lessee has a right to elect whether to continue with the lease
or not, once he exercises his option to continue and the lessor accepts, both parties are thereafter
bound by the new lease agreement. Their rights and obligations become mutually fixed, and the
lessee is entitled to retain possession of the property for the duration of the new lease, and the
lessor may hold him liable for the rent therefor. The lessee cannot thereafter escape liability even
if he should subsequently decide to abandon the premises. Mutuality obtains in such a contract and
equality exists between the lessor and the lessee since they remain with the same faculties in
respect to fulfillment.

Page 257 of 845

 G.R. No. L-22962
September 28, 1972
PILAR N. BORROMEO, ET AL., petitioners, vs. CA, ET AL., respondents

Facts:
Defendant Villamor was a distributor of lumber belonging to Mr. Miller who was the agent
of the Insular Lumber Company in Cebu City. Defendant being a friend and former classmate of
plaintiff used to borrow from the latter certain amounts from time to time. On one occasion,
defendant borrowed from plaintiff a large sum of money for which he mortgaged his land and
house in Cebu City to pay some pressing obligation with Mr. Miller. Mr. Miller filed a civil action
against the defendant and attached his properties including those mortgaged to plaintiff, inasmuch
as the deed of mortgage in favor of plaintiff could not be registered because not properly drawn
up. Plaintiff then pressed the defendant for settlement of his obligation, but defendant instead
offered to execute a document promising to pay his indebtedness even after the lapse of ten years.
Liquidation was made and defendant was found to be indebted to plaintiff in the sum of P7,220.00,
for which defendant signed a promissory note therefor on November 29, 1933 with interest at the
rate of 12% per annum, agreeing to pay as soon as I have money'. The note further stipulate that
defendant 'hereby relinquish, renounce, or otherwise waive my rights to the prescriptions
established by our Code of Civil Procedure for the collection or recovery of the above sum of
P7,220.00. * * * at any time even after the lapse of ten years from the date of this instrument'.
After the execution of the document, plaintiff limited himself to verbally requesting
defendant to settle his indebtedness from time to time. Plaintiff did not file any complaint against
the defendant within ten years from the execution of the document as there was no property
registered in defendant's name, who furthermore assured him that he could collect even after the
lapse of ten years. After the last war, plaintiff made various oral demands, but defendants failed to
settle his account.

Issue:
Whether the CA erred in reversing the ruling of the CFI?

Held:

Yes. Between two possible interpretations, that which saves rather than destroys is to be
preferred. It is a fundamental principle in the interpretation of contracts that while ordinarily the
literal sense of the words employed is to be followed, such is not the case where they "appear to
be contrary to the evident intention of the contracting parties," which intention shall prevail (Art.
1370). The terms, clauses and conditions contrary to law, morals and public order (in this case the
contested stipulation) should be separated from the valid and legal contract when such separation
can be made because they are independent of the valid contract which expresses the will of the
contracting parties.

Page 258 of 845

 G.R. No. 43429
October 24, 1938
BENITO GONZALES, Plaintiff-Appellee, vs. FLORENTINO DE JOSE, Defendant-Appellant

Facts:
This action was instituted by the plaintiff to recover from the defendant the amount of two
promissory notes. Defendant appealed from the decision of the Court of First Instance of Manila
ordering him to pay the plaintiff within thirty days from the date of notification of said decision,
plus the costs.
In his answer the defendant interposed the special defenses that the complaint is uncertain
inasmuch as it does not specify when the indebtedness was incurred or when it was demandable,
and that, granting that the plaintiff has any cause of action, the same has prescribed in accordance
with law.

Issue:
Whether the obligations are due and demandable?

Held:
No. We hold that the promissory notes are governed by article 1128 because under the
terms thereof the plaintiff intended to grant the defendant a period within which to pay his debts.
As the promissory notes do not fix this period, it is for the court to fix the same. The action to ask
the court to fix the period has already prescribed in accordance with section 43 (1) of the Code of
Civil Procedure. This period of prescription is ten years, which has already elapsed from the
execution of the promissory notes until the filing of the action on June 1, 1934. The action which
should be brought in accordance with article 1128 is different from the action for the recovery of
the amount of the notes, although the effects of both are the same, being, like the civil actions,
subject to the rules of prescription.
The action brought by the plaintiff having already prescribed, the appealed decision should
be reversed and the defendant absolved from the complaint.

Page 259 of 845

 G.R. NO. 144435
February 6, 2007
GUILLERMINA BALUYUT, Petitioner, vs. EULOGIO POBLETE, SALUD POBLETE and
THE HON.COURT OF APPEALS, Respondents

Facts:
Petitioner loaned from the spouses Poblete the sum of P850,000.00. As evidence of her
indebtedness, Baluyut signed, on even date, a promissory note for the amount borrowed. Under
the promissory note, the loan shall mature in one month. To secure the payment of her obligation,
she conveyed to the Poblete spouses, by way of a real estate mortgage contract, a house and lot
she owns. Upon maturity of the loan, Baluyut failed to pay her indebtedness. The Poblete spouses
subsequently decided to extrajudicially foreclose the real estate mortgage.
Despite having been issued a TCT for the said property, Baluyut remained in possession
of the subject property and refused to vacate the same.

Issue:
Whether no prior demand to pay is necessary for a loan to mature when there is conflict
between the date of maturity of the loan as stated in the Deed of Real Estate Mortgage and the
Promissory Note on the one hand and the real date of its maturity on the other?

Held:
It is a long-held cardinal rule that when the terms of an agreement are reduced to writing,
it is deemed to contain all the terms agreed upon and no evidence of such terms can be admitted
other than the contents of the agreement itself. In the present case, the promissory note and the real
estate mortgage are the law between petitioner and private respondents. It is not disputed that under
the Promissory Note dated July 20, 1981, the loan shall mature in one month from date of the said
Promissory Note.
Evidence of a prior or contemporaneous verbal agreement is generally not admissible to
vary, contradict or defeat the operation of a valid contract. While parol evidence is admissible to
explain the meaning of written contracts, it cannot serve the purpose of incorporating into the
contract additional contemporaneous conditions which are not mentioned at all in writing, unless
there has been fraud or mistake. In the instant case, aside from the testimony of Atty. Mendoza,
no other evidence was presented to prove that the real date of maturity of the loan is one year. In
fact there was not even any allegation in the Complaint and in the Memorandum filed by petitioner
with the trial court to the effect that there has been fraud or mistake as to the date of the loans
maturity as contained in the Promissory Note of July 20, 1981. In sum, petitioner failed to present
clear and convincing evidence to prove her allegation that the real agreement of the parties is for
the loan to mature in one year.

Page 260 of 845

 G.R. No. 163763
November 10, 2006
MALAYAN REALTY, INC., petitioner, vs. UY HAN YONG, respondent

Facts:
Malayan is the owner of an apartment unit leased to the respondent by virtue of an oral
contract. The monthly rental was increased yearly starting 1989, and by 2001, the monthly rental
was P4,671.65. Subsequently, Malayan sent Uy a written notice informing him that the lease
contract would no longer be renewed or extended upon its expiration on August 31, 2001, and
asking him to vacate and turn over the possession of the property within five days from said date.
Despite Uys receipt of the notice, he refused to vacate the property, prompting Malayan to file
before MeTC a complaint for ejectment.

Issue:
Whether the lease could still be extended?

Held:
Yes. If the period of a lease contract has not been specified by the parties, it is understood
to be from month to month, if the rent agreed upon is monthly. The lease contract thus expires at
the end of each month, unless prior thereto, the extension of said term has been sought by
appropriate action and judgment is eventually rendered therein granting the relief.
In the case at bar, the lease period was not agreed upon by the parties. Rental was paid monthly,
and respondent has been occupying the premises since 1958. As earlier stated, a written notice was
served upon respondent on January 17, 2001 terminating the lease effective August 31, 2001. As
respondent was notified of the expiration of the lease, effectively his right to stay in the premises
had come to an end on August 31, 2001.
The 2nd paragraph of Article 1687 provides, however, that in the event that the lessee has
occupied the leased premises for over a year, the courts may fix a longer term for the lease.
The power of the courts to establish a grace period is potestative or discretionary, depending on
the particular circumstances of the case. Thus, a longer term may be granted where equities come
into play, and may be denied where none appears, always with due deference to the parties freedom
to contract.
In the present case, respondent has remained in possession of the property from the time
the complaint for ejectment was filed on September 18, 2001 up to the present time. Effectively,
respondents lease has been extended for more than five years, which time is, under the
circumstances, deemed sufficient as an extension and for him to find another place to stay.

Page 261 of 845

 G.R. No. 159828
April 19, 2006
KASAPIAN NG MALAYANG MANGGAGAWA SA COCA-COLA (KASAMMA-CCO)-
CFW, petitioner, vs. CA and COCA-COLA BOTTLERS PHILS., INC., respondents

Facts:
The CBA for the years 1995-1998 executed between petitioner union and private
respondent company expired. As the duly certified collective bargaining agent for the rank-and-
file employees of private respondents Manila and Antipolo plants, petitioner submitted its demands
to the company for another round of collective bargaining negotiations. However, said negotiations
came to a gridlock. Thereafter, petitioner filed a notice of strike on 11 November 1998 with the
NCMB, on the ground of CBA negotiation deadlock. With the aim of resolving the impasse,
several conciliation conferences were conducted but to no avail as the parties failed to reach a
settlement. On 19 December 1998, petitioner held the strike in private respondents Manila and
Antipolo plants. Subsequently, through the efforts of NCMB Administrator Buenaventura
Magsalin, both parties came to an agreement settling the labor dispute. Thus, on 26 December
1998, both parties executed and signed a MOA providing for salary increases and other economic
and non-economic benefits. It likewise contained a provision for the regularization of contractual,
casual and/or agency workers who have been working with private respondent for more than one
year. Said MOA was later incorporated to form part of the 1998-2001 CBA and was thereafter
ratified by the employees of the company.
Consequently, petitioner demanded the payment of salary and other benefits to the newly
regularized employees retroactive to 1 December 1998, in accord with the MOA. However, the
private respondent refused to yield to said demands contending that the date of effectivity of the
regularization of said employees were 1 May 1999 and 1 October 1999. Thus, on 5 November 1999,
petitioner filed a complaint before the NLRC for the alleged violations of the subject MOA by the
private respondent. Subsequently, private respondent closed its Manila and Antipolo plants
resulting in the termination of employment of 646 employees.

Issue:
Whether private respondent violated the provisions of the MOA?

Held:
Yes. It must be stressed that under Article 280 of the Labor Code, any employee who has
rendered at least one year of service, whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in which he is employed and his
employment shall continue while such activity exists. Also, under the law, a casual employee is
only casual for one year, and it is the passage of time that gives him a regular status. Hence, even
without the subject MOA provision, the 61 employees must be extended regular employment
status after the lapse of one year. Even if we were to follow private respondents contention that the
date 1 December 1998 provided in the MOA is merely a reckoning date to determine who among
the non-regular employees have rendered one year of service as of said date, all those who have
been with the company for one year by said date must automatically be considered regular
employees by operation of law. Therefore, contrary to the interpretation of the NLRC, private
respondent violated the provision of the MOA when it did not consider the regularization of the
61 employees effective 1 December 1998, and accorded to them the full benefits of the MOA.

Page 262 of 845

 G.R. No. 133895
October 2, 2001
ZENAIDA M. SANTOS, petitioner, vs. CALIXTO SANTOS, ET AL., respondents

Facts:
The spouses Santos owned a parcel of land, on it was a four-door apartment administered
by Rosalia who rented them out. The spouses had five children, Salvador, Calixto, Alberto,
Antonio and Rosa. The spouses executed a deed of sale of the properties in favor of their children
Salvador and Rosa. Rosa in turn sold her share to Salvador. Despite the transfer of the property to
Salvador, Rosalia continued to lease and receive rentals from the apartment units. Jesus, Salvador
and Rosalia all subsequently died. Petitioner, claiming to be an heir, then demanded the rent from
Antonio Hombrebueno, a tenant of Rosalia. When the latter refused to pay, Zenaida filed an
ejectment suit against him with the MeTC, which was decided in her favor.
On January 5, 1989, private respondents instituted an action for reconveyance of property
with preliminary injunction against petitioner in the RTC, where they alleged that the two deeds
of sale were simulated for lack of consideration. They were executed to accommodate Salvador in
generating funds for his business ventures and providing him with greater business flexibility. In
her Answer, Zenaida denied the material allegations in the complaint and as special and affirmative
defenses, argued that Salvador was the registered owner of the property, which could only be
subjected to encumbrances or liens annotated on the title; that the respondents right to
reconveyance was already barred by prescription and laches; and that the complaint stated no cause
of action.

Issue:
Whether a sale through a public instrument tantamount to delivery of the thing sold?

Held:
Nowhere in the Civil Code, does it provide that execution of a deed of sale is a conclusive
presumption of delivery of possession. The Code merely said that the execution shall be equivalent
to delivery. The presumption can be rebutted by clear and convincing evidence. Presumptive
delivery can be negated by the failure of the vendee to take actual possession of the land sold.
As found by both the trial and appellate courts and amply supported by the evidence on record,
Salvador was never placed in control of the property. The original sellers retained their control and
possession. Therefore, there was no real transfer of ownership.

Page 263 of 845

 G.R. No. 146658
October 28, 2002
MANUEL D. MELOTINDOS, petitioner, vs. MELECIO TOBIAS, represented by JOSEFINA
PINEDA, respondent

Facts:
Petitioner was the lessee of the ground floor of a house at No. 577 Julio Nakpil Street in
Malate, Manila. He had been renting the place since 1953 on a month-to-month basis from the
respondent who was then residing in Canada. Sometime in the last quarter of 1995, owing to his
sickly mother who needed constant medical attention and filial care, respondent demanded from
petitioner either to pay an increased rate of monthly rentals or else to vacate the place so he and
his mother could use the house during her regular medical check-up in Manila. For two (2) years
nothing came out of the demand to vacate, hence, in 1997 respondent insisted upon raising the
rental fee once again.
Subsequently, respondent asked petitioner to restore the premises to him for some essential
repairs of its dilapidated structure. This time he did not offer petitioner anymore the option to pay
higher rentals. The renovation of the house was commenced but had to stop midway because
petitioner refused to vacate the portion he was occupying and worse he neglected to pay for the
lease for four months. Hence for the second time, respondent demanded the payment of the rental
arrears as well as the restoration of the house to him. Since petitioner was insisting on keeping
possession of the house but did not pay the rental for January 1999, although he had settled the
arrears of four (4) months, respondent was compelled to file a complaint for ejectment.

Issue:
Whether there is sufficient ground for ejectment?

Held:
Yes, it is not only the evidence on record but petitioner's pleadings themselves that confirm
his default in paying the rental fees for more than three (3) months in 1999 and 1998 prior to the
filing of the ejectment complaint. There is also sufficient basis for the courts a quo to conclude that
respondent desperately needed the property in good faith for his own family and for the repair and
renovation of the house standing thereon. These facts represent legal grounds to eject a tenant.
Also, it bears stressing that Art. 1687 does not grant a lessee an absolute right to an extension of
the lease term but merely gives the courts the discretion to allow additional time for the lessee to
prepare for his eventual ejection. In the instant case the petitioner's old age and length of his
occupancy of the house alone are not just grounds for granting the extension of lease because these
circumstances by themselves do not give him the equitable right to insist upon staying on the
premises as long as he could pay the rentals. The record plainly illustrates, for example, that he
made no substantial or additional improvements on the house which could have hampered his
transfer to another residence.

Page 264 of 845

 G.R. No. 142378
March 7, 2002
LL AND COMPANY DEVELOPMENT AND AGRO-INDUSTRIAL
CORPORATION, petitioner, vs. HUANG CHAO CHUN AND YANG TUNG FA, respondents

Facts:
The case originated from an unlawful detainer case filed by petitioner before the MeTC
against respondents for violating their amended lease contract, when they did not pay the monthly
rentals thereon in the total amount of P4,322,900.00. It also alleged that the amended lease contract
already expired on September 16, 1996 but respondents refused to surrender possession thereof
plus the improvements made thereon, and pay the rental arrearages despite repeated demands.

Issue:
Whether non-payment of rentals is a ground to eject, in an unlawful detainer. Is refusal of
the lessor to accept or collect rentals a valid reason for non-payment of rentals?

Held:
Based on the foregoing, respondents should have deposited in a bank or with judicial
authorities the rent based on the previous rate. In the instant case, respondents failed to pay the rent
from October 1993 to March 1998 or for four (4) years and three (3) months. They should
remember that Article 1658 of the Civil Code provides only two instances in which the lessee may
suspend payment of rent; namely, in case the lessor fails to make the necessary repairs or to
maintain the lessee in peaceful and adequate enjoyment of the property leased. None of these is
present in the case at bar.
Moreover, the mere subsequent payment of rentals by the lessee and the receipt thereof by
the lessor does not, absent any other circumstance that may dictate a contrary conclusion,
legitimize the unlawful character of the possession. The lessor may still pursue the demand for
ejectment. Having said that, we cannot, on the other hand, authorize a unilateral increase in the
rental rate, considering that (1) the option to renew is reciprocal and, thus, the terms and conditions
thereof -- including the rental rate -- must likewise be reciprocal; and (2) the contracted clause
authorizing an increase -- upon presentation of the increased real estate tax to lessees -- has not
been complied with by petitioner.

Page 265 of 845

 G.R. No. L-48494
February 5, 1990
BRENT SCHOOL, INC., and REV. GABRIEL DIMACHE, petitioners, vs. RONALDO
ZAMORA, ET AL., respondents

Facts:
The root of the controversy is an employment contract in virtue of which Doroteo R. Alegre
was engaged as athletic director by Brent School, Inc. The contract fixed a specific term for its
existence, five (5) years, i.e., from July 18, 1971, the date of execution of the agreement, to July
17, 1976. Subsequent subsidiary agreements dated March 15, 1973, August 28, 1973, and
September 14, 1974 reiterated the same terms and conditions, including the expiry date.
Some three months before the expiration of the stipulated period, Alegre was given a copy
of the report filed by Brent School with the Department of Labor advising of the termination of
his services. The stated ground for the termination was "completion of contract, expiration of the
definite period of employment." And a month or so later, Alegre accepted the amount of the full
payment of his services, and signed the receipt thereof. However, at the investigation conducted
by a Labor Conciliator of said report of termination of his services, Alegre protested the announced
termination of his employment. He argued that although his contract did stipulate that the same
would terminate on July 17, 1976, since his services were necessary and desirable in the usual
business of his employer, and his employment had lasted for five years, he had acquired the status
of a regular employee and could not be removed except for valid cause.

Issue:
Whether or not the provisions of the Labor Code have anathematized "fixed period
employment" or employment for a term.

Held:
The Civil Code has always recognized, and continues to recognize, the validity and
propriety of contracts and obligations with a fixed or definite period, and imposes no restraints on
the freedom of the parties to fix the duration of a contract, whatever its object, be it specie, goods
or services, except the general admonition against stipulations contrary to law, morals, good
customs, public order or public policy. Under the Civil Code, therefore, and as a general
proposition, fixed-term employment contracts are not limited, as they are under the present Labor
Code, to those by nature seasonal or for specific projects with pre-determined dates of completion;
they also include those to which the parties by free choice have assigned a specific date of
termination.
Respondent Alegre's contract of employment with Brent School having lawfully
terminated with and by reason of the expiration of the agreed term of period thereof, he is declared
not entitled to reinstatement and the other relief awarded and confirmed on appeal in the
proceedings below.

Page 266 of 845

 G.R. No. L-34338
November 21, 1984
LOURDES VALERIO LIM, petitioner, vs. PEOPLE OF THE PHILIPPINES, respondent

Facts:
Petitioner Lourdes Valerio Lim was found guilty of the crime of estafa and was sentenced
to suffer an imprisonment, to indemnify the offended part, and to pay the costs.From this judgment,
appeal was taken to the then Court of Appeals which affirmed the decision of the lower court but
modified the penalty imposed by sentencing her "to suffer an indeterminate penalty of one (1)
month and one (1) day of arresto mayor as minimum to one (1) year and one (1) day of prision
correccional as maximum, to indemnify the complainant in the amount of P550.50 without
subsidiary imprisonment, and to pay the costs of suit."
The question involved in this case is whether the receipt, Exhibit "A", is a contract of
agency to sell or a contract of sale of the subject tobacco between petitioner and the complainant,
Maria de Guzman Vda. de Ayroso, thereby precluding criminal liability of petitioner for the crime
charged.

Issue:
Whether foregoing receipt gives rise to an obligation wherein the duration of the period
depends upon the will of the debtor in which case the only action that can be maintained is a
petition to ask the court to fix the duration of the period?

Held:
It is clear in the agreement, Exhibit "A", that the proceeds of the sale of the tobacco should
be turned over to the complainant as soon as the same was sold, or, that the obligation was
immediately demandable as soon as the tobacco was disposed of. Hence, Article 1197 of the New
Civil Code, which provides that the courts may fix the duration of the obligation if it does not fix
a period, does not apply.
Also, the fact that appellant received the tobacco to be sold at P1.30 per kilo and the
proceeds to be given to complainant as soon as it was sold, strongly negates transfer of ownership
of the goods to the petitioner. The agreement (Exhibit "A') constituted her as an agent with the
obligation to return the tobacco if the same was not sold.

Page 267 of 845

 G.R. No. L-45656
May 5, 1989
PACIFIC BANKING CORPORATION and CHESTER G. BABST, petitioners, vs. CA, ET
AL., respondents

Facts:
Private respondents discovered an area consisting of 480 hectares of tidewater land in
Tambac Gulf of Lingayen which had great potential for the cultivation of fish and salt-making.
They organized Insular Farms Inc., applied for and, after eleven months, obtained a lease from the
Department of Agriculture for a period of 25 years, renewable for another 25 years. Subsequently
Joseph Hart approached businessman John Clarkin for financial assistance. After which they
signed a MOA pursuant to which the latter was issued shares, and the former was appointed
President and General Manager as a result of which he resigned as Acting Manager of the First
National City Bank at the Port Area. Due to financial difficulties, Insular Farms Inc. borrowed P
250,000.00 from Pacific Banking Corporation. Insular Farms Inc. executed a Promissory Note of
P 250,000.00 to the bank payable in five equal annual installments, the first installment payable
on or before July 1957. Said note provided that upon default in the payment of any installment
when due, all other installments shall become due and payable.
Unfortunately, the business floundered and while attempts were made to take in other
partners, these proved unsuccessful. This was to the effect that all Insular Farms shares of stocks
were pledged to petitioner bank in lieu of additional collateral and to insure an extension of the
period to pay the installment. After, Pacific Farms Inc, was organized to engage in the same
business as Insular Farms Inc. The next day, Pacific Banking Corporation, through petitioner wrote
Insular Farms Inc. giving the latter 48 hours to pay its entire obligation. Consequently, Hart
received notice that the pledged shares of stocks of Insular Farms Inc. would be sold at public
auction to satisfy Insular Farms' obligation. The private respondents commenced the case below
by filing a complaint for reconveyance and damages with prayer for writ of preliminary injunction
before the CFI.

Issue:
Whether the petitioners were granted an indefinite extension of time to pay the loan?

Held:
In case the period of extension is not precise, the provisions of Article 1197 of the Civil
Code should apply. In this case, there was an agreement to extend the payment of the loan,
including the first installment thereon which was due on or before July 1957. The pledge executed
as collateral security on February 9, 1958 no longer contained the provision on an installment of
P 50,000.00 due on or before July 1957. This can mean no other thing than that the time of payment
of the said installment of P 50,000.00 was extended. It is settled that bills and notes may be varied
by subsequent agreement. Thus, conditions may be introduced and arrangements made changing
the terms of payment. The agreement for extension of the parties is clearly indicated and may be
inferred from the acts and declarations of the parties, as testified to in court. The pledge constituted
on February 19, 1958 on the shares of stocks of Insular Farms, Inc. was sufficient consideration
for the extension, considering that this pledge was the additional collateral required by Pacific
Banking in addition to the continuing guarantee of Clarkin.

Page 268 of 845

 G.R. No. L-12611
August 7, 1918
FELIPE AGONCILLO, and his wife, MARCELA MARIO, plaintiff-appellees, vs.
CRISANTO JAVIER, ET AL., defendants-appellants

Facts:
Anastasio Alano, Jose Alano, and Florencio Alano executed in favor of the plaintiff, Da.
Marcela Mario, a document to wit, the testamentary heirs of the Rev. Anastasio C. Cruz were to
pay the latters debt to the lady, and in case of insolvency, to cede a house and lot to Da. Marcela
Mario, transferring to her all rights to the ownership and possession of the lot. If the amount is
not sufficient to cover the total amount of the indebtedness, Anastasio will mortgage four parcels
of land.
Subsequently, Anastasio Alano died intestate. At the instance of one of his creditors,
proceedings upon the administration of his estate were had.On April 27, 1916, at the instance of
the plaintiff, Da. Marcela Mario, and upon the statement, made on her behalf, that she was a
creditor of the deceased and that her claim was secured by mortgage upon real estate belonging to
the said deceased, the court reopened the intestate proceeding, and appointed one Javier to be
administrator of the estate. No request was made for a renewal of the commission of the committee
on claims. The appellants Jose and Florencio Alano objected to the appointment of Javier, but their
objection was overruled by the court.

Issue:
Whether the conveyance of the house and lot described in the contract, took effect upon
the failure of the debtors to pay the debt?

Held:
The principal undertaking evidenced by the document is, obviously, the payment of money.
The attempt to create a mortgage upon the house and lot described in the second clause of the
contract is, of course, invalid, as it is admitted that the so-called mortgage was never recorded.
Equally inefficacious, and for the same reasons, is the purported mortgage by Anastasio Alano of
his land in the barrio of San Isidro described in the third paragraph of the document. The agreement
to convey the house and lot at an appraised valuation in the event of failure to pay the debt in
money a t its maturity is, however, in our opinion, perfectly valid. It is simply an undertaking that
if the debt is not paid in money, it will be paid in another way. As we read the contract, the
agreement is not open to the objection that the stipulation is a pacto comisorio. It is not an attempt
to permit the creditor to declare a forfeiture of the security upon the failure of the debtor to pay the
debt at maturity. It is simply provided that if the debt is not paid in money it shall be paid in another
specific was by the transfer of property at a valuation.
It is quite clear, therefore, that under the terms of the contract, as we read it, and as the
parties themselves have interpreted it, the liability of the defendants as to the conveyance of the
house and lot is subsidiary and conditional, being dependent upon their failure to pay the debt in
money. It must follow, therefore, that if the action to recover the debt has prescribed, the action to
compel a conveyance of the house and lot is likewise barred, as the agreement to make such
conveyance was not an independent principal undertaking, but merely a subsidiary alternative pact
relating to the method by which the debt might be paid.

Page 269 of 845

 G.R. No. L-21196
February 6, 1924
ONG GUAN CAN, plaintiff-appellee, vs. THE CENTURY INSURANCE COMPANY,
LTD., defendant-appellant

Facts:
The action was commenced in the CFI for the purpose of recovering an amount due on the
policy of insurance issued by the defendant to the plaintiff. On the same day a copy of the
complaint was served upon the defendant, through its duly authorized representative. Although the
defendants mailed their notice appeal, the court entered a judgment by default be rendered against
the defendant. The latter contended that the said notice of appearance was mailed, and that the
steamship Vizcaya, carrying mails, including the letter containing the notice of appearance, did not
arrive in the usual course until after the time had expired for filing its appearance due to the fact
that said ship encountered a storm at sea. The same was denied.

Issue:
Whether or not the judgment by default rendered by the lower court should be set aside
and annulled?

Held:
Yes. It has been frequently 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
be ground for vacating a judgment by default. A delay of mail, such as occurred in the present
case, in our opinion amounts to accident or surprise for which judgments by default may be set
aside, especially when the defendant shows by affidavit or otherwise that he has a valid and
meritorious defense. The time fixed for filing papers in a cause is generally directory and the court
always has it in its power, in the exercise of a proper discretion, to extend the time fixed by law
whenever the ends of justice would seem to demand such an extension.

Page 270 of 845

 G.R. No. L-3435
April 28, 1951
CLARA TAMBUNTING DE LEGARDA, ET AL., plaintiffs-appellants, vs. VICTORIA
DESBARATS MIAILHE, substituting WILLIAM J. B. BURKE, defendant-appellee

Facts:
Plaintiffs filed a complaint against the original defendant William J. B. Burke, alleging
defendant's unjustified refusal to accept payment in discharge of a mortgage indebtedness in his
favor, and praying that the latter be ordered (1) to receive the sum of P75,920.83 deposited by
plaintiff Clara Tambunting de Legarda, the mortgagor, on the same date with the clerk of this court
in payment of the mortgage indebtedness of said plaintiff to defendant herein, (2) to execute the
corresponding deed of release of mortgage, and (30 to pay damages in the sum of P1,000.
Upon the issues raised, after due hearing, decision was rendered by this Court through the
then Judge, Honorable Jose Gutierrez David, ordering defendant to accept the sum deposited by
plaintiff Clara Tambunting de Legarda in the office of the clerk of court; to execute forthwith a
deed of release of mortgage covering the property in question; to pay plaintiff the sum of P120.40
representing the cost of the certification of the check deposited in the court and consignation,
together with the clerk's commission for the deposit of the money in court and the costs of the suit.

Issue:
Whether the agreement had by the plaintiffs and William J. B. Burke during the Japanese
occupation was that the rate of the annual interest of the indebtedness was merely reduced to 3
per cent, as claimed by plaintiffs?

Held:
In this case, most of the evidence presented is testimonial, with only some corroborating
letters, and on the basis of this evidence the preponderance in our opinion militates in favor of the
defendant. And we say so because, on one hand, only Vicente Legarda testified for the plaintiffs,
whereas Antonio Carrascoso and William J. B. Burke testified for the defendant. It appears that
the indebtedness in question was granted to Clara Tambunting de Legarda as far back as February
1926, with the obligation to pay it within five (5) years but which period has been extended from
time to time with the gradual reduction of the rate of interest up to January 1942, when, as intimated
by the plaintiff, a further reduction of the interest to 3 1/2 per cent per annum was granted by the
defendant. During this long period of time the plaintiffs enjoyed the use of the money, with a
continued reduction of the rate of interest, and defendant had lavished upon her his unusual
liberality when he extended to her his help and relief whenever she so requested as the exigencies
of her financial situation warranted. The life of this indebtedness would not have been so prolonged
as to be overtaken by war were it not for the desire of the defendant to help the mortgagor in her
hour of need, Yet Vicente Legarda went out of his way to propose that his wife Clara Tambunting
be exempted from paying all the interests due from January 1, 1942, up to the termination of the
war, which caused the defendant to utter some unkind words and to be resentful. Nevertheless,
through the mediation of Attorney Carrascoso, plaintiffs at last became reasonable and agreed not
to pay the obligation until the termination of the war provided that all interests due and which
might become due be condoned.

Page 271 of 845

 G.R. No. 32226
December 29, 1930
ESTANISLAO REYES, plaintiff-appellant, vs. SEBASTIANA MARTINEZ ET
AL., defendants-appellants

Facts:
In this action, plaintiff is seeking first, to recover five parcels of land, containing
approximately one thousand coconut trees, and to obtain a declaration of ownership in his own
favor as against the defendants with respect to said parcels; secondly, to recover from the
defendants the sum of P9,377.50, being the alleged proceeds of some 1,860 coconut trees which
had been applied to the benefit of said defendants; thirdly, to recover from the defendants the sum
of P43,000, to which the plaintiff supposes himself to be entitled, but which have gone, so he
claims, to the benefit of the defendants in said receivership; and fourthly, to recover damages
resulting from their improper meddling in the administration of the receivership property. In
connection with this complaint the plaintiff obtained, several months after the litigation was begun,
an attachment against the defendants upon a judgment credit with the result that the execution of
said money judgment against the plaintiff has been suspended since the record in said case was
returned to the trial court. In reply to the complaint the defendants filed an answer and cross-
complaint in which the defendants sought to recover damages and interest upon their claim against
the plaintiff. Upon hearing the cause, the trial court absolved the defendants from the complaint
and also absolved the plaintiff from the cross-complaint of the defendants, without express
pronouncement as to costs. From this judgment both parties appealed.

Issue:
Whether the plaintiff can recover the five parcels of land?

Held:
Reyes should either have the land originally set apart for him under clauses 4 and 8 of the
contract, or, in case his right thereto should fail, he should not be required to pay the judgment for
P8,000 which was awarded to the Martinez heirs in Martinez v. Grao. This end will accordingly
be effected in the manner set forth in the following paragraph, containing the dispositive part of
this decision. The Martinez heirs, defendants in this action, will be allowed a period of three
months, extendible, if necessary, for a reasonable term in the discretion of the trial court, within
which to procure the execution of a sufficient deed conveying to the plaintiff, Estanislao Reyes,
the particular parcel of land described in paragraph 8 of the contract of March 5, 1921; and until
such deed shall be executed and delivered, or tendered, to Reyes, the judgment against Reyes in
favor of the Martinez heirs for the sum of P8,000, shall stand temporarily enjoined. And in the
event that the said Martinez heirs should fail to procure said conveyance to be made within the
term conceded to them, the judgment in their favor for said P8,000 shall be permanently enjoined.

Page 272 of 845

 G.R. No. L-6220
May 7, 1954
MARTINA QUIZANA, plaintiff-appellee, vs. GAUDENCIO REDUGERIO and JOSEFA
POSTRADO, defendants-appellants

Facts:
The action was originally instituted in the justice of the peace court of Sta. Cruz,
Marinduque, and the same is based on an actionable document attached to the complaint, signed
by the defendants-appellants. The defendants-appellants admit the execution of the document, but
claim, as special defense, that they offered to pledge the land specified in the agreement and
transfer possession thereof to the plaintiff-appellee, but that the latter refused said offer. Judgement
having been rendered by the justice of the peace court of Sta. Cruz, the defendants-appellants
appealed to the Court of First Instance. In that court they reiterated the defenses that they presented
in the justice of the peace court.

Issue:
Whether the second part of the written obligation, in which the obligors agreed and
promised to deliver a mortgage over the parcel of land described therein, upon their failure to pay
the debt on a date specified in the proceeding paragraph, is valid and binding and effective upon
the plaintiff-appellee, the creditor

Held:
The second part of the obligation in question is what is known in law as a facultative
obligation, defined in article 1206 of Civil Code of the Philippines. There is nothing in the
agreement which would argue against its enforcement. It is not contrary to law or public morals or
public policy, and notwithstanding the absence of any legal provision at the time it was entered
into government it, as the parties had freely and voluntarily entered into it, there is no ground or
reason why it should not be given effect. It is a new right which should be declared effective at
once, in consonance with the provisions of article 2253 of the Civil Code of the Philippines.

Page 273 of 845

 G.R. No. 183374
June 29, 2010.
MARSMAN DRYSDALE LAND, INC., petitioner, vs. PHILIPPINE GEOANALYTICS, INC.
AND GOTESCO PROPERTIES, INC., respondents.

Facts:
Marsman Drysdale, Inc. and Gotesco Properties, Inc. entered into a Joint Venture
Agreement for the construction and development of an office building on a land owned by
Marsman Drysdale in Makati City. Parties agreed about the capital, expenses and proceeds that
each should provide and claim for the said project. The building of the office building required the
services of Philippine Geoanalytics, Inc. The services rendered by PGI were incomplete. They
were able to drill only 4 boreholes, out of 5, due to the failure of the partners to clear the area that
was supposed to be drilled. After such, PGI billed the joint venture for the work done. Despite
repeated demands, joint venture wasnt able to pay PGI. PGI filed a case against both Marsman
Drysdale and Gotesco. Marsman claims that he is not liable to PGI because according to their
agreement, Gotesco will be the one to shoulder monetary expenses. On the other hand, Gotesco
contested that PGI had no cause of action because the service rendered was incomplete.

Issue:
Whether Marsman Drysdale and Gotesco are both liable to pay PGI the unpaid claims?

Held:
In the case at bar, the Court ruled that Marsman Drysdale and Gotesco are jointly liable to
PGI. PGI was never a party to the JVA, but it entered into a Technical Service Contract with the
JVA. While the JVA clearly spelled out, inter alia, the capital contributions of Marsman Drysdale
(land) and Gotesco (cash) as well as the funding and financing mechanism for the project, the same
cannot be used to defeat the lawful claim of PGI against the two joint venturers-partners. Marsman
Drysdale and Gotesco were listed as owners of the project in the TSC, and that all billing invoices
indicated the consortium as the client.
It is assumed that the obligation of Marsman Drysdale and Gotesco is joint since it was not
expressly stated, nor does the law or the nature of the obligation required it to be solidary. This is
supported by Article 1207 and 1208 of the New Civil Code.

Page 274 of 845

 G.R. No. 134100
September 29, 2000
PURITA ALIPIO, petitioner, vs. CA, ET AL., respondent

Facts:
Respondent was the lessee of a 14.5 hectare fishpond. The lease was for a period of five
years. Subsequently, he subleased the fishpond, for the remaining period of his lease, to the spouses
Placido and Purita Alipio and the spouses Bienvenido and Remedios Manuel. Each of the four
sub-lessees signed the contract. The first installment was duly paid, but of the second installment,
the sub-lessees only satisfied a portion thereof, leaving an unpaid balance. Despite due demand,
the sub-lessees failed to comply with their obligation, so that the private respondent sued the Alipio
and Manuel spouses for the collection of the said amount before the RTC. In the alternative, he
prayed for the rescission of the sublease contract should the defendants fail to pay the balance.

Issue:
Whether a creditor can sue the surviving spouse for the collection of a debt which is owed
by the conjugal partnership of gains?

Held:
A creditor cannot sue the surviving spouse of a decedent in an ordinary proceeding for the
collection of a sum of money chargeable against the conjugal partnership and that the proper
remedy is for him to file a claim in the settlement of estate of the decedent.
Petitioner and her late husband, together with the Manuel spouses, signed the sublease
contract binding themselves to pay the amount of stipulated rent. Under the law, the Alipios'
obligation (and also that of the Manuels) is one which is chargeable against their conjugal
partnership. When petitioner's husband died, their conjugal partnership was automatically
dissolved and debts chargeable against it are to be paid in the settlement of estate proceedings in
accordance with Rule 73, 2.

Page 275 of 845

 G.R. No. 109648
November 22, 2001
PH CREDIT CORPORATION, petitioner, vs. COURT OF APPEALS and CARLOS M.
FARRALES, respondents

Facts:
PH Credit Corp., filed a case against Pacific Lloyd Corp., Carlos Farrales, Thomas H. Van Sebille
and Federico C. Lim, for a sum of money. After service of summons upon the defendants, they
failed to file their answer within the reglementary period, hence they were declared in default. PH
Credit Corp., was then allowed to present its evidence ex-parte. After the aforesaid decision has
become final and executory, a Writ of Execution was issued and consequently implemented by the
assigned Deputy Sheriff. Personal and real properties of defendant Carlos M. Farrales were levied
and sold at public auction wherein PH Credit Corp. was the highest bidder.

Issue:
Whether the obligation is joint or joint and solidary?

Held:
A solidary obligation is one in which each of the debtors is liable for the entire obligation,
and each of the creditors is entitled to demand the satisfaction of the whole obligation from any or
all of the debtors. On the other hand, a joint obligation is one in which each debtors is liable only
for a proportionate part of the debt, and the creditor is entitled to demand only a proportionate part
of the credit from each debtor. The well-entrenched rule is that solidary obligations cannot be
inferred lightly. They must be positively and clearly expressed. A liability is solidary only when
the obligation expressly so states, when the law so provides or when the nature of the obligation
so requires.
In the dispositive portion of the January 31, 1984 Decision of the trial court, the
word solidary neither appears nor can it be inferred therefrom. The fallo merely stated that the
following respondents were liable: Pacific Lloyd Corporation, Thomas H. Van Sebille, Carlos M.
Farrales and Federico C. Lim. Under the circumstances, the liability is joint, as provided by the
Civil Code.

Page 276 of 845

 G.R. No. 147791
September 8, 2006
CONSTRUCTION DEVELOPMENT CORPORATION OF THE PHILIPPINES, petitioner,
vs. REBECCA G. ESTRELLA, ET AL., respondents

Facts:
Respondents and her granddaughter boarded a BLTB bus bound for Pasay City. However,
they never reached their destination because their bus was rammed from behind by a tractor-truck
of CDCP in the South Expressway. The strong impact pushed forward their seats and pinned their
knees to the seats in front of them. They regained consciousness only when rescuers created a hole
in the bus and extricated their legs from under the seats. They were brought to the Makati Medical
Center where the doctors diagnosed their injuries. Thereafter, respondents filed a Complaint for
damages against CDCP, BLTB, Espiridion Payunan, Jr. and Wilfredo Datinguinoo before the
RTC. They alleged (1) that Payunan, Jr. and Datinguinoo, who were the drivers of CDCP and
BLTB buses, respectively, were negligent and did not obey traffic laws; (2) that BLTB and CDCP
did not exercise the diligence of a good father of a family in the selection and supervision of their
employees; (3) that BLTB allowed its bus to operate knowing that it lacked proper maintenance
thus exposing its passengers to grave danger; (4) that they suffered actual damages amounting to
P250,000.00 for Estrella and P300,000.00 for Fletcher; (5) that they suffered physical discomfort,
serious anxiety, fright and mental anguish, besmirched reputation and wounded feelings, moral
shock, and lifelong social humiliation; (6) that defendants failed to act with justice, give
respondents their due, observe honesty and good faith which entitles them to claim for exemplary
damage; and (7) that they are entitled to a reasonable amount of attorney's fees and litigation
expenses.

Issue:
Whether BLTB and/or its driver is solely liable for the damages sustained by herein
respondents?

Held:
The case filed by respondents against petitioner is an action for culpa aquiliana or quasi-
delict under Article 2176 of the Civil Code. In this regard, Article 2180 provides that the obligation
imposed by Article 2176 is demandable for the acts or omissions of those persons for whom one
is responsible. Consequently, an action based on quasi-delict may be instituted against the
employer for an employee's act or omission. The liability for the negligent conduct of the
subordinate is direct and primary, but is subject to the defense of due diligence in the selection and
supervision of the employee. In the instant case, the trial court found that petitioner failed to prove
that it exercised the diligence of a good father of a family in the selection and supervision of
Payunan, Jr.

Page 277 of 845

 G.R. No. 144413
July 30, 2004
REPUBLIC GLASS CORPORATION, petitioners, vs. LAWRENCE C. QUA, respondent
Facts:
Petitioners and Gervel, Inc., together with respondent were stockholders of Ladtek, Inc.
Ladtek obtained loans from Metropolitan Bank and Trust Company and Private Development
Corporation of the Philippines with RGC, Gervel and Qua as sureties. Among themselves, RGC,
Gervel and Qua executed Agreements for Contribution, Indemnity and Pledge of Shares of Stocks.
The Agreements all state that in case of default in the payment of Ladteks loans, the parties would
reimburse eeach other the proportionate share of any sum that any might pay to the creditors.
Ladtek defaulted on its loan obligations to Metrobank and PDCP. Hence, Metrobank filed a
collection case against Ladtek, RGC, Gervel and Qua. RGC and Gervel assail the Court of Appeals
ruling that the parties liabilities under the Agreements depend on the full payment of the
obligation. RGC and Gervel insist that it is not an essential condition that the entire obligation
must first be paid before they can seek reimbursement from Qua. RGC and Gervel contend that
Qua should pay 42.22% of any amount which they paid or would pay Metrobank and PDCP.

Issue:
Whether payment of the entire obligation is an essential condition for reimbursement?

Held:
Payment of the entire obligation by one or some of the solidary debtors results in a
corresponding obligation of the other debtors to reimburse the paying debtor. However, in this
case, payment of the entire obligation is not an essential condition before they can seek
reimbursement from Qua. The Agreements are contracts of indemnity not only against actual loss
but against liability as well. Therefore, whether the solidary debtor has paid the creditor, the other
solidary debtors should indemnify the former once his liability becomes absolute. However, in this
case, the liability of RGC, Gervel and Qua became absolute simultaneously when Ladtek defaulted
in its loan payment. As a result, RGC, Gervel and Qua all became directly liable at the same time
to Metrobank and PDCP. Thus, RGC and Gervel cannot automatically claim for indemnity from
Qua because Qua himself is liable directly to Metrobank and PDCP.

Page 278 of 845

 189. Industrial Management v. NLRC
GR No. 101723; 331 SCRA 640
May 11, 2000
FACTS:
This is a petition for certiorari assailing the Resolution dated September 4, 1991 issued by
the National Labor Relations Commission in RAB-VII-0711-84 on the alleged ground that it
committed a grave abuse of discretion amounting to lack of jurisdiction in upholding the Alias
Writ of Execution issued by the Labor Arbiter which deviated from the dispositive portion of the
Decision dated March 10, 1987, thereby holding that the liability of the six respondents in a case
adjudicated by the NLRC is solidary despite the absence of the word "solidary" in the dispositive
portion of the Decision, when their liability should merely be joint.
ISSUE:
Is the petitioners liability pursuant to the Decision of the Labor Arbiter dated March 10,
1987, solidary or not?
RULING:
In the dispositive portion of the Labor Arbiter, the word "solidary" does not appear. The
said fallo expressly states the following respondents therein as liable, namely: Filipinas Carbon
and Mining Corporation, Gerardo Sicat, Antonio Gonzales, Industrial Management Development
Corporation (petitioner INIMACO), Chiu Chin Gin, and Lo Kuan Chin. Nor can it be inferred
therefrom that the liability of the six (6) respondents in the case below is solidary, thus their
liability should merely be joint.
Moreover, it is already a well-settled doctrine in this jurisdiction that, when it is not
provided in a judgment that the defendants are liable to pay jointly and severally a certain sum of
money, none of them may be compelled to satisfy in full said judgment. Granting that the Labor
Arbiter has committed a mistake in failing to indicate in the dispositive portion that the liability of
respondents therein is solidary, the correction -- which is substantial -- can no longer be allowed
in this case because the judgment has already become final and executory.

Page 279 of 845

 190. METRO MANILA TRANSIT CORPORATION
vs. THE COURT OF APPEALS
G.R. No. 104408
June 21, 1993
FACTS:
On August 28, 1979, plaintiff-appellant Nenita Custodio boarded as a paying passenger a
public utility jeepney with plate No. D7 305 PUJ, then driven by defendant Agudo Calebag and
owned by his co-defendant Victorino Lamayo, bound for her work at Dynetics Incorporated
located in Bicutan, Taguig, Metro Manila, where she then worked as a machine operator earning
P16.25 a day. While the passenger jeepney was travelling at (a) fast clip along DBP Avenue,
Bicutan, Taguig, Metro Manila another fast moving vehicle, a Metro Manila Transit Corp. bus
with plate no. 3Z 307 PUB (Philippines) '79 driven by defendant Godofredo C. Leonardo was
negotiating Honeydew Road, Bicutan, Taguig, Metro Manila bound for its terminal at Bicutan. As
both vehicles approached the intersection of DBP Avenue and Honeydew Road they failed to slow
down and slacken their speed; neither did they blow their horns to warn approaching vehicles. As
a consequence, a collision between them occurred, the passenger jeepney ramming the left side
portion of the MMTC bus. The collision impact caused plaintiff-appellant Nenita Custodio to hit
the front windshield of the passenger jeepney and (she) was thrown out therefrom, falling onto the
pavement unconscious with serious physical injuries. She was brought to the Medical City
Hospital where she regained consciousness only after one (1) week. Thereat, she was confined for
twenty-four (24) days, and as a consequence, she was unable to work for three and one half months
(3 1/2).
A complaint for damages was filed by herein private respondent, who being then a minor
was assisted by her parents, against all of therein named defendants following their refusal to pay
the expenses incurred by the former as a result of the collision. Said defendants denied all the
material allegations in the complaint and pointed an accusing finger at each other as being the
party at fault.
ISSUE:
Whether the evidence presented during the trial with respect to the proof of due diligence
of petitioner MMTC in the selection and supervision of its employees, particularly driver
Leonardo, is sufficient.
RULING:
With the allegation and subsequent proof of negligence against the defendant driver and
of an employer-employee relation between him and his co-defendant MMTC in this instance, the
case is undoubtedly based on a quasi-delict under Article 2180. When the employee causes
damage due to his own negligence while performing his own duties, there arises the juris tantum
presumption that the employer is negligent, rebuttable only by proof of observance of the
diligence of a good father of a family. For failure to rebut such legal presumption of negligence in

Page 280 of 845

the selection and supervision of employees, the employer is likewise responsible for damages, the
basis of the liability being the relationship of pater familias or on the employer's own negligence.

Hence, the court consistently held that where the injury is due to the concurrent negligence
of the drivers of the colliding vehicles, the drivers and owners of the said vehicles shall be
primarily, directly and solidarily liable for damages and it is immaterial that one action is based
on quasi-delict and the other on culpa contractual, as the solidarity of the obligation is justified by
the very nature thereof. Hence, decision of respondent Court of Appeals is affirmed.

Page 281 of 845

 191. INCIONG VS. COURT OF APPEALS
G.R. No. 96405, June 26, 1996
FACTS:
On February 3, 1983, petitioner Baldomero L. Inciong, Jr. together with Rene C. Naybe
and Gregorio D. Pantanosas signed a promissory note in the amount of P50, 000.00 holding
themselves jointly and severally liable to private respondent Philippine Bank of Communications.
The promissory note was due on May 5, 1983. Said due date expired without the promissors having
paid their obligation.

On November 14, 1983 and on June 8, 1984, private respondent sent petitioner telegrams
demanding payment thereof. On December 11, 1983, private respondent also sent registered mail
a final letter of demand to Rene C. Naybe. Since both obligors did not respond to the demand
made, private respondent filed on January 24, 1986 a complaint for collection of the sum of P50,
000.00 against the three (3) obligors. On January 27, 1987, the lower court dismissed the case
against defendant Pantanosas as prayed by herein private respondent. Meanwhile, only the
summons addressed to petitioner was served for the reason that defendant Naybe had gone to Saudi
Arabia.

The lower court rendered its decision holding petitioner solidarily liable and to pay herein
respondent bank the amount of P50, 000.00 plus interest thereon. Petitioner appealed the said
decision to the Court of Appeals. The respondent court, however, affirmed the decision of the
lower court. The petitioner moved for reconsideration, which was later on denied by the respondent
Court of Appeals.
ISSUE:
Whether or not the dismissal of the complaint against Naybe, the principal debtor, and
against Pantanosas, his co-maker, constituted a release of his obligation.
HELD:
The dismissal of the complaint against Naybe and Pantanosas did not constitute a release
of petitioners obligation, especially because the dismissal of the case against Pantanosas was upon
the motion of private respondent itself. Petitioner signed the promissory note as a solidary co-
maker and not as a guarantor. A solidary or joint and several obligation is one in which each debtor
is liable for the entire obligation, and each creditor is entitled to demand the whole obligation. The
promissory note involved in this case expressly states that the three signatories therein are jointly
and severally liable, any one, some or all of them may be proceeded against for the entire
obligation. The choice is left to the solidary creditor to determine against whom he will enforce
collection

Page 282 of 845

 Under Article 1207 of the Civil Code, when there are two or more debtors in one and the
same obligation, the presumption is that the obligation is joint so that each of the debtors is liable
only for a proportionate part of the debt. There is solidary liability only when the obligation
expressly so states, when the law so provides or when the nature of the obligation so requires.

Page 283 of 845

 192. PHILIPPINE BLOOMING MILLS VS CA
GR No. 142381 October 15, 2003
FACTS:
This is a petition for review on certiorari to annul the Decision dated 16 July 1999 of the
Court of Appeals in CA-G.R. CV No. 39690, as well as its Resolution dated 17 February 2000
denying the motion for reconsideration. The Court of Appeals affirmed with modification the
Decision dated 31 August 1992 rendered by Branch 113 of the Regional Trial Court of Pasay City
("trial court"). The trial courts Decision declared petitioner Alfredo Ching ("Ching") liable to
respondent Traders Royal Bank ("TRB") for the payment of the credit accommodations extended
to Philippine Blooming Mills, Inc. ("PBM"). The petition is a thinly veiled attempt to make the
Supreme Court reconsider its decision in the prior case of Traders Royal Bank v. Court of Appeals.
ISSUE:
Is Ching is liable for obligations PBM contracted after execution of the Deed of
Suretyship?
RULING:
Ching is liable for credit obligations contracted by PBM against TRB before and after the
execution of the 21 July 1977 Deed of Suretyship. This is evident from the tenor of the deed itself,
referring to amounts PBM "may now be indebted or may hereafter become indebted" to TRB. The
law expressly allows a suretyship for "future debts (Article 2053).
Ching would like the Court to rule that his liability is limited, at most, to the amount stated
in PBMs rehabilitation plan. In claiming this reduced liability, Ching invokes Article 1222. In
granting the loan to PBM, TRB required Chings surety precisely to insure full recovery of the
loan in case PBM becomes insolvent or fails to pay in full. This was the very purpose of the surety.
Thus, Ching cannot use PBMs failure to pay in full as justification for his own reduced liability
to TRB. As surety, Ching agreed to pay in full PBMs loan in case PBM fails to pay in full for any
reason, including its insolvency.
TRB, as creditor, has the right under the surety to proceed against Ching for the entire
amount of PBMs loan. This is clear from Article 1216 of the Civil Code whereby the creditor may
proceed against any one of the solidary debtors.

Page 284 of 845

 193. QUEENSLAND-TOKYO COMMODITIES et al.
vs.
THOMAS GEORGE
GR 172727, 08 September 2010

FACTS:
QTCI is a duly licensed broker engaged in the trading of commodity futures. In 1995,
Guillermo Mendoza, Jr. (Mendoza) and Oniler Lontoc (Lontoc) of QTCI met with respondent
Thomas George (respondent), encouraging the latter to invest with QTCI. On July 7, 1995, upon
Mendoza's prodding, respondent finally invested with QTCI. On the same day, Collado, in behalf
of QTCI, and respondent signed the Customer's Agreement. Forming part of the agreement was
the Special Power of Attorney executed by respondent, appointing Mendoza as his attorney-in-
fact with full authority to trade and manage his account.
On June 20, 1996, the Securities and Exchange Commission (SEC) issued a Cease-and-
Desist Order against QTCI. Alarmed by the issuance of the CDO, respondent demanded from
QTCI the return of his investment, but it was not heeded.
QTCI claimed that they were not aware of, nor were they privy to, any arrangement which
resulted in the account of respondent being handled by unlicensed brokers. They pointed out that
respondent transacted business with QTCI for almost a year, without questioning the license or the
authority of the traders handling his account, rendering him estopped. It was only after it became
apparent that QTCI could no longer resume its business transactions by reason of the CDO that
respondent raised the alleged lack of authority of the brokers or traders handling his account.
ISSUE:
Whether or not QTCI should be held liable for the loss incurred by George in the
investment he made with the corporation.
RULING:
YES. It recognized Mendoza and Collado as its brokers. Petitioners did not object to, and
in fact recognized, Mendoza's appointment as respondent's attorney-in-fact. Collado, in behalf of
QTCI, concluded the Customer's Agreement despite the fact that the appointed attorney-in-fact
was not a licensed dealer. Worse, petitioners permitted Mendoza to handle respondent's account.
Doctrine dictates that a corporation is invested by law with a personality separate and
distinct from those of the persons composing it, such that, save for certain exceptions, corporate
officers who entered into contracts in behalf of the corporation cannot be held personally liable for
the liabilities of the latter. Personal liability of a corporate director, trustee, or officer, along
(although not necessarily) with the corporation, may validly attach, as a rule, only when - (1) he
assents to a patently unlawful act of the corporation, or when he is guilty of bad faith or gross

Page 285 of 845

negligence in directing its affairs, or when there is a conflict of interest resulting in damages to the
corporation, its stockholders, or other persons; (2) he consents to the issuance of watered down
stocks or who, having knowledge thereof, does not forthwith file with the corporate secretary his
written objection thereto; (3) he agrees to hold himself personally and solidarily liable with the
corporation; or (4) he is made by a specific provision of law personally answerable for his
corporate action.
Romeo Lau, as president of [petitioner] QTCI, cannot feign innocence on the existence of
these unlawful activities within the company, especially so that Collado, himself a ranking officer
of QTCI, is involved in the unlawful execution of customers orders. Lau, being the chief operating
officer, cannot escape the fact that had he exercised a modicum of care and discretion in
supervising the operations of QTCI, he could have detected and prevented the unlawful acts of
Collado and Mendoza.

Page 286 of 845

 194. Shrimp Specialist, Inc. v. Fuji-Triumph
December 7 2009
FACTS:
Shrimp Specialists and Fuji entered into a Distributorship Agreement, under which Fuji
agreed to supply prawn feeds on credit basis to Shrimp Specialists. The prawn feeds would be
used in prawn farms under Shrimp Specialists technical supervision and management. In 1987,
Shrimp Specialists began purchasing prawn feeds from Fuji and paid for them in the regular
course of business. It was alleged that the same were contaminated. When Fuji was informed
they promised to give a better quality thereof. Fuji denies that the feeds were contaminated. Fuji
asserts that Shrimp Specialists requested to put on hold the deposit of the checks due to
insufficient funds. Fuji adds that when the checks were presented for payment, the drawee bank
dishonored all the checks due to a stop-payment order
In January 1990, Ervin Lim, Fujis Vice-President and owner, and Edward Lim, Shrimp
Specialists Finance Officer, met in Ozamiz City to discuss the unpaid deliveries. After the
meeting, both agreed that Shrimp Specialists would issue another set of checks to cover the ones
issued earlier. This agreement was reduced into writing and signed by both parties on behalf of
their corporations
Fuji claims that despite repeated demands for payment, Shrimp Specialists failed to comply
with its obligation to make good the replacement checks Shrimp Specialists argues that despite the
written agreement, Fuji deposited these checks without first replacing the defective feeds or at
least informing Shrimp Specialists in advance that it would not replace the defective feeds. Thus,
Shrimp Specialists contends that it was constrained to issue another stop-payment order for these
check
Fuji filed criminal charges against the officers of Shrimp Specialists who signed the checks
for violation of the Anti-Bouncing Checks Law. The charges were all dismissed.
Shrimp Specialists and Eugene Lim elevated the case to the CA. On 28 June 2005, the CA
rendered a decision modifying the trial courts decision. The CA affirmed the trial courts decision
to hold Shrimp Specialists liable to pay Fuji P767,427 for the prawn feeds delivered plus
interests, P30,000 as attorneys fees and cost of suit. However, the CA absolved Eugene Lim from
any liability Hence this appeal.

ISSUE:
Whether the CA erred in interpreting the provision "to inform in advance in case the same
checks cannot be deposited for failure to replace the defective feeds."
Fuji presents this sole issue: whether the CA erred in dismissing the case against respondent
Eugene Lim and freeing him from solidary liability with Shrimp Specialists.

Page 287 of 845

DECISION:
The general rule is that obligations incurred by the corporation, acting through its directors,
officers, and employees, are its sole liabilities. However, solidary liability may be incurred, but
only under the following exceptional circumstances:
1. When directors and trustees or, in appropriate cases, the officers of a corporation: (a) vote for
or assent to patently unlawful acts of the corporation; (b) act in bad faith or with gross negligence
in directing the corporate affairs; (c) are guilty of conflict of interest to the prejudice of the
corporation, its stockholders or members, and other persons;
When a director or officer has consented to the issuance of watered stocks or who, having
knowledge thereof, did not forthwith file with the corporate secretary his written objection thereto;
When a director, trustee or officer has contractually agreed or stipulated to hold himself personally
and solidarily liable with the corporation; or
When a director, trustee or officer is made, by specific provision of law, personally liable for his
corporate action
In this case, none of these exceptional circumstances is present. In its decision, the trial
court failed to provide a clear ground why Eugene Lim was held solidarily liable with Shrimp
Specialists.
Hence, the petitions are denied

Page 288 of 845

 195. ASSET BUILDERS CORPORATION vs. STRONGHOLD INSURANCE
COMPANY, INC.
G.R. No. 187116 October 18, 2010
FACTS:
(Lucky Star) as part of the completion of its project to construct the ACG Commercial On
April 28, 2006, Asset Builders Corporation (ABC) entered into an agreement with Lucky Star
Drilling & Construction Corporation Complex 3 Lucky Star was to supply labor, materials, tools,
and equipment including technical supervision to drill one (1) exploratory production well on the
project site. The total contract price for the said project was P1,150,000.00. To guarantee faithful
compliance with their agreement, Lucky Star engaged respondent Stronghold which issued two
(2) bonds in favor of petitioner. The first, SURETY BOND G(16) No. 141558, dated May 9, 2006,
covers the sum of P575,000.004 or the required downpayment for the drilling work. On May 20,
2006, ABC paid Lucky Star P575,000.00 (with 2% withholding tax) as advance payment,
representing 50% of the contract price. Lucky Star, thereafter, commenced the drilling work. By
July 18, 2006, just a few days before the agreed completion date of 60 calendar days, Lucky Star
managed to accomplish only ten (10) % of the drilling work. On the same date, petitioner sent a
demand letter to Lucky Star for the immediate completion of the drilling work with a threat to
cancel the agreement and forfeit the bonds should it still fail to complete said project within the
agreed period.
On August 3, 2006, ABC sent a Notice of Rescission of Contract with Demand for Damages
to Lucky Star
ISSUE:
Whether or not Stronghold should be held liable.
RULING:
Suretyship, in essence, contains two types of relationship the principal relationship
between the obligee (petitioner) and the obligor (Lucky Star), and the accessory surety relationship
between the principal (Lucky Star) and the surety (respondent). In this arrangement, the obligee
accepts the suretys solidary undertaking to pay if the obligor does not pay. Such acceptance,
however, does not change in any material way the obligees relationship with the principal obligor.
Neither does it make the surety an active party to the principal obligee-obligor relationship. Thus,
the acceptance does not give the surety the right to intervene in the principal contract. The suretys
role arises only upon the obligors default, at which time, it can be directly held liable by the
obligee for payment as a solidary obligor.

In the case at bench, when Lucky Star failed to finish the drilling work within the agreed
time frame despite petitioners demand for completion, it was already in delay. Due to this default,
Lucky Stars liability attached and, as a necessary consequence, respondents liability under the

Page 289 of 845

surety agreement arose. In fine, respondent should be answerable to petitioner on account of Lucky
Stars non-performance of its obligation as guaranteed by the performance bond.

Finally, Article 1217 of the New Civil Code acknowledges the right of reimbursement from a co-
debtor (the principal co-debtor, in case of suretyship) in favor of the one who paid (the surety).
Thus, respondent is entitled to reimbursement from Lucky Star for the amount it may be required
to pay petitioner arising from its bonds.

Page 290 of 845

196. ESPARWA SECURITY, v. LICEO DE CAGAYAN UNIVERSITY
G.R. No. 150402 Nov 8, 2006
FACTS:
On 1 December 1997, Eparwa and LDCU, entered into a Contract for Security Services.
On 21 December 1998, 11 security guards (security guards) whom Eparwa assigned to LDCU
from 1 December 1997 to 30 November 1998, filed a complaint before the NLRC Regional
Arbitration Branch No. 10 in Cagayan de Oro City. The complaint was filed against both Eparwa
and LDCU for underpayment of salary, legal holiday pay, 13th month pay, rest day, service
incentive leave, night shift differential, overtime pay, and payment for attorneys fees.
The Labor Arbiter found that the security guards are entitled to wage differentials and premium
for holiday and rest day work. The Labor Arbiter held Eparwa and LDCU solidarily liable
pursuant to Article 109 of the Labor Code. LDCU filed an appeal before the NLRC. LDCU agreed
with the Labor Arbiters decision on the security guards entitlement to salary differential but
challenged the propriety of the amount of the award. LDCU alleged that security guards not
similarly situated were granted uniform monetary awards and that the decision did not include the
basis of the computation of the amount of the award.
ISSUE:
Is LDCU alone ultimately liable to the security guards for the wage differentials and
premium for holiday and rest day pay?
RULING:
Articles 106, 107 and 109 of the Labor Code read:Art. 106. Contractor or subcontractor.
Whenever an employer enters into a contract with another person for the performance of the
formers work, the employees of the contractor and of the latters subcontractor, if any, shall be
paid in accordance with the provisions of this Code.Article 107. Indirect employer. The
provisions of the immediately preceding Article shall likewise apply to any person, partnership,
association or corporation which, not being an employer, contracts with an independent contractor
for the performance of any work, task, job or project. Article 109. Solidary liability. The
provisions of existing laws to the contrary notwithstanding, every employer or indirect employer
shall be held responsible with his contractor or subcontractor for any violation of any provision of
this Code. For purposes of determining the extent of their civil liability under this Chapter, they
shall be considered as direct employers.

This joint and several liability of the contractor and the principal is mandated by the Labor
Code to assure compliance of the provisions therein including the statutory minimum wage
[Article 99, Labor Code]. The contractor is made liable by virtue of his status as direct employer.
The principal, on the other hand, is made the indirect employer of the contractors employees for
purposes of paying the employees their wages should the contractor be unable to pay them. This
joint and several liability facilitates, if not guarantees, payment of the workers performance of

Page 291 of 845

any work, task, job or project, thus giving the workers ample protection as mandated by the 1987
Constitution. For the security guards, the actual source of the payment of their wage differentials
and premium for holiday and rest day work does not matter as long as they are paid. This is the
import of Eparwa and LDCUs solidary liability. Creditors, such as the security guards, may
collect from anyone of the solidary debtors. Solidary liability does not mean that, as between
themselves, two solidary debtors are liable for only half of the payment.
LDCUs ultimate liability comes into play because of the expiration of the Contract for Security
Services. There is no privity of contract between the security guards and LDCU, but LDCUs
liability to the security guards remains because of Articles 106, 107 and 109 of the Labor Code.

Page 292 of 845

 197. DIMAYUGA vs. PHILIPPINE COMMERCIAL & INDUSTRIAL BANK
Division G.R. No. 42542 Aug 5, 1991
FACTS:
On February 6, 1962, petitioner borrowed from the plaintiff-respondent, the sum of ten
thousand (P10,000.00) pesos as evidenced by a promissory note executed and signed by Pedro
Tanjuatco and Carlos Dimayuga. The indebtedness was to be paid on May 7, 1962 with interest at
the rate of ten percent (10%) per annum in case of non-payment at maturity as evidenced by and
in accordance with the terms and conditions of the promissory note executed jointly and severally
by defendants.
In the aforementioned promissory note, Carlos Dimayuga bound himself to pay jointly and
severally with Pedro Tanjuatco interest at the rate of 10% per annum on the said amount of
P10,000.00 until fully paid. Moreover, both undertook to "jointly and severally authorize the
respondent Philippine Commercial and Industrial Bank, at its option to apply to the payment of
this note any and all funds, securities or other real or personal property of value which hands (sic)
on deposit or otherwise belonging to anyone or all of us. Upon the default of the promissors to
pay, a complaint was filed on July 11, 1969 by the PCIB for some of money.
Defendant Carlos Dimayuga, however, had remitted to the plaintiff -respondent the amount
totalling P4,000.00 by way of partial payments made from August 1, 1969 to May 7, 1970 as
evidenced by corresponding receipts thereto. These payments were nevertheless applied to past
interests, charges and partly on the principal. On May 28, 1974, the trial court rendered a decision
holding defendants jointly and severally liable to pay the plaintiff the sum of P9,139.60 with
interest at 10% per annum until fully paid plus P913.96 as attorneys' fees.
On July 11, 1974, petitioner filed a motion alleging that since Pedro Tanjuatco died on December
23, 1973, the money claim of the respondents should be dismissed and prosecuted against the
estate of the late Pedro Tanjuatco. On June 22, 1974, the trial court denied the motion for lack of
merit.Not satisfied, the petitioner appealed to the respondent court. The Court of Appeals
dismissed the appeal. Hence, this petition.
ISSUE:
Whether the position of the petitioner that Pedro Tanjuatco having died on December 23,
1973, the money claim of PCIB should be dismissed and prosecuted against the estate of the late
Tanjuatco.
RULING:
From the evidence presented, there can be no dispute that Carlos Dimayuga bound himself
jointly and severally with Pedro C. Tanjuatco, now deceased, to pay the obligation with PCIB in
the amount of P10,000.00 plus 10% interest per annum. In addition, as above stated, in case of
non-payment, they undertook among others to jointly and severally authorize respondent bank, at
its option to apply to the payment of this note, any and all funds, securities, real or personal
properties, etc. belonging to anyone or all of them. Otherwise stated, the promissory note in

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question provides in unmistakable language that the obligation of petitioner Dimayuga is joint and
several with Pedro C. Tanjuatco.
It is well settled under the law and jurisprudence that when the obligation is solidary, the creditor
may bring his action in toto against the debtors obligated in solidum. As expressly allowed by
Article 1216 of the Civil Code, the creditor may proceed against any one of the solidary debtors
or some or all of them simultaneously. "Hence, there is nothing improper in the creditor's filing of
an action against the surviving solidary debtors alone, instead of instituting a proceeding for the
settlement of the estate of the deceased debtor wherein his claim could be filed." The notice is
undoubtedly left to the solidary creditor to determine against whom he will enforce collection.
Thus, the appeal interposed by petitioner-appellant is dismissed for lack of merit and the decision
of the Court of First Instance is Affirmed in toto.

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198. CERNA VS CA
GR No. L-48359 March 30, 1993
FACTS:
On or about October 16, 1972, Celerino Delgado (Delgado) and Conrad Leviste (Leviste)
entered into a loan agreement which was evidenced by a promissory note worded as follows:
FOR VALUE RECEIVED, I, CELERINO DELGADO, with postal address at 98 K-11 St., Kamias
Rd., Quezon City, promise to pay to the order of CONRAD C. LEVISTE, NINETY (90) DAYS
after date, at his office at 215 Buendia Ave., Makati, Rizal, the total sum of SEVENTEEN
THOUSAND FIVE HUNDRED (P17,500.00) PESOS, Philippine Currency, without necessity of
demand, with interest at the rate of TWELVE (12%) PERCENT per annum
On the same date, Delgado executed a chattel mortgage over a Willy's jeep owned by him. And
acting as the attorney-in-fact of herein petitioner, Manolo P. Cerna (petitioner), he also mortgaged
a "Taunus" car owned by the latter. The period lapsed without Delgado paying the loan. This
prompted Leviste to file a collection suit docketed as Civil Case No. 17507 with the Court of First
Instance of Rizal, Branch XXII against Delgado and petitioner as solidary debtors. The Court of
Appeals held that petitioner and Delgado were solidary debtors.
ISSUE:
Are petitioner and Delgado solidary debtors?
RULING:
Only Delgado signed the promissory note and accordingly, he was the only one bound by
the contract of loan. Nowhere did it appear in the promissory note that petitioner was a co-debtor.
The law is clear that "(c)ontracts take effect only between the parties. But by some stretch of the
imagination, petitioner was held solidarily liable for the debt allegedly because he was a co-
mortgagor of the principal debtor, Delgado. This ignores the basic precept that "(t)here is a solidary
liability only when the obligation expressly so states, or when the law or the nature of the obligation
requires solidarity." We have already stated that the contract of loan, as evidenced by the
promissory note, was signed by Delgado only. Petitioner had no part in the said contract. Thus,
nowhere could it be seen from the agreement that petitioner was solidarily bound with Delgado
for the payment of the loan.

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198. CERNA VS CA
GR No. L-48359 March 30, 1993
FACTS:
On or about October 16, 1972, Celerino Delgado (Delgado) and Conrad Leviste (Leviste)
entered into a loan agreement which was evidenced by a promissory note worded as follows:
FOR VALUE RECEIVED, I, CELERINO DELGADO, with postal address at 98 K-11 St., Kamias
Rd., Quezon City, promise to pay to the order of CONRAD C. LEVISTE, NINETY (90) DAYS
after date, at his office at 215 Buendia Ave., Makati, Rizal, the total sum of SEVENTEEN
THOUSAND FIVE HUNDRED (P17,500.00) PESOS, Philippine Currency, without necessity of
demand, with interest at the rate of TWELVE (12%) PERCENT per annum
On the same date, Delgado executed a chattel mortgage over a Willy's jeep owned by him. And
acting as the attorney-in-fact of herein petitioner, Manolo P. Cerna (petitioner), he also mortgaged
a "Taunus" car owned by the latter. The period lapsed without Delgado paying the loan. This
prompted Leviste to file a collection suit docketed as Civil Case No. 17507 with the Court of First
Instance of Rizal, Branch XXII against Delgado and petitioner as solidary debtors. The Court of
Appeals held that petitioner and Delgado were solidary debtors.
ISSUE:
Are petitioner and Delgado solidary debtors?
RULING:
Only Delgado signed the promissory note and accordingly, he was the only one bound by
the contract of loan. Nowhere did it appear in the promissory note that petitioner was a co-debtor.
The law is clear that "(c)ontracts take effect only between the parties. But by some stretch of the
imagination, petitioner was held solidarily liable for the debt allegedly because he was a co-
mortgagor of the principal debtor, Delgado. This ignores the basic precept that "(t)here is a solidary
liability only when the obligation expressly so states, or when the law or the nature of the obligation
requires solidarity." We have already stated that the contract of loan, as evidenced by the
promissory note, was signed by Delgado only. Petitioner had no part in the said contract. Thus,
nowhere could it be seen from the agreement that petitioner was solidarily bound with Delgado
for the payment of the loan.

Page 296 of 845

 199. NAZARENO VS. COURT OF APPEALS
G.R. No. 131641, February 23, 2000

FACTS:
Maximino Nazareno, Sr. and Aurea Poblete were husband and wife. Aurea died on April
15, 1970, while Maximino, Sr. died on December 18, 1980. After the death of Maximino, Sr.,
Romeo filed an intestate case in the Court of First Instance of Cavite, Branch XV, where the case
was docketed as Sp. Proc. No. NC-28. Upon the reorganization of the courts in 1983, the case was
transferred to the Regional Trial Court of Naic, Cavite. Romeo was appointed administrator of his
fathers estate. In the course of the intestate proceedings, Romeo discovered that his parents had
executed several deeds of sale conveying a number of real properties in favor of his sister,
Natividad. One of the deeds involved six lots in Quezon City which were allegedly sold by
Maximino, Sr., with the consent of Aurea, to Natividad on January 29, 1970 for the total amount
of P47,800.00.
ISSUE:
Whether or not the Deed of Absolute of Sale can be equated as a divisible obligation.
HELD:
The Supreme court held that the Deed of Absolute Sale is an indivisible contract founded
on an indivisible obligation. As such, it being indivisible, it can not be annulled by only one of
them. And since this suit was filed only by the estate of Maximino A. Nazareno, Sr. without
including the estate of Aurea Poblete, the present suit must fail. The estate of Maximino A.
Nazareno, Sr. can not cause its annulment while its validity is sustained by the estate of Aurea
Poblete. An obligation is indivisible when it cannot be validly performed in parts, whatever may
be the nature of the thing which is the object thereof. The indivisibility refers to the prestation and
not to the object. The Deed of Sale of January 29, 1970 supposedly conveyed the six lots to
Natividad. The obligation is clearly indivisible because the performance of the contract cannot be
done in parts, otherwise the value of what is transferred is diminished. Petitioners are mistaken in
basing the indivisibility of a contract on the number of obligors. In any case, if petitioners only
point is that the estate of Maximino, Sr. alone cannot contest the validity of the Deed of Sale
because the estate of Aurea has not yet been settled, the argument would nonetheless be without
merit. The validity of the contract can be questioned by anyone affected by it. A void contract is
inexistent from the beginning. Hence, even if the estate of Maximino, Sr. alone contests the validity
of the sale, the outcome of the suit will bind the estate of Aurea as if no sale took place at all.

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 200. ALONZO VS SAN JUAN
GR No. 137549 February 11, 2005
FACTS:

A complaint for recovery of possession was filed by Aurelio P. Alonzo and Teresita A. Sison
against Jaime and Perlita San Juan docketed as Civil Case No. Q-96-29415 before the Regional
Trial Court (RTC) of Quezon City, Branch 77. In their Complaint, plaintiffs alleged that they are
the registered owners of a parcel of land. At around June of 1996, plaintiffs discovered that a
portion on the left side of the said parcel of land with an area of one hundred twenty-five (125)
square meters, more or less, was occupied by the defendants for more than a year, without their
prior knowledge or consent. A demand letter was sent to the defendants in August of 1996
requiring them to vacate the property but they refused to comply; hence, the filing of the
Complaint. During the pendency of the case, the parties agreed to enter into a Compromise
Agreement which the trial court approved in a Judgment.

Alleging that they failed to abide by the provisions of the Compromise Agreement by their
failure to pay the amounts due thereon, plaintiffs sent a letter demanding that the defendants vacate
the premises. Plaintiffs subsequently filed an Amended Motion for Execution. Acting on the
motion, the trial court issued its Order dated 11 August 1998 denying the motion.
ISSUE:
Is the RTC decision correct?
RULING:
In herein case, the respondents failed to discharge their burden of proving payment. Even
assuming that payments were made, it has not been shown to the full satisfaction of this Court
whether the payments were made specifically to satisfy respondents obligation under the
Compromise Agreement, nor were the circumstances under which the payments were made
explained, taking into consideration the conditions of the Compromise Agreement.
Respondents contract with the petitioners have the force of law between them.
Respondents are thus bound to fulfill what has been expressly stipulated therein. Items 11 and 12
of the Compromise Agreement provided, in clear terms, that in case of failure to pay on the part
of the respondents, they shall vacate and surrender possession of the land that they are occupying
and the petitioners shall be entitled to obtain immediately from the trial court the corresponding
writ of execution for the ejectment of the respondents. This provision must be upheld, because the
Agreement supplanted the Complaint itself. When the parties entered into a Compromise
Agreement, the original action for recovery of possession was set aside and the action was changed
to a monetary obligation. Once approved judicially, the Compromise Agreement can not and must
not be disturbed except for vices of consent or forgery.

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 201. DAVID VS CA
GR No. 115821 October 13, 1999
FACTS:
The Regional Trial Court of Manila, Branch 27, with Judge Ricardo Diaz, then presiding,
issued a writ of attachment over real properties covered by TCT Nos. 80718 and 10289 of private
respondents. In his Decision dated October 31, 1979, Judge Diaz ordered private respondent
Afable to pay petitioner P66,500.00 plus interest from July 24, 1974, until fully paid, plus
P5,000.00 as attorney's fees, and to pay the costs of suit.
On June 20, 1980, however, Judge Diaz issued an Order amending said Decision, so that
the legal rate of interest should be computed from January 4, 1966, instead of from July 24, 1974.
The amended Decision in the decretal portion reads:
WHEREFORE, judgment is hereby rendered against the defendant, Valentin Afable
Jr., ordering him to pay to the plaintiff the sum of P66,500.00 plus the legal rate of interest thereon
from January 4, 1966 up to the time the same is fully paid plus the amount of P5,000.00 as and for
attorney's fees and to pay the costs of the suit." ordering the private respondent Afable to pay the
petitioner the sum of P66,500.00 plus the legal rate of interest thereon from July 24, 1974, plus the
amount of P5,000.00 as attorney's fees and to pay the costs of suit.
The CA affirmed the judgment. The affirmation now comes to review before the SC.
ISSUE:
Should the payment of interest be simple or compound?
RULING:
As therein held, Article 2212 contemplates the presence of stipulated or conventional
interest which has accrued when demand was judicially made. In cases where no interest had been
stipulated by the parties, as in the case of Philippine American Accident Insurance, no accrued
conventional interest could further earn interest upon judicial demand.
When the judgment sought to be executed ordered the payment of simple "legal interest"
only and said nothing about payment of compound interest, but the respondent judge orders
payment of compound interest, then, he goes beyond the confines of a judgment which had become
final.

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 202. REPUBLIC OF THE PHILIPPINES vs.THI THU THUY T. DE GUZMAN
G.R. No. 175021 June 15, 2011
FACTS:

Respondent is a contractor accredited by the PNP for the supply of office and construction
materials and equipment, and for the delivery of various services such as printing and rental, repair
of various equipment, and renovation of buildings, facilities, vehicles, tires, and spare parts. On
December 8, 1995, the PNP Engineering Services (PNPES), released a Requisition and Issue
Voucher for the acquisition of various building materials amounting to (P2,288,562.60) for the
construction of a four-storey condominium building with roof deck at Camp Crame, Quezon City.
Respondent averred that on December 11, 1995, MGM and petitioner, represented by the PNP,
through its chief, executed a Contract of Agreement8 (the Contract) wherein MGM, for the price
of P2,288,562.60, undertook to procure and deliver to the PNP the construction materials itemized
in the purchase order attached to the Contract. Respondent claimed that after the PNP Chief
approved the Contract and purchase order, MGM, on March 1, 1996, proceeded with the delivery
of the construction materials, as evidenced by Delivery Receipts and Sales Invoices and the
"Report of Public Property Purchase" issued by the PNPs Receiving and Accounting Officers to
their Internal Auditor Chief. Respondent asseverated that following the PNPs inspection of the
delivered materials on March 4, 1996, the PNP issued two Disbursement Vouchers; one in the
amount of P2,226,147.26 in favor of MGM, and the other, in the amount of P62,415.34,
representing the three percent (3%) withholding tax, in favor of the BIR.
ISSUE:
What is the proper interest to be awarded?
RULING:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan
or forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded.
In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from
default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article
1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on
the amount of damages awarded may be imposed at the discretion of the court at the rate of 6%
per annum. No interest, however, shall be adjudged on unliquidated claims or damages except
when or until the demand can be established with reasonable certainty. Accordingly, where the
demand is established with reasonable certainty, the interest shall begin to run from the time the
claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot
be so reasonably established at the time the demand is made, the interest shall begin to run only
from the date the judgment of the court is made (at which time the quantification of damages may

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be deemed to have been reasonably ascertained). The actual base for the computation of legal
interest shall, in any case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate
of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per
annum from such finality until its satisfaction, this interim period being deemed to be by then an
equivalent to a forbearance of credit.84

Since the obligation herein is for the payment of a sum of money, the legal interest rate to be
imposed, under Article 2209 of the Civil Code is six percent (6%) per annum.

Page 301 of 845

 203. Marques vs. Far East Bank
G.R. No. 171379, January 10, 2011
Facts:
Maxilite Technologies, Inc. (Maxilite) is a domestic corporation engaged in the
importation and trading of equipment for energy-efficiency systems. Jose N. Marques (Marques)
is the President and controlling stockholder of Maxilite. Far East Bank and Trust Co. (FEBTC) is
a local bank which handled the financing and related requirements of Marques and Maxilite.
Marques and Maxilite maintained accounts with FEBTC. Accordingly, FEBTC financed
Maxilites capital and operational requirements through loans secured with properties of
Marques under the latters name. Far East Bank Insurance Brokers, Inc. (FEBIBI) is a local
insurance brokerage corporation while Makati Insurance Company is a local insurance company.
Both companies are subsidiaries of FEBTC. On 17 June 1993, Maxilite and Marques entered into
a trust receipt transaction with FEBTC, in the sum of US$80,765.00, for the shipment of various
high-technology equipments from the United States, with the merchandise serving as collateral.
The foregoing importation was covered by a trust receipt document signed by Marques on behalf
of Maxilite. Sometime in August 1993, FEBIBI, upon the advice of FEBTC, facilitated the
procurement and processing from Makati Insurance Company of four separate and independent
fire insurance policies over the trust receipted merchandise. Finding that Maxilite failed to pay
the insurance premium in the sum of P8,265.60 for Insurance Policy No. 1024439 covering the
period 24 June 1994 to 24 June 1995, FEBIBI sent written reminders to FEBTC, dated 19
October 1994, 24 January 1995, and 6 March 1995, to debit Maxilites account. On 24 and 26
October 1994, Maxilite fully settled its trust receipt account. On 9 March 1995, a fire gutted the
Aboitiz Sea Transport Building along M.J. Cuenco Avenue, Cebu City, where Maxilites office
and warehouse were located. As a result, Maxilite suffered losses amounting to at least P2.1
million, which Maxilite claimed against the fire insurance policy with Makati Insurance
Company. Makati Insurance Company denied the fire loss claim on the ground of non-payment
of premium. FEBTC and FEBIBI disclaimed any responsibility for the denial of the claim.
Issue:
Whether FEBTC, FEBIBI and Makati Insurance Company are jointly and severally liable
to pay respondents the full coverage of the subject insurance policy?
Held:
Contrary to Maxilites and Marques view, FEBTC is solely liable for the payment of the
face value of the insurance policy and the monetary awards stated in the Court of Appeals
decision. Suffice it to state that FEBTC, FEBIBI, and Makati Insurance Company are
independent and separate juridical entities, even if FEBIBI and Makati Insurance Company are
subsidiaries of FEBTC. Absent any showing of its illegitimate or illegal functions, a subsidiarys
separate existence shall be respected, and the liability of the parent corporation as well as the
subsidiary shall be confined to those arising in their respective business. Besides, the records are
bereft of any evidence warranting the piercing of corporate veil in order to treat FEBTC,

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FEBIBI, and Makati Insurance Company as a single entity. Likewise, there is no evidence
showing FEBIBIs and Makati Insurance Companys negligence as regards the non-payment of
the insurance premium.

Page 303 of 845

 204. PRISMA CONSTRUCTION & DEVELOPMENT CORPORATION
vs.MENCHAVEZ
G.R. No. 160545
March 9, 2010
FACTS:

On December 8, 1993, Pantaleon, the President and Chairman of the Board of PRISMA,
obtained a P1,000,000.00 loan from the respondent, with a monthly interest of P40,000.00
payable for six months, or a total obligation of P1,240,000.00 to be paid within six (6) months.
To secure the payment of the loan, Pantaleon issued a promissory note. As of January 4, 1997,
the petitioners had already paid a total of P1,108,772.00. However, the respondent found that the
petitioners still had an outstanding balance of P1,364,151.00 as of January 4, 1997, to which it
applied a 4% monthly interest. Thus, on August 28, 1997, the respondent filed a complaint for
sum of money with the RTC to enforce the unpaid balance, plus 4% monthly interest,
P30,000.00 in attorneys fees, P1,000.00 per court appearance and costs of suit.

ISSUE:
What is the proper interest rate to be awarded?

RULING:
In the present case, the respondent issued a check for P1,000,000.00. In turn, Pantaleon, in his
personal capacity and as authorized by the Board, executed the promissory note quoted above.
Thus, the P1,000,000.00 loan shall be payable within six (6) months, or from January 8, 1994 up
to June 8, 1994. During this period, the loan shall earn an interest of P40,000.00 per month, for a
total obligation of P1,240,000.00 for the six-month period. We note that this agreed sum can be
computed at 4% interest per month, but no such rate of interest was stipulated in the promissory
note; rather a fixed sum equivalent to this rate was agreed upon.

Article 1956 of the Civil Code specifically mandates that "no interest shall be due unless it has
been expressly stipulated in writing." Under this provision, the payment of interest in loans or
forbearance of money is allowed only if: (1) there was an express stipulation for the payment of
interest; and (2) the agreement for the payment of interest was reduced in writing. The
concurrence of the two conditions is required for the payment of interest at a stipulated rate.
Thus, we held in Tan v. Valdehueza and Ching v. Nicdao that collection of interest without any
stipulation in writing is prohibited by law.

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Applying this provision, we find that the interest of P40,000.00 per month corresponds only to
the six (6)-month period of the loan, or from January 8, 1994 to June 8, 1994, as agreed upon by
the parties in the promissory note. Thereafter, the interest on the loan should be at the legal
interest rate of 12% per annum, consistent with our ruling in Eastern Shipping Lines, Inc. v.
Court of Appeals:

When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be
computed from default, i.e., from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code."

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 205. THERESA MACALALAG vs. PEOPLE OF THE PHILIPPINES
G.R. No. 164358
December 20, 2006

FACTS:

On two separate occasions, particularly on 30 July 1995 and 16 October 1995, petitioner
Theresa Macalalag obtained loans from Grace Estrella (Estrella), each in the amount of
P100,000.00, each bearing an interest of 10% per month. Macalalag consistently paid the
interests. Finding the interest rates so burdensome, Macalalag requested Estrella for a reduction
of the same to which the latter agreed. On 16 April 1996 and 1 May 1996, Macalalag executed
Acknowledgment/Affirmation Receipts promising to pay Estrella the face value of the loans in
the total amount of P200,000.00 within two months from the date of its execution plus 6%
interest per month for each loan. Under the two Acknowledgment/Affirmation Receipts, she
further obligated herself to pay for the two (2) loans the total sum of P100,000.00 as liquidated
damages and attorney's fees in the total sum of P40,000.00 as stipulated by the parties the
moment she breaches the terms and conditions thereof.

As security for the payment of the aforesaid loans, Macalalag issued two Philippine
National Bank (PNB) Checks on 30 June 1996, each in the amount of P100,000.00, in favor of
Estrella. However, the said checks were dishonored for the reason that the account against which
the same was drawn was already closed. Estrella sent a notice of dishonor and demand to make
good the said checks to Macalalag, but the latter failed to do so. Hence, Estrella filed two
criminal complaints for Violation of Batas Pambansa Blg. 22 before the Municipal Trial Court in
Cities (MTCC) of Bacolod City.The MTCC found the accused Theresa Macalalag guilty beyond
reasonable doubt of the crime charged and is likewise ordered to pay as civil indemnity the total
amount of P200,000.00 with interest at the legal rate from the time of the filing of the
informations until the amount is fully paid; less whatever amount was thus far paid and validly
deducted from the principal sum originally claimed. On appealed, the Court of Appeals, affirmed
the RTC and the MTCC decisions with modification to the effect that accused was convicted
only of one (1) count of Violation of Batas Pambansa Blg. 22.
ISSUE:
Whether petitioner`s payments over and above the value of the said checks would free her from
criminal liability.
RULING:

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 The Court argued that, Even if we agree with petitioner Macalalag that the interests on
her loans should not be imputed to the face value of the checks she issued, petitioner Macalalag
is still liable for Violation of Batas Pambansa Blg. 22. Petitioner Macalalag herself declares that
before the institution of the two cases against her, she has made a total payment of P156,000.00.
Applying this amount to the first check (No. C-889835), what will be left is P56,000.00, an
amount insufficient to cover her obligation with respect to the second check. As stated above,
when Estrella presented the checks for payment, the same were dishonored on the ground that
they were drawn against a closed account. Despite notice of dishonor, petitioner Macalalag failed
to pay the full face value of the second check issued.

Only a full payment of the face value of the second check at the time of its presentment
or during the five-day grace period15 could have exonerated her from criminal liability. A
contrary interpretation would defeat the purpose of Batas Pambansa Blg. 22, that of safeguarding
the interest of the banking system and the legitimate public checking account user,16 as the
drawer could very well have himself exonerated by the mere expediency of paying a minimal
fraction of the face value of the check. Hence, the Petition is denied.

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 206. Tan vs. Court f Appeals
G.R. No. 116285, October 19, 2001
367 SCRA 571
FACTS:
On May 14, 1978, petitioner Antonio Tan obtained two (2) loans in the total principal
amount of four (4) million pesos from respondent Cultural Center of the Philippines (CCP),
evidenced by 2 promissory notes with maturity dates on May 14, 1979 and July 6, 1979,
respectively. Petitioner defaulted but after a few partial payments he had the loans restructured
by respondent CCP, and petitioner accordingly executed a promissory note on August 31, 1979
in the amount of P3,411,421.32 payable in five (5) installments. Petitioner Tan, however, failed
to pay any of the supposed installments and again offered another mode of paying restructured
loan which respondent CCP refused to consent.
On May 30, 1984, respondent, thru counsel, wrote petitioner demanding the full
payment, within ten (10) days, from receipt of the letter, of the latters restructured loan which as
of April 30, 1984 amounted to P6, 088,735.03.
On August 29, 1984, respondent CCP filed with the RTC of Manila a complaint for a
collection of a sum of money. Eventually, petitioner was ordered to pay said amount, with 25%
thereof as attorneys fees and P500, 000.00 as exemplary damages. The Court of Appeals, on
appeal, reduced the attorneys fees to 5% of the principal amount to be collected from petitioner
and deleted the exemplary damages.
Still unsatisfied with the decision, petitioner comes to this Court seeking for the deletion
of the attorneys fees and the reduction of the penalties.
ISSUE:
The issue is whether or not interests and penalties may be both awarded in the case at bar.
HELD:
YES. Article 1226 of the New Civil Code provides that in obligations with a penal
clause, the penalty shall substitute the indemnity for damages and the payment of interests in
case of non-compliance, if there is no stipulation to the contrary. Nevertheless, damages shall be
paid if the obligor refuses to pay the penalty or is guilty of fraud in the fulfillment of the
obligation. The penalty may be enforced only when it is demandable in accordance with the
provisions of this Code. In the case at bar, the promissory note expressly provides for the
imposition of both interest and penalties in case of default on the part of the petitioner in the
payment of the subject restructured loan, and since the said stipulation has the force of law
between the parties and does not appear to be inequitable or unjust, the said stipulation must be
respected.

Page 308 of 845

 207. EASTERN SHIPPING INES, INC vs. HON. COURT OF APPEALS
G.R. No. 97412 Jul 12, 1994
FACTS:
On December 4, 1981, two fiber drums of riboflavin were shipped from Yokohama,
Japan for delivery vessel `SS EASTERN COMET' owned by defendant Eastern Shipping Lines
under Bill of Lading No. YMA-8 (The shipment was insured under plaintiff's Marine Insurance
Policy No. 81/01177 for P36,382,466.38.
Upon arrival of the shipment in Manila on December 12, 1981, it was discharged unto the
custody of defendant Metro Port Services, Inc. The latter excepted to one drum, said to be in bad
order, which damage was unknown to plaintiff. On January 7, 1982 defendant Allied Brokerage
Corporation received the shipment from defendant Metro Port Service, Inc., one drum opened
and without. On January 8 and 14, 1982, defendant Allied Brokerage Corporation made
deliveries of the shipment to the consignees' warehouse. The latter excepted to one drum which
contained spillages, while the rest of the contents was adulterated/fake Plaintiff contended that
due to the losses/damage sustained by said drum, the consignee suffered losses totaling
P19,032.95, due to the fault and negligence of defendants. Claims were presented against
defendants who failed and refused to pay the same "As a consequence of the losses sustained,
plaintiff was compelled to pay the consignee P19,032.95 under the aforestated marine insurance
policy, so that it became subrogated to all the rights of action of said consignee against
defendants.
ISSUE:
a.)Whether the payment of legal interest on an award for loss or damage is to be computed from
the time the complaint is filed or form the date the decision appealed from is rendered; and
b)Whether the applicable rate of interest is twelve percent or six percent.
HELD:
When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or
quasi-delicts is breached, the contravenor can be held liable for damages. With regard
particularly to an award of interest in the concept of actual and compensatory damages, the rate
of interest, as well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan
or forbearance of money, the interest due should be that which may have been stipulated in
writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be
computed from default, i.e., from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 23 of the Civil Code.
2. When a obligation, not constituting a loan or forbearance of money, is breached, an interest on
the amount of damages awarded may be imposed at the discretion of the court at the rate of 6%
per annum. No interest, however, shall be adjudged on unliquidated claims or damages except

Page 309 of 845

when or until the demand can be established with reasonable certainty. Accordingly, where the
demand is established with reasonable certainty, the interest shall begin to run from the time the
claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot
be so reasonably established at the time the demand is made, the interest shall begin to run only
from the date of the judgment of the court is made (at which time the quantification of damages
may be deemed to have been reasonably ascertained).
3. When the judgment of the court awarding a sum of money becomes final and executory, the
rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be
12% per annum from such finality until its satisfaction, this interim period being deemed to be
by then an equivalent to a forbearance of credit.

Page 310 of 845

 208. PCI vs Ng Shueng Ngor
A.M. No. P-05-1973. March 18, 2005
FACTS:
Complainant EPCIB is the defendant in Civil Case No. CEB-26983 before the Regional
Trial Court (RTC), Branch 16, Cebu City, entitled, Ng Sheung Ngor, doing business under the
name and style Ken Marketing, Ken Appliance Division, Inc. and Benjamin Go, Plaintiffs, vs.
Equitable PCI Bank, Aimee Yu and Ben Apas, Defendants for Annulment and/or Reformation
of Documents and Contracts.
Respondents Antonio A. Bellones and Generoso B. Regalado are the sheriffs in Branches 9 and
16, respectively, of the RTC of Cebu City.
For garnishing accounts maintained by Equitable PCI Bank, Inc. (EPCIB) at Citibank,
N.A., and Hongkong and Shanghai Bank Corporation (HSBC), allegedly in violation of Section
9(b) of Rule 39 of the Rules of Court, a complaint for grave abuse of authority was filed by Atty.
Paulino L. Yusi against Sheriffs Antonio A. Bellones and Generoso B. Regalado. There was an
offer of other real property by petitioner.
ISSUE:
Did respondents violate the Rules of Court?
RULING:
By serving notices of garnishment on Citibank, N.A., HSBC and PNB, Sheriff Regalado
violated EPCIBs right to choose which property may be levied upon to be sold at auction for the
satisfaction of the judgment debt. Thus, it is clear that when EPCIB offered its real properties, it
exercised its option because it cannot immediately pay the full amount stated in the writ of
execution and all lawful fees in cash, certified bank check or any other mode of payment
acceptable to the judgment obligee.

In the case at bar, EPCIB cannot immediately pay by way of Managers Check so it
exercised its option to choose and offered its real properties. With the exercise of the option,
Sheriff Regalado should have ceased serving notices of garnishment and discontinued their
implementation. This is not true in the instant case. Sheriff Regalado was adamant in his
posture even if real properties have been offered which were sufficient to satisfy the judgment
debt.

Page 311 of 845

 209. NEW SAMPAGUITA BUILDERS CONSTRUCTION, INC. (NSBCI) V.
PHILIPPINE NATIONAL BANK
G.R. No. 148753 2004 Jul 30
FACTS:
On February 11, 1989, Board Resolution No. 05, Series of 1989 was approved by
Petitioner NSBCI authorizing the company to x x x apply for or secure a commercial loan with
the PNB in an aggregate amount of P8.0M, under such terms agreed by the Bank and the NSBCI,
using or mortgaging the real estate properties registered in the name of its President and
Chairman of the Board Petitioner Eduardo R. Dee as collateral; and authorizing petitioner-
spouses to secure the loan and to sign any and all documents which may be required by
Respondent PNB, and that petitioner-spouses shall act as sureties or co-obligors who shall be
jointly and severally liable with Petitioner NSBCI for the payment of any [and all] obligations.
On August 15, 1989, Resolution No. 77 was approved by granting the request of Respondent
PNB thru its Board NSBCI for an P8 Million loan broken down into a revolving credit line of
P7.7M and an unadvised line of P0.3M for additional operating and working capital to mobilize
its various construction projects.
The loan of Petitioner NSBCI was secured by a first mortgage on the following: a)
three (3) parcels of residential land located at Mangaldan, Pangasinan; b) six (6) parcels of
residential land situated at San Fabian, Pangasinan; and c) a residential lot and improvements
thereon located at Mangaldan. The loan was further secured by the joint and several signatures
of Petitioners Eduardo Dee and Arcelita Marquez Dee, who signed as accommodation-
mortgagors since all the collaterals were owned by them and registered in their names.
Moreover Petitioner NSBCI executed three promissory notes. In addition, petitioner corporation
also signed the Credit Agreement dated August 31, 1989 relating to the revolving credit line of
P7.7 Million x x x and the Credit Agreement dated September 5, 1989 to support the unadvised
line of P300,000.00.
On August 31, 1989, petitioner-spouses executed a Joint and Solidary Agreement
(JSA) in favor of Respondent PNB unconditionally and irrevocably binding themselves to be
jointly and severally liable with the borrower for the payment of all sums due and payable to the
Bank under the Credit Document. Later on, Petitioner NSBCI failed to comply with its
obligations under the promissory notes.
On June 18, 1991, Petitioner Eduardo R. Dee on behalf of Petitioner NSBCI sent a
letter to the Branch Manager of the PNB Dagupan Branch requesting for a 90-day extension for
the payment of interests and restructuring of its loan for another term. Subsequently, NSBCI
tendered payment to Respondent PNB of three (3) checks aggregating P1,000,000.00.
In a meeting held on August 12, 1991, Respondent PNBs representative, Mr. Rolly Cruzabra,
was informed by [Petitioner] Eduardo Dee of his intention to remit to Respondent PNB post-
dated checks covering interests, penalties and part of the loan principals of his due account.

Page 312 of 845

 On August 22, 1991, Respondent banks Crispin Carcamo wrote Petitioner Eduardo
Dee, informing him that Petitioner NSBCIs proposal was acceptable, provided the total payment
should be P4,128,968.29 that would cover the amount of P1,019,231.33 as principal,
P3,056,058.03 as interests and penalties, and P53,678.93 for insurance[,] with the issuance of
post-dated checks to be dated not later than November 29, 1991.
On September 6, 1991, Petitioner Eduardo Dee wrote the PNB Branch Manager
reiterating his proposals for the settlement of Petitioner NSBCIs past due loan account
amounting to P7,019,231.33. Petitioner Eduardo Dee later tendered four (4) post-dated
Interbank checks aggregating P1,111,306.67 in favor of Respondent PNB
Upon presentment, however, x x x check nos. 03500087 and 03500088 dated September 29 and
October 29, 1991 were dishonored by the drawee bank and returned due to a stop payment
order from petitioners.
On November 12, 1991, PNBs Mr. Carcamo wrote Petitioner Eduardo Dee informing
him that unless the dishonored checks were made good, said PNB branch shall recall its
recommendation to the Head Office for the restructuring of the loan account and refer the matter
to its legal counsel for legal action. Petitioners did not heed respondents warning and as a result,
the PNB Dagupan Branch sent demand letters to Petitioner NSBCI at its office address at 1611
ERDC Building, E. Rodriguez Sr. Avenue, Quezon City, asking it to settle its past due loan
account.
Petitioners nevertheless failed to pay their loan obligations within the time frame
given them and as a result, Respondent PNB filed with the Provincial Sheriff of Pangasinan at
Lingayen a Petition for Sale
The sheriff foreclosed the real estate mortgage and sold at public auction the mortgaged
properties of petitioner-spouses, with Respondent PNB being declared the highest bidder for the
amount of P10,334,000.00. Copies of the Sheriffs Certificate of Sale were sent by registered
mail to petitioner corporations address petitioner-spouses address.
On April 6, 1992, the PNB Dagupan Branch Manager sent a letter to petitioners at their
address informing them that the properties securing their loan account had been sold at public
auction, that the Sheriffs Certificate of Sale had been registered with the Registry of Deeds of
Pangasinan and that a period of one (1) year therefrom was granted to them within which to
redeem their properties. Petitioners failed to redeem their properties within the one-year
redemption period and so Respondent PNB executed a Deed of Absolute Sale consolidating title
to the properties in its name.
Respondent PNB informed Petitioner NSBCI that the proceeds of the sale conducted on
February 26, 1992 were not sufficient to cover its total claim amounting to P12,506,476.43 and
thus demanded from the latter the deficiency of P2,172,476.43 plus interest and other charges
until the amount was fully paid. Petitioners refused to pay the above deficiency claim which
compelled Respondent PNB to institute the instant Complaint for the collection of its deficiency
claim.

Page 313 of 845

ISSUE:
Whether or not the escalation clause is valid and whether or not it is violative of the
principle of mutuality of contracts.
RULING:
In each drawdown, the Promissory Notes specified the interest rate to be charged: 19.5
percent in the first, and 21.5 percent in the second and again in the third. However, a uniform
clause therein permitted respondent to increase the rate within the limits allowed by law at any
time depending on whatever policy it may adopt in the future x x x, without even giving prior
notice to petitioners. The Court holds that petitioners accessory duty to pay interest did not give
respondent unrestrained freedom to charge any rate other than that which was agreed upon. No
interest shall be due, unless expressly stipulated in writing. It would be the zenith of farcicality
to specify and agree upon rates that could be subsequently upgraded at whim by only one party
to the agreement.
The unilateral determination and imposition of increased rates is violative of
the principle of mutuality of contracts ordained in Article 1308 of the Civil Code. One-sided
impositions do not have the force of law between the parties, because such impositions are not
based on the parties essential equality.
Although escalation clauses are valid in maintaining fiscal stability and retaining the
value of money on long-term contracts, giving respondent an unbridled right to adjust the interest
independently and upwardly would completely take away from petitioners the right to assent to
an important modification in their agreement and would also negate the element of mutuality in
their contracts. The clause cited earlier made the fulfillment of the contracts dependent
exclusively upon the uncontrolled will of respondent and was therefore void. Besides, the pro
forma promissory notes have the character of a contract dadhsion, where the parties do not
bargain on equal footing, the weaker partys the debtors participation being reduced to the
alternative to take it or leave it.

Page 314 of 845

 210. POLOTAN VS CA
GR No. 119379 September 25, 1998
FACTS:
Private respondent Security Diners International Corporation (Diners Club), a credit
card company, extends credit accomodations to its cardholders for the purchase of goods and
other services from member establishments. Said goods and services are reimbursed later on by
cardholders upon proper billing. Petitioner Rodelo G. Polotan, Sr. applied for membership and
credit accmodations with Diners Club in October 1985. The application form contained terms
and conditions governing the use and availment of the Diners Club card, among which is for the
cardholder to pay all charges made through the use of said card within the period indicated in the
statement of account and any remaining unpaid balance to earn 3% interest per annum plus
prime rate of Security Bank & Trust Company. Notably, in the application form submitted by
petitioner, Ofricano Canlas obligated himself to pay jointly and severally with petitioner the
latters obligation to private respondent.
Upon acceptance of his application, petitioner was issued Diners Club card No. 3651-
212766-3005. As of May 8, 1987, petitioner incurred credit charges plus appropriate interest and
service charges in the aggregate amount of P33,819.84 which had become due and demandable.
Demands for payment made against petitioner proved futile. Hence, private respondent filed a
Complaint for Collection of Sum of Money against petitioner before the lower court.
ISSUE:
Is petitioner liable for payment of credit charges plus interest and service charges?
RULING:
A contract of adhesion is one in which one of the contracting parties imposes a ready-
made form of contract which the other party may accept or reject, but cannot modify. One party
prepares the stipulation in the contract, while the other party merely affixes his signature or his
adhesion thereto, giving no room for negotiation and depriving the latter of the opportunity to
bargain on equal footing. Nevertheless, these types of contracts have been declared as binding as
ordinary contracts, the reason being that the party who adheres to the contract is free to reject it
entirely.
In this case, petitioner, in effect, claims that the subject contract is one-sided in that the
contract allows for the escalation of interests, but does not provide for a downward adjustment of
the same in violation of Central Bank Circular 905. Admittedly, the second paragraph of the
questioned proviso which provides that the Cardholder hereby authorizes Security Diners to
correspondingly increase the rate of such interest in the event of changes in prevailing market
rates x x x is an escalation clause. However, it cannot be said to be dependent solely on the will
of private respondent as it is also dependent on the prevailing market rates.

Page 315 of 845

 Escalation clauses are not basically wrong or legally objectionable as long as they are
not solely potestative but based on reasonable and valid grounds. Obviously, the fluctuation in
the market rates is beyond the control of private respondent.

Page 316 of 845

 211. NEW SAMPAGUITA BUILDERS CONSTRUCTION, INC. (NSBCI) V.
PHILIPPINE NATIONAL BANK
G.R. No. 148753 2004 Jul 30
FACTS:
On February 11, 1989, Board Resolution No. 05, Series of 1989 was approved by
Petitioner NSBCI authorizing the company to x x x apply for or secure a commercial loan with
the PNB in an aggregate amount of P8.0M, under such terms agreed by the Bank and the NSBCI,
using or mortgaging the real estate properties registered in the name of its President and
Chairman of the Board Petitioner Eduardo R. Dee as collateral; and authorizing petitioner-
spouses to secure the loan and to sign any and all documents which may be required by
Respondent PNB, and that petitioner-spouses shall act as sureties or co-obligors who shall be
jointly and severally liable with Petitioner NSBCI for the payment of any [and all] obligations.
On August 15, 1989, Resolution No. 77 was approved by granting the request of Respondent
PNB thru its Board NSBCI for an P8 Million loan broken down into a revolving credit line of
P7.7M and an unadvised line of P0.3M for additional operating and working capital to mobilize
its various construction projects.
The loan of Petitioner NSBCI was secured by a first mortgage on the following: a)
three (3) parcels of residential land located at Mangaldan, Pangasinan; b) six (6) parcels of
residential land situated at San Fabian, Pangasinan; and c) a residential lot and improvements
thereon located at Mangaldan. The loan was further secured by the joint and several signatures
of Petitioners Eduardo Dee and Arcelita Marquez Dee, who signed as accommodation-
mortgagors since all the collaterals were owned by them and registered in their names.
Moreover Petitioner NSBCI executed three promissory notes. In addition, petitioner corporation
also signed the Credit Agreement dated August 31, 1989 relating to the revolving credit line of
P7.7 Million x x x and the Credit Agreement dated September 5, 1989 to support the unadvised
line of P300,000.00.
On August 31, 1989, petitioner-spouses executed a Joint and Solidary Agreement
(JSA) in favor of Respondent PNB unconditionally and irrevocably binding themselves to be
jointly and severally liable with the borrower for the payment of all sums due and payable to the
Bank under the Credit Document. Later on, Petitioner NSBCI failed to comply with its
obligations under the promissory notes.
On June 18, 1991, Petitioner Eduardo R. Dee on behalf of Petitioner NSBCI sent a
letter to the Branch Manager of the PNB Dagupan Branch requesting for a 90-day extension for
the payment of interests and restructuring of its loan for another term. Subsequently, NSBCI
tendered payment to Respondent PNB of three (3) checks aggregating P1,000,000.00.
In a meeting held on August 12, 1991, Respondent PNBs representative, Mr. Rolly Cruzabra,
was informed by [Petitioner] Eduardo Dee of his intention to remit to Respondent PNB post-
dated checks covering interests, penalties and part of the loan principals of his due account.

Page 317 of 845

 On August 22, 1991, Respondent banks Crispin Carcamo wrote Petitioner Eduardo
Dee, informing him that Petitioner NSBCIs proposal was acceptable, provided the total payment
should be P4,128,968.29 that would cover the amount of P1,019,231.33 as principal,
P3,056,058.03 as interests and penalties, and P53,678.93 for insurance[,] with the issuance of
post-dated checks to be dated not later than November 29, 1991.
On September 6, 1991, Petitioner Eduardo Dee wrote the PNB Branch Manager
reiterating his proposals for the settlement of Petitioner NSBCIs past due loan account
amounting to P7,019,231.33. Petitioner Eduardo Dee later tendered four (4) post-dated
Interbank checks aggregating P1,111,306.67 in favor of Respondent PNB
Upon presentment, however, x x x check nos. 03500087 and 03500088 dated September 29 and
October 29, 1991 were dishonored by the drawee bank and returned due to a stop payment
order from petitioners.
On November 12, 1991, PNBs Mr. Carcamo wrote Petitioner Eduardo Dee informing
him that unless the dishonored checks were made good, said PNB branch shall recall its
recommendation to the Head Office for the restructuring of the loan account and refer the matter
to its legal counsel for legal action. Petitioners did not heed respondents warning and as a result,
the PNB Dagupan Branch sent demand letters to Petitioner NSBCI at its office address at 1611
ERDC Building, E. Rodriguez Sr. Avenue, Quezon City, asking it to settle its past due loan
account.
Petitioners nevertheless failed to pay their loan obligations within the time frame
given them and as a result, Respondent PNB filed with the Provincial Sheriff of Pangasinan at
Lingayen a Petition for Sale
The sheriff foreclosed the real estate mortgage and sold at public auction the mortgaged
properties of petitioner-spouses, with Respondent PNB being declared the highest bidder for the
amount of P10,334,000.00. Copies of the Sheriffs Certificate of Sale were sent by registered
mail to petitioner corporations address petitioner-spouses address.
On April 6, 1992, the PNB Dagupan Branch Manager sent a letter to petitioners at their
address informing them that the properties securing their loan account had been sold at public
auction, that the Sheriffs Certificate of Sale had been registered with the Registry of Deeds of
Pangasinan and that a period of one (1) year therefrom was granted to them within which to
redeem their properties. Petitioners failed to redeem their properties within the one-year
redemption period and so Respondent PNB executed a Deed of Absolute Sale consolidating title
to the properties in its name.
Respondent PNB informed Petitioner NSBCI that the proceeds of the sale conducted on
February 26, 1992 were not sufficient to cover its total claim amounting to P12,506,476.43 and
thus demanded from the latter the deficiency of P2,172,476.43 plus interest and other charges
until the amount was fully paid. Petitioners refused to pay the above deficiency claim which
compelled Respondent PNB to institute the instant Complaint for the collection of its deficiency
claim.

Page 318 of 845

ISSUE:
Whether or not the escalation clause is valid and whether or not it is violative of the
principle of mutuality of contracts.
RULING:
In each drawdown, the Promissory Notes specified the interest rate to be charged: 19.5
percent in the first, and 21.5 percent in the second and again in the third. However, a uniform
clause therein permitted respondent to increase the rate within the limits allowed by law at any
time depending on whatever policy it may adopt in the future x x x, without even giving prior
notice to petitioners. The Court holds that petitioners accessory duty to pay interest did not give
respondent unrestrained freedom to charge any rate other than that which was agreed upon. No
interest shall be due, unless expressly stipulated in writing. It would be the zenith of farcicality
to specify and agree upon rates that could be subsequently upgraded at whim by only one party
to the agreement.

The unilateral determination and imposition of increased rates is violative of the

principle of mutuality of contracts ordained in Article 1308 of the Civil Code. One-sided
impositions do not have the force of law between the parties, because such impositions are not
based on the parties essential equality.

Although escalation clauses are valid in maintaining fiscal stability and retaining the
value of money on long-term contracts, giving respondent an unbridled right to adjust the interest
independently and upwardly would completely take away from petitioners the right to assent to
an important modification in their agreement and would also negate the element of mutuality in
their contracts. The clause cited earlier made the fulfillment of the contracts dependent
exclusively upon the uncontrolled will of respondent and was therefore void. Besides, the pro
forma promissory notes have the character of a contract dadhsion, where the parties do not
bargain on equal footing, the weaker partys the debtors participation being reduced to the
alternative to take it or leave it.

Page 319 of 845

 212. Nacar v. Gallery Frames
G.R. No. 189871 : August 13, 2013

FACTS:

On October 15, 1998, the Labor Arbiter rendered a Decisionin favor of petitioner and found that
he was dismissed from employment without a valid or just cause. Thus, petitioner was awarded
backwages and separation pay in lieu of reinstatement in the amount ofP158,919.92.

Respondents appealed to the NLRC, but it was dismissed for lack of merit. Accordingly, the
NLRC sustained the decision of the Labor Arbiter. Respondents filed a motion for
reconsideration, but it was denied. Dissatisfied, respondents filed a Petition for Review on
Certiorari before the CA but it was likewise denied. Respondents then sought relief before the
Supreme Court. Finding no reversible error on the part of the CA, this Court denied the petition
in the Resolution dated April 17, 2002.

An Entry of Judgment was later issued certifying that the resolution became final and executory
on May 27, 2002. The case was, thereafter, referred back to the Labor Arbiter for execution.
Petitioner filed a Motion for Correct Computation, praying that his backwages be computed from
the date of his dismissal on January 24, 1997 up to the finality of the Resolution of the Supreme
Court on May 27, 2002. Upon recomputation, the Computation and Examination Unit of the
NLRC arrived at an updated amount in the sum ofP471,320.31.

Respondents filed a Motion to Quash Writ of Execution, arguing, among other things, that since
the Labor Arbiter awarded separation pay ofP62,986.56 and limited backwages ofP95,933.36, no
more recomputation is required to be made of the said awards. They claimed that after the
decision becomes final and executory, the same cannot be altered or amended anymore. LA
denied the motion but the decision was reversed by the NLRC on appeal.

Petitioner appealed to the CA but was denied, stating that since petitioner no longer appealed the
October 15, 1998 Decision of the Labor Arbiter, which already became final and executory, a
belated correction thereof is no longer allowed. The CA stated that there is nothing left to be
done except to enforce the said judgment. Consequently, it can no longer be modified in any
respect, except to correct clerical errors or mistakes. Thus, petitioner filed this petition for review
on certiorari.

ISSUE: Whether or not a re-computation in the course of execution of the labor arbiter's
original computation of the awards made is legally proper.

HELD: Yes.

Labor Law- computation of backwages

Page 320 of 845

A source of misunderstanding in implementing the final decision in this case proceeds from the
way the original labor arbiter framed his decision. The decision consists essentially of two parts.

The first is that part of the decision that cannot now be disputed because it has been confirmed
with finality. This is the finding of the illegality of the dismissal and the awards of separation pay
in lieu of reinstatement, backwages, attorney's fees, and legal interests. The second part is the
computation of the awards made.

Clearly implied from this original computation is its currency up to the finality of the labor
arbiter's decision. As we noted above, this implication is apparent from the terms of the
computation itself, and no question would have arisen had the parties terminated the case and
implemented the decision at that point.

However, the petitioner disagreed with the labor arbiter's findings on all counts - i.e., on the
finding of illegality as well as on all the consequent awards made. Hence, the petitioner appealed
the case to the NLRC which, in turn, affirmed the labor arbiter's decision. By law, the NLRC
decision is final, reviewable only by the CA on jurisdictional grounds.

The petitioner appropriately sought to nullify the NLRC decision on jurisdictional grounds
through a timely filed Rule 65 petition for certiorari. The CA decision, finding that NLRC
exceeded its authority in affirming the payment of 13th month pay and indemnity, lapsed to
finality and was subsequently returned to the labor arbiter of origin for execution.

It was at this point that the present case arose. Focusing on the core illegal dismissal portion of
the original labor arbiter's decision, the implementing labor arbiter ordered the award re-
computed; he apparently read the figures originally ordered to be paid to be the computation due
had the case been terminated and implemented at the labor arbiter's level. It was at this point that
the present case arose. Focusing on the core illegal dismissal portion of the original labor
arbiter's decision, the implementing labor arbiter ordered the award re-computed; he apparently
read the figures originally ordered to be paid to be the computation due had the case been
terminated and implemented at the labor arbiter's level.

Thus, the labor arbiter re-computed the award to include the separation pay and the backwages
due up to the finality of the CA decision that fully terminated the case on the merits.
Unfortunately, the labor arbiter's approved computation went beyond the finality of the CA
decision (July 29, 2003) and included as well the payment for awards the final CA decision had
deleted - specifically, the proportionate 13th month pay and the indemnity awards. Hence, the
CA issued the decision now questioned in the present petition.

We see no error in the CA decision confirming that a re-computation is necessary as it essentially

considered the labor arbiter's original decision in accordance with its basic component parts as
we discussed above. To reiterate, the first part contains the finding of illegality and its monetary

Page 321 of 845

consequences; the second part is the computation of the awards or monetary consequences of the
illegal dismissal, computed as of the time of the labor arbiter's original decision.

By the nature of an illegal dismissal case, the reliefs continue to add up until full satisfaction, as
expressed under Article 279 of the Labor Code. The recomputation of the consequences of
illegal dismissal upon execution of the decision does not constitute an alteration or amendment
of the final decision being implemented. The illegal dismissal ruling stands; only the
computation of monetary consequences of this dismissal is affected, and this is not a violation of
the principle of immutability of final judgments. That the amount respondents shall now pay has
greatly increased is a consequence that it cannot avoid as it is the risk that it ran when it
continued to seek recourses against the Labor Arbiter's decision.

Page 322 of 845

 213. Estores v. Sps. Supangan
April 18 2012
FACTS:
On Oct. 1993, Hermojina Estores and Spouses Supangan entered into a Conditional Deed
of Sale where Estores offered to sell, and Spouses offered to buy a parcel of land in Cavite
forP4.7M. After almost 7 years and despite the payment of P3.5M by the Spouses, Estores still
failed to comply with her obligation to handle the peaceful transfer of ownership as stated in 5
provisions in the contract. In a letter in 2000, Spouses demanded the return of the amount within
15 days from receipt .In reply, Estores promised to return the same within 120 days5 Spouses
agreed but imposed an interest of 12% annually. Estores still failed despite demands
Thereafter, Spouses filed a complaint with the RTC against Estores and Roberto
Arias (allegedly acted as Estores agent)
In Answer, Estores said they were willing to pay the principal amount but without the interest as
it was not agreed upon. That since the Conditional Deed of Sale provided only for the return of
the down payment in case of breach, they cant be liable for legal interest as well RTC ruled
saying that the Spouses are entitled to the interest but only at 6% per annum and also entitled to
attys fees
On appeal, CA said that the issue to resolve whether it is proper to impose interest for an
obligation that does not involve a loan or forbearance of money in the absence of stipulation of
the parties
CA affirmed RTC. Hence this appeal.

ISSUE: Whether it is proper to impose interest for an obligation that does not involve a loan or
forbearance of money in the absence of stipulation of the parties.

HELD:
YES. Interest may be imposed even in the absence of stipulation in the contract.
Article 2210 of the Civil Code expressly provides that [i]nterest may, in the discretion of the
court, be allowed upon damages awarded for breach of contract. In this case, there is no
question that petitioner is legally obligated to return the P3.5 million because of her failure to
fulfill the obligation under the Conditional Deed of Sale, despite demand. Petitioner enjoyed the
use of the money from the time it was given to her until now. Thus, she is already in default of
her obligation from the date of demand.

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Forbearance is defined as a contractual obligation of lender or creditor to refrain during a given
period of time, from requiring the borrower or debtor to repay a loan or debt then due and
payable. This definition describes a loan where a debtor is given a period within which to pay a
loan or debt. In such case, forbearance of money, goods or credits will have no distinct
definition from a loan. We believe however, that the phrase forbearance of money, goods or
credits is meant to have a separate meaning from a loan, otherwise there would have been no
need to add that phrase as a loan is already sufficiently defined in the Civil Code.

Forbearance of money, goods or credits should therefore refer to arrangements other than loan
agreements, where a person acquiesces to the temporary use of his money, goods or credits
pending happening of certain events or fulfillment of certain conditions.

In this case, the respondent-spouses parted with their money even before the conditions were
fulfilled. They have therefore allowed or granted forbearance to the seller (petitioner) to use
their money pending fulfillment of the conditions. They were deprived of the use of their money
for the period pending fulfillment of the conditions and when those conditions were breached,
they are entitled not only to the return of the principal amount paid, but also to compensation for
the use of their money. And the compensation for the use of their money, absent any stipulation,
should be the same rate of legal interest applicable to a loan since the use or deprivation of funds
is similar to a loan.

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 214 . BENNY Y. HUNG VS BPI CARD
G.R. No. 182398
July 20, 2010
FACTS:
Guess? Footwear and BPI Express Card Corporation entered into two merchant
agreements, dated 25 August 1994 and 16 November 1994, whereby Guess? Footwear agreed to
honor validly issued BPI Express Credit Cards presented by cardholders in the purchase of its
goods and services. In the first agreement, petitioner Benny Hung signed as owner and manager
of Guess? Footwear. He signed the second agreement as president of Guess? Footwear which he
also referred to as B & R Sportswear Enterprises.
From May 1997 to January 1999, respondent BPI mistakenly credited, through three
hundred fifty-two (352) checks, Three Million Four Hundred Eighty Thousand Four Hundred
Twenty-Seven Pesos and 23/100 (P3,480,427.23) to the account of Guess? Footwear. When
informed of the overpayments, petitioner Benny Hung transferred Nine Hundred Sixty-Three
Thousand Six Hundred Four Pesos and 03/100 (P963,604.03) from the bank account of B & R
Sportswear Enterprises to BPIs account as partial payment. The letter dated 31 May 1999 was
worded as follows:
BPI filed a collection suit before the RTC of Makati City naming as defendant B & R
Sportswear Distributor, Inc. On 24 June 2002, the RTC rendered a decision ordering defendant B
& R Sportswear Distributor, Inc., to pay the plaintiff (BPI) P2,516,826.68 with 6% interest from
4 October 1999. The RTC ruled that the overpayment of P3,480,427.43 was proven by checks
credited to the account of Guess? Footwear and the P963,604.03 partial payment proved that
defendant ought to pay P2,516,826.68
The Court of Appeals affirmed the order and dismissed petitioners appeal. It ruled that
since B & R Sportswear Distributor, Inc. is not a corporation, it therefore has no personality
separate from petitioner Benny Hung who induced the respondent BPI and the RTC to believe
that it is a corporation
Hence this appeal.
ISSUE:
Whether petitioner can be held liable for the satisfaction of the RTCs Decision against B
& R Sportswear Distributor, Inc.?
DECISION:
The correction on the name of the defendant has rendered moot any further discussion on
the doctrine of piercing the veil of corporate fiction. In any event, we have said that whether the
separate personality of a corporation should be pierced hinges on facts pleaded and proved. In
seeking to pierce the corporate veil of B & R Footwear Distributors, Inc., respondent complained
of deceit, bad faith and illegal scheme/maneuver. As stated earlier, respondent has abandoned

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such accusation. And respondents proof the SEC certification that B & R Sportswear Distributor,
Inc. is not an existing corporation would surely attest to no other fact but the inexistence of a
corporation named B & R Sportswear Distributor, Inc. as such name only surfaced because of its
own error. Hence, we cannot agree with the Court of Appeals that petitioner has represented a
non-existing corporation and induced the respondent and the RTC to believe in his
representation.

On petitioners alleged intention to mislead for his initial silence on the non-existence of
the named defendant, we find more notable respondents own silence on the error it
committed. Contrary to the allegation, the real defendant has even corrected respondents
error. While the evidence showed that petitioner has treated B & R Footwear Distributors, Inc. or
Guess? Footwear as B & R Sportswear Enterprises, respondent did not rely on this ground in
filing the motion to pierce the corporate veil of B & R Footwear Distributors, Inc. Respondents
main contention therein was petitioners alleged act to represent a non-existent corporation
amounting to deceit, bad faith and illegal scheme/maneuver.

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 215. Marques vs. Far East Bank
G.R. No. 171379, January 10, 2011
Facts:
Maxilite Technologies, Inc. (Maxilite) is a domestic corporation engaged in the
importation and trading of equipment for energy-efficiency systems. Jose N. Marques (Marques)
is the President and controlling stockholder of Maxilite. Far East Bank and Trust Co. (FEBTC) is
a local bank which handled the financing and related requirements of Marques and Maxilite.
Marques and Maxilite maintained accounts with FEBTC. Accordingly, FEBTC financed
Maxilites capital and operational requirements through loans secured with properties of
Marques under the latters name. Far East Bank Insurance Brokers, Inc. (FEBIBI) is a local
insurance brokerage corporation while Makati Insurance Company is a local insurance company.
Both companies are subsidiaries of FEBTC. On 17 June 1993, Maxilite and Marques entered into
a trust receipt transaction with FEBTC, in the sum of US$80,765.00, for the shipment of various
high-technology equipments from the United States, with the merchandise serving as collateral.
The foregoing importation was covered by a trust receipt document signed by Marques on behalf
of Maxilite. Sometime in August 1993, FEBIBI, upon the advice of FEBTC, facilitated the
procurement and processing from Makati Insurance Company of four separate and independent
fire insurance policies over the trust receipted merchandise. Finding that Maxilite failed to pay
the insurance premium in the sum of P8,265.60 for Insurance Policy No. 1024439 covering the
period 24 June 1994 to 24 June 1995, FEBIBI sent written reminders to FEBTC, dated 19
October 1994, 24 January 1995, and 6 March 1995, to debit Maxilites account. On 24 and 26
October 1994, Maxilite fully settled its trust receipt account. On 9 March 1995, a fire gutted the
Aboitiz Sea Transport Building along M.J. Cuenco Avenue, Cebu City, where Maxilites office
and warehouse were located. As a result, Maxilite suffered losses amounting to at least P2.1
million, which Maxilite claimed against the fire insurance policy with Makati Insurance
Company. Makati Insurance Company denied the fire loss claim on the ground of non-payment
of premium. FEBTC and FEBIBI disclaimed any responsibility for the denial of the claim.
Issue:
Whether FEBTC, FEBIBI and Makati Insurance Company are jointly and severally liable
to pay respondents the full coverage of the subject insurance policy?
Held:
Contrary to Maxilites and Marques view, FEBTC is solely liable for the payment of the
face value of the insurance policy and the monetary awards stated in the Court of Appeals
decision. Suffice it to state that FEBTC, FEBIBI, and Makati Insurance Company are
independent and separate juridical entities, even if FEBIBI and Makati Insurance Company are
subsidiaries of FEBTC. Absent any showing of its illegitimate or illegal functions, a subsidiarys
separate existence shall be respected, and the liability of the parent corporation as well as the
subsidiary shall be confined to those arising in their respective business. Besides, the records are
bereft of any evidence warranting the piercing of corporate veil in order to treat FEBTC,

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FEBIBI, and Makati Insurance Company as a single entity. Likewise, there is no evidence
showing FEBIBIs and Makati Insurance Companys negligence as regards the non-payment of
the insurance premium.

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 216. LBP vs. ONG
G.R. No. 190755, November 24, 2010
FACTS:
Spouses Johnson and Evangeline Sy secured a loan from Land Bank Legazpi City in the
amount of PhP 16 million. The loan was secured by three (3) residential lots, five (5) cargo trucks,
and a warehouse. Under the loan agreement, PhP 6 million of the loan would be short-term and
would mature on February 28, 1997, while the balance of PhP 10 million would be payable in
seven (7) years. The Notice of Loan Approval dated February 22, 1996 contained an acceleration
clause wherein any default in payment of amortizations or other charges would accelerate the
maturity of the loan.Subsequently, however, the Spouses Sy found they could no longer pay their
loan. They sold three (3) of their mortgaged parcels of land for PhP 150,000 to Angelina Gloria
Ong, Evangelines mother, under a Deed of Sale with Assumption of Mortgage.
Evangelines father, petitioner Alfredo Ong, later went to Land Bank to inform it about the
sale and assumption of mortgage.3 Atty. Edna Hingco, the Legazpi City Land Bank Branch Head,
told Alfredo and his counsel Atty. Ireneo de Lumen that there was nothing wrong with the
agreement with the Spouses Sy but provided them with requirements for the assumption of
mortgage. They were also told that Alfredo should pay part of the principal which was computed
at PhP 750,000 and to update due or accrued interests on the promissory notes so that Atty. Hingco
could easily approve the assumption of mortgage. Two weeks later, Alfredo issued a check for
PhP 750,000 and personally gave it to Atty. Hingco. A receipt was issued for his payment. He also
submitted the other documents required by Land Bank, such as financial statements for 1994 and
1995. Atty. Hingco then informed Alfredo that the certificate of title of the Spouses Sy would be
transferred in his name but this never materialized. No notice of transfer was sent to him. On
December 12, 1997, Alfredo initiated an action for recovery of sum of money with damages
against Land Bank in Civil Case No. T-1941, as Alfredos payment was not returned by Land
Bank. The RTC held that that under the principle of equity and justice, the bank should return the
amount Alfredo had paid with interest at 12% per annum computed from the filing of the
complaint. The RTC further held that Alfredo was entitled to attorneys fees and litigation
expenses for being compelled to litigate.The CA affirmed the RTC Decision.
Land Bank contends that Art. 1236 of the Civil Code backs their claim that Alfredo should have
sought recourse against the Spouses Sy instead of Land Bank. Art. 1236 .
ISSUE:
WON the Art. 1236 of the Civil Code should apply in the instant case.
RULING:
We agree with Land Bank on this point as to the first part of paragraph 1 of Art. 1236.
Land Bank was not bound to accept Alfredos payment, since as far as the former was
concerned, he did not have an interest in the payment of the loan of the Spouses Sy. However, in
the context of the second part of said paragraph, Alfredo was not making payment to fulfill the

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obligation of the Spouses Sy. Alfredo made a conditional payment so that the properties subject
of the Deed of Sale with Assumption of Mortgage would be titled in his name. It is clear from
the records that Land Bank required Alfredo to make payment before his assumption of
mortgage would be approved. He was informed that the certificate of title would be transferred
accordingly. He, thus, made payment not as a debtor but as a prospective mortgagor.
Alfredo, as a third person, did not, therefore, have an interest in the fulfilment of the obligation
of the Spouses Sy, since his interest hinged on Land Banks approval of his application, which
was denied. The circumstances of the instant case show that the second paragraph of Art. 1236
does not apply. As Alfredo made the payment for his own interest and not on behalf of the
Spouses Sy, recourse is not against the latter. And as Alfredo was not paying for another, he
cannot demand from the debtors, the Spouses Sy, what he has paid.

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 217. SPS. MALLARI vs. PRUDENTIAL BANK
[G.R. No. 197861. June 5, 2013. 697 SCRA 555]

FACTS:
In 1984, Petitioner Florentino Mallari obtained a loan from respondent Prudential Bank in the
amount of P300,000.00. It was subject to an interest rate of 21% per annum and, in case of default,
a penalty of 12% per annum of the total amount due and attorneys fees equivalent of 15% of the
total amount due. This was secured by a Deed of Assignment (DOA) over petitioner's time deposit
account. In 1989, Spouses Florentino and Aurea Mallari obtained another loan from respondent
for P1.7 million, stipulating interest of 23% per annum with the same penalties in case of default.
This was secured by Real Estate Mortgage (REM).

Petitioners defaulted. When computed in 1992, the total debt was P571,218.54 and P2,991,294.82
for the first and second loans respectively.

Respondent tried to extrajudicially foreclose the mortgage. Petitioners on the other hand tried to
nullify the mortgage claiming that the Bank imposed onerous terms and conditions and that the
bank was unilaterally increasing its charges and interest over and above those stipulated. The Bank
claimed that the basis for its computation was all written in the Promissory Notes.

The RTC ruled in favor of respondent bank. CA affirmed.

ISSUE: Whether or not an interest rate of 23% per annum and 12% per annum penalty is
unconscionable.

HELD:
No. The Court has also ruled affirmed in a plethora of cases that stipulated interest rates of 3% per
month and higher are excessive, unconscionable and exorbitant. thus, the 23% per annum interest
rate imposed on petitioners loan in this case can by no means be considered excessive or
unconscionable. And neither is the 12% per annum penalty charge unconscionable as the counrt
found in DBP vs. Family Foods (2009) and Ruiz vs. Court of Appeals (2003).

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 218. RGM Industries Inc. v United Pacific Capital Corporation
GR 194781 June 27, 2012
FACTS:
The respondent is a domestic corporation engaged in the business of lending and
financing. On March 3, 1997, it granted a thirty million peso short-term credit facility in favor of
the petitioner. The loan amount was sourced from individual funders on the basis of a direct-
match facility for which a series of promissory notes were issued by the petitioner for the
payment of the loan.
The petitioner failed to satisfy the said promissory notes as they fell due and the loan had to be
assumed in full by the respondent which thereby stepped into the shoes of the individual funders.
Consequently, on April 4, 1998, the petitioner issued in favor of the respondent a consolidated
promissory note in the principal amount of P27,852,075.98 for a term of fourteen (14) days and
maturing on April 28, 1998. The stipulated interest on the consolidated promissory note was 32%
per annum. In case of default, a penalty charge was imposed in an amount equivalent to 8% per
month of the outstanding amount due and unpaid computed from the date of default.
The petitioner failed to satisfy the consolidated promissory note, the principal balance of which
as of April 28, 1998 was P27,668,167.87.
The respondent thus sent demand letters to the petitioner but the latter failed to pay and instead
asked for restructuring of the loan. The respondent declined the request and on October 5, 1999,
filed the herein complaint for collection of sum of money against the petitioner.
The petitioner did not dispute the loan it owes but claimed that the agreed interest rate was fixed
at 15.5% per annum and not the varying interest rates imposed by the respondent which reached
as high as 40% per annum. The petitioner asserted that the respondent unilaterally imposed the
increased interest rates in violation of the principle of mutuality of contracts.
The respondent, on the other hand, argued that the increased interest rates were mutually agreed
upon and that the same cannot be considered usurious because usury is legally non-existent in
this jurisdiction.

ISSUE:
WON modified interest rates and penalty charges decreed by the CA are still exorbitant
and that the CA failed to appreciate the partial payments already made
HELD:
We affirm the interest rate decreed by the CA. Stipulated interest rates are illegal if they
are unconscionable and courts are allowed to temper interest rates when necessary. In exercising
this vested power to determine what is iniquitous and unconscionable, the Court must consider
the circumstances of each case. What may be iniquitous and unconscionable in one case, may be

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just in another. The attorneys fees must likewise be equitably reduced considering that: (1) the
petitioner has already made partial payments; (2) the attorneys fees are not an integral part of
the cost of borrowing but a mere incident of collection; and (3) the attorneys fees were intended
as penal clause to answer for liquidated damages, hence, the rate of 10% of the unpaid obligation
is too onerous. Under the premises, attorneys fees equivalent to one percent (1%) of the
outstanding balance is reasonable.

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 219. PRISMA CONSTRUCTION & DEVELOPMENT CORPORATION
vs.MENCHAVEZ
G.R. No. 160545 March 9, 2010
FACTS:
On December 8, 1993, Pantaleon, the President and Chairman of the Board of PRISMA,
obtained a P1,000,000.00 loan from the respondent, with a monthly interest of P40,000.00
payable for six months, or a total obligation of P1,240,000.00 to be paid within six (6) months.
To secure the payment of the loan, Pantaleon issued a promissory note. As of January 4, 1997,
the petitioners had already paid a total of P1,108,772.00. However, the respondent found that the
petitioners still had an outstanding balance of P1,364,151.00 as of January 4, 1997, to which it
applied a 4% monthly interest. Thus, on August 28, 1997, the respondent filed a complaint for
sum of money with the RTC to enforce the unpaid balance, plus 4% monthly interest,
P30,000.00 in attorneys fees, P1,000.00 per court appearance and costs of suit.

ISSUE:
What is the proper interest rate to be awarded?

RULING:
In the present case, the respondent issued a check for P1,000,000.00. In turn, Pantaleon, in his
personal capacity and as authorized by the Board, executed the promissory note quoted above.
Thus, the P1,000,000.00 loan shall be payable within six (6) months, or from January 8, 1994 up
to June 8, 1994. During this period, the loan shall earn an interest of P40,000.00 per month, for a
total obligation of P1,240,000.00 for the six-month period. We note that this agreed sum can be
computed at 4% interest per month, but no such rate of interest was stipulated in the promissory
note; rather a fixed sum equivalent to this rate was agreed upon.
Article 1956 of the Civil Code specifically mandates that "no interest shall be due unless it has
been expressly stipulated in writing." Under this provision, the payment of interest in loans or
forbearance of money is allowed only if: (1) there was an express stipulation for the payment of
interest; and (2) the agreement for the payment of interest was reduced in writing. The
concurrence of the two conditions is required for the payment of interest at a stipulated rate.
Thus, we held in Tan v. Valdehueza and Ching v. Nicdao that collection of interest without any
stipulation in writing is prohibited by law.
Applying this provision, we find that the interest of P40,000.00 per month corresponds only to
the six (6)-month period of the loan, or from January 8, 1994 to June 8, 1994, as agreed upon by
the parties in the promissory note. Thereafter, the interest on the loan should be at the legal
interest rate of 12% per annum, consistent with our ruling in Eastern Shipping Lines, Inc. v.
Court of Appeals:

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When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be
computed from default, i.e., from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code."

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 220. BONIFACIO SANZ MACEDA, JR. and TERESITA
MACEDADOCENA, vs. DEVELOPMENT BANK OF THE PHILIPPINES and the
COURT OF APPEALS
G.R. No. 135128.
August 26, 1999
FACTS:
On July 28, 1976 plaintiff Bonifacio Maceda, Jr. (Maceda) obtained a loan from the
defendant DBP in the amount of P7.3 million to finance the expansion of the Old Gran Hotel in
Leyte. Upon approval of said loan, plaintiff Maceda executed a promissory note and a mortgage
of real estate. Project cost of the New Gran Hotel was P10.5M. DBP fixed a debt-equity ratio of
70%-30%, corresponding to DBP and Macedas respective infusion in the hotel
project. Macedas equity infusion was P2.93M, or 30% of P10.5M.
The DBP Governor at that time, RecioGarcia, in-charge of loans for hotels, allegedly
imposed the condition that DBP would choose the building contractor,
namely, Moreman Builders Co. (Moreman). The contractor would directly receive the loan
releases from DBP, after verification by DBP of the construction progress. The period of
loan availment was 360 days from date of initial release of the loan. Similarly, suppliers of
equipment and furnishings for the hotel were also to be paid directly by DBP. The construction
deadline was set for December 22, 1977.
Maceda filed a complaint for Rescission of the building contract with Damages against
the contractor Moreman, the CFI rescinded the building contract, suspended the period
of availment, allowed Maceda to himself take over construction, and directed DBP to release
to Maceda the sum of P1.003M, which had previously been approved for release in January
1978. The DBP was further ordered to give plaintiff Maceda such other amounts still pending
release. Moreman filed an appeal which was subsequently dismissed in 1990 by the Supreme
Court. Entry of judgment on this case was issued on April 23, 1990.
The trial court promulgated its Decision in favor of Maceda. DBP filed a Petition for
Certiorari as regards the execution pending appeal before the appellate court. The appellate
court, in DBP v. Hon. Ignacio Capulong granted DBPs petition and annulled the trial courts
order of partial execution pending appeal
Issue:
Whether or not the Court of Appeals erred when it reversed the October 2, 1997 Order of
the trial court granting execution of the latters Decision pending appeal

Decision:
The court held that the contentions of DPB have merit. Hence, In accordance with our
ruling in Sta. Lucia Realty and Development v. Spouses Buenaventura, the applicable interest

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rate on the P6,153,398.05 to be paid by DBP to Maceda is 6% per annum, to be reckoned from
the time of the filing of the complaint on 15 October 1984, because the case at bar involves a
breach of obligation and not a loan or forbearance of money. We guide ourselves with the rules
of thumb established in Eastern Shipping Lines, Inc. v. Court of Appeals.
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan
or forbearance of money, the interest due should be that which may have been stipulated in
writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be
computed from default, i.e., from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest
on the amount of damages awarded may be imposed at the discretion of the court at the rate of
6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages
except when or until the demand can be established with reasonable certainty. Accordingly,
where the demand is established with reasonable certainty, the interest shall begin to run from
the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such
certainty cannot be so reasonably established at the time the demand is made, the interest shall
begin to run only from the date the judgment of the court is made (at which time the
quantification of damages may be deemed to have been reasonably ascertained). The actual base
for the computation of legal interest shall, in any case be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the
rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be
12% per annum from such finality until its satisfaction, this interim period being deemed to be
by then an equivalent to a forbearance of credit.
Pursuant to these rules, the interest rate of 12% per annum shall apply from the finality of
judgment until the total amount awarded is fully paid. The imposition of interest already takes
into account the passage of time, and is meant to compensate Maceda for any further delays in
payment by DBP.

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 221. PNB VS ENCINA
GR 174055. February 12, 2008

FACTS:
The Philippine National Bank (PNB) assails the Decision of the Court of Appeals dated
15 May 2005, rendered in CA-G.R. CV No. 79094 which, among others, declared null and void
the interest rate imposed by PNB on the loan obtained from it by respondents and the consequent
extrajudicial foreclosure of the properties offered as security for the loan.
Respondents Encina spouses acquired several loans from PNB from which it failed to pay
within due time. Encina avers that there ought to be longer gestation periods on its part being
engaged in a business of agricultural character.
ISSUE:
Was there a violation of the Usury Law?
RULING:
As borne by the records, the Encina spouses never challenged the validity of their loan
and the accessory contracts with PNB on the ground that they violated the principle of mutuality
of contracts in view of the provision therein that the interest rate shall be set by management.
Their only contention concerning the interest rate was that the charges imposed by the bank
violated the Usury Law. This was the essence of the second cause of action alleged in the
complaint.
It should be definitively ruled in this regard that the Usury Law had been rendered legally
ineffective by Resolution No. 224 dated 3 December 1982 of the Monetary Board of the Central
Bank, and later by Central Bank Circular No. 905 which took effect on 1 January 1983 and
removed the ceiling on interest rates for secured and unsecured loans regardless of maturity. The
effect of these circulars is to allow the parties to agree on any interest that may be charged on a
loan. The virtual repeal of the Usury Law is within the range of judicial notice which courts are
bound to take into account. After all, the fundamental tenet is that the law is deemed part of the
contract. Thus, the trial court was correct in ruling that the second cause of action was without
basis.

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 222. RESTITUTA IMPERIAL VS. ALEX JAUCIAN
G.R. No. 149004, April 14, 2004
427 SCRA 517
FACTS:
The present controversy arose from a case for collection of money, filed by Alex A. Jaucian
against Restituta Imperial, on October 26, 1989. The complaint alleges, inter alia, that defendant
obtained from plaintiff six (6) separate loans for which the former executed in favor of the latter
six (6) separate promissory notes and issued several checks as guarantee for payment. When the
said loans became overdue and unpaid, especially when the defendants checks were dishonored,
plaintiff made repeated oral and written demands for payment.
The loans were covered by six (6) separate promissory notes executed by defendant. The
face value of each promissory notes is bigger [than] the amount released to defendant because said
face value already included the interest from date of note to date of maturity. Said promissory
notes indicate the interest of 16% per month, date of issue, due date, the corresponding guarantee
checks issued by defendant, penalties and attorneys fees. The trial courts clear and detailed
computation of petitioners outstanding obligation to respondent was affirmed by the CA for being
convincing and satisfactory. However, the CA held that without judicial inquiry, it was improper
for the RTC to rule on the constitutionality of Section 1, Central Bank Circular No. 905, Series of
1982.

ISSUES:
(1) Whether or not the penalties charged per month is in the guise of hidden interest.
(2) Whether or not the reduction of attorneys fees by the RTC is reasonable.

RULING:
Iniquitous and unconscionable stipulations on interest rates, penalties and attorneys fees
are contrary to morals. Consequently, courts are granted authority to reduce them equitably. If
reasonably exercised, such authority shall not be disturbed by appellate courts.
Article 1229 of the Civil Code states thus:The judge shall equitably reduce the penalty
when the principal obligation has been partly or irregularly complied with by the debtor. Even if
there has been no performance, the penalty may also be reduced by the courts if it is iniquitous or
unconscionable.
In exercising this power to determine what is iniquitous and unconscionable, courts must
consider the circumstances of each case. What may be iniquitous and unconscionable in one may
be totally just and equitable in another. In the present case, iniquitous and unconscionable was the
parties stipulated penalty charge of 5 percent per month or 60 percent per annum, in addition to
regular interests and attorneys fees. Also, there was partial performance by petitioner when she
remitted P116,540 as partial payment of her principal obligation of P320,000. Under the

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circumstances, the trial court was justified in reducing the stipulated penalty charge to the more
equitable rate of 14 percent per annum.
The Promissory Note carried a stipulation for attorneys fees of 25 percent of the principal
amount and accrued interests. Strictly speaking, this covenant on attorneys fees is different from
that mentioned in and regulated by the Rules of Court. Rather, the attorneys fees here are in the
nature of liquidated damages and the stipulation therefor is aptly called a penal clause. So long
as the stipulation does not contravene the law, morals, public order or public policy, it is binding
upon the obligor. It is the litigant, not the counsel, who is the judgment creditor entitled to enforce
the judgment by execution.
Nevertheless, it appears that petitioners failure to comply fully with her obligation was
not motivated by ill will or malice. The twenty-nine partial payments she made were a
manifestation of her good faith. Again, Article 1229 of the Civil Code specifically empowers the
judge to reduce the civil penalty equitably, when the principal obligation has been partly or
irregularly complied with. Upon this premise, we hold that the RTCs reduction of attorneys fees
-- from 25 percent to 10 percent of the total amount due and payable -- is reasonable.

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 223. TEDDY PABUGAIS VS. DAVE SAHIJWANI
G.R. No. 156846, February 23, 2004
423 SCRA 596

FACTS:

Pursuant to an Agreement And Undertaking on December 3, 1993, petitioner Teddy G.

Pabugais, in consideration of the amount of P15,487,500.00, agreed to sell to respondent Dave P.
Sahijwani a lot containing 1,239 square meters located at Jacaranda Street, North Forbes Park,
Makati, Metro Manila. Respondent paid petitioner the amount of P600,000.00 as
option/reservation fee and the balance of P14,887,500.00 to be paid within 60 days from the
execution of the contract, simultaneous with delivery of the owners duplicate Transfer Certificate
of Title in respondents name the Deed of Absolute Sale; the Certificate of Non-Tax Delinquency
on real estate taxes and Clearance on Payment of Association Dues. The parties further agreed
that failure on the part of respondent to pay the balance of the purchase price entitles petitioner to
forfeit the P600,000.00 option/reservation fee; while non-delivery by the latter of the necessary
documents obliges him to return to respondent the said option/reservation fee with interest at 18%
per annum.
Petitioner failed to deliver the required documents. In compliance with their agreement,
he returned to respondent the latters P600,000.00 option/reservation fee by way of Far East Bank
& Trust Company Check, which was, however, dishonored.
Petitioner claimed that he twice tendered to respondent, through his counsel, the amount
of P672,900.00 (representing the P600,000.00 option/reservation fee plus 18% interest per annum
computed from December 3, 1993 to August 3, 1994) in the form of Far East Bank & Trust
Company Managers Check No. 088498, dated August 3, 1994, but said counsel refused to accept
the same. On August 11, 1994, petitioner wrote a letter to respondent saying that he is consigning
the amount tendered with the Regional Trial Court of Makati City. On August 15, 1994, petitioner
filed a complaint for consignation.
Respondents counsel, on the other hand, admitted that his office received petitioners letter
dated August 5, 1994, but claimed that no check was appended thereto. He averred that there was
no valid tender of payment because no check was tendered and the computation of the amount to
be tendered was insufficient, because petitioner verbally promised to pay 3% monthly interest and
25% attorneys fees as penalty for default, in addition to the interest of 18% per annum on the
P600,000.00 option/reservation fee.
On November 29, 1996, the trial court rendered a decision declaring the consignation
invalid for failure to prove that petitioner tendered payment to respondent and that the latter refused

Page 341 of 845

to receive the same. Petitioner appealed the decision to the Court of Appeals. Petitioners motion
to withdraw the amount consigned was denied by the Court of Appeals and the decision of the trial
court was affirmed.
On a motion for reconsideration, the Court of Appeals declared the consignation as valid
in an Amended Decision dated January 16, 2003. It held that the validity of the consignation had
the effect of extinguishing petitioners obligation to return the option/reservation fee to respondent.
Hence, petitioner can no longer withdraw the same.
Unfazed, petitioner filed the instant petition for review contending that he can withdraw
the amount deposited with the trial court as a matter of right because at the time he moved for the
withdrawal thereof, the Court of Appeals has yet to rule on the consignations validity and the
respondent had not yet accepted the same.

ISSUE:

Whether or not assigning the amount of P672, 900.00 to Atty. De Guzman is prohibited.

RULING:

The amount consigned with the trial court can no longer be withdrawn by petitioner
because respondents prayer in his answer that the amount consigned be awarded to him is
equivalent to an acceptance of the consignation, which has the effect of extinguishing petitioners
obligation.
Moreover, petitioner failed to manifest his intention to comply with the Agreement And
Undertaking by delivering the necessary documents and the lot subject of the sale to respondent
in exchange for the amount deposited. Withdrawal of the money consigned would enrich
petitioner and unjustly prejudice respondent.
The withdrawal of the amount deposited in order to pay attorneys fees to petitioners
counsel, Atty. De Guzman, Jr., violates Article 1491 of the Civil Code which forbids lawyers from
acquiring by assignment, property and rights which are the object of any litigation in which they
may take part by virtue of their profession. Furthermore, Rule 10 of the Canons of Professional
Ethics provides that the lawyer should not purchase any interest in the subject matter of the
litigation which he is conducting. The assailed transaction falls within the prohibition because
the Deed assigning the amount of P672,900.00 to Atty. De Guzman, Jr., as part of his attorneys
fees was executed during the pendency of this case with the Court of Appeals. In his Motion to
Intervene, Atty. De Guzman, Jr., not only asserted ownership over said amount, but likewise
prayed that the same be released to him. That petitioner knowingly and voluntarily assigned the

Page 342 of 845

subject amount to his counsel did not remove their agreement within the ambit of the prohibitory
provisions. To grant the withdrawal would be to sanction a void contract.
Wherefore, in view of all the foregoing, the instant petition for review is denied.

Page 343 of 845

 224. LO VS. COURT OF APPEALS
G.R. No. 141434, September 23, 2003
411 SCRA 523
FACTS:
Antonio Lo acquired two parcels of land with an office constructed thereon in an auction
sale on November 9,1995 from the Land Bank of the Philippines. At variance, private respondent
National Onion Growers Cooperative Marketing Association, Inc. was the occupant of the parcels
of land under a subsisting contract of lease with Land Bank. The lease was valid until December
31,1995.
Upon the expiration of the lease contract, Lo demanded that private respondent vacate the
leased premises and surrender its possession to him. The agricultural cooperative refused on the
ground of a contest against petitioners acquisition of the parcels of land in an action for annulment
of sale, redemption and damages.
On February 23,1996, petitioner filed an action for ejectment and subsequently asked for
imposition of the contractually stipulated penalty of P5, 000 per day of delay in surrendering the
possession of the property. Thereafter, the trial court decided the case in favor of petitioner. Private
respondent was ordered to vacate the leased premises. On appeal to the Regional Trial Court, the
MTC decision was affirmed in toto. The agricultural cooperative then elevated the case to the court
of Appeals that affirmed the lower courts decision but modified that the penalty to be imposed
must be reduced to P1, 000.
Unsatisfied with the decision of the CA, Lo filed the instant petition for review.
ISSUE:
The issue raised by the petitioner is whether or not the Court of Appeals has the authority
to reduce the penalty awarded by the trial court, the same having been stipulated by the parties in
their Contract of Lease.
RULING:
YES, the Court of Appeals has the authority to do so. While courts are not at liberty to
ignore the freedom of the parties to agree on such terms and conditions as they see fit as long as
they are not contrary to law, morals, good customs, public order or public policy, courts may
equitably reduce a stipulated penalty if it is iniquitous or unconscionable, or if the principal
obligation has been partly or irregularly complied with. This power of the courts is explicitly
sanctioned by Article 1229 of the Civil Code which provides that the judge shall equitably reduce
the penalty when the principal obligation has been partly or irregularly complied with by the
debtor. Even if there has been no performance, the penalty may also be reduced by courts if it is
iniquitous or unconscionable.

Page 344 of 845

 225. LIGUTAN VS. COURT OF APPEALS
G.R. No. 138677, February 12, 2002
376 SCRA 561

FACTS:

Petitioners Tolomeo Ligutan and Leonidas dela Llana obtained on May 11, 1981 a loan in
the amount of P120, 000.00 from respondent Security Bank and Trust Company. Petitioners
executed a promissory note binding themselves, jointly and severally, to pay the sum borrowed
with an interest of 15.189% per annum upon maturity and to pay a penalty of 5% every month on
the outstanding principal and interest in case of default. In addition, petitioners agreed to pay 10%
of the total amount due by way of attorneys fees if the matter were indorsed to a lawyer for
collection or if a suit were instituted to enforce payment. The obligation matured on September 8,
1981; the bank, however, granted an extension but only until December 29, 1981.
When petitioners defaulted on their obligation, the bank filed on November 3, 1982 with
the RTC of Makati, Branch 143 a complaint for recovery of the due amount.
On September 5, 1988, the trial court ruled in favor of the bank. It ordered the petitioners
to pay, jointly and severally, the sum of P114, 416.00 with interest thereon at the rate of 15.189%
per annum, 2% service charge and 5% per month penalty charge, commencing on May 20, 1982
until fully paid.
The Court of Appeals affirmed it but deleted the 2% service charge pursuant to Central
Bank Circular No. 783. Not fully satisfied with the decision, both parties moved for
reconsideration. Petitioners prayed for the reduction of the 5% penalty for being unconscionable.
The bank, on the other hand, asked that the payment of interest and penalty be commenced not
from the date of filing of complaint but from the time of default as so stipulated in the contract of
the parties.
The petitioner, before this Court, contended, among others that the 15.189% interest and
the penalty of 3% per month or 36% per annum imposed by private respondent bank on petitioners
loan obligation are still manifestly exorbitant, iniquitous and unconscionable. Respondent bank,
which did not take an appeal, would, however, have it that the penalty sought to be deleted by
petitioners was even insufficient to fully cover and compensate for the cost of money brought
about by the radical devaluation and decrease in the purchasing power of the peso.

ISSUE:
Whether or not the penalty is reasonable and not iniquitous.

Page 345 of 845

RULING:
NO, the penalty is not unreasonable. The Court held that the question of whether a penalty
is reasonable or iniquitous can be partly subjective and partly objective. Its resolution would
depend on such factors as, but not necessarily confide to, the type, extent and purpose of the
penalty, the nature of the obligation, the mode of breach and its consequences, the supervening
realities, the standing and relationship of the parties, and the like, the application of which, by and
large, is addressed to the sound discretion of the court. In Rizal Commercial Banking Corp. v.
Court of Appeals, for example, the Court has tempered the penalty charges after taking into
account the debtors pitiful situation and its offer to settle the entire obligation with the creditor
bank. The stipulated penalty might likewise be reduced when a partial or irregular payment is made
by the payment. The stipulated penalty might even be deleted such as when there has been
substantial performance in good faith by the obligor, when the penalty clause itself suffers from
fatal infirmity, and when exceptional circumstances so exist as to warrant it. In the case at bar,
given the circumstances, not to mention the repeated acts of breach by petitioners of their
contractual obligation, this Court sees no cogent ground to ruling of the appellate court.

Page 346 of 845

 226. PASCUAL VS. RAMOS
G.R. No. 144712, July 4, 2002
384 SCRA 105

FACTS:

Ramos alleged that on June 3, 1987, for and in consideration of P150,000, the Spouses
Pascual executed in his favor a Deed of Absolute Sale with Right to Repurchase over 2 parcels of
land and the improvements thereon located in Bambang, Bulacan, Bulacan. This document was
annotated at the back of the title. The Pascuals did not exercise their right to repurchase the
property within the stipulated one-year period; hence, Ramos prayed that the title or ownership
over the subject parcels of land and improvements thereon be consolidated in his favor.
In their Answer, the Pascuals admitted having signed the Deed of Absolute Sale with Right
to Repurchase for a consideration of P150, 000 but averred that what the parties had actually agreed
upon and entered into was a real estate mortgage. They further alleged that there was no agreement
limiting the period within which to exercise the right to repurchase and that they had even overpaid
Ramos. The trial court found that the transaction between the parties was actually a loan in the
amount of P150, 000.00, the payment of which was secured by a mortgage of the property covered
by TCT No. 305626. It also found that the Pascuals had made payments in the total sum of
P344,000.00, and that with interest at 7% per annum, they had overpaid the loan by P141,500.00.
Accordingly, in its Decision of March 15, 1995 the trial court ruled in favor of the defendants. The
Pascuals interposed the following defenses: (a) the trial court had no jurisdiction over the subject
or nature of the petition; (b) Ramos had no legal capacity to sue; (c) the cause of action, if any,
was barred by the statute of limitations; (d) the petition stated no cause of action; (e) the claim or
demand set forth in Ramoss pleading had been paid, waived, abandoned, or otherwise
extinguished; and (f) Ramos has not complied with the required confrontation and conciliation
before the barangay.
ISSUE:
Whether or not the contract entered into was a contract of loan and not a contract of sale.
HELD:
After the trial court sustained petitioners claim that their agreement with Ramos was
actually a loan with real estate mortgage, the Pascuals should not be allowed to turn their back on
the stipulation in that agreement to pay interest at the rate of 7% per month. The Pascuals should
accept not only the favorable aspect of the courts declaration that the document is actually an
equitable mortgage but also the necessary consequence of such declaration, that is, that interest on
the loan as stipulated by the parties in that same document should be paid. Besides, when Ramos
moved for a reconsideration of the decision of the trial court pointing out that the interest rate to

Page 347 of 845

be used should be 7% per month, the Pascuals never lifted a finger to oppose the claim. It was
only in their motion for the reconsideration of the decision of the Court of Appeals that the Pascuals
made an issue of the interest rate and prayed for its reduction to 12% per annum.
It is a basic principle in civil law that parties are bound by the stipulations in the contracts
voluntarily entered into by them. Parties are free to stipulate terms and conditions which they
deem convenient provided they are not contrary to law, morals, good customs, public order, or
public policy.
The interest rate of 7% per month was voluntarily agreed upon by Ramos and the Pascuals.
There is nothing from the records and, in fact, there is no allegation showing that petitioners were
victims of fraud when they entered into the agreement with Ramos. Neither is there a showing
that in their contractual relations with Ramos, the Pascuals were at a disadvantage on account of
their moral dependence, ignorance, mental weakness, tender age or other handicap, which would
entitle them to the vigilant protection of the courts as mandated by Article 24 of the Civil Code.

Page 348 of 845

 227. FIRST METRO INVESTMENTS VS. ESTE DEL SOL MOUNTAIN RESERVE,
INC.
G.R. No. 141811, November 15, 2001
369 SCRA 99
FACTS:
Petitioner First Metro granted respondent Este Del Sol a loan of P7,385,500.00 to finance
the construction and development of respondents Mountain Reserve. The loan was payable on
36 consecutive monthly amortizations and the interest on the loan was egged at 16% per annum
based on the diminishing balance. In case of deposit, a 20% one time penalty on the amount due
and such mount shall bear interest at the highest rate permitted by law plus liquidated damages at
the rate of 2% per month and attorneys fees equivalent to 25% of the sum sought to be received.
In accordance with the terms of the loan agreement, respondents Este Del Sol executed several
documents as security for payment. Moreover, it executed as provided for by the loan agreement,
an Underwriting Agreement whereby Forts Metro shall underwrite on a best efforts basis the public
offering of one hundred twenty thousand common shares of Este Del Sol. In addition, the
Underwriting Agreement provided that for supervising the public offering of the shares, Este Del
Sol shall pay First Metro an annual supervision fee of P 200,000.00 per annum and a consultancy
fee of P 332,500.00 per annum for a period of four (4) consecutive years. Simultaneous with the
execution of and in accordance with the terms of the Underwriting Agreement, a consultancy
Agreement was also executed whereby Este Del Sol engaged the services of petitioner First Metro
for a fee as consultant to render general consultancy services.
Since Este Del Sol failed to meet the schedule of repayment it appeared to have incurred a
total obligation of P 12,679,630.98. Thus First Metro caused the extra judicial foreclosure of the
real estate mortgage where First Metro was the highest bidder. However, there remained a balance
of P 6,863,297.73 Hence, First Metro instituted an instant collection suit against respondent,
including those other respondents who have securities of the loan of respondent Este Del Sol by
virtue of their continuing surety agreements.
ISSUE:
Whether or not Underwriting and Consultancy Agreements are mere subterfuges to
camouflage the usurious interest charged by First Metro.
RULING:
The form of the contra ct enters into between the petitioner and respondent is not conclusive
for the law will not permit a usurious loan to hide itself behind a legal form. An apparently legal
loan is usurious when it is intended that additional compensation for the loan providing for
payment bye the borrower for the leaders services which of little value or which are not in fact to
be rendered. Here, the loan Underwriting and Consultancy Agreement are not separate and
independent transactions rather they were executed and delivered contemporaneous by and
executed by First Metro as essential conditions for the grant of the loan. However, in usurious

Page 349 of 845

loans, the entire obligation does not become void because the unpaid principal debt still stands and
remains.

Page 350 of 845

 228. DOMEL TRADING CORPORATION V. COURT OF APPEALS and
G.R. No. 84813, September 22, 1999

FACTS:

On June 3, 1981, private respondent NDC-NACIDA Raw Materials Corporation

(NNRMC) ordered from petitioner Domel Trading Corporation (DOMEL) 22,000 bundles of buri
midribs at P16.00 per bundle to be delivered within 30 working days from the date of the opening
of a letter of credit. On June 4, 1981, private respondent again ordered 300,000 pieces of rattan
poles at P9.65 per piece for a total price of P2,895,000.00, also to be delivered within 60 days from
the date of the opening of a letter of credit. The specifications and provisions of both transactions,
which served as their agreement, were printed in two separate purchase orders.

In accordance with their agreement, NNRMC, on July 9, 1981, opened a letter of credit with
Philippine National Bank (PNB) in favor of DOMEL in the amount of P1,997,000.00 to cover its
order for 206,943 pieces of rattan poles. On July 13, 1981, NNRMC opened another letter of credit
in favor of DOMEL in the amount of P1,236,000.00 to cover the price of 93,057 pieces of rattan
poles and 22,000 bundles of buri midribs.

In violation of their agreement, DOMEL failed to deliver the buri midribs and rattan poles within
the stipulated period. Thus, on September 23, 1981, DOMEL and NNRMC agreed to restructure
the latters purchase orders in a Memorandum of Agreement. Under the agreement, NNRMC
extended the expiry date of its two letters of credit to November 5, 1981. It also reduced the
quantity of the rattan poles from 300,000 to only 100,000 pieces while the quantity of buri midribs
remained at 22,000 bundles. Further, DOMEL undertook to deliver the goods on or before October
31, 1981. However, no deliveries were again made on the said date. Consequently, demands were
made by NNRMC on January 19, 1982 for the payment of damages, which demands were ignored
by DOMEL. Hence, NNRMC filed a complaint for damages before the Regional Trial Court of
Pasig. After trial, judgment was rendered in favor of plaintiff and against defendant.

Both DOMEL and NNRMC assail the above-quoted decision in separate petitions which have
been consolidated before this Court. Based on the pleadings submitted by the parties, this Court
has resolved to give due course to the petition and decides the same. DOMEL submits it has not
breached its contractual obligation to NNRMC inasmuch as it was the fault of the latter for not
inspecting and examining the rattan poles as well as the buri midribs already shipped by the
suppliers and stored in the formers warehouse. In short, DOMEL claims that NNRMC must first
inspect the ordered items before delivery could be made.

Page 351 of 845

ISSUE:

Whether or not the decision of the Court of Appeals in CA-G.R. CV No. 08952 which
modified the decision of the lower court granting private respondents prayer for damages, was
correct.
RULING:
While the Supreme Court did not agree with the Court of Appeals that the failure of
NNRMC to conduct the inspection mitigated DOMELs liability for liquidated damages,
nevertheless, it agreed in the reduction of the amount of liquidated damages to only P150,000.00.
The amount of P2,000.00 as penalty for every day of delay is excessive and unconscionable.
Article 1229 of the Civil Code states, thus:The judge shall equitably reduce the penalty when the
principal obligation has been partly or irregularly complied with by the debtor. Even if there has
been no performance, the penalty may also be reduced by the courts if it is iniquitous or
unconscionable.
Article 2227 of the Civil Code likewise states, thus: Liquidated damages, whether intended as an
indemnity or a penalty, shall be equitably reduced if they are iniquitous or unconscionable.
In determining whether a penalty clause is iniquitous and unconscionable, a court may very well
take into account the actual damages sustained by a creditor who was compelled to sue the
defaulting debtor, which actual damages would include the interest and penalties the creditor may
have had to pay on its own from its funding source. In this case, NNRMC was only able to prove
that it incurred the amounts of P5,995.83 as opening charges on the two Letters of Credit and an
additional P1,911.85 as amendment charges on the same Letters of Credit. Other than that,
NNRMC failed to prove it had suffered actual damages resulting from the nondelivery of the
specified buri midribs and rattan poles. In fact, what it allegedly suffered are what it calls
Foregone Interest Income and Foregone Profit from the two Letters of Credit. Such could not
be considered as actual damages.

Page 352 of 845

 229. MEDEL VS CA
G.R. No. 131622 November 27, 1998

FACTS:
The Medel spouses obtained several loans of which they were unable to pay in full. On July 23,
1986, Servando and Leticia with the latter's husband, Dr. Rafael Medel, consolidated all their
previous unpaid loans totaling P440,000.00, and sought from Veronica another loan in the amount
of P60,000.00, bringing their indebtedness to a total of P500,000.00, payable on August 23, 1986.
They executed a promissory note indicating payment for the balance.
On maturity of the loan, the borrowers failed to pay the indebtedness of P500,000.00, plus
interests and penalties, evidenced by the above-quoted promissory note. On February 20, 1990,
Veronica R. Gonzales, joined by her husband Danilo G. Gonzales, filed with the Regional Trial
Court of Bulacan, Branch 16, at Malolos, Bulacan, a complaint for collection of the full amount
of the loan including interests and other charges.

ISSUE:

What is the interest that must be collected on the instant case?

RULING:

Basically, the issue revolves on the validity of the interest rate stipulated upon. Thus, the
question presented is whether or not the stipulated rate of interest at 5.5% per month on the loan
in the sum of P500,000.00, that plaintiffs extended to the defendants is usurious. In other words,
is the Usury Law still effective, or has it been repealed by Central Bank Circular No. 905, adopted
on December 22, 1982, pursuant to its powers under P.D. No. 116, as amended by P.D. No. 1684?
We agree with petitioners that the stipulated rate of interest at 5.5% per month on the
P500,000.00 loan is excessive, iniquitous, unconscionable and exorbitant. However, we can not
consider the rate "usurious" because this Court has consistently held that Circular No. 905 of the
Central Bank, adopted on December 22, 1982, has expressly removed the interest ceilings
prescribed by the Usury Law and that the Usury Law is now "legally inexistent".
Nevertheless, we find the interest at 5.5% per month, or 66% per annum, stipulated upon
by the parties in the promissory note iniquitous or unconscionable, and, hence, contrary to morals
("contra bonos mores"), if not against the law. 20 The stipulation is void. The courts shall reduce
equitably liquidated damages, whether intended as an indemnity or a penalty if they are iniquitous
or unconscionable.
Consequently, the Court of Appeals erred in upholding the stipulation of the parties.
Rather, we agree with the trial court that, under the circumstances, interest at 12% per annum, and
an additional 1% a month penalty charge as liquidated damages may be more reasonable.

Page 353 of 845

 230. PACITA REFORMINA v TOMOL, JR.
NO. L-59096 October 11, 1985

FACTS:
An action for Recovery of Damages for Injury to Person and Loss of Property was filed.
RTC rendered judgment in favor of the plaintiffs and against the defendants, ordering the latter to
pay jointly and severally the former. On appeal, the decision was modified. In the computation of
the legal interest decreed sought to be executed, petitioners claimed that it should be at 12% per
annum invoking Central bank Circular. The respondents, however, insist that said legal interest
should be at the rate of 6% per annum pursuant to Article 2209 of the New Civil code
ISSUE:
How much by way of legal interest, should a judgment debtor pay the judgment creditor?
RULING:
The judgment spoken of and referred to are judgments in litigations involving loans or
forbearances of any money, goods or credits. Any other kind of monetary judgment does not fall
within the coverage of the said law for it is not within the ambit of authority granted to the Central
Bank. The Monetary Board may not tread on forbidden grounds. To make Central Bank Circular
No. 416 applicable to any case other than those specifically provided for by the Usury Law will
make the same of doubtful constitutionality since the Monetary Board will be exercising legislative
functions which are beyond the intendment of PD No. 116.
The petition is without merit, the same is dismissed with costs against petitioners.

Page 354 of 845

 231. SONNY LO v. KJS ECO-FORMWORK SYSTEM
G.R. No. 149420 October 8, 2003

FACTS:

KJS is engaged in the sale of steel scaffoldings while Lo is a building contractor. On

February 22, 1990, petitioner ordered scaffolding equipments from respondent worth P540,425.80.
He paid a downpayment in the amount of P150,000. The balance was made payable in 10 monthly
installments. Respondent delivered the equipments. Petitioner was able to pay the first two
monthly installments. His business suffered financial difficulties and he was unable to settle his
obligations despite demands. On October 11, 1990, the parties executed a Deed of Assignment
whereby petitioner assigned to respondent his receivables from Jonero Realty. However, Jonero
refused to honor the Dees of Assign,nt because it claimed that petitioner was indebted to it.
Petitioner refused to pay claiming that that his obligation had been extinguished when they
executed the deed of assign,ent. RTC dismissed the complaint on the ground that the assignment
of credit extinguished the obligation. Court of appeals reversed the decision and ordered Lo to pay
the plaintiff KJS with legal interests of 6% per annum until fully paid.

ISSUE:
Whether or not the Deed of Assignment extinguished the obligation
RULING:
An assignment of credit, by virtue of which the owner of the credit, the assignor, by a legal
cause, such as sale, dacion en pago, exchange or donation and without the consent of the debtor
transfers his credit and accessory rights to another, the assignee, who acquires the power to enforce
it against the debtor. Petitioner, as assignor, is bound to warrant the existence and legality of the
credit at the tim of the sale or assignment. When Jonero claimed that it was no longer indebted to
petitioner since the latter had also as unpaid obligation to it, it essentially meant that its obligation
to the petitioner has been extinguished by compensation. Petitioner was found in breach of his
obligation under the Deed of assignment. Court of Appeals decision is affirmed.

Page 355 of 845

 232. PHILPPINE NATIONAL BANK v. CA and LORETO TAN
G.R. No. 108630 April 2, 1996

FACTS:
Private respondent Loreto Tan is the owner of a parcel of land abutting the national
highway. Expropriaton proceedings were instituted by the government. Tan filed a motion
requesting the issuance of an order for the release to him of the expropriation price of P32,480.00.
PNB was required by the trial court to release to tan the amount and deposited it by the government.
Petitioner, through its Assistant Manager Tagamolila, issued a check and delivered the same to
Sonia Gonzaga on the strength of the SPA, without tans knowledge, consent and authority. RTC
ordered petitioner and Tagamolila to pay private respondent jointly and severally the amount worth
legal interests, damages and attorneys fees. Ca affirmed the decision.
ISSUE:
Whether the Special Power of Attorney authorized Sonia Gonzaga to receive payment
intended for private respondent
RULING:

There is no question that no payment had ever been made to private respondent as to the
check was never delivered to him. Under Article 1233 of the Civil Code, a debt shall not be
understood to have been paid unless the thing or service in which the obligation consists has been
completely delivered or rendered, as the case may be. The burden of proof of sad payment lies
with the debtor.
The decision of the court of appeals is affirmed with the modification that the award by the
RTC of P5,000 as attorneys fees is reinstated.

Page 356 of 845

 233. CATHAY PACIFIC AIRWAYS v.Spouses Vazquez
G.R. No. 150843 March 14, 2003
FACTS:
Cathay is a common carrier engaged in transporting passenger and goods by air. Spouses
Vazquez are Gold Card Members of its Marc Polo Club. The Spouses, with two friends and a maid
went to HongKong for business. Spouses have the Business class boarding passes and economy
class for the maid. When boarding, the ground stewardess declared a seat change from Business
class to First Class for the Vazquez. The Spouses refused but after insistence by the stewardess,
the spouses gave in. When the arrived in Manila, spouses demanded to be indemnified in the
amount of one million for the humiliation and embarrassment caused by the employee. RTC
ruled for the Vazquez ordering Cathay Airways to pay the spouses, stating further that there was a
breach of contract not because of overbooking but because the latter pushed through with the
upgrading despite objections of the spouses.

ISSUE:
Is an involuntary upgrading of an airlines accommodation at no extra costs cause a breach
of contract of carriage?
RULING:
The Vazquezes are aware of the privileges, but such privileges may be waived. Spouses
should have been consulted first. It should not have been imposed on them over their vehement
objection. By insisting of the upgrade, Pacific Airways breached its contract of carriage with the
Vazquezes. Nominal damages are adjudicated in order that the right of the plaintiff, which have
been violated may be vindicated or recognized and not for indemnifying the plaintiff for any loss
suffered by him.
Petition is partly granted. Court of Appeals decision is modified. Moral damages deleted,
nominal damages reduced to P5,000.

Page 357 of 845

 234. CITIBANK v.
SABENIANO
G.R.No. 156132, October 16, 2006

FACTS:
Petitioner Citibank is a banking corporation duly authorized under the laws of the USA to
do commercial banking activities n the Philippines. Sabeniano was a client of both Petitioners
Citibank and FNCB Finance. Respondent filed a complaint against petitioners claiming to have
substantial deposits, the proceeds of which were supposedly deposited automatically and directly
to respondents account with the petitioner Citibank and that allegedly petitioner refused to despite
repeated demands. Petitioner alleged that respondent obtained several loans from the former and
in default, Citibank exercised its right to set-off respondents outstanding loans with her deposits
and money. RTC declared the act illegal, null and void and ordered the petitioner to refund the
amount plus interest, ordering Sabeniano, on the other hand to pay Citibank her indebtedness. CA
affirmed the decision entirely in favor of the respondent.
ISSUE:
Whether petitioner may exercise its right to set-off respondents loans with her deposits
and money in Citibank-Geneva

RULING:
Petition is partly granted with modification.
1. Citibank is ordered to return to respondent the principal amount of P318,897.34 and
P203,150.00 plus 14.5% per annum
2. The remittance of US $149,632.99 from respondents Citibank-Geneva account is
declared illegal, null and void, thus Citibank is ordered to refund said amount in
Philippine currency or its equivalent using exchange rate at the time of payment.
3. Citibank to pay respondent moral damages of P300,000, exemplary damages for
P250,000, attorneys fees of P200,000.
4. Respondent to pay petitioner the balance of her outstanding loans of P1,069,847.40
inclusive off interest.

Page 358 of 845

 235. TELENGTAN BROTHERS and SONS v. UNITED STATES LINES G.R.No.
132284,February 28,2006

FACTS:
Petitioner is a domestic corporation while US Lines is a foreign corporation engaged in
overseas shipping. It was made applicable that consignees who fail to take delivery of their
containerized cargo within the 10-day free period are liable to pay demurrage charges. On June
22, 1981, US Lines filed a suit against petitioner seeking payment of demurrage charges plus
interest and damages. Petitioner incurred P94,000 which the latter refused to pay despite repeated
demands. Petitioner disclaims liability alleging that it has never entered into a contract nor signed
an agreement to be bound by it. RTC ruled that petitioner is liable to respondent and all be
computed as of the date of payment in accordance with Article 1250 of the Civil Code. CA
affirmed the decision.

ISSUE:
Whether the re-computation of the judgment award in accordance with Article 1250 of the
Civil Code proper
RULING:
The Supreme Court found as erroneous the trial courts decision as affirmed y the Court
of Appeals. The Court holds that there has been an extraordinary inflation within the meaning of
Article 1250 of the Civil Code. There is no reason for ordering the payment of an obligation in an
amount different from what has been agreed upon because of the purported supervention of an
extraordinary inflation.
The assailed decision is affirmed with modification that the order for re-computation as of
the date of payment in accordance with the provisions of Article 1250 of New Civil Code is
deleted.

Page 359 of 845

 C. F. SHARP v. NORTHWEST AIRLINES
G.R. No. 133498, April 18, 2002

Facts:
On May 9, 1974, respondent entered into an International Passengers Sales Agency
Agreement with petitioner, authorizing the latter to sell its air transport tickets. Petitioner failed to
remit the proceeds of the ticket sales, for which reason, respondent filed a Collection suit against
petitioner before the Tokyo District Court, which ordered petitioner to pay respondent 82,158,195
Yen and damages for the delay at the rate of 6% per annum fro August 28,1980 up to and until
payment is completed. Unable to execute the decision in Japan, respondent filed a case with the
RTC.
RTC issued writ of execution ordering defendant to pay plaintiff 83,158,195 Yen at the
exchange rate on the date of foreign judgment plus 6% interest. On appeal, petitioner contended
that it had already paid partial payments hence, was not liable to pay additional 6% interest
imposed in the foreign judgment.

Issue:
Whether or not the petitioner is liable to pay additional 6% per annum for the delay

Held:

The petition is denied. CA decision is affirmed with modification. Petitioner is directed to

pay respondent 61,734 Yen plus damages for the delay at 6% per annum from August 28,1980
until payment is completed, with interest at the rate of 12% per annum counted from the date of
filing until fully satisfied. Petitioners liability may be paid in Philippine currency computed at the
exchange rate prevailing at the time of payment.

Page 360 of 845

 BERT PADILLA v. SPOUSES PAREDES and COURT OF APPEALS
G.R. NO. 124874, March 17, 2000

Facts:
On October 20, 1988, petitioner Padilla and private respondent entered into a contract to
sell involving a parcel of land. The was untitled but private respondent was paying taxes thereon.
Under the contract, petitioner undertook to secure title to the property in private respondents
names of the P312,840 purchase prize, petitioner was to pay downpayment of P50,000 upon
signing and the balance was to be paid within 10 days from the issuance of the court order directing
issuance of the decree of registration. For failure to pay some of the amount, respondent offered
to sell to petitioner one-half of the property for all the payment, lest respondent rescinds the
contract. Petitioner refused and instituted action for specific performance alleging that they have
substantially complied with the obligation. RTC ruled for the petitioners stating a casual or slight
breach that did not warrant rescission. CA reversed the decision and confirmed the respondents
rescission.

Issue:
Whether or not the private respondents are entitled to rescind the contract to sell the land
to petitioner

Held:
The Supreme Court sustained the ruling of CA that private respondent may validly rescind
the contract to sell, however, the reason for this is not that respondents have the power to rescind
but because their obligation thereunder did not arise. The CA is correct in ordering the return to
petitioner of the amounts received from him by private respondents, on the precept that no one
shall be unjustly enriched himself at the expense of another.

Page 361 of 845

 SPOUSES TIBAJIA v. COURT OF APPEALS and EDEN TAN
G. R. No. 100290, June 4, 1993

Facts:
A suit of collection of sum of money was filed by Eden Tan against the spouses. A writ of
attachment was issued, the Deputy Sheriff filed a return stating that a deposit made by Tibajia in
the amount of P442,750 in another case, had been garnished by him. RTC ruled in favor of Eden
Tan and ordered the spouses to pay her an amount in excess of P3,000,000. Court of Appeals
modified the decision by reducing the amount for damages. Tibajia Spouses delivered to Sheriff
Bolima the total money judgment of P398483.70. Tan refused to accept the payment and insisted
that the garnished funds be withdrawn to satisfy the judgment obligation.

Issue:
Whether or not payment by means of check is considered payment in legal tender

Held:
The ruling applies the statutory provisions which lay down the rule that a check is not legal
tender and that a creditor may validly refuse payment by check, whether it be a managers check,
cashiers or personal check. The decision of the court of Appeals is affirmed.
A check, whether a managers check or ordinary check, is not legal tender, and an offer of
a check in payment of a debt is not a valid tender of payment and may be refused receipt by the
obligee or creditor. A check is not legal tender and that a creditor may validly refuse payment by
check, whether it be a managers, cashiers or personal check. The Supreme Court stressed that,
We are not, by this decision, sanctioning the use of a check for the payment of obligations over
the objection of the creditor.

Page 362 of 845

 DEVELOPMENT BANK OF THE PHILIPPINES v. COURT OF APEEALS
G.R.No. 138703, June 30, 2006

Facts:
In March 1968, DBP granted to private respondents an industrial loan in the amount of
P2,500,000 P500,000 n cash and P2,000,000 in DBP Progress Bank. It was evidenced by a
promissory note and secured by a mortgage executed by respondents over their present and future
properties. Another loan was granted by DBP in the for of a 5-year revolving guarantee to
P1,700,000. In 1975, the outstanding accounts wth DBP was restructured in view of failure to pay.
Amounting to P4,655,992.35 were consolidated into a single account. On the other hand, all
accrued interest and charges due amounting to P3,074,672.21 were denominated as Notes Taken
for Interests and evidenced by a separate promissory note. For failure to comply with its
obligation, DBP initiated foreclosure proceedings upon its computation that respondents loans
were arrears by P62,954,473.68. Respondents contended that the collection was unconscionable if
not unlawful or usurious . RTC, as affirmed by the CA, ruled in favor of the respondents.

Issue:
Whether the prestation to collect by the DBP is unconscionable or usurious

Held:
It cannot be determined whether DBP in fact applied an interest rate higher than what is
prescribed under the law. Assuming it did exceed 12% in addition to the other penalties stipulated
in the note, this should be stricken out for being usurious.
The petition is partly granted. Decision of the court of Appeals is reversed and set aside.
The case is remanded o the trial court for the determination of the total amount of the respondents
obligation based on the promissory notes, according to the interest rate agreed upon by the parties
on the interest rate of 12% per annum, whichever is lower.

Page 363 of 845

 VITARICH vs. LOSIN
G.R. No. 181560, November 15, 2010

Facts:
Respondent Chona Losin (Losin) was in the fastfood and catering services business
named Glamours Chicken House. Since 1993, Vitarich, particularly its Davao Branch, had been
her supplier of poultry meat.In the months of July to November 1996, Losins orders of dressed
chicken and other meat products allegedly amounted to P921,083.10. During this said period,
Losins poultry meat needs for her business were serviced by Rodrigo Directo (Directo) and
Allan Rosa (Rosa), both salesmen and authorized collectors of Vitarich, and Arnold Baybay
(Baybay), a supervisor of said corporation.
On August 24, 1996, Directos services were terminated by Vitarich without Losins
knowledge. He left without turning over some supporting invoices covering the orders of Losin.
Rosa and Baybay, on the other hand, resigned on November 30, 1996 and December 30, 1996,
respectively. Just like Directo, they did not also turn over pertinent invoices covering Losins
account.On February 12, 1997, demand letters were sent to Losin covering her alleged unpaid
account amounting to P921,083.10. It appears that Losin had issued three (3) checks amounting
to P288,463.30 which were dishonored either for reasons - Drawn Against Insufficient Funds
(DAIF) or Stop Payment.
On March 2, 1998, Vitarich filed a complaint for Sum of Money against Losin, Directo,
Rosa, and Baybay before the RTC. On August 9, 2001, the RTC rendered its Decision8 in favor
of Vitarich, however the CA rendered the assailed decision in favor of Losin.

Issue:
Wether or not there is already payment on the part of Losin

Held:

No. As a general rule, one who pleads payment has the burden of proving it.The burden
rests on the debtor to prove payment, rather than on the creditor to prove non-payment. The
debtor has the burden of showing with legal certainty that the obligation has been discharged by
payment.
True, the law requires in civil cases that the party who alleges a fact has the burden of
proving it. Section 1, Rule 131 of the Rules of Court24 provides that the burden of proof is the
duty of a party to prove the truth of his claim or defense, or any fact in issue by the amount of

Page 364 of 845

evidence required by law. In this case, however, the burden of proof is on Losin because she
alleges an affirmative defense, namely, payment. Losin failed to discharge that burden.

After examination of the evidence presented, this Court is of the opinion that Losin failed to
present a single official receipt to prove payment.25 This is contrary to the well-settled rule that
a receipt, which is a written and signed acknowledgment that money and goods have been
delivered, is the best evidence of the fact of payment although not exclusive.26 All she presented
were copies of the list of checks allegedly issued to Vitarich through its agent Directo,27 a
Statement of Payments Made to Vitarich,28 and apparently copies of the pertinent history of her
checking account with Rizal Commercial Banking Corporation (RCBC). At best, these may only
serve as documentary records of her business dealings with Vitarich to keep track of the
payments made but these are not enough to prove payment.

Page 365 of 845

 METROBANK vs. CABILZO
510 SCRA 259

Facts:
On 12 November 1994, Cabilzo issued a Metrobank Check No. 985988, payable to
CASH and postdated on 24 November 1994 in the amount of One Thousand Pesos (P1, 000.00).
The check was drawn against Cabilzos Account with Metrobank Pasong Tamo Branch under
Current Account No. 618044873-3 and was paid by Cabilzo to a certain Mr. Marquez, as his sales
commission. Subsequently, the check was presented to Westmont Bank for payment. Westmont
Bank, in turn, indorsed the check to Metrobank for appropriate clearing. After the entries thereon
were examined, including the availability of funds and the authenticity of the signature of the
drawer, Metrobank cleared the check for encashment in accordance with the Philippine Clearing
House Corporation (PCHC) Rules. On 16 November 1994, Cabilzos representative was at
Metrobank Pasong Tamo Branch to make some transaction when he was asked by bank personnel
if Cabilzo had issued a check in the amount of P91, 000.00 to which the former replied in the
negative. On the afternoon of the same date, Cabilzo himself called Metrobank to reiterate that he
did not issue a check in the amount of P91, 000.00 and requested that the questioned check be
returned to him for verification, to which Metrobank complied. Cabilzo demanded that Metrobank
re-credit the amount of P91, 000.00 to his account. Metrobank, however, refused reasoning that it
has to refer the matter first to its Legal Division for appropriate action. Repeated verbal demands
followed but Metrobank still failed to re-credit the amount of P91, 000.00 to Cabilzos account.
On 30 June 1995, Cabilzo, thru counsel, finally sent a letter-demand to Metrobank for the
payment of P90, 000.00, after deducting the original value of the check in the amount of P1,
000.00Metrobank still failed or refused to comply with its obligation. Consequently, Cabilzo
instituted a civil action for damages against Metrobank before the RTC of Manila, Branch 13. In
his Complaint docketed as Civil Case No. 95-75651, Renato D. Cabilzo v. Metropolitan Bank and
Trust Company, Cabilzo prayed that in addition to his claim for reimbursement, actual and moral
damages plus costs of the suit be awarded in his favor.

Issue:
Whether equitable estoppel can be appreciated in favor of petitioner

Held:
The degree of diligence required of a reasonable man in the exercise of his tasks and the
performance of his duties has been faithfully complied with by Cabilzo. In fact, he was wary
enough that he filled with asterisks the spaces between and after the amounts, not only those stated
in words, but also those in numerical figures, in order to prevent any fraudulent insertion, but
unfortunately, the check was still successfully altered, indorsed by the collecting bank, and cleared
by the drawee bank, and encashed by the perpetrator of the fraud, to the damage and prejudice of
Cabilzo.

Page 366 of 845

 Metrobank cannot lightly impute that Cabilzo was negligent and is therefore prevented
from asserting his rights under the doctrine of equitable estoppel when the facts on record are bare
of evidence to support such conclusion. The doctrine of equitable estoppel states that when one
of the two innocent persons, each guiltless of any intentional or moral wrong, must suffer a loss,
it must be borne by the one whose erroneous conduct, either by omission or commission, was the
cause of injury. Metrobanks reliance on this dictum is misplaced. For one, Metrobanks
representation that it is an innocent party is flimsy and evidently, misleading. At the same time,
Metrobank cannot asseverate that Cabilzo was negligent and this negligence was the proximate
cause of the loss in the absence of even a scintilla proof to buttress such claim. Negligence is not
presumed but must be proven by the one who alleges it, which petitioner failed to.

Page 367 of 845

 EUFEMIA and ROMEL ALMEDA v. BATHALA MARKETING
G.R.No. 150806, January 28, 2008

Facts:
In May 1997, Bathala Marketng, renewed its Contract of Lease with Ponciano Almeda.
Under the contract, Ponciano agreed to lease a porton of Almeda Compound for a monthly rental
of P1,107,348.69 for four years. On January 26, 1998, petitioner informed respondent that its
monthly rental be increased by 73% pursuant to the condition No. 7 of the contract and Article
1250. Respondent refused the demand and insisted that there was no extraordinary inflation to
warrant such application. Respondent refused to pay the VAT and adjusted rentals as demanded
by the petitioners but continually paid the stipulated amount. RTC ruled in favor of the respondent
and declared that plaintiff is not liable for the payment of VAT and the adjustment rental, there
being no extraordinary inflation or devaluation. CA affirmed the decision deleting the amounts
representing 10% VAT and rental adjustment.

Issue:
Whether the amount of rentals due the petitioners should be adjusted by reason of
extraordinary inflation or devaluation

Held:
Petitioners are stopped from shifting to respondent the burden of paying the VAT. 6th
Condition states that respondent can only be held liable for new taxes imposed after the effectivity
of the contract of lease, after 1977, VAT cannot be considered a new tax. Neither can petitioners
legitimately demand rental adjustment because of extraordinary inflation or devaluation. Absent
an official pronouncement or declaration by competent authorities of its existence, its effects are
not to be applied.
Petition is denied. CA decision is affirmed.

Page 368 of 845

 EQUITABLE PCI BANK, YU and APAS v. NG SHEUNG NGOR
G.R.NO. 171545, December 19, 2007

Facts:
On October 7, 2001, respondents Ngor and Go filed an action for amendment and/or
reformation of documents and contracts against Equitable and its employees. They claimed that
they were induced by the bank to avail of its peso and dollar credit facilities by offering low
interests so they accepted and signed Equitables proposal. They alleged that they were unaware
that the documents contained escalation clauses granting Equitable authority to increase interest
without their consent. These were rebutted by the bank. RTC ordered the use of the 1996 dollar
exchange rate in computing respondents dollar-denominated loans. CA granted the Banks
application for injunction but the properties were sold to public auction.

Issue:
Whether or not there was an extraordinary deflation

Held:
Extraordinary inflation exists when there is an unusual decrease in the purchasing power
of currency and such decrease could not be reasonably foreseen or was beyond the contemplation
of the parties at the time of the obligation. Deflation is an inverse situation.
Despite the devaluation of the peso, BSP never declared a situation of extraordinary
inflation. Respondents should pay their dollar denominated loans at the exchange rate fixed by the
BSP on the date of maturity.
Decision of lower courts are reversed and set aside.

Page 369 of 845

 SIMPLICIO PALANCA v. ULYSIUS GUIDES and LORENZO GUIDES
G.R. No. 146365, February 28, 2005

Facts:
In August 1983, petitioner Palanca executed a contract to sell a parcel of land on installment
with Jopson for P11,250. Jopson paid petitioner P1,650 as downpayment, leaving a balance of
P9600. In December 1983, Jopson assigned ad transferred all her rights and interests over the
property to respondent Guides. Believing that she had fully paid the purchase prize, respondent
found out when she verified with the Register of Deeds that the property in question was still in
the name of de Leon. Petitioner stated that she refused to execute the document of sale in favor of
the respondent since the latter failed with the said obligation- that he was not paid the complete
amount in the contract. RTC ruled in favor of the plaintiff and against Palanca, ordering him to
execute a Deed of Absolute Sale and the issuance of TCT, reimburse plaintiff the amount paid n
excess and for damages.

Issue:
Whether the petitioners claim of unpaid charges from the respondent proper

Held:
Petitioner was deemed to have waived his right to present evidence and thus was unable to
adduce evidence of such inflation or fluctuation. Even if there were such, petitioner did not make
a demand on respondent for the satisfaction of the claim.

When petitioner accepted respondents installment payments despite the alleged charges,
and without any showing that he protested the irregularity of such payment, nor demanded the
payment of the alleged charges, respondents liability, if any for said charges is deemed fully
satisfied.

Page 370 of 845

 PCIB v. COURT OF APPEALS
G.R. NO. 121989 January 31, 2006

Facts:
PCIB and MBC were joint bidders in a foreclosure sale held of assorted mining machinery
and equipment previously mortgaged to them by Philippine Iron Mines. Atlas agreed to purchase
some of these properties and the sale was evidenced by a Deed of Sale with a downpayment of
P12,000,000 and the balance of P18,000,000 payable in 6 monthly installments. In compliance
with the contract, Atlas issued HongKong and shanghai Bank check amounting to P12,000,000.
Atlas paid to NAMAWU the amount of P4,298,307.77 in compliance with the writ of garnishment
issued against Atlas to satisfy the judgment in favor of NAMAWU. Atlas alleged that there was
overpayment, hence the suit against PCIB to obtain reimbursement. PCIB contended that Atlas
still owed P908,398.75 because NAAWU had been partially paid in the amount of P601,260.00.
RTC ruled against Atlas to pay P908,398.75 to PCIB. CA reversed the decision.

Issue:
Whether atlas had complied with its obligation to PCIB

Held:
While the original amount sought to be garnished was P4,298,307,77, the partial payment
of P601,260 naturally reduced it to P3,697,047.77 Atlas overpaid NAMAWU, thus the remedy if
Atlas would be to proceed against NAAWU nut not against PCIB in relation to article 1236 of the
Civil Code
The petition is partly granted.CA decision is reversed and set aside and in lieu thereof
Atlas is ordered to pay PCIB the sum of P146,058.96, with the legal interest commencing from
the time of first demand on August 22, 1985.

Page 371 of 845

 JOSE LAGON v. HOOVEN COMALCO INDUSTRIES
G.R. No. 135657, January 17, 2001

Facts:
Petitioner is the owner of a commercial building while respondent is a domestic corporation
known to be the biggest manufacturer and installer of aluminum materials in the country. Parties
entered into 2 contracts whereby for a total consideration of P104,870. Hooven agreed to sell and
install various aluminum materials in Lagons building. Upon execution of contracts, Lagon paid
Hooven P48,000 in advance. On February 24, 1987, Hooven commenced an action for sum of
money. It was alleged that materials were delvered and installed but P69,329 remained unpaid
even after the completion of the project and despite repeated demands. RTC held partly on the
basis of the ocular inspection finding that the total actual deliveries cost P87,140 deducting
therefrom P48,000. CA set aside the decision and held in favor of Hooven.

Issue:
Whether all the materials specified in the contracts had been delivered and installed by
respondent in petitioners commercial building

Held:
Essentially, respondent has the burden of establishing its affirmative allegations of
complete delivery and installation of the materials and petitioners failure to pay therefor. The
evidence on its discharge is grossly anemic. The CA decision is modified. Lagon is ordered to pay
respondent P6,377.66 representing the value unpaid. On the other hand, respondent is ordered to
pay petitioner P50,000 as moral damages, P30,000 attorneys fees and P46,554.50 as actual
damages.

Page 372 of 845

BANK OF THE PHILIPPINE ISLANDS v. EASTERN PLYWOOD and BENIGNO LIM
G.R. No. 104612, May 10, 1994

Facts:
Private respondent , Eastern and Lim, an officer and stock holder of Eastern held at least
one joint bank account with the CBTC, the predecessor-in interest of the petitioner BPI. In March
1975, checking account with Lim in the amount of P120,000 was opened by Velasco with funds
withdrawn fro the account of Eastern and Lim. Velasco died and at the time of his death, the
outstanding balance of the account stood at P662,522.87. Thereafter, Easrtern obtained a loan of
P73,000 fro CBTC in addition, Eastern and Lim and CBTC signed another document entitled
Holdout agreement.
In the settlement proceeding of Velascos estate, the whole balance of P331,261.44 in the
joint account of Velasco and Lim was claimed as part of Velascos estate. The interstate court
granted the urgent motion of heirs of Velasco to withdraw the deposit and authorize them to divide
among themselves the amount. BPI filed a complaint against Lin and Eastern demanding payment
of promissory not for P73,000. RTC ruled that the promissory note is subject to the holdout
agreement. CA affirmed the division.

Issue:
Whether BPI is still liable to the private respondent on the account subject to the holdout
agreement after it is withdrawn by the heirs of Velasco

Held:
The account was proved to belong to Eastern even if it was in the names of Lim and
Velasco. As the real creditor of the bank, Eastern has the right to withdraw it or demand payment
thereof. BPI can not be relieved of its duty to pay Eastern simply because it already allowed the
heirs of Velasco to withdraw the whole balance of the account. Payment made by the debtor to the
wrong party does not extinguish the obligation as to the creditor who is without fault or negligence.

Page 373 of 845

 REPUBLIC vs. THI THU THUY T. DE GUZMAN
G.R. No. 175021 June 15, 2011

Facts:
On December 8, 1995, the PNP Engineering Services (PNPES), released a Requisition and
Issue Voucher for the acquisition of various building materials amounting to Two Million Two
Hundred Eighty-Eight Thousand Five Hundred Sixty-Two Pesos and Sixty Centavos
(P2,288,562.60) for the construction of a four-storey condominium building with roof deck at
Camp Crame, Quezon City. Respondent averred that on December 11, 1995, MGM and petitioner,
represented by the PNP, through its chief, executed a Contract of Agreement (the Contract)
wherein MGM, for the price of P2,288,562.60, undertook to procure and deliver to the PNP the
construction materials itemized in the purchase order attached to the Contract. Respondent claimed
that after the PNP Chief approved the Contract and purchase order,MGM, on March 1, 1996,
proceeded with the delivery of the construction materials, as evidenced by Delivery Receipt Nos.
151-153,11 Sales Invoice Nos. 038 and 041,12 and the "Report of Public Property Purchase"
issued by the PNPs Receiving and Accounting Officers to their Internal Auditor Chief.
Respondent asseverated that following the PNPs inspection of the delivered materials on March
4, 1996,14 the PNP issued two Disbursement Vouchers; one in the amount of P2,226,147.26 in
favor of MGM,15 and the other, 16 in the amount of P62,415.34, representing the three percent
(3%) withholding tax, in favor of the Bureau of Internal Revenue (BIR).The respondent sent a
letter dated October 20, 199718 to the PNP, demanding the payment of P2,288,562.60 for the
construction materials MGM procured for the PNP under their December 1995 Contract. The PNP,
through its Officer-in-Charge, replied19 to respondents counsel, informing her of the payment
made to MGM via Land Bank of the Philippines (LBP). Respondent denying having ever received
the LBP check. On May 5, 1999, respondent filed a Complaint for Sum of Money against the
petitioner. The petitioner presented Edgardo Cruz and testified that Highland Enterprises had been
an accredited contractor of the PNP since 1975. In 1995, Cruz claimed that the PNPES was tasked
to construct "by administration" a condominium building. This meant that the PNPES had to do
all the work, from the canvassing of the materials to the construction of the building. The PNPES
allegedly lacked the funds to do this and so asked for Highland Enterprisess help. In a meeting
with its accredited contractors, the PNPES asked if the other contractors would agree to the use of
their business name50 for a two percent (2%) commission of the purchase order price to avoid the
impression that Highland Enterprises was monopolizing the supply of labor and materials to the
PNP.51 Cruz alleged that on April 23, 1996, he and the respondent went to the PNP Finance Center
to claim the LBP check due to MGM.

Issue:
Whether or not there is already extinguishment of obligation.

Held:
In general, a payment in order to be effective to discharge an obligation, must be made to

Page 374 of 845

the proper person. Thus, payment must be made to the obligee himself or to an agent having
authority, express or implied, to receive the particular payment. Payment made to one having
apparent authority to receive the money will, as a rule, be treated as though actual authority had
been given for its receipt. Likewise, if payment is made to one who by law is authorized to act
for the creditor, it will work a discharge. The receipt of money due on a judgment by an officer
authorized by law to accept it will, therefore, satisfy the debt.

The respondent was able to establish that the LBP check was not received by her or by
her authorized personnel. The PNPs own records show that it was claimed and signed for by
Cruz, who is openly known as being connected to Highland Enterprises, another contractor.
Hence, absent any showing that the respondent agreed to the payment of the contract price to
another person, or that she authorized Cruz to claim the check on her behalf, the payment, to be
effective must be made to her.

Page 375 of 845

PHILIPPINE COMMERCIAL INTERNATIONAL BANK (NOW BDO UNIBANK, INC.)
v. ARTURO P. FRANCO

G.R. No. 180069, March 05, 2014

Facts:
Respondent who was 51 years old then decided to save up for his retirement and to invest
his hard earned money. He chose to deposit his savings with defendant bank primarily because of
the latters representation that by making such investment, he was actually providing for his future
since his investment would be commingled, pooled and automatically rolled-over for better
investment return and which will provide for his needs upon retirement, without need for him to
take any further action. Respondent secured from the bank several Trust Indenture Certificates.
Sometime in 1995, plaintiff discovered that one of his children had leukemia and in the
ensuing hospitalization and treatment, plaintiff spent a lot of money; that because his funds were
already exhausted, plaintiff then turned to his Trust Indenture Certificates and started inquiring as
to how he could liquidate the trust. In the beginning, defendant bank constantly asked for time to
look for his records and promised to have an answer before July 15, 1998. On June 22 however,
plaintiff received a letter from defendants counsel denying plaintiffs request for payment by stating
that due to the conversion of all outstanding PCIBank trust indenture accounts into common trust
certificates, all such PCIBank trust indenture certificates have been rendered null and void.
Defendant also argues that the present action had already prescribed.

Plaintiff now prays for the payment of the amounts under the Trust Indenture Certificates,
plus interest, moral and exemplary damages and attorneys fees.

Issue:
Whether or not plaintiff is entitled the relief he seeks

Held:
Yes. Petitioner Bank failed to adduce any documentary evidence to establish the alleged
fact that the four TICs were already paid or cancelled, or that respondents participation therein was
already withdrawn. With all these findings, the CA concluded that the claim of respondent is not
yet barred by prescription, since the maturity dates of the four TICs did not terminate the express
trust created between the parties. Jurisprudence abounds that, in civil cases, one who pleads
payment has the burden of proving it. Even where the plaintiff must allege non-payment, the
general rule is that the burden rests on the defendant to prove payment, rather than on the plaintiff
to prove non-payment. When the creditor is in possession of the document of credit, he need not
prove non-payment for it is presumed. The creditors possession of the evidence of debt is proof
that the debt has not been discharged by payment.

In this case, respondents possession of the original copies of the subject TICs strongly
supports his claim that petitioner Banks obligation to return the principal plus interest of the money

Page 376 of 845

placement has not been extinguished. The TICs in the hands of respondent is a proof of
indebtedness and a prima facieevidence that they have not been paid. Petitioner Bank could have
easily presented documentary evidence to dispute the claim, but it did not. In its omission, it may
be reasonably deduced that no evidence to that effect really exist. Worse, the testimonies of
petitioner Banks own witnesses, reinforce, rather than belie, respondents allegations of non-
payment.

Page 377 of 845

 AUDION ELECTRIC COMPANY v. NLRC
G.R. NO. 106648, June 17,1999

Facts:
Complainant Nicolas Madolid was employed by Audion as a fabricator. He continuously
rendered service, assigned in different offices or projects for 13 years with a clean record. The
complainant was surprised to received an information stating that he will be considered terminated
after the turnover of materials. Complainant claims that he was dismissed without justifiable cause.
For this reason, he claims that he is entitled to reinstatement with full backwages, payment of
overtime pay, project allowances, increase adjustments, 13th month pay and attorneys fees. Local
Arbiter ruled in favor of Madolid and ordered Audion to pay the former, which was affirmed by
the NLRC.

Issue:
Whether the respondent NLRC committed grave abuse of discretion when it ruled that
private respondent was a regular employee and not a project employee

Held:
Private respondents employment status was established by the certification of employment
issued by the petitioner. The rule is that findings of facts of the NLRC affirming those of the Labor
Arbiter are entitled to a great weight and will not be disturbed if they were supported by substantial
evidence. There was no grave abuse of discretion committed by NLRC in finding that respondent
was not a project employee. Decision of NLRC is affirmed with modification deleting the awards
of damages and attorneys fees.

Page 378 of 845

 LANKBANK OF THE PHILIPPINES vs. ONG
G.R. No. 190755, November 24, 2010

Facts:
Spouses Johnson and Evangeline Sy secured a loan from Land Bank Legazpi City in the
amount of PhP 16 million. The loan was secured by three (3) residential lots, five (5) cargo trucks,
and a warehouse. Under the loan agreement, PhP 6 million of the loan would be short-term and
would mature on February 28, 1997, while the balance of PhP 10 million would be payable in
seven (7) years. The Notice of Loan Approval dated February 22, 1996 contained an acceleration
clause wherein any default in payment of amortizations or other charges would accelerate the
maturity of the loan.Subsequently, however, the Spouses Sy found they could no longer pay their
loan. They sold three (3) of their mortgaged parcels of land for PhP 150,000 to Angelina Gloria
Ong, Evangelines mother, under a Deed of Sale with Assumption of Mortgage.
Evangelines father, petitioner Alfredo Ong, later went to Land Bank to inform it about the sale
and assumption of mortgage.3 Atty. Edna Hingco, the Legazpi City Land Bank Branch Head, told
Alfredo and his counsel Atty. Ireneo de Lumen that there was nothing wrong with the agreement
with the Spouses Sy but provided them with requirements for the assumption of mortgage. They
were also told that Alfredo should pay part of the principal which was computed at PhP 750,000
and to update due or accrued interests on the promissory notes so that Atty. Hingco could easily
approve the assumption of mortgage. Two weeks later, Alfredo issued a check for PhP 750,000
and personally gave it to Atty. Hingco. A receipt was issued for his payment. He also submitted
the other documents required by Land Bank, such as financial statements for 1994 and 1995. Atty.
Hingco then informed Alfredo that the certificate of title of the Spouses Sy would be transferred
in his name but this never materialized. No notice of transfer was sent to him. On December 12,
1997, Alfredo initiated an action for recovery of sum of money with damages against Land Bank
in Civil Case No. T-1941, as Alfredos payment was not returned by Land Bank. The RTC held
that that under the principle of equity and justice, the bank should return the amount Alfredo had
paid with interest at 12% per annum computed from the filing of the complaint. The RTC further
held that Alfredo was entitled to attorneys fees and litigation expenses for being compelled to
litigate.The CA affirmed the RTC Decision.
Land Bank contends that Art. 1236 of the Civil Code backs their claim that Alfredo should have
sought recourse against the Spouses Sy instead of Land Bank. Art. 1236 .

Issue:
Whether or not the Art. 1236 of the Civil Code should apply in the instant case.

Held:
We agree with Land Bank on this point as to the first part of paragraph 1 of Art. 1236.
Land Bank was not bound to accept Alfredos payment, since as far as the former was
concerned, he did not have an interest in the payment of the loan of the Spouses Sy. However, in
the context of the second part of said paragraph, Alfredo was not making payment to fulfill the

Page 379 of 845

obligation of the Spouses Sy. Alfredo made a conditional payment so that the properties subject
of the Deed of Sale with Assumption of Mortgage would be titled in his name. It is clear from
the records that Land Bank required Alfredo to make payment before his assumption of
mortgage would be approved. He was informed that the certificate of title would be transferred
accordingly. He, thus, made payment not as a debtor but as a prospective mortgagor.
Alfredo, as a third person, did not, therefore, have an interest in the fulfilment of the
obligation of the Spouses Sy, since his interest hinged on Land Banks approval of his
application, which was denied. The circumstances of the instant case show that the second
paragraph of Art. 1236 does not apply. As Alfredo made the payment for his own interest and
not on behalf of the Spouses Sy, recourse is not against the latter. And as Alfredo was not paying
for another, he cannot demand from the debtors, the Spouses Sy, what he has paid.

Page 380 of 845

 BINALBAGAN VS. COURT OF APPEALS
G.R. No. 100594, March 10, 1993

Facts:

On May 11, 1967, private respondents, through Angelina P. Echaus, in her capacity as
Judicial Administrator of the intestate estate of Luis B. Puentevella, executed a Contract to Sell
and a Deed of Sale of forty-two subdivision lots within the Phib-Khik Subdivision of the
Puentevella family, conveying and transferring said lots to petitioner Binalbagan Tech., Inc.
(hereinafter referred to as Binalbagan). In turn Binalbagan, through its president, petitioner
Hermilo J. Nava (hereinafter referred to as Nava), executed an Acknowledgment of Debt with
Mortgage Agreement, mortgaging said lots in favor of the estate of Puentevella.
Upon the transfer to Binalbagan of titles to the 42 subdivision lots, said petitioner took
possession of the lots and the building and improvements thereon. Binalbagan started operating a
school on the property from 1967 when the titles and possession of the lots were transferred to it.
It appears that there was a pending case, Civil Case No. 7435 of Regional Trial Court
stationed at Himamaylan, Negros Occidental. In this pending case the intestate estate of the late
Luis B. Puentevella, thru Judicial Administratrix, Angelina L. Puentevella sold said
aforementioned lots to Raul Javellana with the condition that the vendee-promisee would not
transfer his rights to said lots without the express consent of Puentevella and that in case of the
cancellation of the contract by reason of the violation of any of the terms thereof, all payments
therefor made and all improvements introduced on the property shall pertain to the promissor and
shall be considered as rentals for the use and occupation thereof.
Javellana having failed to pay the installments for a period of five years, Civil Case No.
7435 was filed by defendant Puentevella against Raul Javellana and the Southern Negros Colleges
which was impleaded as a party defendant it being in actual possession thereof, for the rescission
of their contract to sell and the recovery of possession of the lots and buildings with damages.
Accordingly, after trial, judgment was rendered in favor of Puentevella. Came December
29, 1965 when the plaintiffs in the instant case on appeal filed their Third-Party Claim based on
an alleged Deed of Sale executed in their favor by spouses Jose and Lolita Lopez, thus Puentevella
was constrained to assert physical possession of the premises to counteract the fictitious and
unenforceable claim of herein plaintiffs.

Upon the filing of the instant case for injunction and damages on January 3, 1966, an ex-
parte writ of preliminary injunction was issued by the Honorable Presiding Judge Carlos Abiera,
which order, however, was elevated to the Honorable Court of Appeals which issued a writ of
preliminary injunction ordering Judge Carlos Abiera or any other person or persons in his behalf
to refrain from further enforcing the injunction issued by him in this case and from further issuing
any other writs or prohibitions which would in any manner affect the enforcement of the judgment
rendered in Civil Case 7435, pending the finality of the decision of the Honorable Court of Appeals
in the latter case. Thus, defendant Puentevella was restored to the possession of the lots and

Page 381 of 845

buildings subject of this case. However, plaintiffs filed a petition for review with the Supreme
Court which issued a restraining order against the sale of the properties claimed by the spouses-
plaintiffs.
When the Supreme Court dissolved the aforesaid injunction issued by the Court of Appeals,
possession of the building and other property was taken from petitioner Binalbagan and given to
the third-party claimants, the de la Cruz spouses. Petitioner Binalbagan transferred its school to
another location. In the meantime, the defendants in Civil Case No. 293 with the Court of Appeals
interposed an appeal. On October 30, 1978, the Court of Appeals rendered judgment, reversing
the appealed decision in Civil Case No. 293. On April 29, 1981, judgment was entered in CA-
G.R. No. 42211, and the record of the case was remanded to the court of origin on December 22,
1981. Consequently, in 1982 the judgment in Civil Case No. 7435 was finally executed and
enforced, and petitioner was restored to the possession of the subdivision lots an May 31, 1982. It
will be noted that petitioner was not in possession of the lots from 1974 to May 31, 1982.
After petitioner Binalbagan was again placed in possession of the subdivision lots, private
respondent Angelina Echaus demanded payment from petitioner Binalbagan for the subdivision
lots, enclosing in the letter of demand a statement of account as of September 1982 showing a total
amount due of P367,509.93, representing the price of the land and accrued interest as of that date.
As petitioner Binalbagan failed to effect payment, private respondent Angelina P. Echaus
filed on October 8, 1982 Civil Case No. 1354 of the Regional Trial Court of the Sixth Judicial
Region stationed in Himamaylan, Negros Occidental against petitioners for recovery of title and
damages. Private respondent Angelina P. Echaus filed an amended complaint by including her
mother, brothers, and sisters as co-plaintiffs, which was admitted by the trial court on March 18,
1983.
The trial court rendered a decision in favor of the petitioner because of prescription.
Nonetheless, the Court of Appeals reversed said decision.

Issue:
Whether or not the petition is with merit

Held:
No. A party to a contract cannot demand performance of the other party's obligations
unless he is in a position to comply with his own obligations. Similarly, the right to rescind a
contract can be demanded only if a party thereto is ready, willing and able to comply with his own
obligations there under (Art. 1191, Civil Code). In a contract of sale, the vendor is bound to transfer
the ownership of and deliver, as well as warrant, the thing which is the object of the sale (Art.
1495, Civil Code); he warrants that the buyer shall, from the time ownership is passed, have and
enjoy the legal and peaceful possession of the thing. As afore-stated, petitioner was evicted from
the subject subdivision lots in 1974 by virtue of a court order in Civil Case No. 293 and reinstated
to the possession thereof only in 1982. During the period, therefore, from 1974 to 1982, seller

Page 382 of 845

private respondent Angelina Echaus' warranty against eviction given to buyer petitioner was
breached though, admittedly, through no fault of her own. It follows that during that period, 1974
to 1982, private respondent Echaus was not in a legal position to demand compliance of the
prestation of petitioner to pay the price of said subdivision lots. In short, her right to demand
payment was suspended during that period, 1974-1982.
The prescriptive period within which to institute an action upon a written contract is ten
years (Art. 1144, Civil Code). The cause of action of private respondent Echaus is based on the
deed of sale afore-mentioned. The deed of sale whereby private respondent Echaus transferred
ownership of the subdivision lots was executed on May 11, 1967. She filed Civil Case No. 1354
for recovery of title and damages only on October 8, 1982. From May 11, 1967 to October 8,
1982, more than fifteen (15) years elapsed. Seemingly, the 10-year prescriptive period had expired
before she brought her action to recover title. However, the period 1974 to 1982 should be
deducted in computing the prescriptive period for the reason that, as above discussed, from 1974
to 1982, private respondent Echaus was not in a legal position to initiate action against petitioner
since as afore-stated, through no fault of hers, her warranty against eviction was breached. In the
case of it was held that a court order deferring action on the execution of judgment suspended the
running of the 5-year period for execution of a judgment. Here the execution of the judgment in
Civil Case No. 7435 was stopped by the writ of preliminary injunction issued in Civil Case No.
293. It was only when Civil Case No. 293 was dismissed that the writ of execution in Civil Case
No. 7435 could be implemented and petitioner Binalbagan restored to the possession of the subject
lots.
Deducting eight years (1974 to 1982) from the period 1967 to 1982, only seven years
elapsed. Consequently, Civil Case No. 1354 was filed within the 10-year prescriptive period.
Working against petitioner's position too is the principle against unjust enrichment, which would
certainly be the result if petitioner were allowed to own the 42 lots without full payment thereof.
WHEREFORE, the petition is DENIED and the decision of the Court of Appeals in CA-
G.R. CV No. 24635 is AFFIRMED.

Page 383 of 845

 LORENZO SHIPPING COMPANY v. BJ MARTHEL INTERNATIONAL
G.R. No. 145483, November 19, 2004

Facts:
Petitioner Lorenzo Shipping is engaged in coastwise shipping and owns the cargo M/V
Dadiangas Express. BJ Marthel is engaged in trading, marketing an dselling various industrial
commodities. Lorenzo Shipping ordered for the second time cylinder lines from the respondent
stating the term of payment to be 25% upon delivery, the balance payable in 5 bi-monthly equal
installments, no again stating the date of the cylinders delivery. It was allegedly paid through post
dated checks but the same was dishonored due to insufficiency of funds. Despite due demands by
the respondent, petitioner falied contending that time was of the essence in the delivery of the
cylinders and that there was a delay since the respondent committed said items within two months
after receipt of fir order. RTC held respondents bound to the quotation with respect to the term
of payment, which was reversed by the Court of appeals ordering appellee to pay appellant
P954,000 plus interest. There was no delay since there was no demand.

Issue:
Whether or not respondent incurred delay in performing its obligation under the contract
of sale

Held:
By accepting the cylinders when they were delivered to the warehouse, petitioner waived
the claimed delay in the delivery of said items. Supreme Court geld that time was not of the
essence. There having been no failure on the part of the respondent to perform its obligations, the
power to rescind the contract is unavailing to the petitioner.
Petition is denied. Court of appeals decision is affirmed.

Page 384 of 845

 LUZON DEVELOPMENT BANK vs. ENRIQUEZ
G.R. No. 168646 January 12, 2011

Facts:
On July 3, 1995, De Leon (owner of Delta) and his spouse obtained a P4 million loan from
the BANK for the express purpose of developing Delta Homes I.8 To secure the loan, the spouses
De Leon executed in favor of the BANK a real estate mortgage (REM) on several of their
properties,9 including Lot 4. Subsequently, this REM was amended10 by increasing the amount
of the secured loan from P4 million to P8 million. Both the REM and the amendment were
annotated on TCT No. T-637183.11. Sometime in 1997, DELTA executed a Contract to Sell with
respondent Angeles Catherine Enriquez (Enriquez)14 over the house and lot in Lot 4 with the
condition that upon full payment of the total consideration the Owner shall execute a final deed of
sale in favor of the Vendee/s.
When DELTA defaulted on its loan obligation, the BANK, instead of foreclosing the REM,
agreed to a dation in payment or a dacion en pago. Enriquez filed a complaint against DELTA and
the BANK before Office of the HLURB19 alleging that DELTA violated the terms of its License
to Sell. The HLURB Arbiter Atty. Raymundo A. Foronda upheld the validity of the purchase
price, but ordered DELTA to accept payment of the balance of P108,013.36 from Enriquez, and
(upon such payment) to deliver to Enriquez the title to the house and lot free from liens and
encumbrances. DELTA appealed the arbiters Decision to the HLURB Board of Commissioners.
The Commission ordered [Enriquez] to pay [DELTA] the amount due from the time she suspended
payment up to filing of the complaint with 12% interest thereon per annum; thereafter the
provisions of the Contract to Sell shall apply until full payment is made.The OP adopted by
reference the findings of fact and conclusions of law of the HLURB Decisions, which it affirmed
in toto. The CA ruled against the validity of the dacion en pago executed in favor of the BANK on
the ground that DELTA had earlier relinquished its ownership over Lot 4 in favor of Enriquez via
the Contract to Sell.46

Issue:
Whether the dacion en pago extinguished the loan obligation, such that DELTA has no
more obligations to the BANK.

Held:
The violation of Section 18 renders the mortgage executed by DELTA void therefore the
8 million loans are unsecured. Since the Contract to sell did not transfer ownership of Lot 4 to
Enriquez, said ownership remained with DELTA. DELTA could then validly transfer such
ownership (as it did) to another person (the BANK). However, the transferee BANK is bound by
the Contract to Sell and has to respect Enriquezs rights thereunder.

Page 385 of 845

BANK is also not entitled to payment of the equivalent value of the lot 4 from DELTA when the
this court ruled in favor of ENRIQUEZ over lot 4. Like in all contracts, the intention of the
parties to the dation in payment is paramount and controlling. The contractual intention
determines whether the property subject of the dation will be considered as the full equivalent of
the debt and will therefore serve as full satisfaction for the debt. "The dation in payment
extinguishes the obligation to the extent of the value of the thing delivered, either as agreed upon
by the parties or as may be proved, unless the parties by agreement, express or implied, or by
their silence, consider the thing as equivalent to the obligation, in which case the obligation is
totally extinguished."

Page 386 of 845

 ESTANISLAO REYES vs. SEBASTIANA MARTINEZ ET AL.,
G.R. No. 32226 . DECEMBER 29, 1930.
Facts:
Estanislao Reyes filed an action against the Martinez heirs in which the plaintiff seeks,
among others, to recover five parcels of land, containing approximately one thousand coconut
trees, and to obtain a declaration of ownership in his own favor as against the defendants with
respect to said parcels. This cause of action is founded upon the contract, and the claim by the
plaintiff is to have the five parcels adjudged to him in lieu of another parcel formerly supposed to
contain one thousand trees and described in paragraph 8 of the contract between him and certain
of the Martinez heirs. By this contract Reyes was to be given the parcel described in clause 8, but
in a proviso to said clause, the parties contracting with Reyes agreed to assure to him certain other
land containing an equivalent number of trees in case he should so elect.

Issue:
Whether or not Reyes is entitled to the recovery of ownership of the five parcels of land
subject of this case.

Held:
The prior history of the litigation shows that Reyes elected to take and hold the parcel
described in clause 8, and his right thereto has all along been recognized in the dispositions made
by the court with respect to said land. In our decision in Martinez vs. Grao (51 Phil., 287, 301),
it was a basal assumption that Reyes would obtain the thousand trees referred to; and we are of the
opinion that, from various steps taken in the prior litigation, Reyes must be taken to have elected
to take that particular parcel and he is now estopped from asserting a contrary election to take the
five parcels of land described in paragraph IX of his complaint.

However, the title to the parcel of land elected by Reyes is in the heirs of Inocente
Martinez and it does not appear that they have transferred said title to Reyes. It results therefore
that Reyes now has a claim for damages against the parties signatory to the contract of March 5,
1921, for the value of the aforesaid property. We therefore reach the conclusion that Reyes
should either have the land originally set apart for him under clauses 4 and 8 of the contract, or,
in case his right thereto should fail, he should not be required to pay the judgment for P8,000
which was awarded to the Martinez heirs in Martinez vs. Grao (51 Phil., 287, 302).

Page 387 of 845

 AQUINTEY v. SPOUSES TIBONG
G.R. No. 166704, December 20, 2006

Facts:
On May 6, 1999, petitioner Aquintey filed before RTC Baguio, a complaint for sum of
money and damages against respondents. Agrifina alleged that Felicidad secured loans from her
on several occasions at monthly interest rates of 6% to 7%. Despite demands, spouses Tibong
failed to pay their outstanding loans of P773,000,00 exclusive of interests. However, spouses
Tiong alleged that they had executed deeds of assignment in favor of Agrifina amounting to
P546,459 and that their debtors had executed promissory notes in favor of Agrifina. Spouses
insisted that by virtue of these documents, Agrifina became the new collector of their debts.
Agrifina was able to collect the total amount of P301,000 from Felicdads debtors. She tried to
collect the balance of Felicidad and when the latter reneged on her promise, Agrifina filed a
complaint in the office of the barangay for the collection of P773,000.00. There was no settlement.
RTC favored Agrifina. Court of Appeals affirmed the decision with modification ordering
defendant to pay the balance of total indebtedness in the amount of P51,341,00 plus 6% per month.

Issue:
Whether or not the deeds of assignment in favor of petitioner has the effect of payment of
the original obligation that would partially extinguish the same

Held:
Substitution of the person of the debtor ay be affected by delegacion. Meaning, the debtor
offers, the creditor accepts a third person who consent of the substitution and assumes the
obligation. It is necessary that the old debtor be released fro the obligation and the third person or
new debtor takes his place in the relation . Without such release, there is no novation. Court of
Appeals correctly found that the respondents obligation to pay the balance of their account with
petitioner was extinguished pro tanto by the deeds of credit. CA decision is affirmed with the
modification that the principal amount of the respondents is P33,841.

Page 388 of 845

 SONNY LO v. KJS ECO-FORMWORK SYSTEM
G.R. No. 149420,October 8, 2003

Facts:
KJS is engaged in the sale of steel scaffoldings while Lo is a building contractor. On
February 22, 1990, petitioner ordered scaffolding equipments from respondent worth P540,425.80.
He paid a downpayment in the amount of P150,000. The balance was made payable in 10 monthly
installments. Respondent delivered the equipments. Petitioner was able to pay the first two
monthly installments. His business suffered financial difficulties and he was unable to settle his
obligations despite demands. On October 11, 1990, the parties executed a Deed of Assignment
whereby petitioner assigned to respondent his receivables from Jonero Realty. However, Jonero
refused to honor the Dees of Assign,nt because it claimed that petitioner was indebted to it.
Petitioner refused to pay claiming that that his obligation had been extinguished when they
executed the deed of assign,ent. RTC dismissed the complaint on the ground that the assignment
of credit extinguished the obligation. Court of appeals reversed the decision and ordered Lo to pay
the plaintiff KJS with legal interests of 6% per annum until fully paid.

Issue:
Whether or not the Deed of Assignment extinguished the obligation

Held:
An assignment of credit, by virtue of which the owner of the credit, the assignor, by a legal
cause, such as sale, dacion en pago, exchange or donation and without the consent of the debtor
transfers his credit and accessory rights to another, the assignee, who acquires the power to enforce
it against the debtor. Petitioner, as assignor, is bound to warrant the existence and legality of the
credit at the tim of the sale or assignment. When Jonero claimed that it was no longer indebted to
petitioner since the latter had also as unpaid obligation to it, it essentially meant that its obligation
to the petitioner has been extinguished by compensation. Petitioner was found in breach of his
obligation under the Deed of assignment. Court of Appeals decision is affirmed.

Page 389 of 845

 ASI CORP and ANTONIO SAN JUAN v. SPOUSES EFREN EVANGELISTA
G.R. No. 158086, February 14, 2008

Facts:
Respondents are engaged in the large-scale business of buying broiler eggs, hatching and
selling them and egg by-products. For incubation and hatchings, respondents availed of the
hatching services of ASJ Corp. They agreed o service fees of 80 centavos per egg. Service fees
were paid upon release. Fro consecutive times the respondents failed to pay the fee until such time
that ASJ retained the chicks demanding full payment from the respondent. ASJ received P15,000
for partial payment but the chicks were still not released. RTC ruling, which was affirmed by the
Court of Appeals holding that ASJ Corp and Antonio San Juan be solidarily liable to the
respondents.

Issue:
Was petitioners retention of the chicks and by-products, on account of respondents
failure to pay the corresponding fees unjustified?

Held:
Respondents offer to partially satisfy their accounts is not enough to extinguish their
obligation. Respondents cannot substitute or apply as their payment the value of the chicks and
by-products they expect to derive because it is necessary that all the debts be paid for the same
kind. The petition is partly granted. The Court of Appeals decision is modified.

Page 390 of 845

 NEREO PACULDO v. BONIFACIO REGALADO
G. R. No. 123855, November 20, 2000

Facts:
On December 27, 1990, petitioner Paculdo and respondent Regalado entered into a contract
of lease over a parcel of land for 25 years. For the first 5 years, Paculdo would pay monthly rental
of P450,000 payable within 5 days of each month, with 2% penalty for very month of delay. Aside
from the above lease, petitioner leased 11 other property from respondent. Petitioner failed to pay.
Without the knowledge of petitioner, respondent ortgaged the land subject of the lease contract
including the improvements to Monte de Piedad. On August 12, 1995, and on subsequent dates
thereafter, respondent refused to accepr petitioners daily rental payments. Petitioner filed an
action for injunction to enjoin respondent from disturbing his possession while respondent filed a
complaint for ejectment attaching the demand letters. MTC held in favor of the plaintiff which was
affired by the RTC. CA found that the petitioner impliedly consented to respondents application
of payment to his obligations, thus, dismissed the petition for lack of merit.

Issue:
Whether petitioner was truly in arrears in the payment of rentals on the subject property at
the time of the filing of the complaint of ejectment

Held:
The lease over the Fairview wet market property is the most onerous among all the
obligations of petitioner to respondent. It was established that the wet market is a going concern
and that petitioner has invested about P35,000,000 in form of improvements, over the property.
Hence, petitioner would stand to lose more if the lease would not proceed. CA decision was based
on a misapprehension of the facts and the law on the application of payment. Hence, the ejectment
case must be dismissed. CA decision is set aside.

Page 391 of 845

 CHINA BANKING CORPORATION v. COURT OF APPEALS
G.R. No. 121158, December 5, 1996

Facts:
China Banking Corporation extended several loans to Native West and so Ching, Native
Wests President. Native west executed a promissory note in favor of China Bank. So Ching, with
the marital consent of his wife additionally executed two real estate mortgages over their
properties. The promissory notes matured and despite due demands, neither private respondents
paid. China Bank filed petition for the extrajudicial foreclosure of the mortgaged properties. Upon
receipt of the foreclosure, private respondents filed a complaint before RTC for accounting with
damages and with temporary restraining order.

Issue:
Whether or not the subject additional mortgaged properties of the spouses are not included
in the notice of foreclosure

Held:
It is well-settled that mortgages given to secure future advancements or loans are valid and
legal contracts, and that the amounts named as considerations in said contracts do not limit the
amount for which the mortgage may stand as security if from the four corners of the instrument
the intent to secure future and their indebtedness can be gathered. Supreme Court found that
petitioners are entitled to foreclose the mortgages.

Page 392 of 845

 MOBIL OIL PHILIPPINES and CALTEX v. COURT OF APPEALS and
CONTINENTAL CEMENT

G.R.No. 103052,May 23, 1997

Facts:
In May 1982, petitioner Mobil Oil entered into a supply agreement with private respondent
Continental Cement, under which the former would supply the latters industrial fuel oil or bunker
fuel oil requirements. MOP extended to CCC an unsecured credit line of P2,000,000 against which
CCCs purchases of oil could initially be charged. MOP made a total of 67 deliveries of BFO, each
delivery consisting of 20,000 liters to CCCs factory. CCC discovered that, the supposed BFO was
in fact, pure water. A joint undertaking was initiated. On August 23, 1983, Caltex informed CCC
that it would be the new owner of Mop effective September 1, 1983 and that Caltex would assume
all rights and obligations of MOP under all its existing contracts. CA upheld the findings of the
trial court that the water-contaminated BFO delivered by MOP caused damages to CCCs rotary
kin.

Issue:
Whether or not petitioners can be held liable for the contaminated BO delivered on the
ground that CFS, as carrier-hauler, was an agent of Mobil

Held:
Court of Appeals correctly ruled that MOP could be held liable for the acts of CFS. The
hauling contract executed by and between MOP and CFS laid out the responsibilities of CFS. The
presumption LAID DOWN IN Article 1523 of the Civil Code is not applicable. The questioned
decision of the court of Appeals is affirmed in toto.

Page 393 of 845

 SPS. BONROSTRO vs. SPS. LUNA
G.R. No.172346, July 24, 2013
Facts:
Respondent Luna entered into a Contract to Sell with Bliss Development Corporation
involving a House and Lot. A year after, respondent Luna entered into another Contract to Sell
with petitioner Bonrostro concerning the same property. After the execution of the contract,
Bonrostro immediately took possession of the property. However, except for the initial
downpayment of P200,000, Bonrostro failed to pay any of the stipulated subsequent amortization
payments. So, Petitioner Luna filed a complaint of rescission of contract with the Bonrostros. In
their answer, the Bonrsotros allege that Luna failed to show up during their agreed date of payment
and that they received no reply in their letter expressing their desire to settle such obligation. Hence
they assert that they should not be assessed any interest subsequent to the date of such tender.
Neither should they be ordered to pay interest which covers the amortizations paid by Spouses
Luna to Bliss, because it was Spouses Luna themselves who prevented such fulfillment by
instructing Bliss not to accept amortization payments from anyone.

Issue:
Whether or not Respondent Bonrostro incurred delay in the performance of its obligation,
and is therefore liable to pay damages

Held:
Clearly, the RTC arrived at the above-quoted conclusion based on its mistaken premise
that rescission is applicable to the case. Hence, its determination of whether there was substantial
breach. As may be recalled, however, the CA, in its assailed Decision, found the contract between
the parties as a contract to sell, specifically of a real property on installment basis, and as such
categorically declared rescission to be not the proper remedy. This is considering that in a contract
to sell, payment of the price is a positive suspensive condition, failure of which is not a breach of
contract warranting rescission under Article 1191 of the Civil Code but rather just an event that
prevents the supposed seller from being bound to convey title to the supposed buyer. Also, and as
correctly ruled by the CA, Article 1191 cannot be applied to sales of real property on installment
since they are governed by the Maceda Law.
There being no breach to speak of in case of non-payment of the purchase price in a contract
to sell, as in this case, the RTCs factual finding that Lourdes was willing and able to pay her
obligation a conclusion arrived at in connection with the said courts determination of whether
the non-payment of the purchase price in accordance with the terms of the contract was a
substantial breach warranting rescission therefore loses significance. The spouses Bonrostros
reliance on the said factual finding is thus misplaced. They cannot invoke their readiness and
willingness to pay their obligation on November 24, 1993 as an excuse from being made liable for
interest beyond the said date.

Page 394 of 845

 DALTON vs.FGR REALTY AND DEVELOPMENT CORP
G.R. No. 172577, January 19, 2011

Facts:
Flora R. Dayrit (Dayrit) owned a 1,811-square meter parcel of land located at the corner of
Rama Avenue which Dalton leased portions of the property. In June 1985, Dayrit sold the property
to respondent FGR Realty and Development Corporation (FGR). In August 1985, Dayrit and FGR
stopped accepting rental payments because they wanted to terminate the lease agreements with
Dalton and Sasam, et al. Soledad Dalton built a house which she initially used as a dwelling and
store space. She vacated the premises when her children got married. She transferred her residence
near F. Ramos Public Market, Cebu City. She constructed the 20 feet by 20 feet floor area house
sometime in 1973. The last monthly rental was P69.00. When defendants refused to accept rent al
and demanded vacation of the premises, she consignated [sic] her monthly rentals in court.
The RTC dismissed the 11 September 1985 complaint and ordered Dalton to vacate the property.
The RTC held that:
The requisites of consignation are as follows:

1. The existence of a valid debt.

2. Valid prior tender, unless tender is excuse [sic];
3. Prior notice of consignation (before deposit)
4. Actual consignation (deposit);
5. Subsequent notice of consignation;
Requisite Nos. 3 and 5 are absent or were not complied with. It is very clear that there were no
prior notices of consignation (before deposit) and subsequent notices of consignation (after
deposit) The Court of Appeals affirmed the RTCs 26 February 2002 Decision.

Issue:
Whether or not the consignation was void.

Held:

No. Compliance with the requisites of a valid consignation is mandatory. Failure to comply
strictly with any of the requisites will render the consignation void. Substantial compliance is not
enough. The requisites of a valid consignation: (1) a debt due; (2) the creditor to whom tender of

Page 395 of 845

payment was made refused without just cause to accept the payment, or the creditor was absent,
unknown or incapacitated, or several persons claimed the same right to collect, or the title of the
obligation was lost; (3) the person interested in the performance of the obligation was given notice
before consignation was made; (4) the amount was placed at the disposal of the court; and (5) the
person interested in the performance of the obligation was given notice after the consignation was
made.

Substantial compliance is not enough for that would render only a directory construction to
the law. The use of the words "shall" and "must" which are imperative, operating to impose a duty
which may be enforced, positively indicate that all the essential requisites of a valid consignation
must be complied with. The Civil Code Articles expressly and explicitly direct what must be
essentially done in order that consignation shall be valid and effectual.

Page 396 of 845

 SPOUSES JAIME BENOS v. SPOUSES GREGORIO LAWILAO
G.R. No. 172259, December 5, 2006

Facts:
On February 11,1999, petitioner-spouses Benos and respondent Lawilao executed a Pacto
de Retro Sale where Benos sold their lot and the building erected thereon for P300,000, one-half
of which to be paid in cash to the Benos and the other half to be paid to the bank to pay off the
loans of the Benos which was secured by the same lot and building. Under the contract, Benos
could redeem the property within 18 months from the date of execution by returning the contract
price, otherwise, the sale would become irrevocable. After paying the P150,000, Lawilao took
possession of the property, restructured it twicw, eventually the loan become due and demandable.
On August 14, 2000, a son of Benos and Lawilao paid the bankl but the bank refused. Lawilao
filed for consignation against the bank and deposited the amount of P159,000.00. RTC declared
Lawilao of the ownership of the subject property, which was affirmed by the Court of Appeals.

Issue:
Whether or not the contract of Pacto de Retro Sale be rescinded by the petitioner

Held:
In the instant case, records show that Lawilao filed the petition for consignation against the
bank in Civil Case without notifying the Benos. Hence, Lawilao failed to prove their offer to pay
the balance, even before the filing of the consignation case. Lawilao never notified the Benos.
Thus, as far as the Benos are concerned, there was no full and complete payment of the contract
price which gives them the right to rescind.

Petition is granted. Court of Appeals decision is reversed and set aside, that the Pacto de
Retro Sale is rescinded and petitioner are ordered to return the amount of P150,000 to respondents.

Page 397 of 845

 PEOPLES INDUSTRIAL AND COMERCIAL v. COURT OF APPEALS and MAR-
ICK INVESTENT

G.R. No. 112733, October 24, 1997

Facts:
Private respondent is the registered owner of Mar-ick Subdivision which entered into 6
agreements with petitioner, whereby to sell 6 subdivision lots. Except for lot no. 8. All the lots
measure 240 sq each. Lot nos. 3,4,5,6 and 7 similarly stipulate that petitioner agreed to pay for
each lot P7,333.20, P480 as down payment. The balance shall be payable n 120 equal monthly
installments of P57.11 every 30th of the month, for 10 years. With lot no. 8, they agreed to the
purchase price of P7,730 with a down payment of P506 and equal installments of P60.20. Petitioner
failed to perform its obligation. After series of negotiations, the parties agreed to enter into a new
contract to sell 8 lots. Checks issued in favor of the private respondent were received but not
encashed. Private respondent filed a suit against the petitioner. RTC directed petitioner to return
the lots, which was affirmed in toto by the CA.

Issue:
Whether or not there was a perfected and enforceable contracts of sale on October 11,1983
which modified the earlier contracts to sell which had not been validly rescinded

Held:
It is apropos to stress that the agreements are contracts to sell and not contract of sale,
hence, rescission either by judicial action or notarial act is not applicable. Private respondents act
of cancelling the contract to sell was not done arbitrarily. Because the contracts to sell had long
been cancelled when private respondent fled the accion publiciana de possession, there was no
more installment buyer and seller relationship to speak of. It had been reduced to a mere case of
an owner claiming possession of its property that had long been illegally withheld from it by
another.

Page 398 of 845

 ETERNAL GARDENS v. COURT OF APPEALS and 7TH DAY ADVENTIST
G.R. No. 124554, December 9, 1997
Facts:
Petitioner Eternal Gardens and private NPUM entered into a Land Development
Agreement. Under the agreement, EG was to develop a parcel of land owned by NPUM into a
memorial park. The P1.5 million initial installment mentioned in the Deed of Absolute Sale, shall
be deducted out of the proceeds from the First Partys 40% at the end of the 5 th year. Subsequent
payment should be changed against what is due to the first Party under the Land Development
agreement. Later, 2 claimants of the land surfaced but were dismissed. The case was remanded to
the CA for proper determination and dispositions. CA required EG to produce documents
necessary for accounting but failed to do so, hence, the right is waived. CA directed EG to pay
private respondent the amounts of P167,065,195.00 as principal and P167,235,451.00 interest.

Issue:
Whether or not the petitioner is liable for interest despite the land dispute

Held:
Even during the pendency of the land dispute cases, EG was required to deposit the
accruing interests with a reputable commercial bank to avoid possible wastage of funds when
the case was given due course. Yet, EG hedged in depository the amounts due and made obvious
attempts to stay payment by filing sundry motions and pleadings. CA correctly held EG liable for
interest of 12%. It is tantamount to a forbearance of money.

Page 399 of 845

 RAYOS V REYES
G.R.No. 150193 February 20, 2003

Facts:
Three parcels were formerly owned by the spouses Francisco and Asuncion Tazal who on
1 September 1957 sold them for P724.00 to respondents predecessor-in-interest, one Mamerto
Reyes, with right to repurchase within two (2) years from date thereof by paying to the vendee the
purchase price and all expenses incident to their reconveyance. After the sale the vendee a retro
took physical possession of the properties and paid the taxes thereon.
The otherwise inconsequential sale became controversial when two (2) of the three (3)
parcels were again sold on 24 December 1958 by Francisco Tazal for P420.00 in favor of
petitioners predecessor-in-interest Blas Rayos without first availing of his right to repurchase the
properties.

Issue:
Was there a valid consignation and tender of payment made in the instant case?

Held:
In order that consignation may be effective the debtor must show that (a) there was a debt
due; (b) the consignation of the obligation had been made because the creditor to whom a valid
tender of payment was made refused to accept it; (c) previous notice of the consignation had been
given to the person interested in the performance of the obligation; (d) the amount due was placed
at the disposal of the court; and, (e) after the consignation had been made the person interested
was notified thereof.
In the instant case, petitioners failed, first, to offer a valid and unconditional tender of
payment; second, to notify respondents of the intention to deposit the amount with the court; and
third, to show the acceptance by the creditor of the amount deposited as full settlement of the
obligation, or in the alternative, a declaration by the court of the validity of the consignation. The
failure of petitioners to comply with any of these requirements rendered the consignation
ineffective.

Consignation and tender of payment must not be encumbered by conditions if they are to
produce the intended result of fulfilling the obligation. In the instant case, the tender of payment
of P724.00 was conditional and void as it was predicated upon the argument of Francisco Tazal
that he was paying a debt which he could do at any time allegedly because the 1 September 1957
transaction was a contract of equitable mortgage and not a deed of sale with right to repurchase

Page 400 of 845

 OCCENA V CA
G.R.No. 44349, October 29, 1976

Facts:
On February 25, 1975 private respondent Tropical Homes, Inc. filed a complaint for
modification of the terms and conditions of its subdivision contract with petitioners (landowners
of a 55,330 square meter parcel of land in Davao City), making the following allegations:
"That due to the increase in price of oil and its derivatives and the concomitant worldwide
spiralling of prices, which are not within the control of plaintiff, of all commodities including basis
raw materials required for such development work, the cost of development has risen to levels
which are unanticipated, unimagined and not within the remotest contemplation of the parties at
the time said agreement was entered into and to such a degree that the conditions and factors which
formed the original basis of said contract, Annex 'A', have been totally changed. That further
performance by the plaintiff under the contract, Annex 'A', will result in situation where defendants
would be unjustly enriched at the expense of the plaintiff; will cause an inequitous distribution of
proceeds from the sales of subdivided lots in manifest contravention of the original essence of the
agreement; and will actually result in the unjust and intolerable exposure of plaintiff to implacable
losses.

Issue:
Whether or not provisions of art 1267 of the new civil code is applicable in the case at a
bar

Held:
ART. 1267. When the service has become so difficult as to be manifestly beyond the
contemplation of the parties, the obligor may also be released therefrom, in whole or in part."
Respondent's complaint seeks not release from the subdivision contract but that the court
"render judgment modifying the terms and conditions of the contract . . . by fixing the proper shares
that should pertain to the herein parties out of the gross proceeds from the sales of subdivided lots
of subject subdivision". The cited article does not grant the courts this authority to remake, modify
or revise the contract or to fix the division of shares between the parties as contractually stipulated
with the force of law between the parties, so as to substitute its own terms for those covenanted by
the parties themselves. Respondent's complaints for modification of contract manifestly has no
basis in law and therefore states no cause of action. Under the particular allegations of respondent's
complaint and the circumstances therein averred, the courts cannot even in equity grant the relief
sought.

Page 401 of 845

 ORTIGAS V FEATI BANK
G.R.No. 24670 December 14, 1979
Facts:
On March 4, 1952, plaintiff, as vendor, and Augusto Padilla y Angeles and Natividad
Angeles, as vendees, entered into separate agreements of sale on installments over two parcels of
land, known as Lots Nos. 5 and 6, Block 31, of the Highway Hills Subdivision, situated at
Mandaluyong, Rizal. On July 19, 1962, the said vendees transferred their rights and interests over
the aforesaid lots in favor of one Emma Chavez. Upon completion of payment of the purchase
price, the plaintiff executed the corresponding deeds of sale in favor of Emma Chavez.
On or about May 5, 1963, defendant-appellee began laying the foundation and commenced
the construction of a building on Lots Nos. 5 and 6, to be devoted to banking purposes, but which
defendant-appellee claims could also be devoted to, and used exclusively for, residential purposes.
The following day, plaintiff-appellant demanded in writing that defendant-appellee stop the
construction of the commercial building on the said lots. The latter refused to comply with the
demand, contending that the building was being constructed in accordance with the zoning
regulations, defendant-appellee having filed building and planning permit applications with the
Municipality of Mandaluyong, and it had accordingly obtained building and planning permits to
proceed with the construction.

Issue:
Whether the Resolution No. 27 s-1960 can nullify or supersede the contractual obligations
assumed by defendant-appellee.

Held:
It should be stressed, that while non-impairment of contracts is constitutionally guaranteed,
the rule is not absolute, since it has to be reconciled with the legitimate exercise of police power.
Resolution No. 27, s-1960 declaring the western part of Highway 54, EDSA from Shaw Boulevard
to the Pasig River as an industrial and commercial zone, was obviously passed by the Municipal
Council of Mandaluyong, Rizal in the exercise of police power to safeguard or promote the health,
safety, peace, good order and general welfare of the people in the locality. Judicial notice may be
taken of the conditions prevailing in the area, especially where Lots Nos. 5 and 6 are located. The
lots themselves not only front the highway; industrial and commercial complexes have flourished
about the place. EDSA, a main traffic artery which runs through several cities and municipalities
in the Metro Manila area, supports an endless stream of traffic and the resulting activity, noise and
pollution are hardly conducive to the health, safety or welfare of the residents in its route. Having
been expressly granted the power to adopt zoning and subdivision ordinances or regulations, the
municipality of Mandaluyong, through its Municipal Council, was reasonably, if not perfectly,
justified under the circumstances, in passing the subject resolution.

Page 402 of 845

 DANIEL T. SO vs. FOOD FEST LAND, INC.
G.R. No. 183628, April 7, 2010

Facts:
Food Fest Land Inc. (Food Fest) entered into a September 14, 1999 Contract of Lease1
with Daniel T. So (So) over a commercial space in San Antonio Village, Makati City for a period
of three years (1999-2002) on which Food Fest intended to operate a Kentucky Fried Chicken
carry out branch. Before forging the lease contract, the parties entered into a preliminary agreement
dated July 1, 1999, the pertinent portion of which states that the lease shall not become binding
upon us unless and until the government agencies concerned shall authorize, permit or license us
to open and maintain our business at the proposed Lease Premises.
While Food Fest was able to secure the necessary licenses and permits for the year 1999, it failed
to commence business operations. For the year 2000, Food Fests application for renewal of
barangay business clearance was "held in abeyance until further study of [its] kitchen facilities."
As the barangay business clearance is a prerequisite to the processing of other permits,
licenses and authority by the city government, Food Fest was unable to operate. Fearing further
business losses, Food Fest, by its claim, communicated its intent to terminate the lease contract to
So who, however, did not accede and instead offered to help Food Fest secure authorization from
the barangay.
On April 26, 2001, So filed a complaint for ejectment and damages against Food Fest
before the Metropolitan Trial Court (MeTC) of Makati City. The MeTC, by Decision of July 4,
2005,7 rendered judgment in favor of So.The Regional Trial Court (RTC), by Decision of
November 30, 2006,9 reversed the MeTC Decision.
Court of Appeals however, declared that Food Fests obligation to pay rent was not extinguished
upon its failure to secure permits to operate.

Issue:
Whether or not the principle of rebus sic stantibus is applicable to the instant case.

Held:
No. As for Food Fests invocation of the principle of rebus sic stantibus as enunciated in
Article 1267 of the Civil Code to render the lease contract functus officio, and consequently
release it from responsibility to pay rentals, the Court is not persuaded.
This article, which enunciates the doctrine of unforeseen events, is not, however, an
absolute application of the principle of rebus sic stantibus, which would endanger the security of
contractual relations. The parties to the contract must be presumed to have assumed the risks of

Page 403 of 845

unfavorable developments. It is, therefore, only in absolutely exceptional changes of
circumstances that equity demands assistance for the debtor.19

Food Fest was able to secure the permits, licenses and authority to operate when the lease
contract was executed. Its failure to renew these permits, licenses and authority for the
succeeding year, does not, however, suffice to declare the lease functus officio, nor can it be
construed as an unforeseen event to warrant the application of Article 1267.

Page 404 of 845

 MAGAT V CA
G.R.No. 124221 August 4, 2000

Facts:
Private respondent Santiago A. Guerrero (hereinafter referred to as "Guerrero") was
President and Chairman of[4] "Guerrero Transport Services", a single proprietorship.
Sometime in 1972, Guerrero Transport Services won a bid for the operation of a fleet of
taxicabs within the Subic Naval Base, in Olongapo. As highest bidder, Guerrero was to "provide
radio-controlled taxi service within the U. S. Naval Base, Subic Bay, utilizing as demand requires...
160 operational taxis consisting of four wheel, four-door, four passenger, radio controlled, meter
controlled, sedans, not more than one year.

On September 22, 1972, with the advent of martial law, President Ferdinand E. Marcos
issued Letter of Instruction No. 1. SEIZURE AND CONTROL OF ALL PRIVATELY OWNED
NEWSPAPERS, MAGAZINES, RADIO AND TELEVISION FACILITIES AND ALL
OTHERMEDIA OF COMMUNICATION.

Issue:
Whether the contract between Victorino and Guerrero for the purchase of radio transceivers
was void.

Held:
The contract was not void ab initio. Nowhere in the LOI and Admin. Circular is there an
express ban on the importation of transceivers. The LOI and Administrative Circular did not render
"radios and transceivers" illegal per se. The Administrative Circular merely ordered the Radio
Control Office to suspend the "acceptance and processing .... of applications... for permits to
possess, own, transfer, purchase and sell radio transmitters and transceivers..."[41] Therefore,
possession and importation of the radio transmitters and transceivers was legal provided one had
the necessary license for it.[42] Transceivers were not prohibited but merely regulated goods. The
LOI and Administrative Circular did not render the transceivers outside the commerce of man.
They were valid objects of the contract.

Page 405 of 845

 PNCC V CA
G.R.No. 118696 May 5, 1997

Facts:
On 7 January 1986, petitioner obtained from the Ministry of Human Settlements a
Temporary Use Permit 2 for the proposed rock crushing project. The permit was to be valid for
two years unless sooner revoked by the Ministry. On 16 January 1986, private respondents wrote
petitioner requesting payment of the first annual rental in the amount of P240,000 which was due
and payable upon the execution of the contract. They also assured the latter that they had already
stopped considering the proposals of other aggregates plants to lease the property because of the
existing contract with petitioner. In its reply-letter, petitioner argued that under paragraph 1 of the
lease contract, payment of rental would commence on the date of the issuance of an industrial
clearance by the Ministry of Human Settlements, and not from the date of signing of the contract.
It then expressed its intention to terminate the contract, as it had decided to cancel or discontinue
with the rock crushing project "due to financial, as well as technical, difficulties." Private
respondents refused to accede to petitioner's request for the pretermination of the lease contract.
They insisted on the performance of petitioner's obligation and reiterated their demand for the
payment of the first annual rental.

Issue:
Whether provisions of Article 1266 and the principle of rebus sic stantibus is applicable in
the case at bar?

Held:
Article 1266 of the Civil Code, which reads: "The debtor in obligations to do shall also be
released when the prestation becomes legally or physically impossible without the fault of the
obligor." Petitioner cannot, however, successfully take refuge in the said article, since it is
applicable only to obligations "to do," and not to obligations "to give." An obligation "to do"
includes all kinds of work or service; while an obligation "to give" is a prestation which consists
in the delivery of a movable or an immovable thing in order to create a real right, or for the use of
the recipient, or for its simple possession, or in order to return it to its owner. The obligation to
pay rentals or deliver the thing in a contract oflease falls within the prestation "to give"; hence, it
is not covered within the scope of Article 1266. At any rate, the unforeseen event and causes
mentioned by petitioner are not the legal or physical impossibilities contemplated in the said
article. Besides, petitioner failed to state specifically the circumstances brought about by "the
abrupt change in the political climate in the country" except the alleged prevailing uncertainties in
government policies on infrastructure projects. The principle of rebus sic stantibus neither fits in

Page 406 of 845

with the facts of the case. Under this theory, the parties stipulate in the light of certain prevailing
conditions, and once these conditions cease to exist, the contract also ceases to exist.

Page 407 of 845

 NATELCO V CA
G.R.No. 107112 February 24, 1994

Facts:
Petitioner Naga Telephone Co., Inc. (NATELCO) is a telephone company rendering local
as well as long distance service in Naga City while private respondent Camarines Sur II Electric
Cooperative, Inc. (CASURECO II) is a private corporation established for the purpose of operating
an electric power service in the same city. On November 1, 1977, the parties entered into a contract
(Exh. "A") for the use by petitioners in the operation of its telephone service the electric light posts
of private respondent in Naga City. In consideration therefor, petitioners agreed to install, free of
charge, ten (10) telephone connections for the use by private respondent
After the contract had been enforced for over ten (10) years, private respondent filed on
January 2, 1989 with the Regional Trial Court of Naga City (Br. 28) C.C. No. 89-1642 against
petitioners for reformation of the contract with damages, on the ground that it is too one-sided in
favor of petitioners; that it is not in conformity with the guidelines of the National Electrification
Administration (NEA) which direct that the reasonable compensation for the use of the posts is
P10.00 per post, per month; that after eleven (11) years of petitioners' use of the posts, the
telephone cables strung by them thereon have become much heavier with the increase in the
volume of their subscribers, worsened by the fact that their linemen bore holes through the posts
at which points those posts were broken during typhoons.

Issue:
Whether respondent court erred in making a contract for the parties by invoking Article
1267 of the New Civil Code.

Held:
Article 1267 speaks of "service" which has become so difficult. Taking into consideration
the rationale behind this provision, 9 the term "service" should be understood as referring to the
"performance" of the obligation. In the present case, the obligation of private respondent consists
in allowing petitioners to use its posts in Naga City, which is the service contemplated in said
article. Furthermore, a bare reading of this article reveals that it is not a requirement thereunder
that the contract be for future service with future unusual change. According to Senator Arturo M.
Tolentino, 10 Article 1267 states in our law the doctrine of unforseen events. This is said to be
based on the discredited theory of rebus sic stantibus in public international law; under this theory,
the parties stipulate in the light of certain prevailing conditions, and once these conditions cease
to exist the contract also ceases to exist. Considering practical needs and the demands of equity

Page 408 of 845

and good faith, the disappearance of the basis of a contract gives rise to a right to relief in favor of
the party prejudiced.

Page 409 of 845

 REYNA V. COA
FEBRUARY 8, 2011

Facts:

The Land Bank of the Philippines (Land Bank) was engaged in a cattle-financing program
wherein loans were granted to various cooperatives. Pursuant thereto, Land Bank's Ipil,
Zamboanga del Sur Branch (Ipil Branch) went into a massive information campaign offering the
program to cooperatives.Cooperatives who wish to avail of a loan under the program must fill up
a Credit Facility Proposal (CFP) which will be reviewed by the Ipil Branch. The Ipil Branch
approved the applications of four cooperatives.One of the conditions stipulated in the CFP is that
prior to the release of the loan, a Memorandum of Agreement (MOA) between the supplier of the
cattle, Remad Livestock Corporation (REMAD), and the cooperative, shall have been signed. As
alleged by petitioners, the terms of the CFP allowed for pre-payments or advancement of the
payments prior to the delivery of the cattle by the supplier REMAD but such was not stipulated in
the contracts.
Three checks were issued by the Ipil Branch to REMAD to serve as advanced payment for
the cattle. REMAD, however, failed to supply the cattle on the dates agreed upon.
In post audit, the Land Bank Auditor disallowed the amount of P3,115,000.00 under CSB
No. 95-005 dated December 27, 1996 and Notices of Disallowance Nos. 96-014 to 96-019 in view
of the non-delivery of the cattle. Also made as the basis of the disallowance was the fact that
advanced payment was made in violation of bank policies and COA rules and regulations.
Petitioners were made liable for the amount

Issue:

Whether or not the writing off of a loan is considered as condonation

Held:

This Court rules that writing-off a loan does not equate to a condonation or release of a
debt by the creditor.As an accounting strategy, the use of write-off is a task that can help a company
maintain a more accurate inventory of the worth of its current assets. In general banking practice,
the write-off method is used when an account is determined to be uncollectible and an uncollectible
expense is recorded in the books of account. If in the future, the debt appears to be collectible, as
when the debtor becomes solvent, then the books will be adjusted to reflect the amount to be
collected as an asset. In turn, income will be credited by the same amount of increase in the

Page 410 of 845

accounts receivable.
Write-off is not one of the legal grounds for extinguishing an obligation under the Civil Code. It
is not a compromise of liability. Neither is it a condonation, since in condonation gratuity on the
part of the obligee and acceptance by the obligor are required. In making the write-off, only the
creditor takes action by removing the uncollectible account from its books even without the
approval or participation of the debtor.

Page 411 of 845

 TRANS PACIFIC V CA
G.R.No. 109172 August 19, 1994

Facts:
Sometime in 1979, petitioner applied for and was granted several financial
accommodations amounting to P1,300,000.00 by respondent Associated Bank. The loans were
evidence and secured by four (4) promissory notes, a real estate mortgage covering three parcels
of land and a chattel mortgage over petitioner's stock and inventories.
Unable to settle its obligation in full, petitioner requested for, and was granted by respondent bank,
a restructuring of the remaining indebtedness which then amounted to P1,057,500.00, as all the
previous payments made were applied to penalties and interests.
The mortgaged parcels of land were substituted by another mortgage covering two other
parcels of land and a chattel mortgage on petitioner's stock inventory. The released parcels of land
were then sold and the proceeds amounting to P1,386,614.20, according to petitioner, were turned
over to the bank and applied to Trans-Pacific's restructured loan. Subsequently, respondent bank
returned the duplicate original copies of the three promissory notes to Trans-Pacific with the word
"PAID" stamped thereon. Despite the return of the notes, or on December 12, 1985, Associated
Bank demanded from Trans-Pacific payment of the amount of P492,100.00 representing accrued
interest on PN No. TL-9077-82. According to the bank, the promissory notes were erroneously
released.

Issue:
Whether or not petitioner has indeed paid in full its obligation to respondent bank

Held:
Art. 1271. The delivery of a private document evidencing a credit, made voluntarily by
the creditor to the debtor, implies the renunciation of the action which the former had against the
latter." The surrender and return to plaintiffs of the promissory notes evidencing the consolidated
obligation as restructured, produces a legal presumption that Associated had thereby renounced its
actionable claim against plaintiffs (Art. 1271, NCC). The presumption is fortified by a showing
that said promissory notes all bear the stamp "PAID", and has not been otherwise overcome. Upon
a clear perception that Associated's record keeping has been less than exemplary . . . , a proffer of
bank copies of the promissory notes without the "PAID" stamps thereon does not impress the Court
as sufficient to overcome presumed remission of the obligation vis-a-vis the return of said
promissory notes. Indeed, applicable law is supportive of a finding that in interest bearing
obligations-as is the case here, payment of principal (sic) shall not be deemed to have been made
until the interests have been covered (Art. 1253, NCC). Conversely, competent showing that the
principal has been paid, militates against postured entitlement to unpaid interests.

Page 412 of 845

 DALUPAN V HARDEN
G.R.No. L-3975 November 27, 1951

Facts:
On August 26, 1948, plaintiff filed an action against the defendant for the collection of
P113,837.17, with interest thereon from the filing of the complaint, which represents 50 per cent
of the reduction plaintiff was able to secure from the Collector of Internal Revenue in the amount
of unpaid taxes claimed to be due from the defendant. Defendant acknowledged this claim and
prayed that judgment be rendered accordingly. In the meantime, the receiver in the liquidation case
No. R-59634 and the wife of the defendant, Esperanza P. de Harden, filed an answer in intervention
claiming that the amount sought by the plaintiff was exorbitant and prayed that it be reduced to 10
per cent of the rebate. By reason of the acquiescence of the defendant to the claim on one hand,
and the opposition of the receiver and of the wife on the other, an amicable settlement was
concluded by the plaintiff and the intervenor whereby it was agreed that the sum of P22,767.43 be
paid to the plaintiff from the funds under the control of the receiver "and the balance of P91,069.74
shall be charged exclusively against the defendant Fred M. Harden from whatever share he may
still have in the conjugal partnership between him and Esperanza P. de Harden.

Issue:
Whether or not the writ of execution asked for by the plaintiff on the two checks is
premature.

Held:
Examining the terms the court finds that the stipulation limits the right of the plaintiff to
ask for the execution of the judgment to whatever share Fred M. Harden may still have in the
conjugal partnership between him and his wife after the final liquidation and partition thereof. The
execution of the judgment is premised upon a condition precedent, which is the final liquidation
and partition of the conjugal partnership. Note that the condition does not refer to the liquidation
of a particular property of the partnership. It refers to the over-all and final liquidation of the
partnership. Such being the stipulation of the parties which was sanctioned and embodied by the
Court in its decision, it is clear that the writ of execution asked for by the plaintiff on the two
checks is premature.

Page 413 of 845

 LOPEZ V TAMBUNTING
G.R.No. 9806, January 19, 1916

Facts:
These proceedings were brought to recover from the defendant the sum of P2,000, amount
of the fees, which, according to the complaint, are owing for professional medical services
rendered by the plaintiff to a daughter of the defendant from March 10 to July 15, 1913, which
fees the defendant refused to pay, notwithstanding the demands therefor made upon him by the
plaintiff. The defendant denied the allegations of the complaint, and furthermore alleged that the
obligation which the plaintiff endeavored to compel him to fulfill was already extinguished.

Issue:
Whether or not implied condonation can be legally pressumed in the instant case?

Held:
It is true that number 8 of section 334 of the Code of Civil Procedure provides as a legal
presumption "that an obligation delivered up to the debtor has been paid." Article 1188 of the Civil
Code also provides that the voluntary surrender by a creditor to his debtor, of a private instrument
proving a credit, implies the renunciation of the right of action against the debtor; and article 1189
prescribes that whenever the private instrument which evidences the debt is in the possession of
the debtor, it will be presumed that the creditor delivered it of his own free will, unless the contrary
is proven.
But the legal presumption established by the foregoing provisions of law cannot stand if
sufficient proof is adduced against it. In the case at bar the trial court correctly held that there was
sufficient evidence to the contrary, in view of the preponderance thereof in favor of the plaint iff
and of the circumstances connected with the defendant's possession of said receipt Exhibit 1.
Furthermore, in order that such a presumption may be taken into account, it is necessary, as stated
in the laws cited, that the evidence of the obligation be delivered up to the debtor and that the
delivery of the instrument proving the credit be made voluntarily by the creditor to the debtor. In
the present case, it cannot be said that these circumstances concurred, inasmuch as when the
plaintiff sent the receipt to the defendant for the purpose of collecting his fee, it was not his
intention that that document should remain in the possession of the defendant if the latter did not
forthwith pay the amount specified therein.

Page 414 of 845

 ESTATE OF MOTA V SERRA
G.R.No. 22825 February 14, 1925

Facts:
On February 1, 1919, plaintiffs and defendant entered into a contract of partnership,
marked Exhibit A, for the construction and exploitation of a railroad line from the "San Isidro"
and "Palma" centrals to the place known as "Nandong". The original capital stipulated was
P150,000. It was covenanted that the parties should pay this amount in equal parts and the plaintiffs
were entrusted with the administration of the partnership.
January 29, 1920, the defendant entered into a contract of sale with Venancio Concepcion,
Phil. C. Whitaker, and Eusebio R. de Luzuriaga, whereby he sold to the latter the estate and central
known as "Palma" with its running business, as well as all the improvements, machineries and
buildings, real and personal properties, rights, choses in action and interests, including the sugar
plantation of the harvest year of 1920 to 1921, covering all the property of the vendor. Before the
delivery to the purchasers of the hacienda thus sold, Eusebio R. de Luzuriaga renounced all his
rights under the contract of January 29, 1920, in favor of Messrs. Venancio Concepcion and Phil.
C. Whitaker.

Afterwards, on January 8, 1921, Venancio Concepcion and Phil. C. Whitaker bought from
the plaintiffs the one half of the railroad line pertaining to the latter executing therefor the
document Exhibit 5. The price of this sale was P237,722.15, excluding any amount which the
defendant might be owing to the plaintiffs.

Issue:
Whether or not there was confusion of the rights of the creditor and debtor

Held:
The purchasers, Phil. C. Whitaker and Venancio Concepcion, to secure the payment of the
price, executed a mortgage in favor of the plaintiffs on the same rights and titles that they had
bought and also upon what they had purchased from Mr. Salvador Serra. In other words, Phil C.
Whitaker and Venancio Concepcion mortgaged unto the plaintiffs what they had bought from the
plaintiffs and also what they had bought from Salvador Serra. If Messrs. Phil. C. Whitaker and
Venancio Concepcion had purchased something from Mr. Salvador Serra, the herein defendant,
regarding the railroad line, it was undoubtedly the one-half thereof pertaining to Mr. Salvador
Serra. This clearly shows that the rights and titles transferred by the plaintiffs to Phil. C. Whitatker
and Venancio Concepcion were only those they had over the other half of the railroad line.
Therefore, as already stated, since there was no novation of the contract between the plaintiffs and

Page 415 of 845

the defendant, as regards the obligation of the latter to pay the former one-half of the cost of the
construction of the said railroad line, and since the plaintiffs did not include in the sale, evidenced
by Exhibit 5, the credit that they had against the defendant, the allegation that the obligation of the
defendant became extinguished by the merger of the rights of creditor and debtor by the purchase
of Messrs. Phil. C. Whitaker and Venancio Concepcion is wholly untenable.

Page 416 of 845

 YEK TON LIN V YUSINGCO
G.R.No. 43608, July 20, 1937

Facts:
Defendant Pelagio Yusingco was the owner of the steamship Yusingco and, as such, he
executed, on November 19, 1927, a power of attorney in favor of Yu Seguioc to administer, lease,
mortgage and sell his properties, including his vessels or steamship. Yu Seguioc mortgaged to the
plaintiff Yek Tong Lin Fire & Marine Insurance Co., Ltd., with the approval of the Bureau of
Customs, the steamship Yusingco belonging to the defendant. One year and some months later,
the steamship Yusingco needed some repairs which were made by the Earnshaw Docks &
Honolulu Iron Works. The repairs were made upon the guaranty of the defendant and appellant
Vicente Madrigal at a cost of P8,244.66. When neither A. Yusingco Hermanos nor Pelagio
Yusingco could pay said sum to the Earnshaw Docks & Honolulu Iron Works, the defendant and
appellant Vicente Madrigal had to make payment thereof with the stipulated interest thereon,
which was at the rate of 9 per cent per annum, on March 9, 1932, because he was bound thereto
by reason of the bond filed by him, the payment then made by him having amounted to P8,777.60.
When said defendant discovered that he was not to be reimbursed for the repairs made on the
steamship Yusingco, he brought an action against his codefendant Pelagio Yusingco and A.
Yusingco Hermanos to compel them to reimburse, thereby giving rise to civil case No. 41654 of
the Court of First Instance of Manila, entitled "Vicente Madrigal, plaintiff, vs. Pelagio Yusingco
and A. Yusingco Hermanos, defendants" which resulted in a judgment favorable to him and
adverse to the Yusingcos.

Issue:
Whether or not obligations were extinguished by reason of the merger of the rights of the
debt or and creditor

Held:
After the steamship Yusingco had been sold by virtue of the judicial writ issued in civil
case No. 41654 for the execution of the judgment rendered in favor of Vicente Madrigal, the only
right left to the plaintiff was to collect its mortgage credit from the purchaser thereof at public
auction, inasmuch as the rule is that a mortgage directly and immediately subjects the property on
which it is imposed, whoever its possessor may be, to the fulfillment of the obligation for the
security of which it was created (article 1876, Civil code); but it so happens that it can not take
such steps now because it was the purchaser of the steamship Yusingco at public auction, and it
was so with full knowledge that it had a mortgage credit on said vessel. Obligations are

Page 417 of 845

extinguished by the merger of the rights of the creditor and debtor (articles 1156 and 1192, Civil
Code).

Page 418 of 845

 E.G.V. REALTY V CA
G.R.No. 120236 July 20, 1999

Facts:
Petitioner E.G.V. Realty Development Corporation is the owner/developer of a seven-
storey condominium building known as Cristina Condominium. Cristina Condominium
Corporation holds title to all common areas of Cristina Condominium and is in charge of
managing, maintaining and administering the condominiums common areas and providing for the
buildings security. Respondent Unisphere International, Inc. (hereinafter referred to as Unisphere)
is the owner/occupant of Unit 301 of said condominium. On November 28, 1981, respondent
Unispheres Unit 301 was allegedly robbed of various items valued at P6,165.00. The incident was
reported to petitioner CCC. On July 25, 1982, another robbery allegedly occurred at Unit 301
where the items carted away were valued at P6,130.00, bringing the total value of items lost to
P12,295.00. This incident was likewise reported to petitioner CCC. On October 5, 1982,
respondent Unisphere demanded compensation and reimbursement from petitioner CCC for the
losses incurred as a result of the robbery. On January 28, 1987, petitioners E.G.V. Realty and CCC
jointly filed a petition with the Securities and Exchange Commission (SEC) for the collection of
the unpaid monthly dues in the amount of P13,142.67 against respondent Unisphere.

Issue:
Whether or not set-off or compensation has taken place in the instant case.

Held:
Compensation or offset under the New Civil Code takes place only when two persons or
entities in their own rights, are creditors and debtors of each other. (Art. 1278). A distinction must
be made between a debt and a mere claim. A debt is an amount actually ascertained. It is a claim
which has been formally passed upon by the courts or quasi-judicial bodies to which it can in law
be submitted and has been declared to be a debt. A claim, on the other hand, is a debt in embryo.
It is mere evidence of a debt and must pass thru the process prescribed by law before it develops
into what is properly called a debt. Absent, however, any such categorical admission by an obligor
or final adjudication, no compensation or off-set can take place. Unless admitted by a debtor
himself, the conclusion that he is in truth indebted to another cannot be definitely and finally
pronounced, no matter how convinced he may be from the examination of the pertinent records of
the validity of that conclusion the indebtedness must be one that is admitted by the alleged debtor
or pronounced by final judgment of a competent court or in this case by the Commission. There
can be no doubt that Unisphere is indebted to the Corporation for its unpaid monthly dues in the
amount of P13,142.67. This is admitted.

Page 419 of 845

 AEROSPACE CHEMICAL V CA
G.R. No. 108129, September 23, 1999

Facts:
On June 27, 1986, petitioner Aerospace Industries, Inc. (Aerospace) purchased five
hundred (500) metric tons of sulfuric acid from private respondent Philippine Phosphate Fertilizer
Corporation (Philphos). Initially set beginning July 1986, the agreement provided that the buyer
shall pay its purchases in equivalent Philippine currency value, five days prior to the shipment
date. Petitioner as buyer committed to secure the means of transport to pick-up the purchases from
private respondent's loadports. Per agreement, one hundred metric tons (100 MT) of sulfuric acid
should be taken from Basay, Negros Oriental storage tank, while the remaining four hundred
metric tons (400 MT) should be retrieved from Sangi, Cebu. On December 18, 1986, M/T Sultan
Kayumanggi docked at Sangi, Cebu, but withdrew only 157.51 MT of sulfuric acid. Again, the
vessel tilted. Further loading was aborted. Two survey reports conducted by the Societe Generale
de Surveillance (SGS) Far East Limited, dated December 17, 1986 and January 2, 1987, attested
to these occurrences. Later, on a date not specified in the record, M/T Sultan Kayumanggi sank
with a total of 227.51 MT of sulfuric acid on board. Petitioner chartered another vessel, M/T Don
Victor, with a capacity of approximately 500 MT.6 [TSN, September 1, 1989, pp. 28-29.] On
January 26 and March 20, 1987, Melecio Hernandez, acting for the petitioner, addressed letters to
private respondent, concerning additional orders of sulfuric acid to replace its sunken purchases.

Issue:
Should expenses for the storage and preservation of the purchased fungible goods, namely
sulfuric acid, be on seller's account pursuant to Article 1504 of the Civil Code?

Held:
Petitioner tries to exempt itself from paying rental expenses and other damages by arguing
that expenses for the preservation of fungible goods must be assumed by the seller. Rental expenses
of storing sulfuric acid should be at private respondent's account until ownership is transferred,
according to petitioner. However, the general rule that before delivery, the risk of loss is borne by
the seller who is still the owner, is not applicable in this case because petitioner had incurred delay
in the performance of its obligation. Article 1504 of the Civil Code clearly states: "Unless
otherwise agreed, the goods remain at the seller's risk until the ownership therein is transferred to
the buyer, but when the ownership therein is transferred to the buyer the goods are at the buyer's
risk whether actual delivery has been made or not, except that: (2) Where actual delivery has been
delayed through the fault of either the buyer or seller the goods are at the risk of the party at fault."
On this score, we quote with approval the findings of the appellate court, thus: The
defendant [herein private respondent] was not remiss in reminding the plaintiff that it would have
to bear the said expenses for failure to lift the commodity for an unreasonable length of time.But
Page 420 of 845
even assuming that the plaintiff did not consent to be so bound, the provisions of Civil Code come
in to make it liable for the damages sought by the defendant.

Page 421 of 845

 APODACA V NLRC
G.R.No. 80039 April1 8, 1989

Facts:
Petitioner was employed in respondent corporation. On August 28, 1985, respondent Jose
M. Mirasol persuaded petitioner to subscribe to P1,500 shares of respondent corporation it P100.00
per share or a total of P150,000.00. He made an initial payment of P37,500.00. On September 1,
1975, petitioner was appointed President and General Manager of the respondent corporation.
However, on January 2, 1986, he resigned.
On December 19, 1986, petitioner instituted with the NLRC a complaint against private
respondents for the payment of his unpaid wages, his cost of living allowance, the balance of his
gasoline and representation expenses and his bonus compensation for 1986. Petitioner and private
respondents submitted their position papers to the labor arbiter. Private respondents admitted that
there is due to petitioner the amount of P17,060.07 but this was applied to the unpaid balance of
his subscript in the amount of P95,439.93. Petitioner questioned the set-off alleging that there was
no call or notice for the payment of unpaid subscription and that, accordingly, the alleged
obligation is not enforceable.

Issue:
Does the National Labor Relations Commission (NLRC) have jurisdiction to resolve a
claim for non-payment of stock subscriptions to a corporation? Assuming that it has, can an
obligation arising therefrom be offset against a money claim of an employee against the employer?

Held:
Firstly, the NLRC has no jurisdiction to determine such intra-corporate dispute between
the stockholder and the corporation as in the matter of unpaid subscriptions. This controversy is
within the exclusive jurisdiction of the Securities and Exchange Commission.

Secondly, assuming arguendo that the NLRC may exercise jurisdiction over the said subject
matter under the circumstances of this case, the unpaid subscriptions are not due and payable
until a call is made by the corporation for payment. Private respondents have not presented a
resolution of the board of directors of respondent corporation calling for the payment of the
unpaid subscriptions. It does not even appear that a notice of such call has been sent to petitioner
by the respondent corporation.

Page 422 of 845

 283. SPOUSES CHUNG V. ULANDAY CONSTRUCTION
G.R. No. 156038
October 11, 2010

FACTS:

In February 1985, the petitioners contracted with respondent Ulanday Construction, Inc. to
construct, within a 150-day period,the concrete structural shell of the formers two-storey
residential house in Urdaneta Village, Makati City at the contract price of P3, 291,142.00.

The contract stipulated among others that the petitioners shall pay a P987,342.60 downpayment,
with the balance to be paid in progress payments based on actual work completed; (c) the
Construction Manager or Architect shall check the respondents request for progress payment
and endorse it to the petitioners for payment within 3 days from receipt, (d) the petitioners shall
pay the respondents within 7 days from receipt of the Construction Managers or Architects
certificate; (e) the respondent cannot change or alter the plans, specifications, and works without
the petitioners prior written approval. Respondent gave 12 progress billings but the petitioners
were only able to pay 7 of them. On their part, the respondent effected 19 change orders without
the consent of the petitioners amounting to P912, 885.91. Respondents demanded the remaining
balance from the petitioners which the petitioners denied asserting that the respondents violated
the contract.

ISSUE:

Whether or not the petitioners are liable for the remaining balance

RULING:

In contractual relations, the law allows the parties leeway and considers their agreement as the
law between them.Contract stipulations that are not contrary to law, morals, good customs,
public order or public policy shall be binding and should be complied with in good faith. No
party is permitted to change his mind or disavow and go back upon his own acts, or to proceed
contrary thereto, to the prejudice of the other party. In the present case, we find that both parties
failed to comply strictly with their contractual stipulations on the progress billings and change
orders that caused the delays in the completion of the project.

Under the circumstances, fairness and reason dictate that we simply order the set-off of the
petitioners contractual liabilities totaling P575,922.13 against the repair cost for the defective
gutter, pegged at P717,524.00, leaving the amount of P141,601.87 still due from the respondent.
Support in law for this ruling for partial legal compensation proceeds from Articles 1278, 1279,
1281, and 1283 of the Civil Code. In short, both parties are creditors and debtors of each other,
although in different amounts that are already due and demandable.

Page 423 of 845

 284. MONDRAGON V. SOLA, JR.
G.R. No. 174882
January 21 2013

FACTS:

Petitioner Mondragon Personal Sales Inc., a company engaged in the business of selling various
consumer products through a network of sales representatives, entered into a Contract of
Services with respondent Victoriano S. Sola, Jr. for a period of three years. Under the said
contract, respondent, as service contractor, would provide service facilities, i.e., bodega cum
office, to petitioner's products, sales force and customers in General Santos City and as such, he
was entitled to commission.

The agreement then came into effect when petitioner's goods were delivered to respondent's
bodega and were sold by petitioner's employees. Prior to the execution of the contract, however,
respondents wife, Lina Sola, had an existing obligation with petitioner arising from her
Franchise Distributorship Agreement with the latter being dealt with. The respondent then wrote
a letter to the petitioner's Vice-President for Finance, wherein he acknowledged and confirmed
his wifes indebtedness to petitioner in the amount of P1, 973,154.73 and, together with his wife,
bound himself to pay on instalment basis the said debt.

Consequently, petitioner withheld the payment of respondent's service fees from February to
April 1995 and applied the same as partial payments to the debt which he obligated to pay. On
April 29, 1995, respondent closed and suspended operation of his office cum bodega where
petitioner's products were stored and customers were being dealt with.

ISSUE:

Whether or not there was legal compensation under Article 1279 of the Civil Code

RULING:

The letter sent by the respondent clearly shows that he solidarily bound himself to pay the debt.
Based on the letter, respondent's wife had an account with petitioner in the amount of P3,
463,173.88, out of which only the amount of P1,973,154.73 was confirmed while the remaining
amount of P1,490,019.15 would still be subject to reconciliation. As respondent bound himself to
pay the amount of P1, 973,154.73, he becomes petitioner's principal debtor to such amount.

The Supreme Court finds that petitioner's act of withholding respondent's service fees and
applying them to the latter's outstanding obligation with the former is merely an
acknowledgment of the legal compensation that occurred by operation of law between the
parties. Compensation is a mode of extinguishing to the concurrent amount the obligations of
persons who in their own right and as principals are reciprocally debtors and creditors of each

Page 424 of 845

other. Legal compensation takes place by operation of law when all the requisites are present, as
opposed to conventional compensation which takes place when the parties agree to compensate
their mutual obligations even in the absence of some requisites.

The present case was found to have all of the requisites for legal compensation. Petitioner and
respondent are both principal obligors and creditors of each other. Their debts to each other
consist in a sum of money. Respondent acknowledged and bound himself to pay petitioner the
amount of P1, 973,154.73 which was already due, while the service fees owing to respondent by
petitioner become due every month. Respondent's debt is liquidated and demandable, and
petitioner's payments of service fees are liquidated and demandable every month as they fall due.
Finally, there is no retention or controversy commenced by third persons over either of the debts.
Thus, compensation is proper up to the concurrent amount where petitioner owes respondent
P125,040.01 for service fees, while respondent owes petitioner P1,973,154.73.

Page 425 of 845

 285. INSULAR INVESTMENT V. CAPITAL ONE
G.R. No. 183308
April 25, 2012

FACTS:

Insular and Capital One and Planters are regularly engaged in trading, sale and purchase of
Philippine treasury bills. Then on May 10, 1994, Capital One wrote a letter to Insular demanding
the physical delivery of the treasury bills which the Capital one purchased.

Then on July 1, 1994, the 3 companies entered into a tripartite agreement whrein Planters
assigned to Insular, which in turn assigned to Capital one, bills with the total value of
P50million. But despite the repeated demands, Planters failed to deliver the balance worth of
bills making Capital one likewise unable to deliver the remaining bills to Insular.

The trial court ordered (a) IITC to pay COEC P17,056,608.00 with interest at the rate of 6%
from June 10, 1994 until full payment and (b) PDB to pay IITC P136,790,000.00 with interest at
the rate of 6% from March 21, 1995 until full payment.

CA affirmed the RTC finding that IITC was not a mere conduit but rather a direct seller to
COEC of the treasury bills. The CA, however, absolved PDB from any liability, ruling that
because PDB was not involved in the transactions between IITC and COEC, IITC should have
alleged and proved that PDB sold treasury bills to IITC.

ISSUE:

Whether COEC can set-off its obligation to IITC as against the latters obligation to it;

RULING:

The issue raised by IITC is factual in nature as it requires the Court to delve into the records and
review the evidence presented by the parties to determine the validity of the findings of both the
RTC and the CA as to IITCs role in the transactions in question. These are purely factual issues
which this Court cannot review.Well-established is the principle that factual findings of the trial
court, when adopted and confirmed by the Court of Appeals, are binding and conclusive on this
Court and will generally not be reviewed on appeal.

Petition partially granted.

Page 426 of 845

 286. SELWIN LAO V. SPECIAL PLANS, INC.
GR No. 164729
June 29, 2010

FACTS:

Petitioners Selwyn F. Lao and Edgar Manansala (Manansala), together with Benjamin Jim (Jim),
entered into a Contract of Lease with respondent Special Plans, Inc. (SPI) for the period January
16, 1993 to January 15, 1995 over SPIs building at No. 354 Quezon Avenue, Quezon City.
Petitioners intended to use the premises for their karaoke and restaurant business known as
Saporro Restaurant.
Upon expiration of the lease contract, it was renewed for a period of eight months at a monthly
rate of P23, 000.00. On June 3, 1996, SPI sent a Demand Letter to the petitioners asking for full
payment of rentals in arrears.Receiving no payment, SPI filed on July 23, 1996 a Complaint for
sum of money with the MeTC of Quezon City, claiming unpaid rentals of P118, 000.00 covering
the period March 16, 1996 to August 16, 1996.

Petitioners answered faulting SPI for making them believe that it owns the leased property and
that SPI did not deliver the leased premises in a condition fit for petitioners intended use. Thus,
petitioners claimed that they were constrained to incur expenses for necessary repairs as well as
expenses for the repair of structural defects, which SPI failed and refused to reimburse.
Petitioners prayed that the complaint be dismissed and judgment on their counterclaims be
rendered ordering SPI to pay them the sum of P422, 920.40 as actual damages, as well as moral
damages, attorneys fees and exemplary damages.

ISSUE:

Whether or not the cost of repairs incurred by the petitioners should be compensated against the
unpaid rentals.

RULING:

Petitioners failed to properly discharge their burden to show that the debts are liquidated and
demandable. Consequently, legal compensation is inapplicable.

The petitioners attempted to prove that they spent for the repair of the roofing, ceiling and
flooring, as well as for waterproofing. However, they failed to appreciate that, as per their lease
contract, only structural repairs are for the account of the lessor, herein respondent SPI. In which
case, they overlooked the need to establish that aforesaid repairs are structural in nature, in the
context of their earlier agreement. It would have been an altogether different matter if the lessor
was informed of the said structural repairs and he implicitly or expressly consented and agreed to
take responsibility for the said expenses. Such want of evidence on this respect is fatal to this
appeal. Consequently, their claim remains unliquidated and, legal compensation is inapplicable.

Page 427 of 845

 287. UNITED PLANTERS MILLING CO. V. CA
GR No. 126890
April 2, 2009

FACTS:

In 1987, the Republic of the Philippines lost around 1.5 Billion Pesos after it had waived its right
to collect on an outstanding indebtedness from petitioner, by virtue of a so-called friendly
foreclosure agreement that ultimately was friendly only to petitioner.

Petitioner United Planters Sugar Milling Co. (UPSUMCO) was engaged in the business of
milling sugar. In 1974, as UPSUMCO commenced operations, it obtained a set of loans from
respondent Philippine National Bank (PNB). The loans were secured over two parcels of land
where the milling plant stood and chattel mortgages over the machineries and equipment.

On 27 February 1987, through a Deed of Transfer, PNB assigned to the Government its rights,
titles and interests over UPSUMCO, among several other assets.[6] The Deed of Transfer
acknowledged that said assignment was being undertaken in compliance with Presidential
Proclamation No. 50. The Government subsequently transferred these rights, titles and
interests over UPSUMCO to the respondent Asset and Privatization Trust (APT).

ISSUE:

Whether or not there was compensation in the present case.

RULING:

The right of PNB to set-off payments from UPSUMCO arose out of conventional compensation
rather than legal compensation, even though all of the requisites for legal compensation were
present as between those two parties. The determinative factor is the mutual agreement between
PNB and UPSUMCO to set-off payments. Even without an express agreement stipulating
compensation, PNB and UPSUMCO would have been entitled to set-off of payments, as the
legal requisites for compensation under Article 1279 were present.

As soon as PNB assigned its credit to APT, the mutual creditor-debtor relation between PNB and
UPSUMCO ceased to exist. However, PNB and UPSUMCO had agreed to a conventional
compensation, a relationship which does not require the presence of all the requisites under
Article 1279. And PNB too had assigned all its rights as creditor to APT, including its rights
under conventional compensation. The absence of the mutual creditor-debtor relation between
the new creditor APT and UPSUMCO cannot negate the conventional compensation.
Accordingly, APT, as the assignee of credit of PNB, had the right to set-off the outstanding
obligations of UPSUMCO on the basis of conventional compensation before the condonation
took effect on 3 September 1987.

Page 428 of 845

 288. PNB MANAGEMENT V R&R METAL
G.R. No. 132245
January 1, 2002

FACTS:

It appears that on November 19, 1993, respondent R&R Metal Casting and Fabricating, Inc.
(R&R) obtained a judgment in its favor against Pantranco North Express, Inc. (PNEI). PNEI
was ordered to pay respondent P213,050 plus interest as actual damages, P50,000 as exemplary
damages, 25 percent of the total amount payable as attorneys fees, and the costs of suit.
However, the writ of execution was returned unsatisfied since the sheriff did not find any
property of PNEI recorded at the Registries of Deeds of the different cities of Metro Manila.
Neither did the sheriff receive a reply to the notice of garnishment he sent to PNB-Escolta.On
March 27, 1995, respondent filed with the trial court a motion for the issuance of subpoenae
duces tecum and ad testificandum requiring petitioner PNB Management and Development
Corp. (PNB MADECOR) to produce and testify on certain documents pertaining to transactions
between petitioner and PNEI from 1981 to 1995.

ISSUE:

Whether or not legal compensation have occured in the instant case?

RULING:

Legal compensation could not have occurred because of the absence of one requisite in this case:
that both debts must be due and demandable.
Petitioners obligation to PNEI appears to be payable on demand, following the above
observation made by the CA and the assertion made by petitioner. Petitioner is obligated to pay
the amount stated in the promissory note upon receipt of a notice to pay from PNEI. If
petitioner fails to pay after such notice, the obligation will earn an interest of 18 percent per
annum.

Since petitioners obligation to PNEI is payable on demand, and there being no demand made, it
follows that the obligation is not yet due. Therefore, this obligation may not be subject to
compensation for lack of a requisite under the law. Without compensation having taken place,
petitioner remains obligated to PNEI to the extent stated in the promissory note. This obligation
may undoubtedly be garnished in favor of respondent to satisfy PNEIs judgment debt.

Page 429 of 845

 289. SILAHIS V IAC
G.R. No. 74027
December 7, 1989

FACTS:

Petitioner Silahis Marketing Corporation seeks in this petition for review on certiorari a reversal
of the decision of the then Intermediate Appellate Court (IAC) in AC-G.R. CV No. 67162
entitled "De Leon, etc. v. Silahis Marketing Corporation", disallowing petitioner's counterclaim
for commission to partially offset the claim against it of private respondent Gregorio de Leon for
the purchase price of certain merchandise. A review of the record shows that on various dates in
October, November and December, 1975, Gregorio de Leon doing business under the name and
style of Mark Industrial Sales sold and delivered to Silahis Marketing Corporation various items
of merchandise covered by several invoices in the aggregate amount of P22,213.75 payable
within thirty (30) days from date of the covering invoices.Allegedly due to Silahis' failure to pay
its account upon maturity despite repeated demands, de Leon filed before the then Court of First
Instance of Manila a complaint for the collection of the said accounts including accrued interest
thereon in the amount of P661.03 and attorney's fees of P5,000.00 plus costs of litigation.

ISSUE:

Whether or not private respondent is liable to the petitioner for the commission or margin for the
direct sale which the former concluded and consummated with Dole Philippines, Incorporated
without coursing the same through herein petitioner.

RULING:

It must be remembered that compensation takes place when two persons, in their own right, are
creditors and debtors to each other. Article 1279 of the Civil Code provides that: "In order that
compensation may be proper, it is necessary: [1] that each one of the obligors be bound
principally, and that he be at the same time a principal creditor of the other; [2] that both debts
consist in a sum of money, or if the things due are consumable, they be of the same kind, and
also of the same quality if the latter has been stated; [3] that the two debts be due; [4] that they be
liquidated and demandable; [5] that over neither of them there be any retention or controversy,
commenced by third persons and communicated in due time to the debtor."

When all the requisites mentioned in Art. 1279 of the Civil Code are present, compensation takes
effect by operation of law, even without the consent or knowledge of the creditors and debtors. 5
Article 1279 requires, among others, that in order that legal compensation shall take place, "the
two debts be due" and "they be liquidated and demandable." Compensation is not proper where
the claim of the person asserting the set-off against the other is not clear nor liquidated;
compensation cannot extend to unliquidated, disputed claim existing from breach of contract.
Undoubtedly, petitioner admits the validity of its outstanding accounts with private respondent in

Page 430 of 845

the amount of P22,213.75 as contained in its answer. But whether private respondent is liable to
pay the petitioner a 20% margin or commission on the subject sale to Dole Philippines, Inc. is
vigorously disputed. This circumstance prevents legal compensation from taking place.

Page 431 of 845

 290. FRANCIA V CA
G.R. No. 67649
June 28, 1998

FACTS:

Engracio Francia is the registered owner of a residential lot and a two-story house built upon it
situated at Barrio San Isidro, now District of Sta. Clara, Pasay City, Metro Manila. On October
15, 1977, a 125 square meter portion of Francia's property was expropriated by the Republic of
the Philippines for the sum of P4,116.00 representing the estimated amount equivalent to the
assessed value of the aforesaid portion.Since 1963 up to 1977 inclusive, Francia failed to pay his
real estate taxes. Thus, on December 5, 1977, his property was sold at public auction by the City
Treasurer of Pasay City pursuant to Section 73 of Presidential Decree No. 464 known as the Real
Property Tax Code in order to satisfy a tax delinquency of P2,400.00. Ho Fernandez was the
highest bidder for the property. Francia was not present during the auction sale since he was in
Iligan City at that time helping his uncle ship bananas. On March 3, 1979, Francia received a
notice of hearing of LRC Case No. 1593-P "In re: Petition for Entry of New Certificate of Title"
filed by Ho Fernandez, seeking the cancellation of TCT No. 4739 (37795) and the issuance in his
name of a new certificate of title. On March 20, 1979, Francia filed a complaint to annul the
auction sale. He later amended his complaint on January 24, 1980.

ISSUE:

Whether or not francias tax delinquency of P2,400.00 has been extinguished by legal
compensation.

RULING:

There is no legal basis for the contention. By legal compensation, obligations of persons, who in
their own right are reciprocally debtors and creditors of each other, are extinguished (Art. 1278,
Civil Code). The circumstances of the case do not satisfy the requirements provided by Article
1279, to wit:
"(1) that each one of the obligors be bound principally and that he be at the same time a
principal creditor of the other;
We have consistently ruled that there can be no off-setting of taxes against the claims that the
taxpayer may have against the government. A person cannot refuse to pay a tax on the ground
that the government owes him an amount equal to or greater than the tax being collected. The
collection of a tax cannot await the results of a lawsuit against the government.
A claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set-off
under the statutes of set-off, which are construed uniformly, in the light of public policy, to
exclude the remedy in an action or any indebtedness of the state or municipality to one who is
liable to the state or municipality for taxes. Neither are they a proper subject of recoupment since
they do not arise out of the contract or transaction sued on. "The general rule based on grounds

Page 432 of 845

of public policy is well-settled that no set-off admissible against demands for taxes levied for
general or local governmental purposes. The reason on which the general rule is based, is that
taxes are not in the nature of contracts between the party and party but grow out of duty to, and
are the positive acts of the government to the making and enforcing of which, the personal
consent of individual taxpayers is not required

Page 433 of 845

 291. TRINIDAD V ACAPULCO
G.R. No. 147477
June 27, 2006

FACTS:

On May 6, 1991, respondent Estrella Acapulco filed a Complaint before the RTC seeking the
nullification of a sale she made in favor of petitioner Hermenegildo M. Trinidad. She alleged:
Sometime in February 1991, a certain Primitivo Caete requested her to sell a Mercedes Benz for
P580,000.00. Caete also said that if respondent herself will buy the car, Caete was willing to
sell it for P500,000.00. Petitioner borrowed the car from respondent for two days but instead of
returning the car as promised, petitioner told respondent to buy the car from Caete for
P500,000.00 and that petitioner would pay respondent after petitioner returns from Davao.
Following petitioners instructions, respondent requested Caete to execute a deed of sale
covering the car in respondents favor for P500,000.00 for which respondent issued three checks
in favor of Caete. Respondent thereafter executed a deed of sale in favor of petitioner even
though petitioner did not pay her any consideration for the sale. When petitioner returned from
Davao, he refused to pay respondent the amount of P500,000.00 saying that said amount would
just be deducted from whatever outstanding obligation respondent had with petitioner. Due to
petitioners failure to pay respondent, the checks that respondent issued in favor of Caete
bounced, thus criminal charges were filed against her.[3] Respondent then prayed that the deed
of sale between her and petitioner be declared null and void; that the car be returned to her; and
that petitioner be ordered to pay damages.

ISSUE:

Whether or not petitioners claim for legal compensation was already too late

RULING:

The court ruled in favor of the petitioner. Compensation takes effect by operation of law even
without the consent or knowledge of the parties concerned when all the requisites mentioned in
Article 1279 of the Civil Code are present.[26] This is in consonance with Article 1290 of the
Civil Code which provides that: Article 1290. When all the requisites mentioned in article 1279
are present, compensation takes effect by operation of law, and extinguishes both debts to the
concurrent amount, even though the creditors and debtors are not aware of the compensation.
Since it takes place ipso jure,[27] when used as a defense, it retroacts to the date when all its
requisites are fulfilled.

Page 434 of 845

 292. HEIRS OF FRANCO V. SPS. GONZALES
G.R. No. 159709
June 27 2012

FACTS:

Defendants Servando Franco and Leticia Mendel obtained loans from Veronica Gonzales for the
latter was engaged in the business of financing under the company Gonzales Credit Enterprises.
There were three loans which the Servando and Leticia secured with the respondent, which was
not paid on maturity. The third loan was secured by a property was owned by one Leticia
Makalintal Yapintchay, who issued a special power of attorney in favor of Leticia Medel,
authorizing her to execute the mortgage. The fourth loan was engaged with Dr. Rafael Mendel,
the husband of Leticia Mendel of P 60,000 by executing a promissory note which consolidates
the other previous loans which totals to P 500,000.

Upon maturity of the new promissory note, the defendants failed to pay their obligation. So, the
plaintiffs filed a complaint for the collection of the full amount of the loan, plus interests and
other charges. Servando contended that he did not obtain any loan from the respondents, he was
not benefited from its proceed and he signed the promissory note as a witness. With the various
appeals and motion for reconsideration with the RTC and CA, it was decided that the parties
should be liable for the loans. Servando opposed that he and the respondents had agreed to fix
the entire obligation at P775,000.00. According to Servando, their agreement, which was
allegedly embodied in a receipt dated February 5, 1992, whereby he made an initial payment of
P400,000.00 and promised to pay the balance of P375,000.00 on February 9, 1992, superseded
the July 23, 1986 promissory note. But the RTC ruled over Servandos opposition and moved to
the execution of the judgment for it is final and executory. Then, Servandos heirs, on account of
his intervening death, appealed that there was novation is the judgment that transpired upon the
decision of the court on December 9, 1991 and February 5, 1992.

ISSUE:

Whether or not there is novation between the judgments rendered by the courts?

RULING:

No, the court rule that there is no novation when there is no irreconcilable incompatibility
between the old and the new obligations. There is no novation in case of only slight
modifications; hence, the old obligation prevails. Extinguishment of the old obligation is a
necessary element for novation and the new one will arise from such. Novation arises when
there is a substitution of an obligation by a subsequent one that extinguishes the first, either by
changing the object or the principal conditions, or by substituting the person of the debtor, or by
subrogating a third person in the rights of the creditor. For a valid novation to take place, there

Page 435 of 845

must be, therefore: (a) a previous valid obligation; (b) an agreement of the parties to make a new
contract; (c) an extinguishment of the old contract; and (d) a valid new contract.

In short, the new obligation extinguishes the prior agreement only when the substitution is
unequivocally declared, or the old and the new obligations are incompatible on every point. A
compromise of a final judgment operates as a novation of the judgment obligation upon
compliance with either of these two conditions.

To be clear, novation is not presumed. This means that the parties to a contract should expressly
agree to abrogate the old contract in favor of a new one. In the absence of the express agreement,
the old and the new obligations must be incompatible on every point. There is incompatibility
when the two obligations cannot stand together, each one having its independent existence. If the
two obligations cannot stand together, the latter obligation novates the first. Changes that breed
incompatibility must be essential in nature and not merely accidental. The incompatibility must
affect any of the essential elements of the obligation, such as its object, cause or principal
conditions thereof; otherwise, the change is merely modificatory in nature and insufficient to
extinguish the original obligation.

The receipt dated February 5, 1992 was only the proof of Servandos payment of his obligation
as confirmed by the decision of the RTC. It did not establish the novation of his agreement with
the respondents. Indeed, the Court has ruled that an obligation to pay a sum of money is not
novated by an instrument that expressly recognizes the old, or changes only the terms of
payment, or adds other obligations not incompatible with the old ones, or the new contract
merely supplements the old one. A new contract that is a mere reiteration, acknowledgment or
ratification of the old contract with slight modifications or alterations as to the cause or object or
principal conditions can stand together with the former one, and there can be no incompatibility
between them. Moreover, a creditors acceptance of payment after demand does not operate as a
modification of the original contract.

Lastly, the extension of the maturity date did not constitute a novation of the previous agreement.
It is settled that an extension of the term or period of the maturity date does not result in
novation.

Page 436 of 845

 293. CAROLINA HERNANDEZ-NIEVERA V. WILFREDO HERNANDEZ
GR No. 171165
February 14, 2011

FACTS:

Project Movers Realty & Development Corporation (PMRDC) is a duly organized domestic
corporation engaged in real estate development. It entered into a Memorandum of Agreement
(MOA) whereby it was given the option to buy pieces of land owned by petitioners Carolina
Hernandez-Nievera, Margarita H. Malvar and Demetrio P. Hernandez, Jr. Demetrio, under
authority of a Special Power of Attorney to Sell or Mortgage, signed the MOA also in behalf of
Carolina and Margarita. In the aggregate, the realty measured 4,580,451 square meters and was
segregated by agreement into Area I and Area II.

On March 23, 1998, the PMRDC entered with LBP and Demetrio - the latter purportedly acting
under authority of the same special power of attorney as in the MOA - into a Deed of
Assignment and Conveyance (DAC). PMRDC delivered to petitioners certain checks
representing the money, the same however allegedly bounced. Hence, on January 8, 1999,
petitioners demanded the return of the corresponding TCTs over the land but PMRDC said that
the TCTs could no longer be delivered back to petitioners as the covered properties had already
been conveyed and assigned to the Asset Pool pursuant to the March 23, 1998 DAC. Petitioner
contended that Demetrio could not have entered into the said agreement as his power of attorney
was limited only to selling or mortgaging the properties and not conveying the same to the Asset
Pool.

ISSUE:

Whether or not the novation of the MOA is valid.

RULING:

Thus, it becomes clear that Demetrio's special power of attorney to sell is sufficient to enable
him to make a binding commitment under the DAC in behalf of Carolina and Margarita. In
particular, it does include the authority to extinguish PMRDC's obligation under the MOA to
deliver option money and agree to a more flexible term by agreeing instead to receive shares of
stock in lieu thereof and in consideration of the assignment and conveyance of the properties to
the Asset Pool. Indeed, the terms of his special power of attorney allow much leeway to
accommodate not only the terms of the MOA but also those of the subsequent agreement in the
DAC which, in this case, necessarily and consequently has resulted in a novation of PMRDC's
integral obligations.

There are two ways which could indicate, in fine, the presence of novation and thereby produce
the effect of extinguishing an obligation by another which substitutes the same. The first is when

Page 437 of 845

novation has been explicitly stated and declared in unequivocal terms. The second is when the
old and the new obligations are incompatible on every point. The test of incompatibility is
whether the two obligations can stand together, each one having its independent existence. If
they cannot, they are incompatible, and the latter obligation novates the first.

Page 438 of 845

 294. ST. JAMES COLLEGE V. EQUITABLE PCI BANK
GR No. 179441
August 9, 2010

FACTS:

Petitioners-spouses owned and operated St. James College of Paranaque. Sometime in 1995, the
Philippine Commercial and International Bank (PCIB), respondent, granted the Torres spouses
and/or St. James College a credit line facility of up to 25,000,000 secured by a real estate
mortgage over a parcel of land in Paranaque. Petitioners had defaulted in the payment of the loan
obtained from the secured credit accommodation, their total unpaid loan obligation, as of
September 2001, stood at 18,300,000. Respondent proposed a payment scheme to pay annually
which the petitioners agreed upon but failed to comply with. Respondent then demanded full
settlement of the loan. Petitioners contended that the full amount is still not due owing to the
implied novation of the terms of payment previously agreed upon. As petitioners assert in this
regard that the acceptance by respondent, particularly of the June 23, 2003 Php 2,521,609.62
payment, without any objection on the new terms set forth in their June 23, 2003 complementing
covering letter, novated the terms of payment of the 18,300,000 secured loan.

ISSUE:

Whether or not there was novation of contract

RULING:

As a civil law concept, novation is the extinguishment of an obligation by the substitution or

change of the obligation by a subsequent one which terminates it, either by changing its objects
or principal conditions, or by substituting a new debtor in place of the old one, or by subrogating
a third person to the rights of the creditor. Novation may be extinctive or modificatory. It is
extinctive when an old obligation is terminated by the creation of a new one that takes the place
of the former; it is merely modificatory when the old obligation subsists to the extent that it
remains compatible with the amendatory agreement. Novation may either be express, when the
new obligation declares in unequivocal terms that the old obligation is extinguished, or implied,
when the new obligation is on every point incompatible with the old one. The test of
incompatibility lies on whether the two obligations can stand together, each one with its own
independent existence.

For novation, as a mode of extinguishing or modifying an obligation, to apply, the following

requisites must concur:
1) There must be a previous valid obligation.
2) The parties concerned must agree to a new contract.
3) The old contract must be extinguished.
4) There must be a valid new contract.

Page 439 of 845

 295. MARIA TOMIMBANG V. ATTY. JOSE TOMIMBANG
GR No. 165116
August 4, 2009

FACTS:

Petitioner and respondent are siblings. Their parents donated to petitioner an eight-door
apartment located at 149 Santolan Road, Murphy, Quezon City. Petitioner failed to obtain a loan
from PAG-IBIG Fund, hence, respondent offered to extend a credit line to petitioner on the
following conditions: (1) petitioner shall keep a record of all the advances; (2) petitioner shall
start paying the loan upon the completion of the renovation; (3) upon completion of the
renovation, a loan and mortgage agreement based on the amount of the advances made shall be
executed by petitioner and respondent; and (4) the loan agreement shall contain comfortable
terms and conditions which petitioner could have obtained from PAG-IBIG.

A conflict between the siblings ensued leading to a new agreement whereby petitioner was to
start making monthly payments on her loan. Upon respondent's demand, petitioner turned over
to respondent all the records of the cash advances for the renovations. Subsequently, or from
June to October of 1997, petitioner made monthly payments of P18, 700.00, or a total ofP93,
500.00. Petitioner never denied the fact that she started making such monthly payments.
Thereafter, the petitioner can no longer be found and also stopped making the monthly payments.
Thus, a complaint was filed against the petitioner demanding payment of the loan plus interest.
Petitioner contended that the loan is not yet due and demandable as the renovation of the
apartment is not yet completed.

ISSUE:

Whether or not the loan is already due and demandable.

RULING:

The loan is already due and demandable due to the subsequent agreement entered in to by the
parties.
Article 1291 of the Civil Code provides, thus:

Art. 1291. Obligations may be modified by:

(1) Changing their object or principal conditions;
(2) Substituting the person of the debtor;
(3) Subrogating a third person in the rights of the creditor.

The petitioner admitted that she started to comply with the demand of the respondent to pay on a
monthly basis. Her partial performance of her obligation is unmistakable proof that indeed the
original agreement between her and respondent had been novated by the deletion of the condition

Page 440 of 845

that payments shall be made only after completion of renovations. Hence, by her very own
admission and partial performance of her obligation, there can be no other conclusion but that
under the novated agreement, petitioner's obligation is already due and demandable.

Page 441 of 845

 296. MINDANAO SAVINGS AND LOAN ASSOCIATION INC. V. EDWARD WILLKOM
GR No. 178618
October 11, 2010

FACTS:

The First Iligan Savings and Loan Association, Inc. (FISLAI) and the Davao Savings and Loan
Association, Inc. (DSLAI) banks that entered into a merger, with DSLAI as the surviving
corporation. The articles of merger were not registered with the SEC but when DSLAI changed
its corporate name to MSLAI the amendment was approved by the SEC.Meanwhile, the Board of
Directors of FISLAI passed a resolution, assigning its assets in favor of DSLAI which in turn
assumed the formers liabilities.The business of MSLAI, however, failed was ordered its closure
and placed under receivership.

Prior to the closure of MSLAI, Uy filed an action for collection of sum of money against
FISLAI. The RTC issued a summary decision in favor of Uy, directing defendants therein (which
included FISLAI) to pay the former the sum of P136, 801.70. Therafter,sheriff Bantuas levied on
six (6) parcels of land owned by FISLAI and Willkom was the highest bidder. New certificates
of title covering the subject properties were issued in favor of Willkom who sold one of the
subject parcels of land to Go.

MSLAI, represented by PDIC, filed a complaint forAnnulment of Sheriffs Sale, Cancellation of

Title and Reconveyance of Properties against respondents. Therespondents averred that MSLAI
had no cause of action against them or the right to recover the subject properties because MSLAI
is a separate and distinct entity from FISLAI as the merger did not take effect.

ISSUE:

Whether or not there was novation of the obligation by substituting the person of the debtor

RULING:

It is a rule that novation by substitution of debtor must always be made with the consent of the
creditor. Article 1293 of the Civil Code is explicit, thus: Art. 1293. Novation which consists in
substituting a new debtor in the place of the original one, may be made even without the
knowledge or against the will of the latter, but not without the consent of the creditor. Payment
by the new debtor gives him the rights mentioned in Articles 1236 and 1237.

In this case, there was no showing that Uy, the creditor, gave her consent to the agreement that
DSLAI (now MSLAI) would assume the liabilities of FISLAI. Such agreement cannot prejudice
Uy. Thus, the assets that FISLAI transferred to DSLAI remained subject to execution to satisfy
the judgment claim of Uy against FISLAI. The subsequent sale of the properties by Uy to

Page 442 of 845

Willkom, and of one of the properties by Willkom to Go, cannot, therefore, be questioned by
MSLAI.

The consent of the creditor to a novation by change of debtor is as indispensable as the creditors
consent in conventional subrogation in order that a novation shall legally take place. Since
novation implies a waiver of the right which the creditor had before the novation, such waiver
must be express.

Page 443 of 845

 297. AQUINTEY v. SPOUSES TIBONG
G.R. No. 166704
December 20, 2006

FACTS:

On May 6, 1999, petitioner Aquintey filed before RTC Baguio, a complaint for sum of money
and damages against respondents. Agrifina alleged that Felicidad secured loans from her on
several occasions at monthly interest rates of 6% to 7%. Despite demands, spouses Tibong failed
to pay their outstanding loans of P773,000,00 exclusive of interests. However, spouses Tiong
alleged that they had executed deeds of assignment in favor of Agrifina amounting to P546,459
and that their debtors had executed promissory notes in favor of Agrifina. Spouses insisted that
by virtue of these documents, Agrifina became the new collector of their debts. Agrifina was
able to collect the total amount of P301,000 from Felicdads debtors. She tried to collect the
balance of Felicidad and when the latter reneged on her promise, Agrifina filed a complaint in
the office of the barangay for the collection of P773,000.00. There was no settlement. RTC
favored Agrifina. Court of Appeals affirmed the decision with modification ordering defendant
to pay the balance of total indebtedness in the amount of P51,341,00 plus 6% per month.

ISSUE:

Whether or not the deeds of assignment in favor of petitioner has the effect of payment of the
original obligation that would partially extinguish the same

RULING:

Substitution of the person of the debtor May be affected by delegacion. Meaning, the debtor
offers, the creditor accepts a third person who consent of the substitution and assumes the
obligation. It is necessary that the old debtor be released from the obligation and the third person
or new debtor takes his place in the relation . Without such release, there is no novation. Court
of Appeals correctly found that the respondents obligation to pay the balance of their account
with petitioner was extinguished pro tanto by the deeds of credit. CA decision is affirmed with
the modification that the principal amount of the respondents is P33,841.

Page 444 of 845

 298. ASIAN TERMINALS, INC V. PHILAM INSURANCE CO., INC.
G.R. No. 181163
July 24, 2013

FACTS:

On April 15, 1995, Nichimen Corporation shipped to Universal Motors Corporation (Universal
Motors) 219 packages containing 120 units of brand new Nissan Pickup Truck Double Cab 42
model, without engine, tires and batteries, on board the vessel S/S Calayan Iris from Japan to
Manila. The shipment, which had a declared value of US$81,368 or P29,400,000, was insured
with Philam against all risks under Marine Policy No. 708-8006717-4.

The carrying vessel arrived at the port of Manila on April 20, 1995, and when the shipment was
unloaded by the staff of ATI, it was found that the package marked as 03-245-42K/1 was in bad
order. The Turn Over Survey of Bad Order Cargoes identified two packages as being dented and
broken. Thereafter, the cargoes were stored for temporary safekeeping inside CFS Warehouse in
Pier No. 5.

On May 11, 1995, the shipment was withdrawn by R.F. Revilla Customs Brokerage, Inc., the
authorized broker of Universal Motors, and delivered to the latters warehouse in Mandaluyong
City. Upon the request of Universal Motors, a bad order survey was conducted on the cargoes
and it was found that one Frame Axle Sub without LWR was deeply dented on the buffle plate
while six Frame Assembly with Bush were deformed and misaligned.Owing to the extent of the
damage to said cargoes, Universal Motors declared them a total loss.

On August 4, 1995, Universal Motors filed a formal claim for damages in the amount of
P643,963.84 against Westwind, ATI and R.F. Revilla Customs Brokerage, Inc. When Universal
Motors demands remained unheeded, it sought reparation from and was compensated in the sum
of P633,957.15 by Philam. Accordingly, Universal Motors issued a Subrogation Receipt dated
November 15, 1995 in favor of Philam.

On January 18, 1996, Philam, as subrogee of Universal Motors, filed a Complaint for damages
against Westwind, ATI and R.F. Revilla Customs Brokerage, Inc. before the RTC of Makati
City, Branch 148.

On September 24, 1999, the RTC rendered judgment in favor of Philam and ordered Westwind
and ATI to pay Philam, jointly and severally.

The court a quo ruled that there was sufficient evidence to establish the respective participation
of Westwind and ATI in the discharge of and consequent damage to the shipment. It found that
the subject cargoes were compressed while being hoisted using a cable that was too short and
taut.

Page 445 of 845

The trial court observed that while the staff of ATI undertook the physical unloading of the
cargoes from the carrying vessel, Westwinds duty officer exercised full supervision and control
throughout the process. It held Westwind vicariously liable for failing to prove that it exercised
extraordinary diligence in the supervision of the ATI stevedores who unloaded the cargoes from
the vessel. However, the court absolved R.F. Revilla Customs Brokerage, Inc. from liability in
light of its finding that the cargoes had been damaged before delivery to the consignee.

On appeal, the CA affirmed with modification the ruling of the RTC. In a Decision dated
October 15, 2007, the appellate court directed Westwind and ATI to pay Philam, jointly and
severally, the amount of P190,684.48 with interest at the rate of 12% per annum until fully paid,
attorneys fees of P47,671 and litigation expenses.

ISSUE:

Whether or not Philam may claim against Westwind and ATI as a subrogee

RULING:

The Court holds that petitioner Philam has adequately established the basis of its claim against
petitioners ATI and Westwind. Philam, as insurer, was subrogated to the rights of the consignee,
Universal Motors Corporation, pursuant to the Subrogation receipt executed by the latter in
favour of the former. The right of subrogation accrues simply upon payment by the insurance
company of the insurance claim.

Petitioner Philams action finds support in Article 2207 of the Civil Code which provides that if
the plaintiffs property has been insured, and he has received indemnity from the insurance
company for the injury or loss arising out of the wrong or breach of contract complained of, the
insurance company shall be subrogated to the rights of the insured against the wrongdoer or the
person who has violated the contract.

In Malayan Insurance Co., Inc. V.. Alberto, the Court explained the effect of payment by the
insurer of the insurance claim in this wise:

We have held that payment by the insurer to the insured operates as an equitable assignment to
the insurer of all the remedies that the insured may have against the third party whose negligence
or wrongful act caused the loss. The right of subrogation is not dependent upon, nor does it grow
out of, any privity of contract. It accrues simply upon payment by the insurance company of the
insurance claim. The doctrine of subrogation has its roots in equity. It is designed to promote and
accomplish justice; and is the mode that equity adopts to compel the ultimate payment of a debt
by one who, in justice, equity, and good conscience, ought to pay.

Page 446 of 845

 299. LOADMASTERS CUSTOMS SERVICES, INC., V.. GLODEL BROKERAGE
CORPORATION and R&B INSURANCE CORPORATION
G.R. No. 179446
January 10, 2011

FACTS:

The case is a petition for review on certiorari under Rule 45 of the Revised Rules of Court
assailing the August 24, 2007 Decision of the Court of Appeals (CA) in CA-G.R. CV No. 82822.
On August 28, 2001, R&B Insurance issued Marine Policy No. MN-00105/2001 in favor of
Columbia to insure the shipment of 132 bundles of electric copper cathodes against All Risks.
On August 28, 2001, the cargoes were shipped on board the vessel "Richard Rey" from Isabela,
Leyte, to Pier 10, North Harbor, Manila. They arrived on the same date.

Columbia engaged the services of Glodel for the release and withdrawal of the cargoes from the
pier and the subsequent delivery to its warehouses/plants. Glodel, in turn, engaged the services of
Loadmasters for the use of its delivery trucks to transport the cargoes to Columbias
warehouses/plants in Bulacan and Valenzuela City.

The goods were loaded on board twelve (12) trucks owned by Loadmasters, driven by its
employed drivers and accompanied by its employed truck helpers. Of the six (6) trucks route to
Balagtas, Bulacan, only five (5) reached the destination. One (1) truck, loaded with 11 bundles or
232 pieces of copper cathodes, failed to deliver its cargo.

Later on, the said truck, was recovered but without the copper cathodes. Because of this incident,
Columbia filed with R&B Insurance a claim for insurance indemnity in the amount of P1,
903,335.39. After the investigation, R&B Insurance paid Columbia the amount ofP1, 896,789.62
as insurance indemnity.

R&B Insurance, thereafter, filed a complaint for damages against both Loadmasters and Glodel
before the Regional Trial Court, Branch 14, Manila (RTC), It sought reimbursement of the
amount it had paid to Columbia for the loss of the subject cargo. It claimed that it had been
subrogated "to the right of the consignee to recover from the party/parties who may be held
legally liable for the loss."

On November 19, 2003, the RTC rendered a decision holding Glodel liable for damages for the
loss of the subject cargo and dismissing Loadmasters counterclaim for damages and attorneys
fees against R&B Insurance.

Both R&B Insurance and Glodel appealed the RTC decision to the CA.

On August 24, 2007, the CA rendered that the appellate is an agent of appellant Glodel, whatever
liability the latter owes to appellant R&B Insurance Corporation as insurance indemnity must

Page 447 of 845

likewise be the amount it shall be paid by appellate Loadmasters. Hence, Loadmasters filed the
present petition for review on certiorari.

ISSUE:

Whether or not Loadmasters is an agent of Glodel, and whether or not it may be held liable under
the transaction between Glodel and Columbia.

RULING:

Glodel and Loadmasters are both common carriers, as they hold out their carriage services to the
public. As such, under the Civil Code, they are mandated to show extraordinary diligence in the
conduct of transport. In the case at bar, both Glodel and Loadmasters were negligent as the cargo
failed to reach its destination. Loadmasters failed to ensure that its employees would not tamper
with the cargo. Glodel failed to ensure that Loadmasters is sufficiently capable of completing the
delivery. Glodel and Loadmasters are therefore joint tortfeasors and are solidarily liable to R&B
Insurance.

Loadmasters cannot be considered an agent of Glodel. Loadmasters in no way represented itself

as such, and in the transfer of cargo, did not represent itself as doing such in behalf of Glodel. In
fact, Loadmasters is not privy to the agreement between Glodel and Columbia. It cannot be
considered an agent of Glodel, and cannot be held liable to Glodel.

Page 448 of 845

 300. METROBANK V. RURAL BANK OF GERONA
G.R. No. 159097
July 5, 2010

FACTS:

The Central Bank and the RBG entered into an agreement providing that RBG shall facilitate the
loan applications of farmers-borrowers under the Central Bank-International Bank for
Reconstruction and Developments (IBRDs) 4th Rural Credit Project.

The agreement required RBG to open a separate bank account where the IBRD loan proceeds
shall be deposited. The RBG accordingly opened a special savings account with Metrobanks
Tarlac Branch. As the depository bank of RBG, Metrobank was designated to receive the credit
advice released by the Central Bank representing the proceeds of the IBRD loan of the farmers-
borrowers; Metrobank, in turn, credited the proceeds to RBGs special savings account for the
latters release to the farmers-borrowers.

On 1978, the Central Bank released a credit advice in Metrobanks favor and accordingly credited
Metrobanks demand deposit account in the amount of P178, 652.00, for the account of RBG.
The amount, which was credited to RBGs special savings account represented the approved loan
application of farmer-borrower Dominador de Jesus. RBG withdrew the P178, 652.00 from its
account.

On the same date, the Central Bank approved the loan application of another farmer-borrower,
Basilio Panopio, for P189, 052.00, and credited the amount to Metrobanks demand deposit
account. Metrobank, in turn, credited RBGs special savings account. Metrobank claims that the
RBG also withdrew the entire credited amount from its account.

On October 3, 1978, the Central Bank approved Ponciano Lagmans loan application for P220,
000.00. As with the two other IBRD loans, the amount was credited to Metrobanks demand
deposit account, which amount Metrobank later credited in favor of RBGs special savings
account. Of the P220, 000.00, RBG only withdrew P75, 375.00.

On November 3, 1978, more than a month after RBG had made the withdrawals from its account
with Metrobank, the Central Bank issued debit advices, reversing all the approved IBRD loans.

Metrobank, however, claimed that these amounts were insufficient to cover all the credit advices
that were reversed by the Central Bank. It demanded payment from RBG which could make
partial payments. As of October 17, 1979, Metrobank claimed that RBG had an outstanding
balance of P334, 220.00. To collect this amount, it filed a complaint for collection of sum of
money against RBG before the RTC.

Page 449 of 845

ISSUE:

Whether or not there was express or tacit approval by RBG of the payment enforced against
Metrobank

RULING:

Metrobank was a third party to the Central Bank-RBG agreement, had no interest except as a
conduit, and was not legally answerable for the IBRD loans. Despite this, it was Metrobanks
demand deposit account, instead of RBGs, which the Central Bank proceeded against, on the
assumption perhaps that this was the most convenient means of recovering the cancelled loans.
That Metrobanks payment was involuntarily made does not change the reality that it was
Metrobank which effectively answered for RBGs obligations.

After Metrobank received the Central Banks debit advices in November 1978, it (Metrobank)
accordingly debited the amounts it could from RBGs special savings account without any
objection from RBG. RBGs President and Manager, Dr. Aquiles Abellar, even wrote
Metrobank, on August 14, 1979, with proposals regarding possible means of settling the amounts
debited by Central Bank from Metrobanks demand deposit account. These instances are all
indicative of RBGs approval of Metrobanks payment of the IBRD loans. That RBGs tacit
approval came after payment had been made does not completely negate the legal subrogation
that had taken place.

Article 1303 of the Civil Code states that subrogation transfers to the person subrogated the
credit with all the rights thereto appertaining, either against the debtor or against third persons.
The present case exemplifies the circumstance contemplated under paragraph 2, of Article 1302
of the Civil Code which provides: It is presumed that there is legal subrogation: (1) When a
creditor pays another creditor who is preferred, even without the debtors knowledge; (2) When a
third person, not interested in the obligation, pays with the express or tacit approval of the
debtor; (3) When, even without the knowledge of the debtor, a person interested in the
fulfillment of the obligation pays, without prejudice to the effects of confusion as to the latters
share.

As the entity against which the collection was enforced, Metrobank was subrogated to the rights
of Central Bank and has a cause of action to recover from RBG the amounts it paid to the Central
Bank, plus 14% per annum interest.

Page 450 of 845

 301. SWAGMAN V. CA
G.R. No. 161135
April 8, 2005

FACTS:

Sometime in 1996 and 1997, petitioner Swagman Hotels and Travel, Inc., through Atty. Leonor
L. Infante and Rodney David Hegerty, its president and vice-president, respectively, obtained
from private respondent Neal B. Christian loans evidenced by three promissory notes dated 7
August 1996, 14 March 1997, and 14 July 1997. Each of the promissory notes is in the amount
of US$50,000 payable after three years from its date with an interest of 15% per annum payable
every three months. In a letter dated 16 December 1998, Christian informed the petitioner
corporation that he was terminating the loans and demanded from the latter payment in the total
amount of US$150,000 plus unpaid interests in the total amount of US$13,500.

On 2 February 1999, private respondent Christian filed with the Regional Trial Court of Baguio
City, Branch 59, a complaint for a sum of money and damages against the petitioner corporation,
Hegerty, and Atty. Infante. The petitioner corporation, together with its president and vice-
president, filed an Answer raising as defenses lack of cause of action and novation of the
principal obligations. According to them, Christian had no cause of action because the three
promissory notes were not yet due and demandable.

ISSUE:

Where there is a valid novation and may the original terms of contract which has been novated
still prevail

RULING:

The receipts, as well as private respondents summary of payments, lend credence to petitioners
claim that the payments were for the principal loans and that the interests on the three
consolidated loans were waived by the private respondent during the undisputed renegotiation of
the loans on account of the business reverses suffered by the petitioner at the time.

There was therefore a novation of the terms of the three promissory notes in that the interest was
waived and the principal was payable in monthly installments of US$750. Alterations of the
terms and conditions of the obligation would generally result only in modificatory novation
unless such terms and conditions are considered to be the essence of the obligation itself.[25]
The resulting novation in this case was, therefore, of the modificatory type, not the extinctive
type, since the obligation to pay a sum of money remains in force.

Thus, since the petitioner did not renege on its obligation to pay the monthly installments
conformably with their new agreement and even continued paying during the pendency of the

Page 451 of 845

case, the private respondent had no cause of action to file the complaint. It is only upon
petitioners default in the payment of the monthly amortizations that a cause of action would
arise and give the private respondent a right to maintain an action against the petitioner.

Page 452 of 845

 302. AZOLLA FARMS V CA
G.R. No. 138085
November 11, 2004

FACTS:

Petitioner Francis R. Yuseco, Jr., is the Chairman, President and Chief Operating Officer of
petitioner Azolla Farms International Philippines. In 1982, Azolla Farms undertook to participate
in the National Azolla Production Program wherein it will purchase all the Azolla produced by
the Azolla beneficiaries in the amount not exceeding the peso value of all the inputs provided to
them. The project also involves the then Ministry of Agriculture, the Kilusang Kabuhayan at
Kaunlaran, and the Kiwanis. To finance its participation, petitioners applied for a loan with
Credit Manila, Inc., which the latter endorsed to its sister company, respondent Savings Bank of
Manila (Savings Bank). The Board of Directors of Azolla Farms, meanwhile, passed a board
resolution on August 31, 1982, authorizing Yuseco to borrow from Savings Bank in an amount
not exceeding P2,200,000.00.

The loan having been approved, Yuseco executed a promissory note on September 13, 1982,
promising to pay Savings Bank the sum of P1,400,000.00 on or before September 13, 1983. the
Azolla Farms project collapsed. Blaming Savings Bank, petitioners Yuseco and Azolla Farms
filed on October 3, 1983 with the Regional Trial Court of Manila (Branch 25), a complaint for
damages. In essence, their complaint alleges that Savings Bank unjustifiably refused to promptly
release the remaining P300,000.00 which impaired the timetable of the project and inevitably
affected the viability of the project resulting in its collapse, and resulted in their failure to pay off
the loan. Thus, petitioners pray for P1,000,000.00 as actual damages, among others.

ISSUE:

Whether the trial court erred in admitting petitioners amended complaint

RULING:

SEC. 5. Amendment to conform to or authorize presentation of evidence .When issues not

raised by the pleadings are tried by express or implied consent of the parties, they shall be treated
in all respects, as if they had been raised in the pleadings. Such amendment of the pleadings as
may be necessary to cause them to conform to the evidence and to raise these issues may be
made upon motion of any party at any time, even after judgment; but failure so to amend does
not affect the result of the trial of these issues. If evidence is objected to at the trial on the ground
that it is not within the issues made by the pleadings, the court may allow the pleadings to be
amended and shall do so freely when the presentation of the merits of the action will be
subserved thereby and the objecting party fails to satisfy the court that the admission of such
evidence would prejudice him in maintaining his action or defense upon the merits.

Page 453 of 845

As can be gleaned from the records, it was petitioners belief that respondents evidence justified
the amendment of their complaint. The trial court agreed thereto and admitted the amended
complaint. On this score, it should be noted that courts are given the discretion to allow
amendments of pleadings to conform to the evidence presented during the trial.

Page 454 of 845

 303. BAUTISTA V PILAR DEVELOPMENT
G.R.NO. 135046
August 17, 1999

FACTS:

In 1978, petitioner spouses Florante and Laarni Bautista purchased a house and lot in Pilar
Village, Las Pinas, Metro Manila. To partially finance the purchase, they obtained from the
Apex Mortgage & Loan Corporation a loan in the amount of P100,180.00. They executed a
promissory note on December 22, 1978 obligating themselves, jointly and severally, to pay the
"principal sum of P100,180.00 with interest rate of 12% and service charge of 3%" for a period
of 240 months, or twenty years, from date, in monthly installments of P1,378.83. Late payments
were to be charged a penalty of one and one-half per cent (1 1/2%) of the amount due.

In the same promissory note, petitioners authorized Apex to "increase the rate of interest and/or
service charges" without notice to them in the event that a law, Presidential Decree or any
Central Bank regulation should be enacted increasing the lawful rate of interest and service
charges on the loan. Payment of the promissory note was secured by a second mortgage on the
house and lot purchased by petitioners. Petitioner spouses failed to pay several installments. On
September 20, 1982, they executed another promissory note in favor of Apex. This note was in
the amount of P142, 326.43 at the increased interest rate of twenty-one per cent (21%) per
annum with no provision for service charge but with penalty charge of 1 1/2% for late payments.

ISSUE:

Whether or not there was valid novation in the case at bar

RULING:

Novation has four (4) essential requisites: (1) the existence of a previous valid obligation; (2) the
agreement of all parties to the new contract; (3) the extinguishment of the old contract; and (4)
the validity of the new one. In the instant case, all four requisites have been complied with. The
first promissory note was a valid and subsisting contract when petitioner spouses and Apex
executed the second promissory note. The second promissory note absorbed the unpaid principal
and interest of P142,326.43 in the first note which amount became the principal debt therein,
payable at a higher interest rate of 21% per annum. Thus, the terms of the second promissory
note provided for a higher principal, a higher interest rate, and a higher monthly amortization, all
to be paid within a shorter period of 16.33 years. These changes are substantial and constitute
the principal conditions of the obligation. Both parties voluntarily accepted the terms of the
second note; and also in the same note, they unequivocally stipulated to extinguish the first note.
Clearly, there was animus novandi, an express intention to novate. The first promissory note was
cancelled and replaced by the second note. This second note became the new contract governing
the parties' obligations.

Page 455 of 845

 304. EVADEL REALTY V SORIANO
G.R.No. 144291
April 20, 2001

FACTS:

On April 12, 1996, the spouses Antero and Virginia Soriano (respondent spouses), as sellers,
entered into a "Contract to Sell " with Evadel Realty and Development Corporation (petitioner),
as buyer, over a parcel of land denominated as Lot 5536-C of the Subdivision Plan of Lot 5536
covered by Transfer Certificate of Title No. 125062 which was part of a huge tract of land
known as the Imus Estate. Upon payment of the first installment, petitioner introduced
improvements thereon and fenced off the property with concrete walls. Later, respondent spouses
discovered that the area fenced off by petitioner exceeded the area subject of the contract to sell
by 2,450 square meters. Upon verification by representatives of both parties, the area encroached
upon was denominated as Lot 5536-D-1 of the subdivision plan of Lot 5536-D of Psd-04-092419
and was later on segregated from the mother title and issued a new transfer certificate of title,
TCT No. 769166, in the name of respondent spouses. Respondent spouses successively sent
demand letters to petitioner on February 14, March 7, and April 24, 1997, to vacate the
encroached area. Petitioner admitted receiving the demand letters but refused to vacate the said
area.

ISSUE:

Whether or not there was novation of contract

RULING:

Petitioner's claim that there was a novation of contract because there was a "second" agreement
between the parties due to the encroachment made by the national road on the property subject of
the contract by 1,647 square meters, is unavailing. Novation, one of the modes of extinguishing
an obligation, requires the concurrence of the following: (1) there is a valid previous obligation;
(2) the parties concerned agree to a new contract; (3) the old contract is extinguished; and (4)
there is valid new contract. Novation may be express or implied. In order that an obligation may
be extinguished by another which substitutes the same, it is imperative that it be so declared in
unequivocal terms (express novation) or that the old and the new obligations be on every point
incompatible with each other (implied novation).

In the instant case, there was no express novation because the "second" agreement was not even
put in writing. Neither was there implied novation since it was not shown that the two
agreements were materially and substantially incompatible with each other. We quote with
approval the following findings of the trial court: Since the alleged agreement between the
plaintiffs [herein respondents] and defendant [herein petitioner] is not in writing and the alleged
agreement pertains to the novation of the conditions of the contract to sell of the parcel of land

Page 456 of 845

subject of the instant litigation, ipso facto, novation is not applicable in this case since, as stated
above, novation must be clearly proven by the proponent thereof and the defendant in this case is
clearly barred by the Statute of Frauds from proving its claim.
Prescription; Article 1144 of the Civil Code. We concur with the CAs ruling that respondents
action did not yet prescribe. The legal provision governing this case was not Article 1146 of the
Civil Code, but Article 1144 of the Civil Code, which states:

Article 1144. The following actions must be brought within ten years from the time the cause of
action accrues:

(1)Upon a written contract; (2) Upon an obligation created by law; (3) Upon a judgment.

Page 457 of 845

 305. ROSARIO V. DE GUZMAN
G.R. No. 191247
July 10, 2013

FACTS:

In August 1990, Spouses Pedro and Rosita de Guzman engaged the legal services of Atty.
Francisco L. Rosario, Jr. as defense counsel in the complaint filed against them by one Loreta A.
Chong for annulment of contract and recovery of possession with damages involving a parcel of
land in Paraaque City. Petitioners legal services commenced from the RTC and ended up in
this Court. Spouses de Guzman, represented by petitioner, won their case at all levels. While the
case was pending before this Court, Spouses de Guzman died in a vehicular accident. Thereafter,
they were substituted by their children, namely: Rosella de Guzman-Bautista, Lellani de
Guzman, Arleen de Guzman, and Philip Ryan de Guzman.

On September 8, 2009, petitioner filed the Motion to Determine Attorneys Fees before the RTC.
He alleged, among others, that he had a verbal agreement with the deceased Spouses de Guzman
that he would get 25% of the market value of the subject land if the complaint filed against them
by Chong would be dismissed. Despite the fact that he had successfully represented them,
respondents refused his written demand for payment of the contracted attorneys fees. Petitioner
insisted that he was entitled to an amount equivalent to 25% percent of the value of the subject
land on the basis of quantum meruit.

ISSUE:

Whether or not there was an error in denying the motion to determine attorneys fees on the
ground that it lost jurisdiction over the case since the judgment in the case has become final and
executory

RULING:

In the case at bench, the attorneys fees being claimed by the petitioner refers to the
compensation for professional services rendered, and not as indemnity for damages. He is
demanding payment from respondents for having successfully handled the civil case filed by
Chong against Spouses de Guzman.

As to the timeliness of the filing, the Court holds that the questioned motion to determine
attorneys fees was seasonably filed. The records show that the August 8, 1994 RTC decision
became final and executory on October 31, 2007. There is no dispute that petitioner filed his
Motion to Determine Attorneys Fees on September 8, 2009, which was only about one (1) year
and eleven (11) months from the finality of the RTC decision. Because petitioner claims to have
had an oral contract of attorneys fees with the deceased spouses, Article 1145 of the Civil Code
allows him a period of six (6) years within which to file an action to recover professional fees for

Page 458 of 845

services rendered. Respondents never asserted or provided any evidence that Spouses de
Guzman refused petitioners legal representation.

With respect to petitioners entitlement to the claimed attorneys fees, the Courts considered
view that he is deserving of it and that the amount should be based on quantum meruit.

The Court, however refused to grant petitioner's prayer for an award of 25% attorney's fees based
on the value of the property subject of litigation because petitioner failed to clearly substantiate
the details of his oral agreement with Spouses de Guzman. According to the Court, a fair and
reasonable amount of attorney's fees should be 15% of the market value of the property.

Page 459 of 845

 306. VECTOR SHIPPING CORPORATION, ET AL. V. AMERICAN HOME ASSURANCE
CO., ET AL.
G.R. No. 159213
July 3, 2013

FACTS:

Caltex entered into a contract of affreightment with Vector for the transport of Caltexs
petroleum cargo through the M/T Vector. Caltex ensured the petroleum cargo with respondent
for Php 7, 455, 421.08 under Marine Open Policy. After approximately three months, the entire
petroleum cargo of Caltex on board the M/T Vector perished due to an accident during voyage
on December 20, 1987. The respondent indemnified Caltex for Php 7, 455, 421.08.

The respondent filed a complaint against Vector, Soriano, and Sulpicio Lines, Inc. to recover full
amount og Php 7, 455, 421.08 it paid to Caltex only on March 5, 1992.

ISSUE:

Whether or not the action of respondent was already barred by prescription for bringing it only
on March 5, 1992

RULING:

The legal provision governing this case was not Article 1146 of the Civil Code, but Article 1144
of the Civil Code. However, the present action was not upon a written contract but upon an
obligation created by law. Hence, it came under Article 1144 (2) of the Civil Code. This is
because the subrogation of respondent to the rights of Caltex as the insured was by virtue of the
express provision of law embodied in Article 2207 of the Civil Code, to wit:

Article 2207. If the plaintiffs property has been insured, and he has received indemnity from the
insurance company for the injury or loss arising out of the wrong or breach of contract
complained of, the insurance company shall be subrogated to the rights of the insured against the
wrongdoer or the person who has violated the contract. If the amount paid by the insurance
company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover
the deficiency from the person causing the loss or injury. (Emphasis supplied)

Subrogation under Article 2207 of the Civil Code gives rise to a cause of action created by law.
For purposes of the law on the prescription of actions, the period of limitation is ten years.

Page 460 of 845

 307. VILLEZA V. GERMAN MANAGEMENT
G.R. No. 182937
August 8, 2010

FACTS:

This petition sprouted from an earlier Supreme Court ruling in German Management v. Court of
Appeals, September 14, 1989, which has already become final and executory. The decision,
however, remains unenforced due to the prevailing partys own inaction. This petition, therefore,
is the struggle of a victor trying to retrieve the prize once won.

It appears that German Management v. Court of Appeals stemmed from a forcible entry case
instituted by petitioner Ernesto Villeza against respondent German Management, the authorized
developer of the landowners, before the Metropolitan Trial Court of Antipolo City (MeTC). The
Decision of this Court favoring the petitioner became final and executory.

Petitioner filed a Motion for Issuance of Writ of Execution with the MeTC. Petitioner later filed
a Motion to Defer Resolution thereon because he was permanently assigned in Iloilo and it
would take quite some time before he could come back. The MeTC issued an order holding in
abeyance the resolution of his motion to issue writ of execution until his return. Three years later,
as there was no further movement, the said court issued an order denying the petitioners Motion
for Issuance of Writ of Execution for lack of interest.

More than three years had passed before petitioner filed a Motion for Reconsideration alleging
that he had retired from his job in Iloilo City and was still interested in the issuance of the writ.
The MeTC issued a writ of execution,

As the sheriff was implementing the writ, an Opposition with Motion to Quash Writ of
Execution was filed by German Management and Services, Inc, On June 3, 1999, an order was
handed down granting the motion to quash the writ of execution issued. Villeza filled with the
MeTC a Complaint for Revival of Judgment of the Decision of the Supreme Court. German
Management moved to dismiss the complaint. Petition Villeza appealed the decision to te RTC
which affirmed in toto the MeTC order of dismissal

ISSUE:

Whether or not the interruption or suspension granted by the MeTC must be considered in
computing the period because it had the effect of stopping the counting of the period for
execution

RULING:

Page 461 of 845

An action for revival of judgment is governed by Article 1144 (3), Article 1152 of the Civil Code
and Section 6, Rule 39 of the Rules of Court. Thus, Art. 1144. The following actions must be
brought within ten years from the time the right of action accrues: x x x x (3) Upon a judgment

Article 1152 of the Civil Code states:

Art. 1152. The period for prescription of actions to demand the fulfillment of obligations
declared by a judgment commences from the time the judgment became final.

Apropos, Section 6, Rule 39 of the Rules of Court reads:

Sec. 6. Execution by motion or by independent action. A final and executory judgment or order
may be executed on motion within five (5) years from the date of its entry. After the lapse of
such time, and before it is barred by the statute of limitations, a judgment may be enforced by
action. The revived judgment may also be enforced by motion within five (5) years from the date
of its entry and thereafter by action before it is barred by the statute of limitations. (emphasis
supplied)

The rules are clear. Once a judgment becomes final and executory, the prevailing party can have
it executed as a matter of right by mere motion within five years from the date of entry of
judgment. If the prevailing party fails to have the decision enforced by a motion after the lapse of
five years, the said judgment is reduced to a right of action which must be enforced by the
institution of a complaint in a regular court within ten years from the time the judgment becomes
final.

When petitioner Villeza filed the complaint for revival of judgment on October 3, 2000, it had
already been eleven (11) years from the finality of the judgment he sought to revive. Clearly, the
statute of limitations had set in.

Page 462 of 845

 308. INSURANCE OF THE PHILIPPINE ISLANDS V. SPS. GREGORIO
G.R. No. 174104
February 14, 2011

FACTS:

Spouses Vidal Gregorio and Julita Gregorio obtained loans from the Insurance of the Philippine
Islands Corporation. By way of security for the said loan, respondents executed Real Estate
Mortgage. Respondents failed to pay their loans, as a result of which the mortgaged properties
were extrajudicially foreclosed.

Petitioner filed a Complaint for damages against respondents alleging that in 1995, when it was
in the process of gathering documents for the purpose of filing an application for the registration
and confirmation of its title over the foreclosed properties, it discovered that the said lots were
already registered in the names of third persons and transfer certificates of title (TCT) were
issued to them.

The RTC of Morong, Rizal, ruled in favor of petitioner, while the CA rendered a Decision
reversing and setting aside the decision of the RTC and dismissing the complaint of petitioner. It
ruled that petitioner's action for damages is barred by prescription and laches.

ISSUE:

Whether or not petitioner's right of action prescribed four years after the subject properties were
registered with the Register of Deeds of Morong, Rizal and TCTs were subsequently issued in
the names of third persons.

RULING:

The Court finds no error in the ruling of the CA that petitioner's cause of action accrued at the
time it discovered the alleged fraud committed by respondents. It is at this point that the four-
year prescriptive period should be counted. However, the Court does not agree with the CA in its
ruling that the discovery of the fraud should be reckoned from the time of registration of the
titles covering the subject properties. The reckoning period for prescription of petitioner's action
should be from the time of actual discovery of the fraud.

Neither may the principle of laches apply in the present case. The essence of laches or stale
demands is the failure or neglect for an unreasonable and unexplained length of time to do that
which, by exercising due diligence, could or should have been done earlier, thus, giving rise to a
presumption that the party entitled to assert it either has abandoned or declined to assert it. It is
not concerned with mere lapse of time; the fact of delay, standing alone, being insufficient to
constitute laches.

Page 463 of 845

 309. MARIANO V. PETRON
G.R. No. 169438
January 21, 2010

FACTS:

On 5 November 1968, Aure Group, owners of a 2,064 square meter parcel of land in Tagaytay
City, leased the Property to ESSO Standard Eastern, Inc. The lease period is 90 years and the
rent is payable monthly for the first 10 years, and annually for the remaining period. The lease
contract contained an assignment veto clause barring the parties from assigning the lease without
prior consent of the other. Excluded from the prohibition were certain corporations to whom
ESSO Eastern may unilaterally assign its leasehold right.

On 23 December 1977, ESSO Eastern sold ESSO Philippines to the Philippine National Oil
Corporation. Apparently, the Aure Group was not informed of the sale. ESSO Philippines, whose
corporate name was successively changed to Petrophil Corporation then to Petron Corporation,
took possession of the Property.

On 18 November 1993, petitioner Romeo D. Mariano bought the Property from the Aure Group
and obtained title to the Property issued in his name bearing an annotation of ESSO Easterns
lease.

On 17 December 1998, petitioner sent to Petron a notice to vacate the Property. Petitioner
informed Petron that Presidential Decree No. 471, dated 24 May 1974, reduced the Contracts
duration from 90 to 25 years, ending on 13 November 1993. Despite receiving the notice to
vacate on 21 December 1998, Petron remained on the Property.

On 18 March 1999, petitioner sued Petron in the Regional Trial Court of Tagaytay City, Branch
18, to rescind the Contract and recover possession of the Property. Aside from invoking PD 471,
petitioner alternatively theorized that the Contract was terminated on 23 December 1977 when
ESSO Eastern sold ESSO Philippines to PNOC, thus assigning to PNOC its lease on the
Property, without seeking the Aure Groups prior consent.

In its Answer, Petron countered that the Contract was not breached because PNOC merely
acquired ESSO Easterns shares in ESSO Philippines, a separate corporate entity. Alternatively,
Petron argued that petitioners suit, filed on 18 March 1999, was barred by prescription under
Article 1389 and Article 1146(1) of the Civil Code as petitioner should have sought rescission
within four years from PNOCs purchase of ESSO Philippines on 23 December 1977 or before 23
December 1981.

ISSUE:

Whether or not the petitioners suit is barred by prescription

Page 464 of 845

RULING:

Petitioner filed his complaint regarding the lessees breach of the lease contracts assignment
veto clause, nearly 22 years after the assignment of leasehold rights and almost six years after
petitioner bought the property from the lessor. The lapse of more than two decades lputs this case
well within the territory of the 10-year prescriptive bar to suits based upon a written contract
under Article 1144 (1) of the Civil Code.

Page 465 of 845

 310. SPOUSES PATRICIO AND MYRNA BERNALES V. HEIRS OF JULIAN SAMBAAN
G.R. No. 163271
January 15, 2010

FACTS:

Spouses Julian and Guillerma Sambaan were the registered owner of a property located in Bulua,
Cagayan de oro City. The respondents and the petitioner Myrna Bernales are the children of
Julian and Guillerma. Myrna, who is the eldest of the siblings, is the present owner and possessor
of the property in question.

Julian died in an ambush in 1975. Before he died, he requested that the property in question be
redeemed from Myrna and her husband Patricio Bernales. Thus, in 1982 one of Julians siblings
offered to redeem the property but the petitioners refused because they were allegedly using the
property as tethering place for their cattle.

In January 1991, respondents received an information that the subject property was already
transferred to Myrna Bernales. The Deed of Absolute Sale dated December 7, 1970 bore the
forged signatures of their parents, Julian and Guillerma.

On April 1993, the respondents, together with their mother Guillerma, filed a complaint for
Annulment of Deed of Absolute Sale and cancellation of TCT No. T-14204 alleging that their
parents signatures were forged. The trial court rendered a decision on August 2, 2001 cancelling
the TCT and ordering another title to be issued in the name of the late Julian Sambaan.

Petitioners went to the CA and appealed the decision. The CA affirmed the decision of the lower
court. A motion for reconsideration of the decision was, likewise, denied in 2004. Hence, this
petition for certiorari.

ISSUE:

Whether or not the Deed of Absolute Sale is authentic as to prove the ownership of the
petitioners over the subject property

RULING:

It is a question of fact rather than of law. Well-settled is the rule that the Supreme Court is not a
trier of facts. Factual findings of the lower courts are entitled to great weight and respect on
appeal, and in fact accorded finality when supported by substantial evidence on the record.
Substantial evidence is more than a mere scintilla of evidence. It is that amount of relevant
evidence that a reasonable mind might accept as adequate to support a conclusion, even if other
minds, equally reasonable, might conceivably opine otherwise. But to erase any doubt on the
correctness of the assailed ruling, we have carefully perused the records and, nonetheless, arrived

Page 466 of 845

at the same conclusion. We find that there is substantial evidence on record to support the Court
of Appeals and trial courts conclusion that the signatures of Julian and Guillerma in the Deed of
Absolute Sale were forged.

Conclusions and findings of fact by the trial court are entitled to great weight on appeal and
should not be disturbed unless for strong and cogent reasons because the trial court is in a better
position to examine real evidence, as well as to observe the demeanor of the witnesses while
testifying in the case. The fact that the CA adopted the findings of fact of the trial court makes
the same binding upon this court.

Thus, we hold that with the presentation of the forged deed, even if accompanied by the owners
duplicate certificate of title, the registered owner did not thereby lose his title, and neither does
the assignee in the forged deed acquire any right or title to the said property.

Page 467 of 845

 311. B & I REALTY V. CASPE
G.R. No. 146972
January 29, 2008

FACTS:

Consorcia L. Venegas was the owner of a parcel of land located in Barrio Bagong-Ilog in Pasig,
Rizal and covered by TCT No. 247434. She delivered said title to, and executed a simulated deed
of sale in favor of, Datuin for purposes of obtaining a loan with the RCBC. Datuin claimed that
he had connections with the management of RCBC and offered his assistance to Venegas in
obtaining a loan from the bank. He issued a receipt to the Venegases, acknowledging that the lot
was to be used as a collateral for bank financing and that the deed of sale was executed only as a
device to obtain the loan. However, Datuin prepared a deed of absolute sale and, through
forgery, made it appear that the spouses Venegas executed the document in his favor.

Venegas learned of Datuin's fraudulent scheme when she sold the lot to herein respondents for
P160,000 in a deed of conditional sale. She, along with her husband, instituted a complaint
against Datuin in the then Court of First Instance CFI of Rizal, Branch 11, docketed as Civil
Case No. 188893, for recovery of property and nullification of TCT No. 377734, with damages.
However, when the case was called for pre-trial, the Venegases' counsel failed to appear and the
complaint was eventually dismissed without prejudice.

ISSUE:

Whether or not filing of Civil Case No. 36852 by the Venegases had the effect of interrupting the
prescriptive period for the filing of the complaint for judicial foreclosure of mortgage

RULING:

We agree with the CA's ruling that Civil Case No. 36852 did not have the effect of interrupting
the prescription of the action for foreclosure of mortgage as it was not an action for foreclosure
but one for annulment of title and nullification of the deed of mortgage and the deed of sale. It
was not at all the action contemplated in Article 1155 of the Civil Code which explicitly provides
that the prescription of an action is interrupted only when the action itself is filed in court.

Petitioner could have protected its right over the property by filing a cross-claim for judicial
foreclosure of mortgage against respondents in Civil Case No. 36852. The filing of a cross-claim
would have been proper there. All the issues pertaining to the mortgage validity of the mortgage
and the propriety of foreclosure would have been passed upon concurrently and not on a
piecemeal basis. This should be the case as the issue of foreclosure of the subject mortgage was
connected with, or dependent on, the subject of annulment of mortgage in Civil Case No. 36852.
The actuations clearly manifested that petitioner knew its rights under the law but chose to sleep
on the same.

Page 468 of 845

 312. MESINA V. GARCIA
G.R. No. 168035
November 30, 2006

FACTS:

Atty. Honorio Valisno Garcia and Felicisima Mesina, during their lifetime, enstered into a
Contract to Sell over a lot consisting of 235 square meters, situated at Diversion Road, Sangitan,
Cabanatuan City, covered and embraced by TCT No. T-31643 in the name of Felicisima Mesina
which title was eventually cancelled and TCT No. T-78881 was issued in the name of herein
petitioners. The Contract to Sell provides that the cost of the lot is P70.00 per square meter for a
total amount of P16,450.00; payable within a period not to exceed 7 years at an interest rate of
12% per annum, in successive monthly installments of P260.85 per month, starting May 1977.

Thereafter, the succeeding monthly installments are to be paid within the first week of every
month, at the residence of the vendor at Quezon City, with all unpaid monthly installments
earning an interest of 1% per month. Instituting this case at bar, respondent asserts that despite
the full payment made on 7 February 1984 for the consideration of the subject lot, petitioners
refused to issue the necessary Deed of Sale to effect the transfer of the property to her.

ISSUE:

Whether or not respondents cause of action had already prescribed

RULING:

Article 1155 of the Civil Code is explicit that the prescriptive period is interrupted when an
action has been filed in court; when there is a written extrajudicial demand made by the
creditors; and when there is any written acknowledgment of the debt by the debtor.

The records reveal that starting 19 April 1986 until 2 January 1997 respondent continuously
demanded from the petitioners the execution of the said Deed of Absolute Sale but the latter
conjured many reasons and excuses not to execute the same. Respondent even filed a Complaint
before the Housing and Land Use Regulatory Board way back in June, 1986, to enforce her
rights and to compel the mother of herein petitioners, who was still alive at that time, to execute
the necessary Deed of Absolute Sale for the transfer of title in her name. On 2 January 1997,
respondent, through her counsel, sent a final demand letter to the petitioners for the execution of
the Deed of Absolute Sale, but still to no avail. Consequently, because of utter frustration of the
respondent, she finally lodged a formal Complaint for Specific Performance with Damages
before the trial court on 20 January 1997.

Hence, from the series of written extrajudicial demands made by respondent to have the
execution of the Deed of Absolute Sale in her favor, the prescriptive period of 10 years has been

Page 469 of 845

interrupted. Therefore, it cannot be said that the cause of action of the respondent has already
been prescribed.

Page 470 of 845

 313. HEIRS OF GAUDIANE V. CA
G.R. No. 119879
March 11, 2004

FACTS:

The lot in controversy is Lot 4389 located at Dumaguete City and covered by Original
Certificate of Title No. 2986-A (OCT 2986-A) in the names of co-owners Felix and Juana
Gaudiane. Felix died in 1943 while his sister Juana died in 1939. Herein respondents are the
descendants of Felix while petitioners are the descendants of Juana.

On November 4, 1927, Felix executed a document entitled Escritura de Compra-Venta whereby

he sold to his sister Juana his one-half share in Lot No. 4156 covered by Transfer Certificate of
Title No. 3317-A.

Petitioners predecessors-in-interest, Geronimo and Ines Iso (the Isos), believed that the sale by
Felix to their mother Juana in 1927 included not only Lot 4156 but also Lot 4389. In 1974, they
filed a pleading in the trial court seeking to direct the Register of Deeds of Dumaguete City to
cancel OCT 2986-A covering Lot 4389 and to issue a new title in favor of the Isos. This was
later withdrawn after respondents predecessors-in-interest, Procopio Gaudiane and Segundo
Gaudiane, opposed it on the ground that the Isos falsified their copy of the Escritura by erasing
Lot 4156 and intercalating in its place Lot 4389.

ISSUE:

Whether the court gravely erred in not giving due course to the claim of petitioners and legal
effect of prescription and laches adverted by defendants-appellants in their answer and
affirmative defenses proven during the hearing by documentary and testimonial evidence.

RULING:

As a general rule, ownership over titled property cannot be lost through prescription. Petitioners,
however, invoke our ruling in Tambot V.. Court of Appeals which held that titled property may
be acquired through prescription by a person who possessed the same for 36 years without any
objection from the registered owner who was obviously guilty of laches.

Petitioners claim is already rendered moot by our ruling barring petitioners from raising the
defense of exclusive ownership due to res judicata. Even assuming arguendo that petitioners are
not so barred, their contention is erroneous. As correctly observed by the appellate court.
As explained earlier, only Lot No. 4156 was sold. It was through this misrepresentation that
appellees predecessor-in-interest succeeded in withholding possession of appellees share in Lot
No. 4389. Appellees cannot, by their own fraudulent act, benefit therefrom by alleging
prescription and laches.

Page 471 of 845

 314. LAUREANO V. CA
G.R. No. 114776
February 2, 2000

FACTS:

Petitioner was employed in the singapore airlines limited as the pilot captain of B-707. Sometime
in 1982, defendant, hit by a recession, initiated cost-cutting measures. Seventeen expatriate
captains in the Airbus fleet were found in excess of the defendant's requirement. Consequently,
defendant informed its expatriate pilots including plaintiff of the situation and advised them to
take advance leaves. Realizing that the recession would not be for a short time, defendant
decided to terminate its excess personnel. It did not, however, immediately terminate it's A-300
pilots. It reviewed their qualifications for possible promotion to the B-747 fleet. Among the 17
excess Airbus pilots reviewed, twelve were found qualified. Unfortunately, plaintiff was not one
of the twelve. Aggrieved, plaintiff on June 29, 1983, instituted a case for illegal dismissal before
the Labor Arbiter. Defendant moved to dismiss on jurisdictional grounds. Before said motion
was resolved, the complaint was withdrawn.

ISSUE:

What is the prescriptive period for money claims arising from employer-employee relationship?

RULING:

Article 291. Money claims. - All money claims arising from employee-employer relations
accruing during the effectivity of this Code shall be filed within three (3) years from the time the
cause of action accrued; otherwise they shall be forever barred.

It should be noted further that Article 291 of the Labor Code is a special law applicable to money
claims arising from employer-employee relations; thus, it necessarily prevails over Article 1144
of the Civil Code, a general law. Basic is the rule in statutory construction that 'where two
statutes are of equal theoretical application to a particular case, the one designed therefore should
prevail.'

In the instant case, the action for damages due to illegal termination was filed by plaintiff-
appellee only on January 8, 1987 or more than four (4) years after the effectivity date of his
dismissal on November 1, 1982. Clearly, plaintiff-appellee's action has already prescribed.

Page 472 of 845

 315. BANCO FILIPINO V. COURT OF APPEALS
G.R. No. 129227.
May 30, 2000

FACTS:

Elsa Arcilla and her husband, Calvin Arcilla secured on three occasions, loans from the Banco
Filipino Savings and Mortgage bank in the amount of Php.107,946.00 as evidenced by the
Promissory Note executed by the spouses in favor of the said bank. To secure payment of said
loans, the spouses executed Real Estate Mortgages in favor of the appellants (Banco Filipino)
over their parcels of land. The appellee spouses failed to pay their monthly amortization to
appellant. On September 2, 1985 the appellees filed a complaint for Annulment of the Loan
Contracts, Foreclosure Sale with Prohibitory and Injunction which was granted by the RTC.
Petitioners appealed to the Court of Appeals, but the CA affirmed the decision of the RTC.

ISSUE:

Whether or not the CA erred when it held that the cause of action of the private respondents
accrued on October 30, 1978 and the filing of their complaint for annulment of their contracts in
1085 was not yet barred by the prescription/

RULING:

The court held that the petition is unmeritorious. Petitioners claim that the action of the private
respondents have prescribed is bereft of merit. Under Article 1150 of the Civil Code, the time
for prescription of all kinds of action where there is no special provision which ordains otherwise
shall be counted from the day they may be brought. Thus the period of prescription of any cause
of action is reckoned only from the date of the cause of action accrued. The period should not be
made to retroact to the date of the execution of the contract, but from the date they received the
statement of account showing the increased rate of interest, for it was only from the moment that
they discovered the petitioners unilateral increase thereof.

Page 473 of 845

 316. VDA. DE DEL GADO V. COURT OF APPEALS
G.R. No. 125728
August 28, 2001

FACTS:

Carlos Delgado was the absolute owner of a parcel of land with an area of 692,549 square meter
situated in the Municipality of Catarman Samar. Carlos Delgado granted and conveyed by way
of donation with quitclaim all rights, title, interest claim and demand over a portion of land with
an area of 165,000 square meter in favor of the Commonwealth of the Philippines.

The acceptance was then made to President Quezon in his capacity as Commander-in-Chief.
The Deed of Donation was executed with a condition that the said land will be used for the
formation of the National Defense of the Philippines. The said parcel of land then covered by
the Torrens System of the Philippines and was registered in the name of Commonwealth of the
Philippines for a period of 40 years. The land was registered under TCT 0-2539-160 in favor of
the Commonwealth however without any annotation.

Upon declaration of independence, the Commonwealth was replaced by Republic of the

Philippines which took over the subject land and turned over to Civil Aeronautics
Administration, later named Bureau of Air Transportation Office. The said agency utilizes the
said land a domestic airport.

Jose Delgado filed a petition for reconveyance for a violation of the condition. The RTC ruled in
favor of the plaintiff Delgado. But the CA reversed the said decision because of prescription. The
petitioner filed only before 24 years oF discovery which the law only requires 10 years of filing.

ISSUE:

Whether or not the petitioners action for reconveyance is already barred by prescription.

RULING:

The Supreme Court denied the petition and affirmed the decision of the Court of Appeals
because the time of filing has been prescribed. Under Article 1144 of the Civil Code on
Prescription based on written contracts, the filing of action for reconveyance is within 10 years
from the time the condition in the Deed of Donation was violated. The petitioner herein filed
only 24 years in the first action and 43 years in the second filing of the 2nd action.

The action for reconveyance on the alleged excess of 33, 607 square meter mistakenly included
in the title was also prescribed Article 1456 of the Civil Code states, if property is acquired
through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an

Page 474 of 845

implied trust for the benefits of the person from whom the property comes, if within 10 years
such action for reconveyance has not been executed.

Page 475 of 845

 317. MAESTRADO V. COURT OF APPEALS
G.R. No. 133345.
March 9, 2000

FACTS:

These consolidated cases involve Lot No. 5872 and the rights of the contending parties thereto.
The lot has an area of 57.601 sq.m. and is registered in the name of the deceased spouses Ramon
and Rosario Chaves. The spouses died intestate in 1943 and 1944, respectively. They were
survived by six heirs. To settle the estate of said spouse, Angel Chaves, one of the heirs, initiated
intestate proceedings and was appointed administrator of said estates in the process. An
inventory of the estates was made and thereafter, the heirs agreed on a project partition. The
court approved the partition but a copy of said decision was missing. Nonetheless, the estate was
divided among the heirs. Subsequently, in 1956, the partition case effected and the respective
shares of the heirs were delivered to them.

Significantly, Lot No.5872 was not included in a number of documents. Parties offered different
explanations as to the omission of said lot in the documents. Petitioners maintain the existence of
an oral partition agreement entered into by all heirs after the death of their parents. To set things
right, petitioners then prepared a quitclaim to confirm the alleged oral agreement. Respondents
dispute voluntariness of their consent to the quitclaims.
Six years after the execution of the quitclaims, respondents discovered that indeed subject lot
was still a common property in the name of the deceased spouses. Eventually, an action for
Quieting of Title was filed by petitioners on December 22, 1983.

The trial court considered Lot No. 5872 as still a common property and therefore must be
divided into six parts, there being six heirs. Petitioners appealed to the Court of Appeals which
sustained the decision of the trial court.

ISSUE:

Whether or not the action for quieting of title had already prescribed.

RULING:

The Supreme Court ruled that an action for quieting of title is imprescriptible especially if the
plaintiff is in possession of the property being litigated. One who is in actual possession of a
land, claiming to be the owner thereof may wait until his possession is disturbed or his title is
attacked before making steps to vindicate his right because his undisturbed possession gives him
a continuing right to seek the aid of the courts to ascertain the nature of the adverse claim and its
effect on his title. Moreover, the Court held that laches is inapplicable in this case. This is
because, as mentioned earlier, petitioners possession of the subject lot has rendered their right to
bring an action for quieting of title imprescriptible.

Page 476 of 845

 318. F.A.T. KEE V. ONLINE DIGEST
G.R. No. 171238
February 2, 2011

FACTS:

Petitioner F.A.T. Kee Computer Systems, Inc. (FAT KEE) is a domestic corporation engaged in
the business of selling computer equipment and conducting maintenance services for the units it
sold. ONLINE is also a domestic corporation principally engaged in the business of selling
computer units, parts and software.

ONLINE sold computer printers to FAT KEE. However, FAT KEE failed to pay its obligations
to ONLINE without any valid reason. ONLINE filed a Complaint for Sum of Money against
FAT KEE.

During the trial FAT KEE insisted that the conversion rate they agreed upon was P34:US$1 and
not P40 as insisted by ONLINE.

The RTC dismissed the complaint of ONLINE for the latters failure to establish its claim. The
appellate court reversed and set aside the Decision of the RTC. The CA ruled that even granting
that FAT KEE was of the impression that P34:$1 was the applicable rate for its obligation,
ONLINE cannot be put in estoppel as this was immediately rectified by ONLINE.

ISSUES:

Whether or not the non-attachment of the relevant portions of the TSN renders the petition of
FAT KEE fatally defective.

Whether or not ONLINE is estopped as to the conversion rate used.

RULING:

First Issue:
Rule 45, Section 4 of the Rules of Court indeed requires the attachment to the petition for review
on certiorari such material portions of the record as would support the petition. However, such
a requirement was not meant to be an ironclad rule such that the failure to follow the same would
merit the outright dismissal of the petition.

The SC ruled that non-attachment of the relevant portions of the TSN does not render fatally
defective. Given that the TSN of the proceeding before the RTC forms part of the record of the
instant case, the failure of petitioner to attach the same was already cured by subsequent
elevation of the case records to this Court.

Page 477 of 845

Second Issue:
One who claims the benefit of an estoppel on the ground that he has been misled by the
representations of another must not have been misled through his own want of reasonable care
and circumspection. A lack of diligence by a party claiming an estoppel is generally fatal. Thus,
after participating in the meeting on January 15, 1998, submitting its own proposals and further
negotiating for the lowering of the exchange rate, FAT KEE cannot anymore insist that it was
completely under the impression that the applicable exchange rate was P34:US$1.

Page 478 of 845

 319. TANAY RECREATION CENTER AND DEVELOPMENT CORP.V. CATALINA
MATIENZO FAUSTO
G.R. No. 140182
April 12, 2005

FACTS:

Petitioner Tanay Recreation Center and Development Corp. (TRCDC) is the lessee of a 3,090-
square meter property located in Sitio Gayas, Tanay, Rizal, owned by Catalina Matienzo Fausto,
under a Contract of Lease. On this property stands the Tanay Coliseum Cockpit operated by
petitioner. The lease contract provided for a 20-year term, subject to renewal within sixty days
prior to its expiration. The contract also provided that should Fausto decide to sell the property,
petitioner shall have the priority right to purchase the same.

On June 17, 1991, petitioner wrote Fausto informing her of its intention to renew the lease.
However, it was Faustos daughter, respondent Anunciacion F. Pacunayen, who replied, asking
that petitioner remove the improvements built thereon, as she is now the absolute owner of the
property. It appears that Fausto had earlier sold the property to Pacunayen and title has already
been transferred in her name. Petitioner filed an Amended Complaint for Annulment of Deed of
Sale, Specific Performance with Damages, and Injunction

In her Answer, respondent claimed that petitioner is estopped from assailing the validity of the
deed of sale as the latter acknowledged her ownership when it merely asked for a renewal of the
lease. According to respondent, when they met to discuss the matter, petitioner did not demand
for the exercise of its option to purchase the property, and it even asked for grace period to
vacate the premises.

ISSUE:

The contention in this case refers to petitioners priority right to purchase, also referred to as the
right of first refusal.

RULING:

When a lease contract contains a right of first refusal, the lessor is under a legal duty to the lessee
not to sell to anybody at any price until after he has made an offer to sell to the latter at a certain
price and the lessee has failed to accept it. The lessee has a right that the lessor's first offer shall
be in his favor. Petitioners right of first refusal is an integral and indivisible part of the contract
of lease and is inseparable from the whole contract. The consideration for the lease includes the
consideration for the right of first refusal and is built into the reciprocal obligations of the parties.

It was erroneous for the CA to rule that the right of first refusal does not apply when the property
is sold to Faustos relative. When the terms of an agreement have been reduced to writing, it is

Page 479 of 845

considered as containing all the terms agreed upon. As such, there can be, between the parties
and their successors in interest, no evidence of such terms other than the contents of the written
agreement, except when it fails to express the true intent and agreement of the parties. In this
case, the wording of the stipulation giving petitioner the right of first refusal is plain and
unambiguous, and leaves no room for interpretation. It simply means that should Fausto decide
to sell the leased property during the term of the lease, such sale should first be offered to
petitioner. The stipulation does not provide for the qualification that such right may be exercised
only when the sale is made to strangers or persons other than Faustos kin. Thus, under the terms
of petitioners right of first refusal, Fausto has the legal duty to petitioner not to sell the property
to anybody, even her relatives, at any price until after she has made an offer to sell to petitioner
at a certain price and said offer was rejected by petitioner.

Page 480 of 845

 320. ROMEO MENDOZA V. COURT OF APPEALS
G.R. No. 160014
February 18, 2005

FACTS:

Manotok was the administrator of a parcel of land which it leased to Benjamin Mendoza; that the
contract of lease expired on December 31, 1988; that even after the expiration of the lease
contract, Benjamin Mendoza, and after his demise, his son, Romeo, continued to occupy the
premises and thus incurred a total of P44,011.25 as unpaid rentals from January 1, 1989 to July
31, 1996; that on July 16, 1996, Manotok made a demand on Benjamin Mendoza to pay the
rental arrears and to vacate the premises within fifteen (15) days from receipt of the demand
letter; that despite receipt of the letter and after the expiration of the 15-day period, the
Mendozas refused to vacate the property and to pay the rentals. The complaint prayed that the
court order Mendoza and those claiming rights under him to vacate the premises and deliver
possession thereof to Manotok, and to pay the unpaid rentals from January 1, 1989 to July 31,
1996 plus P875.75 per month starting August 1, 1996, subject to such increase allowed by law,
until he finally vacates the premise.

ISSUE:

Whether or not the Honorable Court of Appeals committed error in giving efficacy to a lease
contract signed in 1988 when the alleged signatory was already dead since 1986.

RULING:

This is a case for unlawful detainer. It appears that respondent corporation leased the property
subject of this case to petitioners father. After expiration of the lease, petitioner continued to
occupy the property but failed to pay the rentals. On July 16, 1996, Respondent Corporation
made a demand on petitioner to vacate the premises and to pay their arrears.
An action for unlawful detainer may be filed when possession by a landlord, vendor, vendee or
other person of any land or building is unlawfully withheld after the expiration or termination of
the right to hold possession by virtue of a contract, express or implied. The only issue to be
resolved in an unlawful detainer case is physical or material possession of the property involved,
independent of any claim of ownership by any of the parties involved. In the case at bar,
petitioner lost his right to possess the property upon demand by Respondent Corporation to
vacate the rented lot. Petitioner cannot now refute the existence of the lease contract because of
his prior admissions in his pleadings regarding his status as tenant on the subject property.

Page 481 of 845

 321. JEFFERSON LIM V. QUEENSLAND TOKYO COMMODITIES, INC.
G.R. No. 136031
January 4, 2002

FACTS:

Sometime in 1992, Benjamin Shia, a market analyst and trader of Queensland, was introduced to
petitioner Jefferson Lim by Marissa Bontia, one of his employees. Marissas father was a former
employee of Lims father. Shia suggested that Lim invest in the Foreign Exchange Market,
trading U.S. dollar against the Japanese yen, British pound, Deutsche Mark and Swiss Franc.

Before investing, Lim requested Shia for proof that the foreign exchange was really lucrative.
They conducted mock tradings without money involved. As the mock trading showed
profitability, Lim decided to invest with a marginal deposit of US$5,000 in managers check.
The marginal deposit represented the advance capital for his future tradings. It was made to
apply to any authorized future transactions, and answered for any trading account against which
the deposit was made, for any loss of whatever nature, and for all obligations, which the investor
would incur with the broker. Petitioner Lim was then allowed to trade with respondent company
which was coursed through Shia by virtue of blank order forms all signed by Lim. Respondent
furnished Lim with the daily market report and statements of transactions as evidenced by the
receiving forms, some of which were received by Lim.

Meanwhile, on October 22, 1992, respondent learned that it would take seventeen (17) days to
clear the managers check given by petitioner. Shia returned the check to petitioner who
informed Shia that petitioner would rather replace the managers check with a travelers check.
Shia noticed that the travelers check was not indorsed but Lim told Shia that Queensland could
sign the endorsee portion. Because Shia trusted the latters good credit rating, and out of
ignorance, he brought the check back to the office unsigned. Inasmuch as that was a busy Friday,
the check was kept in the drawer of respondents consultant. Later, the travelers check was
deposited with Citibank.

On October 27, 1992, Citibank informed respondent that the travelers check could not be
cleared unless it was duly signed by Lim, the original purchaser of the travelers check. A Miss
Arajo, from the accounting staff of Queensland, returned the check to Lim for his signature, but
the latter, aware of his P44,465 loss, demanded for a liquidation of his account and said he would
get back what was left of his investment.

ISSUE:

Whether or not the CA erred in reversing the decision of the RTC which dismissed the
respondents complaint

Page 482 of 845

RULING:
The essential elements of estoppel are: (1) conduct of a party amounting to false representation
or concealment of material facts or at least calculated to convey the impression that the facts are
otherwise than, and inconsistent with, those which the party subsequently attempts to assert; (2)
intent, or at least expectation, that this conduct shall be acted upon by, or at least influence, the
other party; and (3) knowledge, actual or constructive, of the real facts. ere, it is uncontested that
petitioner had in fact signed the Customers Agreement in the morning of October 22, 1992,
knowing fully well the nature of the contract he was entering into. The Customers Agreement
was duly notarized and as a public document it is evidence of the fact, which gave rise to its
execution and of the date of the latter.

Next, petitioner paid his investment deposit to respondent in the form of a managers check in
the amount of US$5,000 as evidenced by PCI Bank Managers Check No. 69007, dated October
22, 1992. All these are indicia that petitioner treated the Customers Agreement as a valid and
binding contract.

Page 483 of 845

 322. PLACEWELL INTERNATIONAL SERVICES CORP. V. CAMOTE
G.R. No. 169973
June 26, 2006

FACTS:

Petitioner Placewell International Services Corporation (PISC) deployed respondent Ireneo B.

Camote to work as building carpenter for SAAD Trading and Contracting Co. (SAAD) at the
Kingdom of Saudi Arabia (KSA) for a contract duration of two years, with a corresponding
salary of US$370.00 per month. At the job site, respondent was allegedly found incompetent by
his foreign employer; thus the latter decided to terminate his services. However, respondent
pleaded for his retention and consented to accept a lower salary of SR 800.00 per month. Thus,
SAAD retained respondent until his return to the Philippines two years after.

On November 27, 2001, respondent filed a sworn Complaint for monetary claims against
petitioner alleging that when he arrived at the job site, he and his fellow Filipino workers were
required to sign another employment contract written in Arabic under the constraints of losing
their jobs if they refused; that for the entire duration of the new contract, he received only SR
590.00 per month; that he was not given his overtime pay despite rendering nine hours of work
every day; that he and his co-workers sought assistance from the Philippine Embassy but they
did not succeed in pursuing their cause of action because of difficulties in communication.

ISSUE:

Whether there is estoppel by laches

RULING:

R.A. No. 8042 explicitly prohibits the substitution or alteration to the prejudice of the worker, of
employment contracts already approved and verified by the Department of Labor and
Employment (DOLE) from the time of actual signing thereof by the parties up to and including
the period of the expiration of the same without the approval of the DOLE. The subsequently
executed side agreement of an overseas contract worker with her foreign employer which
reduced her salary below the amount approved by the POEA is void because it is against our
existing laws, morals and public policy. The said side agreement cannot supersede her standard
employment contract approved by the POEA.

Petitioners contention that respondent is guilty of laches is without basis. Laches has been
defined as the failure of or neglect for an unreasonable and unexplained length of time to do that
which by exercising due diligence, could or should have been done earlier, or to assert a right
within reasonable time, warranting a presumption that the party entitled thereto has either
abandoned it or declined to assert it. Thus, the doctrine of laches presumes that the party guilty

Page 484 of 845

of negligence had the opportunity to do what should have been done, but failed to do so.
Conversely, if the said party did not have the occasion to assert the right, then, he can not be
adjudged guilty of laches. Laches is not concerned with the mere lapse of time; rather, the party
must have been afforded an opportunity to pursue his claim in order that the delay may
sufficiently constitute laches.

In the instant case, respondent filed his claim within the three-year prescriptive period for the
filing of money claims set forth in Article 291 of the Labor Code from the time the cause of
action accrued. Thus, we find that the doctrine of laches finds no application in this case.

Page 485 of 845

 323. HEIRS OF RAGUA V. COURT OF APPEALS
G.R. Nos. 88521-22
January 31, 2000

FACTS:

These consolidated cases involve a prime lot consisting of 4,399,322 square meters, known as
the Diliman Estate, situated in Quezon City. On this 439 hectares of prime land now stand the
following: the Quezon City Hall, Philippine Science High School, Quezon Memorial Circle,
Visayas Avenue, Ninoy Aquino Parks and Wildlife, portions of UP Village and East Triangle,
the entire Project 6 and Vasha Village, Veterans Memorial Hospital and golf course, Department
of Agriculture, Department of Environment and Natural Resources, Sugar Regulatory
Administration, Philippine Tobacco Administration, Land Registration Authority, Philcoa
Building, Bureau of Telecommunications, Agricultural Training Institute building, Pagasa
Village, San Francisco School, Quezon City Hospital, portions of Project 7, Mindanao Avenue
subdivision, part of Bago Bantay resettlement project, SM City North EDSA, part of Phil-Am
Life Homes compound and four-fifths of North Triangle. This large estate was the subject of a
petition for judicial reconstitution originally filed by Eulalio Ragua in 1964, which gave rise to
protracted legal battles between the affected parties, lasting more than thirty-five (35) years.

ISSUE:

Whether estoppel by laches exists on the part of petitioner

RULING:

Petitioners filed the petition for reconstitution of OCT 632 nineteen (19) years after the
title was allegedly lost or destroyed. We thus consider petitioners guilty of laches. Laches is
negligence or omission to assert a right within a reasonable time, warranting the presumption
that the party entitled to assert it either has abandoned or declined to assert it.

Page 486 of 845

 324. METROPOLITAN BANK & TRUST COMPANY V. COURT OF APPEALS
G.R. No. 122899
June 8, 2000

FACTS:

Mr. Chia offered the subject property for sale to private respondent G.T.P. Development
Corporation (hereafter, GTP), with assumption of the mortgage indebtedness in favor of
petitioner METROBANK secured by the subject property. Pending negotiations for the proposed
sale, Atty. Bernardo Atienza, acting in behalf of respondent GTP, went to METROBANK to
inquire on Mr. Chia's remaining balance on the real estate mortgage. METROBANK obliged
with a statement of account of Mr. Chia amounting to about P115,000.00 as of August ,1980.

The deed of sale and the memorandum of agreement between Mr. Chia and respondent GTP
were eventually executed and signed. Atty. Atienza went to METROBANK Quiapo Branch and
paid one hundred sixteen thousand four hundred sixteen pesos and seventy-one centavos
(P116,416.71) for which METROBANK issued an official receipt acknowledging payment. This
notwithstanding, petitioner METROBANK refused to release the real estate mortgage on the
subject property despite repeated requests from Atty. Atienza, thus prompting respondent GTP to
file an action for specific performance against petitioner METROBANK and Mr. Chia.

ISSUE:

Whether or not the CA erred in reversing the decision of the lower court.

RULING:

The Court found no compelling reasons to disturb the assailed decision. All things studiedly
viewed in proper perspective, the Court are of the opinion, and so rule, that whatever debts or
loans mortgagor Chia contracted with Metrobank after September 4, 1980, without the
conformity of plaintiff-appellee, could not be adjudged as part of the mortgage debt the latter so
assumed. We are persuaded that the contrary ruling on this point in Our October 24, 1994
decision would be unfair and unjust to plaintiff-appellee because, before buying subject property
and assuming the mortgage debt thereon, the latter inquired from Metrobank about the exact
amount of the mortgage debt involved.

Petitioner METROBANK is estopped from refusing the discharge of the real estate mortgage on
the claim that the subject property still secures "other unliquidated past due loans."

Page 487 of 845

 325. SPOUSES DEL CAMPO V. COURT OF APPEALS
G.R. No. 108228
February 1, 2001

FACTS:

Salome, Consorcia, Alfredo, Maria, Rosalia, Jose, Quirico and Julita, all surnamed Bornales,
were the original co-owners of the lot in question.

On July 14, 1940, Salome sold part of her 4/16 share to Soledad Daynolo. Thereafter, Soledad
Daynolo immediately took possession of the land described above and built a house thereon. A
few years later, Soledad and her husband, Simplicio Distajo, mortgaged the subject portion of the
lot as security for a debt to Jose Regalado, Sr. This transaction was evidenced by a Deed of
Mortgage.

On April 14, 1948, three of the eight co-owners of Lot 162, specifically, Salome, Consorcia and
Alfredo, sold 24,993 square meters of said lot to Jose Regalado, Sr. On May 4, 1951, Simplicio
Distajo, heir of Soledad Daynolo who had since died, paid the mortgage debt and redeemed the
mortgaged portion of Lot 162 from Jose Regalado, Sr. The latter, in turn, executed a Deed of
Discharge of Mortgage in favor of Soledads heirs, namely: Simplicio Distajo, Rafael Distajo
and Teresita Distajo-Regalado. On same date, the said heirs sold the redeemed portion of Lot
162 for P1, 500.00 to herein petitioners, the spouses Manuel Del Campo and Salvacion
Quiachon.

ISSUE:

Whether or not the sale of the subject portion constitutes a sale of a concrete or definite portion
of land owned in common does not absolutely deprive herein petitioners of any right or title
thereto.

RULING:

There can be no doubt that the transaction entered into by Salome and Soledad could be legally
recognized in its entirety since the object of the sale did not even exceed the ideal shares held by
the former in the co-ownership. As a matter of fact, the deed of sale executed between the parties
expressly stipulated that the portion of Lot 162 sold to Soledad would be taken from Salomes
4/16 undivided interest in said lot, which the latter could validly transfer in whole or in part even
without the consent of the other co-owners. Salomes right to sell part of her undivided interest
in the co-owned property is absolute in accordance with the well-settled doctrine that a co-owner
has full ownership of his pro-indiviso share and has the right to alienate, assign or mortgage it,
and substitute another person in its enjoyment.

Page 488 of 845

 326. CUENCO V. CUENCO
G.R. No. 149844
October 13, 2004

FACTS:

On September 19, 1970, the respondent filed the initiatory complaint herein for specific
performance against her uncle Miguel Cuenco which averred, inter alia that her father, the late
Don Mariano Jesus Cuenco and said petitioner formed the Cuenco and Cuenco Law Offices;
that on or around August 4, 1931, the Cuenco and Cuenco Law Offices served as lawyers in two
(2) cases entitled Valeriano Solon versus Zoilo Solon (Civil Case 9037) and Valeriano Solon
versus Apolonia Solon (Civil Case 9040) involving a dispute among relatives over ownership of
lot 903 of the Banilad Estate which is near the Cebu Provincial Capitol; that records of said
cases indicate the name of the [petitioner] alone as counsel of record, but in truth and in fact, the
real lawyer behind the success of said cases was the influential Don Mariano Jesus Cuenco; that
after winning said cases, the awardees of Lot 903 subdivided said lot into three (3) parts as
follows:

Lot 903-A: 5,000 [square meters]: Mariano Cuencos attorneys fees

Lot 903-B: 5,000 [square meters]: Miguel Cuencos attorneys fees
Lot 903-C: 54,000 [square meters]: Solons retention

Petitioner later claimed the property after the death of his brother.

ISSUES:

Whether Petitioner is in is estoppel

Whether laches barred the right of action of respondent

RULING:

From the time Lot 903-A was subdivided and Marianos six children -- including Concepcion --
took possession as owners of their respective portions, no whimper of protest from petitioner was
heard until 1963. By his acts as well as by his omissions, Miguel led Mariano and the latters
heirs, including Concepcion, to believe that Petitioner Cuenco respected the ownership rights of
respondent over Lot 903-A-6. That Mariano acted and relied on Miguels tacit recognition of his
ownership thereof is evident from his will, executed in 1963. Indeed, as early as 1947, long
before Mariano made his will in 1963, Lot 903-A -- situated along Juana Osmea Extension,
Kamputhaw, Cebu City, near the Cebu Provincial Capitol -- had been subdivided and distributed
to his six children in his first marriage. Having induced him and his heirs to believe that Lot
903-A-6 had already been distributed to Concepcion as her own, petitioner is estopped from
asserting the contrary and claiming ownership thereof. The principle of estoppel in pais applies

Page 489 of 845

when -- by ones acts, representations, admissions, or silence when there is a need to speak out --
one, intentionally or through culpable negligence, induces another to believe certain facts to
exist; and the latter rightfully relies and acts on such belief, so as to be prejudiced if the former is
permitted to deny the existence of those facts.

Petitioner claims that respondents action is already barred by laches. Laches is negligence or
omission to assert a right within a reasonable time, warranting a presumption that the party
entitled to it has either abandoned or declined to assert it.[40] In the present case, respondent has
persistently asserted her right to Lot 903-A-6 against petitioner. Concepcion was in possession as
owner of the property from 1949 to 1969. When Miguel took steps to have it separately titled in
his name, despite the fact that she had the owners duplicate copy of TCT No. RT-6999 -- the
title covering the entire Lot 903-A -- she had her adverse claim annotated on the title in 1967.
When petitioner ousted her from her possession of the lot by tearing down her wire fence in
1969, she commenced the present action on September 19, 1970, to protect and assert her rights
to the property. We find that she cannot be held guilty of laches, as she did not sleep on her
rights.

Page 490 of 845

 327. LAUREL V. HON. ANIANO A. DESIERTO
G.R. No. 145368
April 12, 2002

FACTS:

Petitioner Salvador H. Laurel moves for a reconsideration of this Courts decision declaring him,
as Chair of the National Centennial Commission (NCC), a public officer. Petitioner also prays
that the case be referred to the Court En Banc.

ISSUE:

Whether or not Laurel is a public officer as Chair of the NCC

RULING:

The issue in this case is whether petitioner, as Chair of the NCC, is a public officer under the
jurisdiction of the Ombudsman. Assuming, as petitioner proposes, that the designation of other
members to the NCC runs counter to the Constitution, it does not make petitioner, as NCC Chair,
less a public officer. Such serious constitutional repercussions do not reduce the force of the
rationale behind this Courts decision.

Second, petitioner invokes estoppel. He claims that the official acts of the President, the Senate
President, the Speaker of the House of Representatives, and the Supreme Court, in designating
Cabinet members, Senators, Congressmen and Justices to the NCC, led him to believe that the
NCC is not a public office.

The contention has no merit. In estoppel, the party representing material facts must have the
intention that the other party would act upon the representation. It is preposterous to suppose that
the President, the Senate President, the Speaker and the Supreme Court, by the designation of
such officials to the NCC, intended to mislead petitioner just so he would accept the position of
NCC Chair. Estoppel must be unequivocal and intentional. Moreover, petitioner himself admits
that the principle of estoppel does not operate against the Government in the exercise of its
sovereign powers.

Third, as ground for the referral of the case to the Court En Banc, petitioner submits that our
decision in this case modified or reversed doctrines rendered by this Court, which can only be
done by the Court En Banc.It is argued that by designating three of its then incumbent members
to the NCC, the Court took the position that the NCC was not a public office. The argument is a
bit of a stretch. Section 4 (3), Article VIII of the Constitution provides that no doctrine or
principle of law laid down by the court in a decision rendered en banc or in division may be
modified or reversed except by the court sitting en banc. In designating three of its incumbent
members to the NCC, the Court did not render a decision, in the context of said constitutional

Page 491 of 845

provision, which contemplates an actual case. Much less did the Court, by such designation,
articulate any doctrine or principle of law. Invoking the same provision, petitioner asserts that
the decision in this case reversed or modified Macalino V.. Sandiganbayan, holding that the
Assistant Manager of the Treasury Division and the Head of the Loans Administration &
Insurance Section of the Philippine National Construction Corporation (PNCC) is not a public
officer under Republic Act No. 3019. This contention also has no merit. The rationale for the
ruling in Macalino is that the PNCC has no original charter as it was incorporated under the
general law on corporations. However, as we pointed out in our decision, a conclusion that
EXPOCORP is a government-owned or controlled corporation would not alter the outcome of
this case because petitioners position and functions as Chief Executive Officer of EXPOCORP
are by virtue of his being Chairman of the NCC. The other issues raised by petitioner are mere
reiterations of his earlier arguments. The Court, however, remains unswayed thereby.

Page 492 of 845

 328. SPOUSES HANOPOL V. SHOEMART INCORPORATED
G.R. No. 137774
October 4, 2002

FACTS:

Shoemart, Inc., is a corporation duly organized and existing under the laws of the Philippines
engaged in the operation of department stores. On December 4, 1985, Shoemart, through its
Executive Vice-President, Senen T. Mendiola, and spouses Manuel R. Hanopol and Beatriz T.
Hanopol executed a Contract of Purchase on Credit.

Under the terms of the contract, Shoemart extended credit accommodations, in the amount of
Three Hundred Thousand Pesos (P300,000.00), for purchases on credit made by holders of SM
Credit Card issued by spouses Hanopol for one year, renewable yearly thereafter. Spouses
Hanopol were given a five percent (5%) discount on all purchases made by their cardholders,
deductible from the semi-monthly payments to be made to Shoemart by spouses Hanopol.

For failure of spouses Hanopol to pay the principal amount of One Hundred Twenty-Four
Thousand Five Hundred Seventy-One Pesos and Eighty-Nine Centavos (P124,571.89) as of
October 6, 1987, Shoemart instituted extrajudicial foreclosure proceedings against the mortgaged
properties.

Spouses Hanopol alleged that Shoemart breached the contract when the latter failed to furnish
the former with the requisite documents by which the formers liability shall be determined,
namely: charge invoices, purchase booklets and purchase journal, as provided in their contract;
that without the requisite documents, spouses Hanopol had no way of knowing that, in fact, they
had already paid, even overpaid, whatever they owed to Shoemart; that despite said breach,
Shoemart even had the audacity to apply for extrajudicial foreclosure with the Sheriff.

ISSUE:

Whether or not Shoemart acted with manifest bad faith in pursuing with the foreclosure and
auction sale of the property of spouses Hanopol, and, accordingly, should be held liable for
damages.

RULING:

All the three (3) elements for litis pendentia as a ground for dismissal of an action are present,
namely: (a) identity of parties, or at least such parties who represent the same interest in both
actions; (b) identity of rights asserted and relief prayed for, the relief being founded on the same
facts; and (c) the identity, with respect to the two (2) preceding particulars in the two (2) cases, in
such that any judgment that may be rendered in the pending case, regardless of which party is
successful, would amount to res judicata in the other.

Page 493 of 845

In the case at bench, the parties are the same; the relief sought in the case before the Court of
Appeals and the trial court are the same, that is, to permanently enjoin the foreclosure of the real
estate mortgage executed by spouses Hanopol in favor of Shoemart; and, both are premised on
the same facts. The judgment of the Court of Appeals would constitute a bar to the suit before
the trial court.

Page 494 of 845

 329. TERMINAL FACILITIES V. PPA
G.R. No. 135639
February 27, 2002

FACTS:

Before us are two (2) consolidated petitions for review, one filed by the Terminal Facilities and
Services Corporation (TEFASCO) and the other by the Philippine Ports Authority (PPA).
TEFASCO is a domestic corporation organized and existing under the laws of the Philippines
with principal place of business at Barrio Ilang, Davao City. It is engaged in the business of
providing port and terminal facilities as well as arrastre, stevedoring and other port-related
services at its own private port at Barrio Ilang.

Sometime in 1975 TEFASCO submitted to PPA a proposal for the construction of a specialized
terminal complex with port facilities and a provision for port services in Davao City. To ease the
acute congestion in the government ports at Sasa and Sta. Ana, Davao City, PPA welcomed the
proposal and organized an inter-agency committee to study the plan. The committee
recommended approval.

On April 21, 1976 the PPA Board of Directors passed Resolution No. 7 accepting and approving
TEFASCO's project proposal.

Long after TEFASCO broke round with massive infrastructure work, the PPA Board curiously
passed on October 1, 1976 Resolution No. 50 under which TEFASCO, without asking for one,
was compelled to submit an application for construction permit. Without the consent of

TEFASCO, the application imposed additional significant conditions.

The series of PPA impositions did not stop there. Two (2) years after the completion of the port
facilities and the commencement of TEFASCO's port operations, or on June 10, 1978, PPA again
issued to TEFASCO another permit, under which more onerous conditions were foisted on
TEFASCO's port operations. In the purported permit appeared for the first time the contentious
provisions for ten percent (10%) government share out of arrastre and stevedoring gross income
and one hundred percent (100%) wharfage and berthing charges.

On February 10, 1984 TEFASCO and PPA executed a Memorandum of Agreement (MOA)
providing among others for (a) acknowledgment of TEFASCO's arrears in government share at
Three Million Eight Hundred Seven Thousand Five Hundred Sixty-Three Pesos and Seventy-
Five Centavos (P3,807,563.75) payable monthly, with default penalized by automatic withdrawal
of its commercial private port permit and permit to operate cargo handling services; (b) reduction
of government share from ten percent (10%) to six percent (6%) on all cargo handling and
related revenue (or arrastre and stevedoring gross income); (c) opening of its pier facilities to all
commercial and third-party cargoes and vessels for a period coterminous with its foreshore lease

Page 495 of 845

contract with the National Government; and, (d) tenure of five (5) years extendible by five (5)
more years for TEFASCO's permit to operate cargo handling in its private port facilities. In
return PPA promised to issue the necessary permits for TEFASCO's port activities. TEFASCO
complied with the MOA and paid the accrued and current government share.

On August 30, 1988 TEFASCO sued PPA and PPA Port Manager, and Port Officer in Davao
City for refund of government share it had paid and for damages as a result of alleged illegal
exaction from its clients of one hundred percent (100%) berthing and wharfage fees. The
complaint also sought to nullify the February 10, 1984 MOA and all other PPA issuances
modifying the terms and conditions of the April 21, 1976 Resolution No. 7 above-mentioned.

PPA appealed the decision of the trial court to the Court of Appeals. The appellate court in its
original decision recognized the validity of the impositions and reversed in toto the decision of
the trial court. TEFASCO moved for reconsideration which the Court of Appeals found partly
meritorious. Thus the Court of Appeals in its Amended Decision partially affirmed the RTC
decision only in the sense that PPA was directed to pay TEFASCO (1) the amounts of Fifteen
Million Eight Hundred Ten Thousand Thirty-Two Pesos and Seven Centavos (P15,810,032.07)
representing fifty percent (50%) wharfage fees and Three Million Nine Hundred Sixty-One
Thousand Nine Hundred Sixty-Four Pesos and Six Centavos (P3,961,964.06) representing thirty
percent (30%) berthing fees which TEFASCO could have earned as private port usage fee from
1977 to 1991. The Court of Appeals held that the one hundred percent (100%) berthing and
wharfage fees were unenforceable because they had not been approved by the President under
P.D. No. 857, and discriminatory since much lower rates were charged in other private ports as
shown by PPA issuances effective 1995 to 1997. Both PPA and TEFASCO were unsatisfied with
this disposition hence these petitions.

ISSUE:

Whether or not the collection by PPA of one hundred percent (100%) wharfage fees and berthing
charges; (c) the propriety of the award of fifty percent (50%) wharfage fees and thirty percent
(30%) berthing charges as actual damages in favor of TEFASCO for the period from 1977 to
1991 is valid.

RULING:

The imposition by PPA of ten percent (10%), later reduced to six percent (6%), government
share out of arrastre and stevedoring gross income of TEFASCO is void. This exaction was
never mentioned in the contract, much less is it a binding prestation, between TEFASCO and
PPA. What was clearly stated in the terms and conditions appended to PPA Resolution No. 7 was
for TEFASCO to pay and/or secure from the proper authorities "all fees and/or permits pertinent
to the construction and operation of the proposed project." The government share demanded and
collected from the gross income of TEFASCO from its arrastre and stevedoring activities in
TEFASCO's wholly owned port is certainly not a fee or in any event a proper condition in a

Page 496 of 845

regulatory permit. Rather it is an onerous "contractual stipulation" which finds no root or basis or
reference even in the contract aforementioned.

Page 497 of 845

 MENDOZA vs. COURT OF APPEALS

June 25, 2001

FACTS:

Petitioner Danilo D. Mendoza was granted by Philippine National Bank (PNB) a Five
Hundred Thousand Pesos (P500,000.00) credit line and a One Million Pesos (P1,000,000.00)
Letter of Credit/Trust Receipt (LC/TR) line.

As security for the credit accommodations and for those which may thereinafter be granted,
petitioner executd Read Estate Mortgages.

Petitioner executed in favor of respondent PNB three (3) promissory . Petitioner made use of his
LC/TR line to purchase raw materials from foreign importers. He signed a total of eleven (11)
documents denominated as "Application and Agreement for Commercial Letter of Credit," on
various dates

In a letter dated January 3, 1980 and signed by Branch Manager Fil S. Carreon Jr., respondent
PNB advised petitioner Mendoza that effective December 1, 1979, the bank raised its interest
rates to 14% per annum, in line with Central Bank's Monetary Board Resolution No. 2126 dated
November 29, 1979.

On March 9, 1981, he wrote a letter to respondent PNB requesting for the restructuring of his
past due accounts into a five-year term loan and for an additional LC/TR line of Two Million
Pesos (P2,000,000.00). According to the letter, because of the shut-down of his end-user
companies and the huge amount spent for the expansion of his business, petitioner failed to pay
to respondent bank his LC/TR accounts as they became due and demandable.

ISSUE:

Whether or not respondent promised to be bound by the proposal of the petitioner for a five-year
restructuring of his overdue loan.

RULING:

No. The doctrine of promissory estoppel is an exception to the general rule that a promise of
future conduct does not constitute an estoppel. In some jurisdictions, in order to make out a
claim of promissory estoppel, a party bears the burden of establishing the following elements: (1)
a promise reasonably expected to induce action or forebearance; (2) such promise did in fact
induce such action or forebearance, and (3) the party suffered detriment as a result.

It is clear from the forgoing that the doctrine of promissory estoppel presupposes the existence of
a promise on the part of one against whom estoppel is claimed. The promise must be plain and
unambiguous and sufficiently specific so that the Judiciary can understand the obligation

Page 498 of 845

assumed and enforce the promise according to its terms. For petitioner to claim that respondent
PNB is estopped to deny the five-year restructuring plan, he must first prove that respondent
PNB had promised to approve the plan in exchange for the submission of the proposal. As
discussed earlier, no such promise was proven, therefore, the doctrine does not apply to the case
at bar. A cause of action for promissory estoppel does not lie where an alleged oral promise was
conditional, so that reliance upon it was not reasonable. It does not operate to create liability
where it does not otherwise exist.

Page 499 of 845

 MARQUES VS. FAR EAST BANK

G.R. No. 171379

Facts:

Jose Marques and Maxilite technologies entered into a Trust Receipt transaction with Far
East Bank and Trust Company (FEBTC). FEBTC also referred the incoming goods to Far East
Bank Insurance Company (FEBIC) to insure said goods from fire. Marques et al. were unable to
comply with the trust agreement, and restructured the debt with FEBTC by availing of a straight
loan to pay for the initial obligation. At the same time, Marques et al. were unable to pay the
premium for the fire insurance. FEBIC notified FEBTC of the unpaid premium, and asked that
Marquesaccount be debited the amount. FEBTC was unable to do so. Subsequently, the
warehouse where the goods in question were stored burned down. Marques et al. sought to
collect the insurance proceeds from Makati Insurance and FEBIC. Both refused compliance as
the insurance premium was unpaid. Marques et al. sued FEBTC, FEBIC, and Makati Insurance
companyfor actual, moral, and exemplary damages. The RTC found for Marques, and ruled that
all respondents were solidarilyliable to Marques for actual damages, with 12% interest per
annum, as well as moral and exemplary damages. On appeal, the CA affirmed the finding of the
RTC but modified the interest to 6% per annum. Both parties appealed.Marques contends that
since the obligation is to render a sum of money, the proper interest is 12%. FEBTC, and Makati
Insurance Company raised the non-payment of premiums, as well as its separate juridical entity
as defense.

ISSUES:

Whether or not the reduction of interest is proper (G.R. No. 171379) and Whether or not
FEBTC and Makati Insurance Company can be held solidarily liable with FEBIC. (G.R. No.
171419)

HELD: Petition is without merit (G.R. 171379) Petition is partly meritorious (G.R. 171419)

Credit Transactions: 12% interest is granted from day of default for breaches of obligation of a
sum of money. On the other hand, 6% interest for unliquidated damages. In this case, the
appellate court found that it was negligence of FEBTC that lead to damages suffered by Marques
et al. Hence, the interest on the award is properly 6%

Torts and damages: The appellate court has found that FEBTC is the cause of the damage
suffered by Marques. It was the one who referred the goods to the insurance company. It was
also the entity approached by FEBIC for the debit of the unpaid insurance premium. The loan
that it extended to Marques was to cover all expenses related to the trust receipt, including the
insurance cost. Hence, FEBTC is clearly the one responsible to take care of the matters of the

Page 500 of 845

insurance premium. Since it failed in its duty due to negligence, it is clearly liable for damages it
caused to Marques, as Marques was unable to get insurance proceeds for his loss.

Page 501 of 845

 ROBLETT INDUSTRIAL CONSTRUCTION CORPORATION

vs. COURT OF APPEALS

266 SCRA 71

FACTS:

On 23 September 1986 respondent Contractors Equipment Corporation (CEC) instituted an

action for a sum of money against petitioner Roblett Industrial Construction Corporation (RICC)
before the Regional Trial Court of Makati alleging that in 1985 it leased to the latter various
construction equipment which it used in its projects. As a result RICC incurred unpaid accounts
amounting to P342,909.38.

On 19 December 1985 RICC through its Assistant Vice President for Finance Candelario S.
Aller Jr. entered into an Agreement with CEC where it confirmed petitioner's account. As an off-
setting arrangement respondent received from petitioner construction materials worth
P115,000.00 thus reducing petitioner's balance to P227,909.38.

A day before the execution of their Agreement, or on 18 December 1985, RICC paid CEC
P10,000.00 in postdated checks which when deposited were dishonored. As a consequence the
latter debited the amount to petitioner's account of P227,909.38 thus increasing its balance to
P237,909.38.

On 24 July 1986 Mariano R. Manaligod, Jr., General Manager of CEC, sent a letter of demand to
petitioner through its Vice President for Finance regarding the latter's overdue account of
P237,909.38 and sought settlement thereof on or before 31 July 1986. In reply, petitioner
requested for thirty (30) days to have enough time to look for funds to substantially settle its
account.

Traversing the allegations of respondent, Candelario S. Aller Jr. declared that he signed the
Agreement with the real intention of having proof of payment. In fact Baltazar Banlot, Vice
President for Finance of petitioner, claimed that after deliberation and audit it appeared that
petitioner overpaid respondent by P12,000.00 on the basis of the latter's Equipment Daily Time
Reports for 2 May to 14 June 1985 which reflected a total obligation of only P103,000.00. He
claimed however that the Agreement was not approved by the Board and that he did not
authorize Aller Jr. to sign thereon.

On rebuttal, Manaligod Jr. declared that petitioner had received a statement of account covering
the period from 28 March to 12 July 1985 in the amount of P376,350.18 which it never
questioned. From this amount P3,440.80, based on respondent's account with petitioner and
P30,000.00, representing payments made by the latter, were deducted thus leaving a balance of
P342,909.38 as mentioned in the Agreement. On 19 December 1990 the trial court rendered
judgment ordering petitioner to pay respondent

Page 502 of 845

ISSUE:

Whether or not the agreement between the parties is binding upon them.

RULING:

Yes. It must be emphasized that the same agreement was used by plaintiff as the basis for
claiming defendant's obligation of P237,909.38 and also used by defendant as the same basis for
its alleged payment in full of its obligation to plaintiff. But while plaintiff treats the entire
agreement as valid, defendant wants the court to treat that portion which treats of the offsetting
of P115,000.00 as valid, whereas it considers the other terms and conditions as "onerous, illegal
and want of prior consent and Board approval." This Court cannot agree to defendant's
contention. It must be stressed that defendant's answer was not made under oath, and therefore,
the genuineness and due execution of the agreement which was the basis for plaintiff's claim is
deemed admitted (Section 8, Rule 8, Rules of Court). Such admission, under the principle of
estoppel, is rendered conclusive upon defendant and cannot be denied or disproved as against
plaintiff (Art. 1431, Civil Code). Either the agreement is valid or void. It must be treated as a
whole and not to be divided into parts and consider only those provisions which favor one party
(in this case the defendant). Contracts must bind both contracting parties, its validity or
compliance cannot be left to the will of one of them (Art. 1308, New Civil Code).

Page 503 of 845

 SIME DARBY PILIPINAS, INC. V. GOODYEAR PHILIPPINES, INC.

GR No. 182148; June 8, 2011

FACTS:

Macgraphics leased a billboard to Sime Darby to bare its name and logo at a monthly rental of
P120, 000.00 for four years and was set to expire on March 30, 1998. Sime Darby paid
Macgraphics a total of P1.2 million representing the ten-month deposit which the latter would
apply to the last ten months of the lease. Thereafter, Sime Darby was bought by Goodyear for a
total of P1.65 billion including the assignment of the receivables in connection with its billboard
advertising. Sime Darby then notified Macgraphics of the assignment of the Magallanes
billboard in favor of Goodyear.

Macgraphics then sent a letter to Sime Darby, dated July 11, 1996, informing the latter that it
could not give its consent to the assignment of lease to Goodyear and advised Goodyear that any
advertising service it intended to get from them would have to wait until after the expiration or
valid pre-termination of the lease then existing with Sime Darby. Goodyear demanded partial
rescission of deed and the refund of P1, 239,000.00value of Sime Darby's leasehold rights over
the Magallanes billboard.

ISSUE:

Whether or not the doctrine of laches can be applied in the present case

RULING:

The Court finds that the doctrine of laches cannot be applied in this case.

Laches is the failure or neglect, for an unreasonable and unexplained length of time, to do that
which, by exercising due diligence, could or should have been done earlier; it is negligence or
omission to assert a right within a reasonable time, warranting the presumption that the party
entitled to assert it either has abandoned or declined to assert it. There is no absolute rule as to
what constitutes laches or staleness of demand; each case is to be determined according to its
particular circumstances, with the question of laches addressed to the sound discretion of the
court. Because laches is an equitable doctrine, its application is controlled by equitable
considerations and should not be used to defeat justice or to perpetuate fraud or injustice.

From the records, it appears that Macgraphics first learned of the assignment when Sime Darby
sent its letter-notice dated May 3, 1996. From the letters sent by Macgraphics to Goodyear, it is
apparent that Macgraphics had to study and determine both the legal and practical implications
of entertaining Goodyear as a client. After review, Macgraphics found that consenting to the
assignment would entail the commitment of manpower and resources that it did not foresee at the
Page 504 of 845
inception of the lease. It thereafter communicated its non-conformity to the assignment. To the
mind of the Court, there was never a delay.

Page 505 of 845

 FAR EAST BANK AND TRUST COMPANY AND ROLANDO BORJA VS SPS.
ERNESTO AND LEONOR C. CAYETANO

G.R. No. 179909

FACTS:

Leonor C. Cayetano executed a special power of attorney in favor of her daughter

Teresita C. Tabing authorizing her to contract a loan from petitioner in an amount not more than
three hundred thousand pesos (P300,000.00) and to mortgage her two (2) lots located in
Barangay Carolina, Naga City. Petitioner foreclosed the mortgage for failure of the respondents
and the spouses Tabing to pay the loan. They asked to postpone the auction but it was still
conducted and sold the property for one hundred sixty thousand pesos. Subsequently, petitioner
consolidated its title and obtained new titles in its name after the redemption period lapsed
without respondents taking any action. More than five (5) years later, Tabing, on behalf of
Cayetano, sent a letter dated September 10, 1996 to petitioner expressing the intent to repurchase
the properties for two hundred fifty thousand pesos (P250,000.00) with proposed terms of
payment. Petitioner refused the offer stating that the minimum asking price for the properties
was five hundred thousand pesos (P500,000.00) and it was not amenable to the proposed terms
of payment. Petitioner nevertheless gave respondents the chance to buy back the properties by
joining a bidding to be set in some future date.

ISSUE: Whether or not they are already estopped to repurchase their property.

RULING:

Notwithstanding the nullity of the real estate mortgage executed by Tabing and her
husband, we find that the equity principle of laches is applicable in the instant case. Laches is
negligence or omission to assert a right within a reasonable time, warranting a presumption that
the party entitled to assert it either has abandoned it or declined to assert it. Its essential elements
are: (1) conduct on the part of the defendant, or of one under whom he claims, giving rise to the
situation complained of; (2) delay in asserting complainants right after he had knowledge of the
defendants conduct and after he has an opportunity to sue; (3) lack of knowledge or notice on
the part of the defendant that the complainant would assert the right on which he bases his suit;
and (4) injury or prejudice to the defendant in the event relief is accorded to the complainant.

There is no absolute rule on what constitutes laches. It is a creation of equity and applied
not really to penalize neglect or sleeping upon ones rights but rather to avoid recognizing a right
when to do so would result in a clearly inequitable situation. The question of laches, we said, is
addressed to the sound discretion of the court and each case must be decided according to its
particular circumstances.24 Verily, in a number of cases, it had been held that laches, the essence
of which is the neglect to assert a right over a long period of time, may prevent recovery of a
titled property

Page 506 of 845

 KINGS PROPERTIES CORP V. GALIDO

G.R. No. 170023 Nov 27, 2009

FACTS:

This case involves an action for cancellation of certificates of title, registration of deed of
sale and issuance of certificates of title filed by Canuto A. Galido. Subsequently a deed of sale
covering the Antipolo property was executed between Rufina Eniceo and Maria Eniceo as
vendors and respondent as vendee. They sold the Antipolo property to respondent for P250,000.
A certain Carmen Aldana delivered the owners duplicate copy of OCT No. 535 to
respondent.Petitioner alleges that when Maria Eniceo died in June 1975, Rufina Eniceo and the
heirs of Maria Eniceo, who continued to occupy the Antipolo property as owners, thought that
the owners duplicate copy of OCT No. 535 was lost. On 5 April 1988, the Eniceo heirs
registered with the Registry of Deeds of Marikina City a Notice of Loss dated 2 April 1988 of
the owners copy of OCT No. 535. The Eniceo heirs also filed a petition for the issuance of a
new owners duplicate copy of OCT No. 535 with Branch 72 of the Regional Trial Court of
Antipolo, Rizal. The RTC rendered a decision finding that the certified true copy of OCT No.
535 contained no annotation in favor of any person, corporation or entity

On 14 March 1995, respondent caused the annotation of his adverse claim in OCT No.
535. On 20 March 1995, the Eniceo heirs executed a deed of absolute sale in favor of petitioner
covering lots 3 and 4 of the Antipolo property for P500,000. On 16 January 1996, respondent
filed a civil complaint with the trial court against the Eniceo heirs and petitioner. Respondent
prayed for the cancellation of the certificates of title issued in favor of petitioner, and the
registration of the deed of sale and issuance of a new transfer certificate of title in favor of
respondent. The trial court rendered its decision dismissing the case for lack of legal and factual
basis. Respondent appealed to the Court of Appeals. On 20 December 2004, the CA rendered a
decision reversing the trial courts decision.

ISSUES:

Whether the adverse claim of respondent over the Antipolo property should be barred by
laches;

HELD:

The essence of laches is the failure or neglect, for an unreasonable and unexplained
length of time, to do that which, through due diligence, could have been done earlier, thus giving
rise to a presumption that the party entitled to assert it had either abandoned or declined to assert
it. Respondent discovered in 1991 that a new owners copy of OCT No. 535 was issued to the
Eniceo heirs. Respondent filed a criminal case against the Eniceo heirs for false testimony. When
respondent learned that the Eniceo heirs were planning to sell the Antipolo property, respondent

Page 507 of 845

caused the annotation of an adverse claim. On 16 January 1996, when respondent learned that
OCT No. 535 was cancelled and new TCTs were issued, respondent filed a civil complaint with
the trial court against the Eniceo heirs and petitioner. Respondents actions negate petitioners
argument that respondent is guilty of laches.

Page 508 of 845

 METROBANK v. CABLZO

G.R. No. 154469 December 6, 2006

FACTS:

Respondent Cabilzo was one of the Metrobanks client who maintained a current
account. On November 12, 199, Cabilzo issued a Metrobank check payable to cash in the
amount of P1,000 and was paid to a certain Mr. Marquez. The check was oresented to Westmont
Bank or payment and in turn indorsed to etrobank for appropriate clearing. It was discovered
that the amount withdrawn wa P91,000, thus, the check was altered. Cabilzo re-credit the amount
of P91,000 to his account but Metrobank refused to comply despite demands. RTC ordered
Metrobank to pay the sum of P90,000 to Cabilzo. Court of Appeals affirmed the decision with
modification.

ISSUE:

Whether holding Metrobank, as drawee bank, liable for the alternations on the subject
check bearing the authentic signature of the drawer thereof

RULING:

The degree of diligence in the exercise of his tasks and the performance of his duties have
been faithfully complied with by Cabilzo. It is obvious that Metrobank was remiss in the duty
and violated that fiduciary relationship with its clients as it appeared that there are material
alterations on the check that are visble to the naked eye but the bank failed to detect such.

Petition is denied. Court of Appeals decision is affirmed with modification that

exemplary damages in the amount of P50,000 be awarded.

Page 509 of 845

 MESINA V. GARCIA

G.R. No. 168035 November 30, 2006

FACTS:

Atty. Honorio Valisno Garcia and Felicisima Mesina, during their lifetime, enstered into a
Contract to Sell over a lot consisting of 235 square meters, situated at Diversion Road, Sangitan,
Cabanatuan City, covered and embraced by TCT No. T-31643 in the name of Felicisima Mesina
which title was eventually cancelled and TCT No. T-78881 was issued in the name of herein
petitioners. The Contract to Sell provides that the cost of the lot is P70.00 per square meter for a
total amount of P16,450.00; payable within a period not to exceed 7 years at an interest rate of
12% per annum, in successive monthly installments of P260.85 per month, starting May 1977.
Thereafter, the succeeding monthly installments are to be paid within the first week of every
month, at the residence of the vendor at Quezon City, with all unpaid monthly installments
earning an interest of 1% per month. Instituting this case at bar, respondent asserts that despite
the full payment made on 7 February 1984 for the consideration of the subject lot,
petitioners refused to issue the necessary Deed of Sale to effect the transfer of the property to
her.

ISSUE:

Whether or not respondents cause of action had already prescribed?

RULING:

Article 1155 of the Civil Code is explicit that the prescriptive period is interrupted when an
action has been filed in court; when there is a written extrajudicial demand made by the
creditors; and when there is any written acknowledgment of the debt by the debtor.

The records reveal that starting 19 April 1986 until 2 January 1997 respondent continuously
demanded from the petitioners the execution of the said Deed of Absolute Sale but the latter
conjured many reasons and excuses not to execute the same. Respondent even filed a Complaint
before the Housing and Land Use Regulatory Board way back in June, 1986, to enforce her
rights and to compel the mother of herein petitioners, who was still alive at that time, to execute
the necessary Deed of Absolute Sale for the transfer of title in her name. On 2 January 1997,
respondent, through her counsel, sent a final demand letter to the petitioners for the execution of
the Deed of Absolute Sale, but still to no avail. Consequently, because of utter frustration of the
respondent, she finally lodged a formal Complaint for Specific Performance with Damages
before the trial court on 20 January 1997. Hence, from the series of written extrajudicial
demands made by respondent to have the execution of the Deed of Absolute Sale in her favor,
the prescriptive period of 10 years has been interrupted. Therefore, it cannot be said that the
cause of action of the respondent has already been prescribed.

Page 510 of 845

 PAHAMOTANG VS. PNB

G.R. No. 156403, March 21, 2005

FACTS:

On July 1, 1972, Melitona Pahamotang died. She was survived by her husband Agustin
Pahamotang, and their eight (8) children, namely: Ana, Genoveva, Isabelita, Corazon, Susana,
Concepcion and herein petitioners Josephine and Eleonor, all surnamed Pahamotang. On
September 15, 1972, Agustin filed with the then Court of First Instance of Davao City a petition
for issuance of letters administration over the estate of his deceased wife. The petition, docketed
as Special Case No. 1792, was raffled to Branch VI of said court, hereinafter referred to as the
intestate court. In his petition, Agustin identified petitioners Josephine and Eleonor as among the
heirs of his deceased spouse. It appears that Agustin was appointed petitioners' judicial guardian
in an earlier case - Special Civil Case No. 1785 also of the CFI of Davao City, Branch VI. On
December 7, 1972, the intestate court issued an order granting Agustins petition.

The late Agustin then executed several mortgages and later sale of the properties with the
PNB and Arguna respectively. The heirs later questioned the validity of the transactions
prejudicial to them. The trial court declared the real estate mortgage and the sale void but both
were valid with respect to the other parties. The decision was reversed by the Court of Appeals;
to the appellate court, petitioners committed a fatal error of mounting a collateral attack on the
foregoing orders instead of initiating a direct action to annul them.

ISSUE:

Whether the Court of Appeals erred in reversing the decision of the trial court

RULING:

In the present case, the appellate court erred in appreciating laches against petitioners. The
element of delay in questioning the subject orders of the intestate court is sorely lacking.
Petitioners were totally unaware of the plan of Agustin to mortgage and sell the estate properties.
There is no indication that mortgagor PNB and vendee Arguna had notified petitioners of the
contracts they had executed with Agustin. Although petitioners finally obtained knowledge
of the subject petitions filed by their father, and eventually challenged the July 18, 1973,
October 19, 1974, February 25, 1980 and January 7, 1981 orders of the intestate court, it is
not clear from the challenged decision of the appellate court when they (petitioners) actually
learned of the existence of said orders of the intestate court. Absent any indication of the point
in time when petitioners acquired knowledge of those orders, their alleged delay in
impugning the validity thereof certainly cannot be established. And the Court of Appeals cannot
simply impute laches against them

Page 511 of 845

Page 512 of 845
 SHOPPER'S PARADISE REALTY & DEVELOPMENT CORPORATION

vs. EFREN ROQUE

January 13, 2004

FACTS:

On 23 December 1993, petitioner Shopper's Paradise Realty & Development Corporation,

represented its president, Veredigno Atienza, entered into a twenty-five year lease with Dr.
Felipe C. Roque, now deceased, over a parcel of land, Petitioner issued to Dr. Roque a check for
P250,000.00 by way of "reservation payment." Simultaneously, petitioner and Dr. Roque
likewise entered into a memorandum of agreement for the construction, development and
operation of a commercial building complex on the property. Conformably with the agreement,
petitioner issued a check for another P250,000.00 "downpayment" to Dr. Roque.

The donation was made in a public instrument duly acknowledged by the donor-spouses before a
notary public and duly accepted on the same day by respondent before the notary public in the
same instrument of donation. The title to the property, however, remained in the name of Dr.
Felipe C. Roque, and it was only transferred to and in the name of respondent sixteen years later,
or on 11 May 1994, while he resided in the United States of America, delegated to his father the
mere administration of the property. Respondent came to know of the assailed contracts with
petitioner only after retiring to the Philippines upon the death of his father. On 9 August 1996,
the trial court dismissed the complaint of respondent.

On appeal, the Court of Appeals reversed the decision of the trial court and held to be
invalid the Contract of Lease and Memorandum of Agreement.

ISSUE:

Whether or not the respondent is barred by laches and estoppel from denying the contracts.

RULING:

The essential elements of estoppel in pais, in relation to the party sought to be estopped,
are: 1) a clear conduct amounting to false representation or concealment of material facts or, at
least, calculated to convey the impression that the facts are otherwise than, and inconsistent with,
those which the party subsequently attempts to assert; 2) an intent or, at least, an expectation,
that this conduct shall influence, or be acted upon by, the other party; and 3) the knowledge,
actual or constructive, by him of the real facts. With respect to the party claiming the estoppel,
the conditions he must satisfy are: 1) lack of knowledge or of the means of knowledge of the
truth as to the facts in question; 2) reliance, in good faith, upon the conduct or statements of the
party to be estopped; and 3) action or inaction based thereon of such character as to change his
position or status calculated to cause him injury or prejudice. It has not been shown that

Page 513 of 845

respondent intended to conceal the actual facts concerning the property; more importantly,
petitioner has been shown not to be totally unaware of the real ownership of the subject property.
Altogether, there is no cogent reason to reverse the Court of Appeals in its assailed decision.

Page 514 of 845

 MEATMASTER vs. LELIS INTEGRATED

452 SCRA 626

FACTS:

On November 11, 1993, petitioner Meatmasters International Corporation engaged the services
of respondent Lelis Integrated Development Corporation to undertake the construction of a
slaughterhouse and meat cutting and packing plant. The Construction Agreement provided that
the construction of petitioners slaughterhouse should be completed by March 10, 1994.
Respondent failed to finish the construction of the said facility within the stipulated period,
hence, petitioner filed a complaint for rescission of contract and damages on August 9, 1996
before the Regional Trial Court.

On November 23, 1998, the trial court rendered decision RESCINDING the Construction
Agreement between plaintiff Meatmaster Intl. Corp. and defendant Lelis Integrated Devt. Corp.
with both parties shouldering their own respective damage.

A copy of the decision was received by the respondent on December 9, 1998. A motion for
reconsideration was filed by respondent on December 22, 1998, but the same was denied. A
copy of the resolution denying the motion for reconsideration was received on March 25, 1999.
Respondent filed its notice of appeal on March 29, 1999.

Initially, the trial court dismissed the appeal for failure of the respondent to pay the requisite
docket fees within the reglementary period. Upon motion by the respondent however, the trial
court reconsidered and gave due course to the notice of appeal because respondent paid the
docket fees.

In a motion to dismiss filed before the appellate court, the petitioner alleged that respondents
appeal suffers from jurisdictional infirmity because of late payment of docket fees.

CA set aside the decision of the trial court and directed petitioner to pay respondent the amount
of P1,863,081.53. Petitioners motion for reconsideration was denied Hence, the instant petition.

ISSUE:

Whether or not the Court of Appeals erred in entertaining the appeal of respondent despite the
finality of the trial courts decision.

RULING:

Yes. It is well-established that the payment of docket fees within the prescribed period is
mandatory for the perfection of an appeal. This is so because a court acquires jurisdiction over

Page 515 of 845

the subject matter of the action only upon the payment of the correct amount of docket fees
regardless of the actual date of filing of the case in court. The payment of the full amount of the
docket fee is a sine qua non requirement for the perfection of an appeal. The court acquires
jurisdiction over the case only upon the payment of the prescribed docket fees.

In the case at bar, the respondent seasonably filed the notice of appeal but it paid the docket fees
one (1) month after the lapse of the appeal period. As admitted by the respondent, the last day
for filing the notice of appeal was on March 29, 1999, but it paid the docket fees only on April
30, 1999 because of oversight. Obviously, at the time the said docket fees were paid, the
decision appealed from has long attained finality and no longer appealable.

Respondents contention that the petitioner is now estopped from raising the issue of late
payment of the docket fee because of his failure to assail promptly the trial courts order
approving the notice of appeal and accepting the appeal fee, is untenable. Estoppel by laches
arises from the negligence or omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to assert it either has abandoned or declined to assert it. In the
case at bar, petitioner raised at the first instance the non-payment of the docket fee in its motion
for reconsideration before the trial court. Petitioner reiterated its objection in the motion to
dismiss before the appellate court and finally, in the instant petition. Plainly, petitioner cannot be
faulted for being remiss in asserting its rights considering that it vigorously registered a
persistent and consistent objection to the Court of Appeals assumption of jurisdiction at all
stages of the proceedings.

Page 516 of 845

 MANIPOR vs. RICAFORT

407 SCRA 298

FACTS:

Respondent spouses Pablo and Antonia Ricafort instituted an action for annulment of
Transfer of Certificate of Title in the name of spouses Renato and Teresita Villareal covering a
299 sq.m. lot. The Ricaforts alleged that they are co-owners of said property together with
Abelardo, the father and predecessor of Renato as evidenced by an agreement whereby Abelardo
recognized their ownership of portion of the lot. Respondents also claim that, in violation of
the agreement, Abelardo obtained during his lifetime Original Certificate of Title over the lot
without their knowledge and consent. When Abelardo died in 1993, Renato and Teresita
transferred the title over the land in their name and were issued a TCT.

In the course of the proceedings, parties entered into a compromise settlement wherein
the Villareals admitted the genuineness and due execution of the agreement between respondents
and Abelardo. Hence, they agreed to physically divide the lot into half. They also agreed to cause
a relocation survey and the expenses will be borne equally by them.

The trial court approved the compromise agreement but not long thereafter, respondents
filed a motion to cite the Villareals in contempt of court for refusing to comply with the terms of
the agreement. Eventually, herein petitioners who are all siblings of Renato filed a motion for
intervention and substitution of parties alleging that spouses Renato and Teresita have waived
their interest in the disputed lot in their favor. Petitioners availed of various remedies only to
pursue the endeavor for the annulment of the compromise judgment. Most of them were denied
until they resorted to this review before the Supreme Court.

ISSUE:

Whether or not the petitioners are estopped from seeking the annulment of the
compromise judgment.

RULING:

Yes, note that in a Sinumpaang Salaysay, petitioners admitted that they acquiesced to
have the subject lot donated and registered in Renatos name. In view of such admission,
petitioners are estopped from denying Renatos absolute title to the lot. Under the principle of
estoppel, an admission or representation is rendered conclusive upon the person making it and
cannot be denied against the person relying thereon. Verily, since petitioners admitted that they
donated the lot to Renato, they cannot now be allowed to defeat respondents claim by
conveniently asserting that they are co-owners of the lot. Otherwise, respondents, who rightfully
relied on the Certificate of Title, would be prejudiced by petitioners misleading conduct.

Page 517 of 845

 LARENA vs. MAPILI

408 SCRA 484

FACTS:

Hipolito Mapili during his lifetime owned a parcel of unregistered land declared for taxation
purposes in his name. The property had descended by succession from Hipolito to his only son
Magno and on to the latters own widow and children. These heirs, the herein respondents, took
possession of the property up to the outbreak of World War II when they evacuated to the
hinterlands.

On the other hand, petitioner Aquilina Larena took possession of the property in the1970s
alleging that she had purchased it from her aunt (Filomena Larena) on February 17, 1968.
Filomena Larena in turn claimed to have bought it from Hipolito on October 28, 1949, as
evidence by the Affidavit of Transfer of Real Property executed on the same date. The Regional
Trial Court, however, declared the said affidavit as spurious because Hipolito was already dead
when the alleged transfer was made to Filomena Larena.

On appeal, the Court of Appeals declared that respondents had never lost their right to the land in
question as they were the heirs to whom the property had descended upon the death of the
original claimant and possessor.

ISSUE:

Whether or not Filomena Larena acquired the subject property by means of sale,
prescription, and/or laches.

RULING:

No, Filomena did not acquire said property by means of sale, prescription and/or laches. First,
the tax declarations are not a conclusive evidence of ownership, but a proof that the holder has a
claim of title over the property. It is good indicia of possession in the concept of owner. It may
strengthen Aquilinas bona fide claim of acquisition of ownership. However, petitioners failed to
present the evidence needed to tack the date of possession on the property in question.

Second, acquisitive prescription is a mode of acquiring ownership by a possessor through the

requisite lapse of time. Since the claims of purchase were unsubstantiated, petitioners acts of
possessory character have been merely tolerated by the owner. Hence, it did not constitute
possession. Moreover, there is lack of just title on the part of Aquilina and therefore, ordinary
acquisitive prescription of ten (10) years as provided under Article 1134 of the Civil Code cannot
be applied. Under Article 1137 of the Civil Code, the lapse of time required for extra-ordinary
acquisitive prescription is thirty (30) years, and records show that the lapse of time was only

Page 518 of 845

twenty-seven (27) yearsa period that was short of three (3) years, when the complaint was
filed.

Finally, laches is a failure or neglect for an unreasonable and unexplained length of time to do
that which could or should have been done earlier through the exercise of due diligence. The
filing by respondents of the complaint in 1977 completely negates the decision that the latter
were negligent in asserting their claim.

Page 519 of 845

 SANTOS vs. SANTOS

366 SCRA 395

FACTS:

Petitioner Zenaida M. Santos is the widow of Salvador Santos, a brother of private respondents
Calixto, Alberto, Antonio, all surnamed Santos and Rosa Santos-Carreon.

The spouses Jesus and Rosalia were the parents of the respondents and the husband of the
petitioner. The spouses owned a parcel of registered land with a four-door apartment
administered by Rosalia who rented them out. On January 19, 1959, the spouses executed a deed
of sale of the properties in favor of their children Salvador and Rosa. Rosa in turn sold her share
to Salvador on November 20, 1973, which resulted in the issuance of new TCT. Despite the
transfer of the property to Salvador, Rosalia continued to lease and receive rentals from the
apartment units.

On January 9, 1985, Salvador died, followed by Rosalia who died the following month. Shortly
after, petitioner Zenaida, claiming to be Salvadors heir, demanded the rent from Antonio
Hombrebueno, a tenant of Rosalia. When the latter refused to pay, Zenaida filed an ejectment
suit against him with the Metropolitan Trial Court of Manila, which eventually decided in
Zenaidas favor.

On January 5, 1989, private respondent instituted an action for reconveyance of property with
preliminary injunction against petitioner in the Regional Trial Court of Manila, where they
alleged that the two deeds of sale were simulated for lack of consideration. The petitioner on the
other hand denied the material allegations in the complaint and that she further alleged that the
respondents right to reconveyance was already barred by prescription and laches considering the
fact that from the date of sale from Rosa to Salvador up to his death, more or less twelve (12)
years had lapsed, and from his death up to the filing of the case for reconveyance, four (4) years
has elapsed. In other words, it took respondents about sixteen (16) years to file the case.
Moreover, petitioner argues that an action to annul a contract for lack of consideration prescribes
in ten (10) years and even assuming that the cause of action has not prescribed, respondents are
guilty of laches for their inaction for a long period of time.

The trial court decided in favor of private respondents in as much as the deeds of sale were
fictitious, the action to assail the same does not prescribe.

Upon appeal, the Court of Appeals affirmed the trial courts decision. It held that the subject
deeds of sale did not confer upon Salvador the ownership over the subject property, because even
after the sale, the original vendors remained in dominion, control, and possession thereof.

Page 520 of 845

ISSUE:

Whether or not the cause of action of the respondents had prescribed and/or barred by laches.

RULING:

No, the cause of action by the respondents had not prescribed nor is it barred by laches.

First, the right to file an action for the reconveyance of the subject property to the estate of
Rosalia has not prescribed since deeds of sale were simulated and fictitious. The complaint
amounts to a declaration of nullity of a void contract, which is imprescriptible. Hence,
respondents cause of action has not prescribed.

Second, neither is their action barred by laches. The elements of laches are: 1) conduct on the
part of the defendant, or of one under whom he claims, giving rise to the situation of which the
complainant seeks a remedy; 2) delay in asserting the complainants rights, the complainant
having knowledge or notice of the defendants conduct as having been afforded an opportunity to
institute a suit; 3) lack of knowledge or notice on the part of the defendant that the complainant
would assert the right in which he bases his suit; and 4) injury or prejudice to the defendant in
the event relief is accorded to the complainant, or the suit is not held barred. These elements
must all be proved positively. The lapse of four (4) years is not an unreasonable delay sufficient
to bar respondents action. Moreover, the fourth (4th) element is lacking in this case. The
concept of laches is not concerned with the lapse of time but only with the effect of unreasonable
lapse. The alleged sixteen (16) years of respondents inaction has no adverse effect on the
petitioner to make respondents guilty of laches.

Page 521 of 845

 VILLANUEVA- MIJARES ET. AL. vs. COURT OF APPEALS

April 12, 2000

FACTS:

Felipe Villanueva left a 15,336-square-meter parcel of land in Kalibo, Capiz to his eight
children: Simplicio, Benito, Leon, Eustaquio, Camila, Fausta and Pedro. In 1952, Pedro declared
under his name 1/6 portion of the property (1,905 sq. m.). He held the remaining properties in
trust for his co-heirs who demanded the subdivision of the property but to no avail. After Leons
death in 1972, private respondents discovered that the shares of Simplicio, Nicolasa, Fausta and
Maria Baltazar had been purchased by Leon through a deed of sale dated August 25, 1946 but
registered only in 1971. In July 1970, Leon also sold and partitioned the property in favor of
petitioners, his children, who thereafter secured separate and independent titles over their
respective pro- indiviso shares.

Private respondents, who are also descendants of Felipe, filed an action for partition with
annulment of documents and/or reconveyance and damages against petitioners. They contended
that Leon fraudulently obtained the sale in his favor through machinations and false pretenses.
The RTC declared that private respondents action had been barred by res judicata and that
petitioners are the legal owners of the property in question in accordance with the individual
titles issued to them.

ISSUE:

Whether or not laches apply against the minors property that was held in trust.

RULING:

No. At the time of the signing of the Deed of Sale of August 26,1948, private respondents
Procerfina, Prosperedad, Ramon and Rosa were minors. They could not be faulted for their
failure to file a case to recover their inheritance from their uncle Leon, since up to the age of
majority, they believed and considered Leon their co-heir administrator. It was only in 1975, not
in 1948, that they became aware of the actionable betrayal by their uncle. Upon learning of their
uncles actions, they filed for recovery. Hence, the doctrine of stale demands formulated in
Tijam cannot be applied here. They did not sleep on their rights, contrary to petitioners
assertion.

Furthermore, when Felipe Villanueva died, an implied trust was created by operation of law
between Felipes children and Leon, their uncle, as far as the 1/6 share of Felipe. Leons
fraudulent titling of Felipes 1/6 share was a betrayal of that implied trust.

Page 522 of 845

 GARCIA VS. VILLAR

G.R. No. 158891 June 27, 2012

Facts:

Lourdes V. Galas was the original owner of the subject propertywith her daughter, Ophelia G.
Pingolas co-maker, mortgaged the subject property to Yolanda Valdez Villar as security for a
loan.Galas, again with Pingol as her comaker, mortgaged the same subject property to Pablo P.
Garcia to secure her loan. Galas sold the subject property to Villar and declared in the Deed of
Sale that such property was free and clear of all liens and encumbrances of any kind whatsoever.

Garcia filed a Petition for Mandamus with Damages against Villar and subsequently amended
his petition to a complaint for Foreclosure of Real Estate Mortgage with Damages alleging that
when Villar purchased the subject property, she acted in bad faith and with malice as she
knowingly and willfully disregarded the provisions on laws on judicial and extrajudicial
foreclosure of mortgaged property. Garcia further claimed that when Villar purchased the subject
property, Galas was relieved of her contractual obligation and the characters of creditor and
debtor were merged in the person of Villar. Therefore, Garcia argued, he, as the second
mortgagee, was subrogated to Villars original status as first mortgagee, which is the creditor
with the right to foreclose. Garcia further asserted that he had demanded payment from
Villar,whose refusal compelled him to incur expenses in filing an action in court.

Villar, in her Answer claimed that the complaint stated no cause of action and that the second
mortgage was done in bad faith as it was without her consent and knowledge. Villar alleged that
she only discovered the second mortgage when she had the Deed of Sale registered. Villar
blamed Garcia for the controversy as he accepted the second mortgage without prior consent
from her. She averred that there could be no subrogation as the assignment of credit was done
with neither her knowledge nor prior consent. Villar added that Garcia should seek recourse
against Galas and Pingol, with whom he had privity insofar as the second mortgage of property
is concerned.

The RTC ruled in favor of Garcia. Villar appealed to the court of appeals which reversed the
ruling of the regional trial court.

Issue:

Whether or not the sale of the subject property to Villar was in violation of the
prohibition on pactumcommissorium

Ruling:

No.The following are the elements of pactumcommissorium:

Page 523 of 845
(1) There should be a property mortgaged by way of security for the payment of the principal
obligation; and

(2) There should be a stipulation for automatic appropriation by the creditor of the thing
mortgaged in case of non-payment of the principal obligation within the stipulated period.39
Villars purchase of the subject property did not violate the prohibition on pactumcommissorium.
The power of attorney provision above did not provide that the ownership over the subject
property would automatically pass to Villar upon Galass failure to pay the loan on time. What it
granted was the mere appointment of Villar as attorney-in-fact, with authority to sell or
otherwise dispose of the subject property, and to apply the proceeds to the payment of the
loan.40 This provision is customary in mortgage contracts, and is in conformity with Article
2087 of the Civil Code, which reads: Art. 2087. It is also of the essence of these contracts that
when the principal obligation becomes due, the things in which the pledge or mortgage consists
may be alienated for the payment to the creditor.

Galass decision to eventually sell the subject property to Villar for an additional P1,500,000.00
was well within the scope of her rights as the owner of the subject property. The subject property
was transferred to Villar by virtue of another and separate contract, which is the Deed of Sale.
Garcia never alleged that the transfer of the subject property to Villar was automatic upon
Galass failure to discharge her debt, or that the sale was simulated to cover up such automatic
transfer.

Page 524 of 845

 SPS. EDRALIN V. PHIL. VETERANS BANK

G.R. No. 168523, March 09, 2011

FACTS:

Veterans Bank granted petitioner spouses Fernando and Angelina Edralin a loan in the
amount of Two Hundred Seventy Thousand Pesos (P270,000.00). As security thereof,
petitioners executed a Real Estate Mortgage in favor of Veterans Bank over a real property
situated in the Municipality of Paraaque and registered in the name of petitioner Fernando
Edralin. The Edralins failed to pay their obligation to Veterans Bank. Veterans Bank filed a
Petition for Extrajudicial Foreclosure of the REM. It was foreclosed and a sale was held at public
auction. Veterans Bank emerged as the highest bidder. Upon the Edralins failure to redeem the
property during the one-year period provided under Act No. 3135, Veterans Bank acquired
absolute ownership of the subject property. Consequently, Veterans Bank caused the
consolidation of ownership of the subject property in its name. The Edralins failed to vacate and
surrender possession of the subject property to Veterans Bank. Thus, Veterans Bank filed an Ex-
Parte Petition for the Issuance of a Writ of Possession. The same, however, was dismissed for
Veterans Banks failure to prosecute. Veterans Bank again filed an Ex-Parte Petition for Issuance
of Writ of Possession

The Edralins moved to dismiss the petition on the ground that the dismissal of LRC No.
96-060 constituted res judicata. The trial court denied the motion to dismiss explaining that the
ground of failure to present evidence is not a determination of the merits of the case hence does
not constitute res judicata on the petition for issuance of a writ of possession. The appellate court
ruled in favor of Veterans Bank hence the petition.

ISSUE:

Whether the consolidation of ownership of the extrajudicially foreclosed property

through a Deed of Sale is in accordance with law.

HELD:

"The right to possess a property merely follows the right of ownership," and it would be
illogical to hold that a person having ownership of a parcel of land is barred from seeking
possession thereof. Moreover, the provisions cited by petitioners refer to prescription of actions.
An action is "defined as an ordinary suit in a court of justice, by which one party prosecutes
another for the enforcement or protection of a right, or the prevention or redress of a wrong." On
the other hand "a petition for the issuance of the writ, under Section 7 of Act No. 3135, as
amended, is not an ordinary action filed in court, by which one party `sues another for the
enforcement or protection of a right, or prevention or redress of a wrong.' It is in the nature of an
ex parte motion [in] which the court hears only one side. It is taken or granted at the instance

Page 525 of 845

and for the benefit of one party, and without notice to or consent by any party adversely affected.
Accordingly, upon the filing of a proper motion by the purchaser in a foreclosure sale, and the
approval of the corresponding bond, the writ of possession issues as a matter of course and the
trial court has no discretion on this matter."Hence the Petition was denied for lack of merit. The
CA Decision dated June 10, 2005 in CA-G.R. SP No. 89248 was affirmed.

Page 526 of 845

 UNIVERSITY PHYSICIANS SERVICES, INCORPORATED VS. MARIAN CLINICS,
INC.

G.R. No. 152303 September 1, 2010

FACTS:

Marian Clinics, Inc.and University Physicians Services, Incorporated entered into a

Lease Agreement whereby the former leased to the latter the Marian General Hospital and four
schools for a period of ten years. The land, buildings, facilities, fixtures and equipment
appurtenant thereto, including the soledad Building, were included in the lease, for which a
monthly rental of P70,000 was agreed upon. Later, UPSI filed a complaint for specific
performance against MCIand prayed for the delivery of the Certificates of Occupancy of the
buildings leased, for the correction of the defects in the electrical installations thereon, and
damages. UPsi sent a letter to MCI, informing it of the filing of the complaint and the suspension
of payment of the monthly rentals until the resolution of the case. On November 7, 1975, MCI
sent a demand letter to UPSI for the payment of the rent.

Thereafter, MCI and Dr. Lourdes F. Mabanta filed a Complaint for Unlawful Detainer
against UPSI which was later on dismissed the on the finding that (1) UPSIs suspension of
rental payments was justified; and (2) there was no ground to cause the rescission of the lease
and warrant the ejectment of UPSI.

During the pendency of these cases, MCI ceded to the Development Bank of the
Philippines some of the leased buildings, including certain facilities, furniture, fixtures and
equipment found therein, in full settlement of MCIs debt to DBP. The Deed of Cession of
Properties in Payment of Debt (Dacion en Pago) contained an annex which listed the properties
ceded to DBP. Upon the execution of the dacion en pago, UPSI paid P60,000 of the monthly
rental to DBP as the new owner of the properties subject of the dacion en pago.

The RTC of Manila affirmed the City Court Decision dismissing MCIs unlawful
detainer case. The intermediate appellate court rendered its Decision reversing the rulings of the
lower courts. According to the CA, the absence of the certificates of occupancy for two of the
leased buildings, being a matter between the owner of the building and the city government, did
not impair the peaceful and adequate enjoyment by UPSI of the premises and the alleged
defective electrical installations on the premises leased is no justification for the refusal to pay
rentals, as, under Article 1663 of the Civil Code, the lessee may have said installations properly
reinstalled at the expense of the lessor.Hence, the petition.

Issue:

Page 527 of 845

 Whether or not the order for the replacement of the subject properties had been rendered
moot by dacion en pago, by a deed of conditional sale, and by payment in full satisfaction of the
judgment credit

Ruling:

Yes. On UPSIs argument that the order for the replacement of the subject properties had
been rendered moot by dacion en pago, by a deed of conditional sale, and by payment in full
satisfaction of the judgment credit in Civil Case No. 529778, we rule that the same may also be
and are best threshed out in hearings to be conducted by the execution court. Indeed, there is a
need for the execution court to (1) identify the mass of properties actually leased to UPSI; (2)
identify and exclude the properties transferred to DBP under the dacion en pago and to UPSI
under the conditional deed of sale; and (3) identify and exclude properties which UPSI already
returned, replaced or paid the value of in Civil Case No. 529778. UPSI can be made responsible
for only the remaining leased assets which have not been previously returned or replaced, if there
are any. As these matters are factual in nature and it is elementary that this Court is not a trier of
facts, remand of the case to the execution court would be in order.

Page 528 of 845

 MARTIN V. DBS

G.R. No. 174632 June 16, 2010

FACTS:

Felicidad T. Martin, Melissa M. Isidro, Grace M. David, Caroline M. Garcia, Victoria M.

Roldan, and Benjamin T. Martin, Jr., as lessors, entered into a lease contract with the DBS Bank
Philippines, Inc., covering a commercial warehouse and lots that DBS was to use for office,
warehouse, and parking yard for repossessed vehicles. The lease was for five years, from March
1, 1997 to March 1, 2002, at a monthly rent of P300,000.00 for the first year, P330,000.00 for the
second year, P363,000.00 for the third year, P399,300.00 for the fourth year, and P439,230.00 for
the final year, all net of withholding taxes. DBS paid a deposit of P1,200,000.00 and advance
rentals of P600,000.00. On May 25 and August 13, 1997 heavy rains flooded the leased property
and submerged into water the DBS offices there along with its 326 repossessed vehicles. As a
result, on February 11, 1998 DBS wrote the Martins demanding that they take appropriate steps to
make the leased premises suitable as a parking yard for its vehicles. DBS suggested the
improvement of the drainage system or the raising of the propertys ground level. In response, the
Martins filled the propertys grounds with soil and rocks. But DBS lamented that the property
remained unsuitable for its use since the Martins did not level the grounds. Worse, portions of the
perimeter fence collapsed because of the excessive amount of soil and rock that were haphazardly
dumped on it. In June 1998, DBS vacated the property but continued paying the monthly rents. On
September 11, 1998, however, it made a final demand on the Martins to restore the leased premises
to tenantable condition on or before September 30, 1998, otherwise, it would rescind the lease
contract. On September 24, 1998 the Martins contracted the services of Altitude Systems &
Technologies Co. for the reconstruction of the perimeter fence on the property. On October 13,
1998 DBS demanded the rescission of the lease contract and the return of its deposit. At that point,
DBS had already paid the monthly rents from March 1997 to September 1998. The Martins
refused, however, to comply with DBS demand. On July 7, 1999 DBS filed a complaint against
the Martins for rescission of the contract of lease with damages before the Regional Trial Court of
Makati City, Branch 141, in Civil Case 99-1266. Claiming that the leased premises had become
untenantable, DBS demanded rescission of the lease contract as well as the return of its deposit of
P1,200,000.00.

The Makati City RTC rendered a decision, dismissing the complaint against the Martins.
The trial court found that, although the floods submerged DBS vehicles, the leased premises
remained tenantable and undamaged. Moreover, the Martins had begun the repairs that DBS
requested but were not given sufficient time to complete the same. It held that DBS unjustifiably
abandoned the leased premises and breached the lease contract. Thus, the trial court ordered its
deposit of P1,200,000.00 deducted from the unpaid rents due the Martins and ordered DBS to pay
them the remaining P15,198,360.00 in unpaid rents.

Page 529 of 845

 On appeal to the Court of Appeals, the court rendered judgment reversing and setting aside
the RTC decision. The CA found that floods rendered the leased premises untenantable and that
the RTC should have ordered the rescission of the lease contract especially since the contract
provided for such remedy. The CA ordered the Martins to apply the deposit of P1,200,000.00 to
the rents due up to July 7, 1999 when DBS filed the complaint and exercised its option to rescind
the lease. The CA ordered the Martins to return the remaining balance of the deposit to DBS. With
the denial of their separate motions for reconsideration DBS and the Martins filed their respective
petitions for review before this Court in G.R. 174632 and 174804. The Court eventually
consolidated the two cases.

ISSUE:

Whether or not the CA erred in holding that DBS is entitled to the rescission of the lease
contract only from July 7, 1999 when it filed its action for rescission, entitling the Martins to
collect rents until that time.

HELD:

Unless the terms of a contract are against the law, morals, good customs, and public policy,
such contract is law between the parties and its terms bind them. In Felsan Realty & Development
Corporation v. Commonwealth of Australia,13 the Court regarded as valid and binding a provision
in the lease contract that allowed the lessee to pre-terminate the same when fire damaged the leased
building, rendering it uninhabitable or unsuitable for living. Here, paragraph VIII14 of the lease
contract between DBS and the Martins permitted rescission by either party should the leased
property become untenantable because of natural causes. Thus In case of damage to the leased
premises or any portion thereof by reason of fault or negligence attributable to the lessee, its agents,
employees, customers, or guests, the lessee shall be responsible for undertaking such repair or
reconstruction. In case of damage due to fire, earthquake, lightning, typhoon, flood, or other
natural causes, without fault or negligence attributable to the lessee, its agents, employees,
customers or guests, the lessor shall be responsible for undertaking such repair or reconstruction.
In the latter case, if the leased premises become untenantable, either party may demand for the
rescission of this contract and in such case, the deposit referred to in paragraph III shall be returned
to the lessee immediately. The Martins claim that DBS cannot invoke the above since they
undertook the repair and reconstruction of the leased premises, incurring P1.6 million in expenses.
The Martins point out that the option to rescind was available only if they failed to do the repair
work and reconstruction.

But, under their agreement, the remedy of rescission would become unavailable to DBS
only if the Martins, as lessors, made the required repair and reconstruction after the damages by
natural cause occurred, which meant putting the premises after the floods in such condition as
would enable DBS to resume its use of the same for the purposes contemplated in the agreement,
namely, as office, warehouse, and parking space for DBS repossessed vehicles. Here, it is

Page 530 of 845

undisputed that the floods of May 25 and August 13, 1997 submerged the DBS offices and its 326
repossessed vehicles. The floods rendered the place unsuitable for its intended uses. And, while
the Martins did some repairs, they did not restore the place to meet DBS needs. The
photographs16 taken of the place show that the Martins filled the grounds with soil and rocks to
raise the elevation but did not level and compact the same so they could accommodate the
repossessed vehicles. Moreover, the heaviness of the filling materials caused portions of the
perimeter walls to collapse or lean dangerously.17 Indeed, the Office of the City Engineer advised
DBS that unless those walls were immediately demolished or rehabilitated, they would endanger
passersby

Undeniably, the DBS suffered considerable damages when flood waters deluged its offices
and 326 repossessed vehicles. Notably, DBS vacated the leased premises in June of 1998, without
rescinding the lease agreement, evidently to allow for unhindered repair of the grounds. In fact,
DBS continued to pay the monthly rents until September 1998, showing how DBS leaned back to
enable the Martins to finish the repair and rehabilitation of the place. 19 The Martins provided
basis for rescission by DBS when they failed to do so.

Hence the Court denied the petition and affirmed with mocifications the April 26, 2006
decision of the Court of Appeals in CA-G.R. CV 76210 in that Felicidad T. Martin, Melissa M.
Isidro, Grace M. David, Caroline M. Garcia, Victoria M. Roldan, and Benjamin T. Martin, Jr. are
ORDERED to return the full deposit of P1,200,000.00 to DBS Bank Philippines, Inc. (formerly
known as Bank of Southeast Asia, now merged with and into BPI Family Bank) with interest of
12% per annum to be computed from the finality of this decision until the amount is fully paid.

Page 531 of 845

 HEIRS OF ZABALA V. CA

G.R. No. 189602 May 6, 2010

FACTS:

On April 1, 2002, respondent Vicente T. Manuel filed a Complaint for ejectment with
damages against Alfredo Zabala before the Municipal Trial Court in Cities of Balanga, Bataan.
Respondent alleged that he was in actual and peaceful possession of a fishpond (Lot No. 1483)
located in Ibayo, Balanga City. On October 15, 2001, Zabala allegedly entered the fishpond
without authority, and dumped soil into the fishpond without an Environment Compliance
Certificate. Zabala continued such action until the time of the filing of the Complaint, killing the
crabs and the bangus that respondent was raising in the fishpond. Thus, respondent asked that
Zabala be restrained from touching and destroying the fishpond; that Zabala be ejected therefrom
permanently; and for actual and moral damages and attorneys fees. Zabala promptly moved for
the dismissal of the Complaint for non-compliance with the requirement under the Local
Government Code to bring the matter first to barangay conciliation before filing an action in court.

Respondent subsequently filed a Motion for Judgment on the ground of petitioners failure to file
a responsive pleading or answer. The MTCC, in an Order dated May 27, 2003, granted Zabalas
motion and dismissed the Complaint, holding that respondent indeed violated the requirement of
barangay conciliation. Respondent then appealed the ruling to the Balanga, Bataan Regional Trial
Court. In a decision dated March 30, 2004,[5] the RTC reversed the MTCCs May 27, 2003 Order
and rendered judgment directing Zabala, his heirs or subalterns to immediately vacate Lot No.
1483 and restore respondent to his peaceful possession thereof. The RTC also directed Zabala to
pay respondent actual damages, moral damages, and attorneys fees. The RTC found that Zabala
did not, in fact, file an answer to the Complaint. Zabala then filed a Petition for Review before the
Court of Appeal. The CA promulgated a Decision upholding the RTCs reversal of the MTCCs
Order. The CA held that, based on the allegations in the Complaint, the requirement for prior
conciliation proceedings under the Local Government Code was inapplicable to the suit before the
MTCC, the action being one for ejectment and damages, with application for a writ of preliminary
injunction, even without the use of those actual terms in the Complaint. However, the CA granted
Zabalas prayer for the deletion of the awards for actual and moral damages, and for attorneys
fees. Zabala filed a Motion for Reconsideration, which the CA denied. Zabalas heirs filed this
Verified Petition for Certiorari. They prayed for the annulment of the CAs December 19, 2008
Decision and August 26, 2009 Resolution, and for the reinstatement of the MTCCs May 27, 2003
Order. In the alternative, they prayed that the Court remand the records to the MTCC, so that they
could file their Answer, and that due proceedings be undertaken before judgment. In a Resolution
dated November 18, 2009, respondents were required to file their Comment on the Petition.
Subsequently a Compromise Agreement was entered into by the parties.

Page 532 of 845

ISSUE:

Whether or not the case must prosper and continue considering the present circumstances

HELD :

No. The Court ruled that Under Article 2028 of the Civil Code, a compromise agreement
is a contract whereby the parties, by making reciprocal concessions, avoid litigation or put an end
to one already commenced. Compromise is a form of amicable settlement that is not only allowed,
but also encouraged in civil cases. Contracting parties may establish such stipulations, clauses,
terms, and conditions as they deem convenient, provided that these are not contrary to law, morals,
good customs, public order, or public policy. Thus, finding the above Compromise Agreement to
have been validly executed and not contrary to law, morals, good customs, public order, or public
policy, we approve the same. Thus the Compromise Agreement was and judgment is hereby
rendered in accordance therewith. By virtue of such approval, this case was deemed terminated.

Page 533 of 845

 STAR PAPER vs. SIMBOL

487 SCRA 228

FACTS:

Petitioner was the employer of the respondents. Under the policy of Star Paper the
employees are:

1. New applicants will not be allowed to be hired if in case he/she has a relative, up to the 3rd
degree of relationship, already employed by the company.

2. In case of two of our employees (singles, one male and another female) developed a friendly
relationship during the course of their employment and then decided to get married, one of them
should resign to preserve the policy stated above.

Respondents Comia and Simbol both got married to their fellow employees. Estrella on
the other hand had a relationship with a co-employee resulting to her pregnancy on the belief that
such was separated. The respondents allege that they were forced to resign as a result of the
implementation of the said assailed company policy.

The Labor Arbiter and the NLRC ruled in favor of petitioner. The decision was appealed
to the Court of Appeals which reversed the decision.

ISSUE:

Whether the prohibition to marry in the contract of employment is valid

HELD:

It is significant to note that in the case at bar, respondents were hired after they were found
fit for the job, but were asked to resign when they married a co-employee. Petitioners failed to
show how the marriage of Simbol, then a Sheeting Machine Operator, to Alma Dayrit, then an
employee of the Repacking Section, could be detrimental to its business operations. Neither did
petitioners explain how this detriment will happen in the case of Wilfreda Comia, then a Production
Helper in the Selecting Department, who married Howard Comia, then a helper in the cutter-
machine. The policy is premised on the mere fear that employees married to each other will be less
efficient. If we uphold the questioned rule without valid justification, the employer can create
policies based on an unproven presumption of a perceived danger at the expense of an employees
right to security of tenure.

Page 534 of 845

 Petitioners contend that their policy will apply only when one employee marries a co-
employee, but they are free to marry persons other than co-employees. The questioned policy may
not facially violate Article 136 of the Labor Code but it creates a disproportionate effect and under
the disparate impact theory, the only way it could pass judicial scrutiny is a showing that it is
reasonable despite the discriminatory, albeit disproportionate, effect. The failure of petitioners to
prove a legitimate business concern in imposing the questioned policy cannot prejudice the
employees right to be free from arbitrary discrimination based upon stereotypes of married
persons working together in one company.

Lastly, the absence of a statute expressly prohibiting marital discrimination in our

jurisdiction cannot benefit the petitioners. The protection given to labor in our jurisdiction is vast
and extensive that we cannot prudently draw inferences from the legislatures silence that married
persons are not protected under our Constitution and declare valid a policy based on a prejudice or
stereotype. Thus, for failure of petitioners to present undisputed proof of a reasonable business
necessity, we rule that the questioned policy is an invalid exercise of management prerogative.
Corollary, the issue as to whether respondents Simbol and Comia resigned voluntarily has become
moot and academic.

In the case of Estrella, the petitioner failed to adduce proof to justify her dismissal. Hence,
the Court ruled that it was illegal.

Page 535 of 845

 G.R. No. 163512
February 28, 2007
TIU vs. PLATINUM PLANS PHILIPPINES

FACTS: Respondent Platinum Plans Philippines, Inc. is a domestic corporation engaged in the
pre-need industry. From 1987 to 1989, petitioner Daisy B. Tiu was its Division Marketing
Director. On January 1, 1993, respondent re-hired petitioner as Senior Assistant Vice-President
and Territorial Operations Head in charge of its Hong Kong and Asean operations. The parties
executed a contract of employment valid for five years.

On September 16, 1995, petitioner stopped reporting for work. In November 1995, she became
the Vice-President for Sales of Professional Pension Plans, Inc., a corporation engaged also in the
pre-need industry.

Consequently, respondent sued petitioner for damages before the RTC of Pasig City, Branch 261.
Respondent alleged, among others, that petitioners employment with Professional Pension Plans,
Inc. violated the non-involvement clause in her contract of employment. In upholding the validity
of the non-involvement clause, the trial court ruled that a contract in restraint of trade is valid
provided that there is a limitation upon either time or place. In the case of the pre-need industry,
the trial court found the two-year restriction to be valid and reasonable. On appeal, the Court of
Appeals affirmed the trial courts ruling. It reasoned that petitioner entered into the contract on
her own will and volition. Thus, she bound herself to fulfill not only what was expressly stipulated
in the contract, but also all its consequences that were not against good faith, usage, and law. The
appellate court also ruled that the stipulation prohibiting non-employment for two years was valid
and enforceable considering the nature of respondents business.

ISSUE: Whether the Court of Appeals erred in sustaining the validity of the non-involvement
clause

HELD: In this case, the non-involvement clause has a time limit: two years from the time
petitioners employment with respondent ends. It is also limited as to trade, since it only prohibits
petitioner from engaging in any pre-need business akin to respondents. More significantly, since
petitioner was the Senior Assistant Vice-President and Territorial Operations Head in charge of
respondents Hongkong and Asean operations, she had been privy to confidential and highly
sensitive marketing strategies of respondents business. To allow her to engage in a rival business
soon after she leaves would make respondents trade secrets vulnerable especially in a highly
competitive marketing environment. In sum, The Court finds the non-involvement clause not
contrary to public welfare and not greater than is necessary to afford a fair and reasonable
protection to respondent. Hence the restraint is valid and such stipulation prevails.

Page 536 of 845

 G.R. No. 153674
December 20, 2006
AVON COSMETICS, INCORPORATED and JOSE MARIE FRANCO vs.
LETICIA H. LUNA

FACTS: The present petition stemmed from a complaint[3] dated 1 December 1988, filed by
herein respondent Luna alleging, inter alia that she began working for Beautifont, Inc. in 1972,
first as a franchise dealer and then a year later, as a Supervisor. Sometime in 1978, Avon
Cosmetics, Inc. (Avon), herein petitioner, acquired and took over the management and operations
of Beautifont, Inc. Nonetheless, respondent Luna continued working for said successor company.
Aside from her work as a supervisor, respondent Luna also acted as a make-up artist of petitioner
Avons Theatrical Promotions Group, for which she received a per diem for each theatrical
performance.

The contract was that:

The Company agrees:

1) To allow the Supervisor to purchase at wholesale the products of the Company.

The Supervisor agrees:

1) To purchase products from the Company exclusively for resale and to be responsible for
obtaining all permits and licenses required to sell the products on retail.

The Company and the Supervisor mutually agree:

1) That this agreement in no way makes the Supervisor an employee or agent of the Company,
therefore, the Supervisor has no authority to bind the Company in any contracts with other parties.
2) That the Supervisor is an independent retailer/dealer insofar as the Company is concerned,
and shall have the sole discretion to determine where and how products purchased from the
Company will be sold. However, the Supervisor shall not sell such products to stores, supermarkets
or to any entity or person who sells things at a fixed place of business.
3) That this agreement supersedes any agreement/s between the Company and the Supervisor.
4) That the Supervisor shall sell or offer to sell, display or promote only and exclusively
products sold by the Company.
5) Either party may terminate this agreement at will, with or without cause, at any time upon
notice to the other.

Later, respondent Luna entered into the sales force of Sandre Philippines which caused her
termination for the alleged violation of the terms of the contract. The trial court ruled in favor of
Luna that the contract was contrary to public policy thus the dismissal was not proper. The Court
of Appeals affirmed the decision, hence this petition.

ISSUE: Whether the Court of Appeals erred in ruling that the Supervisors Agreement was invalid
for being contrary to public policy
Whether there was subversion of the autonomy of contracts by the lower courts

Page 537 of 845

HELD: Agreements in violation of orden pblico must be considered as those which conflict with
law, whether properly, strictly and wholly a public law (derecho) or whether a law of the person,
but law which in certain respects affects the interest of society. Plainly put, public policy is that
principle of the law which holds that no subject or citizen can lawfully do that which has a tendency
to be injurious to the public or against the public good. As applied to contracts, in the absence of
express legislation or constitutional prohibition, a court, in order to declare a contract void as
against public policy, must find that the contract as to the consideration or thing to be done, has a
tendency to injure the public, is against the public good, or contravenes some established interests
of society, or is inconsistent with sound policy and good morals, or tends clearly to undermine the
security of individual rights, whether of personal liability or of private property.

From another perspective, the main objection to exclusive dealing is its tendency to foreclose
existing competitors or new entrants from competition in the covered portion of the relevant
market during the term of the agreement. Only those arrangements whose probable effect is to
foreclose competition in a substantial share of the line of commerce affected can be considered as
void for being against public policy. The foreclosure effect, if any, depends on the market share
involved. The relevant market for this purpose includes the full range of selling opportunities
reasonably open to rivals, namely, all the product and geographic sales they may readily compete
for, using easily convertible plants and marketing organizations.

Applying the preceding principles to the case at bar, there is nothing invalid or contrary to public
policy either in the objectives sought to be attained by paragraph 5, i.e., the exclusivity clause, in
prohibiting respondent Luna, and all other Avon supervisors, from selling products other than
those manufactured by petitioner Avon.

Having held that the exclusivity clause as embodied in paragraph 5 of the Supervisors
Agreement is valid and not against public policy, we now pass to a consideration of respondent
Lunas objections to the validity of her termination as provided for under paragraph 6 of the
Supervisors Agreement giving petitioner Avon the right to terminate or cancel such contract. The
paragraph 6 or the termination clause therein expressly provides that:

The Company and the Supervisor mutually agree:

6) Either party may terminate this agreement at will, with or without cause, at any time upon
notice to the other.

In the case at bar, the termination clause of the Supervisors Agreement clearly provides for two
ways of terminating and/or cancelling the contract. One mode does not exclude the other. The
contract provided that it can be terminated or cancelled for cause, it also stated that it can be
terminated without cause, both at any time and after written notice. Thus, whether or not the
termination or cancellation of the Supervisors Agreement was for cause, is immaterial. The
only requirement is that of notice to the other party. When petitioner Avon chose to terminate the
contract, for cause, respondent Luna was duly notified thereof.

Worth stressing is that the right to unilaterally terminate or cancel the Supervisors Agreement
with or without cause is equally available to respondent Luna, subject to the same notice
requirement. Obviously, no advantage is taken against each other by the contracting parties.

Page 538 of 845

Hence, the petition was granted.

Page 539 of 845

 G.R. No. L-21127
February 9, 1924
ALFONSO DEL CASTILLO vs. SHANNON RICHMOND

FACTS: The plaintiff alleges that the provisions and conditions contained in the third paragraph
of their contract constitute an illegal and unreasonable restriction upon his liberty to contract, are
contrary to public policy, and are unnecessary in order to constitute a just and reasonable protection
to the defendant; and asked that the same be declared null and void and of no effect. The defendant
interposed a general and special defense. In his special defense he alleges that during the time the
plaintiff was in the defendant's employ he obtained knowledge of his trade and professional secrets
and came to know and became acquainted and established friendly relations with his customers so
that to now annul the contract and permit plaintiff to establish a competing drugstore in the town
of Legaspi, as plaintiff has announced his intention to do, would be extremely prejudicial to
defendant's interest." The defendant further, in an amended answer, alleges that this action not
having been brought within four years from the time the contract referred to in the complaint was
executed, the same has prescribed.

ISSUE: Whether the contract is valid and the autonomy of contracts be upheld

HELD: Considering the nature of the business in which the defendant is engaged, in relation with
the limitation placed upon the plaintiff both as to time and place, The Court is of the opinion, and
so decide, that such limitation is legal and reasonable and not contrary to public policy, otherwise,
the autonomy of the contract will be subverted.

Page 540 of 845

 G.R. No. 142277
December 11, 2002
ARWOOD INDUSTRIES, INC. vs. DM CONSUNJI, INC.

FACTS: Petitioner and respondent, as owner and contractor, respectively, entered into a civil,
structural and architectural works Agreement dated February 6, 1989 for the construction of
petitioners Westwood condominium at No. 23 Eisenhower St., Greenhills, San Juan, Metro
Manila. The contract price for the condominium project aggregated P20, 800,000.00.

Despite the completion of the condominium project, the amount of P962, 434.78 remain unpaid
by petitioner. Repeated demands by respondent for petitioner to pay went unheeded.

Thus on August 13, 1993, respondent as plaintiff in a civil case filed its complaint for the recovery
of the balance of the contract price and for damages against petitioner.

Respondent specifically prayed for the payment of the: (a) amount of P962, 434.78 with interest
of 2% per month or a fraction thereof, from November 1990 up to the time of payment; (b) the
amount of P250,000 as Attorneys fees and litigation expenses; (c) amount of P150,000.00 as
exemplary damages; and (d)cost of suit.

On appeal, the Court of Appeals affirmed the lower courts decision with modification

ISSUE: Whether or not the imposition of two percent interest on the amount adjudged is proper.

HELD: Yes. It must be noted that the agreement provided the contractor, respondent in this case,
two (2) options in case of delay in monthly payments, to wit: a) suspend works on the project until
payment is remitted by the owner or continue the work but the owner shall be required to pay
interest at a rate of two (2) percent per month or a fraction thereof. Evidently, respondent chose
the latter option, as the condominium project was in fact already completed. Since the agreement
stands as the law between the parties, the court cannot ignore the existence of such provision
providing for a penalty for every months delay.

Page 541 of 845

 G.R. No. 17120
June 18, 2010
SPOUSES TECKLO VS. RURAL BANK OF PAMPLONA, INC

Facts: Spouses Roberto and Maria Antonette Co obtained from respondent Rural Bank of
Pamplona, Inc. a P100,000.00 loan due in three months which was secured by a real estate
mortgage. One of the stipulations in the mortgage contract was that the mortgaged property would
also answer for the future loans of the mortgagor. Pursuant to this provision, spouses Co obtained
on 4 March 1994 a second loan from respondent bank in the amount of P150,000.00 due in three
months. Petitioners, spouses Benedict and Maricel Dy Tecklo, meanwhile instituted an action for
collection of sum of money against spouses Co. When the two loans remained unpaid after
becoming due and demandable, respondent bank instituted extrajudicial foreclosure proceedings
Petitioners then exercised the right of redemption as successors-in-interest of the judgment debtor.
Stepping into the shoes of spouses Co, petitioners tendered the amount of P155,769.50, based on
the computation made by the Office of the Provincial Sheriff, Respondent bank objected to the
non-inclusion of the second loan. It also claimed that the applicable interest rate should be the rate
fixed in the mortgage, which was 24% per annum plus 3% service charge per annum and 18%
penalty per annum. However, the Provincial Sheriff insisted that the interest rate should only be
12% per annum. Respondent bank then sought annulment of the redemption, injunction, and
damages in the Regional Trial Court and the latter held that the second loan, not having been
annotated on the TCT of the mortgaged property, could not bind third persons such as petitioners.
Upon appeal, the CA affirmed the trial courts decision. Hence, the petition.

Issue: Whether or not he redemption amount includes the second loan in the amount of
P150,000.00 even if it was not included in respondent banks application for extrajudicial
foreclosure

Ruling: No.For its failure to include the second loan in its application for extrajudicial foreclosure
as well as in its bid at the public auction sale, respondent bank is deemed to have waived its lien
on the mortgaged property with respect to the second loan. Of course, respondent bank may still
collect the unpaid second loan, and the interest thereon, in an ordinary collection suit before the
right to collect prescribes.
After the foreclosure of the mortgaged property, the mortgage is extinguished and the purchaser
at auction sale acquires the property free from such mortgage. Any deficiency amount after
foreclosure cannot constitute a continuing lien on the foreclosed property, but must be collected
by the mortgagee-creditor in an ordinary action for collection. In this case, the second loan from
the same mortgage deed is in the nature of a deficiency amount after foreclosure.

In order to effect redemption, the judgment debtor or his successor -in-interest need only pay the
purchaser at the public auction sale the redemption amount composed of (1) the price which the
purchaser at the public auction sale paid for the property and (2) the amount of any assessment or
taxes which the purchaser may have paid on the property after the purchase, plus the applicable
interest. Respondent banks demand that the second loan be added to the actual amount paid for
the property at the public auction sale finds no basis in law or jurisprudence.

Page 542 of 845

 G.R. No. 163825
July 13, 2010
BANATE VS. PHILIPPINE COUNTRY SIDE

FACTS: The petitioner spouses Rosendo Maglasang and Patrocinia Monilar obtained a loan
amounting to Php 1,070,000.00 evidenced by a promissory note whose maturity date is on January
18, 1998. The spouses executed a real estate mortgage over the subject property owned by spouses
Mary Melgrid and Bonifacio Cortel consisting of a lot including the house constructed thereon to
secure the loan. Aside from the said loan, the spouses obtained two other loans which were also
evidenced and secured by promissory notes and mortgages on their other properties.

Before the subject loan became due, in 1997, the spouses asked PRCBs permission through the
Branch Manager, Pancrasio Mondigo to sell and release the subject properties since the two other
loans were sufficiently secured by the other mortgages. The Manager then verbally agreed but
required first the full payment of the subject loan. Both spouses then sold the said properties to
Violeta Bante for Php 1,750,000.00. The amount obtained was used to pay the subject loan with
PRCB. However, the owners duplicate certificate of title given to Banate carried the mortagge
lien in favour of PRCB, prompting the petitioners to request a Deed of Release of Mortgage. Since
PRCB refused the request, the petitioners instituted an action for specific performance before the
RTC. The petitioners also sought to recover damages because they claimed that PRCB caused the
publication of a news report saying that the petitioners surreptitiously caused the transfer of
ownership.

PCRB countered the petitioners allegations by invoking the cross-collateral stipulation in the
mortgage deed which states that the full payment of the three loans was necessary before any of
the mortgages could be released. The RTC considered the petitioners entitled to a deed of release
of mortgage pursuant to the verbal agreement between the petitioners and Mondigo since it was a
novation of the original mortgage contract. On appeal, CA reversed the RTC decision on the
ground that the verbal agreement cannot amend the cross-collateral stipulation of the mortgage
contract. The CA did not consider as material the release of the owners duplicate copy of the title
since it was done merely to allow the annotation of the sale. The petitioners then filed a present
appeal by certiorari.

ISSUES: 1. Whether the purported agreement between the petitioners and Mondigo novated the
mortgage contract over the subject properties and is thus binding upon PCRB.
2. If the first issue is resolved negatively, whether Banate can demand restitution of the
amount paid for the subject properties on the theory that the new agreement with Mondigo is
deemed rescinded.

HELD: The Court held that for an extinctive novation to occur, the following requisites should be
present: (1) a previous valid obligation; (2) an agreement of all parties concerned to a new contract;
(3) the extinguishment of the old obligation; and (4) the birth of a valid new obligation. The second
requisite is lacking in this case. Novation presupposes not only the extinguishment or modification

Page 543 of 845

of an existing obligation but, more importantly, the creation of a valid new obligation. For the
consequent creation of a new contractual obligation, consent of both parties is, thus, required. On
the second issue, rescission has no legal basis; there can be no restitution of the amount paid. As
declared by the Court, even if they were to assume that the purported agreement has been
sufficiently established, since it is not binding on the bank for lack of authority of PCRBs branch
manager, then the prayer for restitution of the amount paid would have no legal basis. Mondigos
lack of authority did not affect the validity of the payment made since the dispute was merely on
the effect of the payment on the security given. Banate cannot recover accrues since PRCB never
dealt with her; as to the borrowers-mortgagers, they merely paid what was owed.

The claim for moral damages must necessary fail on the alleged injurious publication since there
was no evidence submitted to prove that the words surreptitious are present in the publication
and that there was no proof which shows damage to the petitioners. Thus, the Supreme Court
denied petitioners petition for lack of merit and affirm the decision of the Court of Appeals.

G.R. No. 144712

Page 544 of 845

 July 4, 2002
SPOUSES SILVESTRE and CELIA PASCUAL vs. RODRIGO V. RAMOS

FACTS: Ramos alleged that on 3 June 1987, for and in consideration of P150,000, the Spouses
Pascual executed in his favor a Deed of Absolute Sale with Right to Repurchase over two parcels
of land and the improvements thereon located in Bambang, Bulacan, Bulacan. This document was
annotated at the back of the title. The Pascuals did not exercise their right to repurchase the
property within the stipulated one-year period; hence, Ramos prayed that the title or ownership
over the subject parcels of land and improvements thereon be consolidated in his favor.

In their Answer, the Pascuals admitted having signed the Deed of Absolute Sale with Right to
Repurchase for a consideration of P150, 000 but averred that what the parties had actually agreed
upon and entered into was a real estate mortgage. They further alleged that there was no agreement
limiting the period within which to exercise the right to repurchase and that they had even overpaid
Ramos. The trial court found that the transaction between the parties was actually a loan in the
amount of P150,000, the payment of which was secured by a mortgage of the property covered by
TCT No. 305626. It also found that the Pascuals had made payments in the total sum of P344,000,
and that with interest at 7% per annum, they had overpaid the loan by P141,500. Accordingly, in
its Decision of 15 March 1995 the trial court ruled in favor of the defendants. The Pascuals
interposed the following defenses: (a) the trial court had no jurisdiction over the subject or nature
of the petition; (b) Ramos had no legal capacity to sue; (c) the cause of action, if any, was barred
by the statute of limitations; (d) the petition stated no cause of action; (e) the claim or demand set
forth in Ramoss pleading had been paid, waived, abandoned, or otherwise extinguished; and (f)
Ramos has not complied with the required confrontation and conciliation before the barangay.
The Court of Appeals affirmed in toto the trial courts Orders of 5 June 1995 and 7 September
1995.

ISSUE: Whether or not the contract entered into is a contract of loan.

HELD: The Pascuals are actually raising as issue the validity of the stipulated interest rate. It
must be stressed that they never raised as a defense or as basis for their counterclaim the nullity of
the stipulated interest. While overpayment was alleged in the Answer, no ultimate facts which
constituted the basis of the overpayment was alleged. In their pre-trial brief, the Pascuals made a
long list of issues, but not one of them touched on the validity of the stipulated interest rate. Their
own evidence clearly shows that they have agreed on, and have in fact paid interest at, the rate of
7% per month.
After the trial court sustained petitioners claim that their agreement with RAMOS was actually a
loan with real estate mortgage, the Pascuals should not be allowed to turn their back on the
stipulation in that agreement to pay interest at the rate of 7% per month. The Pascuals should
accept not only the favourable aspect of the courts declaration that the document is actually an
equitable mortgage but also the necessary consequence of such declaration, that is, that interest on
the loan as stipulated by the parties in that same document should be paid. Besides, when Ramos
moved for a reconsideration of the 15 March 1995 Decision of the trial court pointing out that the
interest rate to be used should be 7% per month, the Pascuals never lifted a finger to oppose the
claim. Admittedly, in their Motion for Reconsideration of the Order of 5 June 1995, the Pascuals
argued that the interest rate, whether it be 5% or 7%, is exorbitant, unconscionable, unreasonable,

Page 545 of 845

usurious and inequitable. However, in their Appellants Brief, the only argument raised by the
Pascuals was that Ramoss petition did not contain a prayer for general relief and, hence, the trial
court had no basis for ordering them to pay Ramos P511,000 representing the principal and unpaid
interest. It was only in their motion for the reconsideration of the decision of the Court of Appeals
that the Pascuals made an issue of the interest rate and prayed for its reduction to 12% per annum.

It is a basic principle in civil law that parties are bound by the stipulations in the contracts
voluntarily entered into by them. Parties are free to stipulate terms and conditions which they
deem convenient provided they are not contrary to law, morals, good customs, public order, or
public policy.

The interest rate of 7% per month was voluntarily agreed upon by Ramos and the Pascuals. There
is nothing from the records and, in fact, there is no allegation showing that petitioners were victims
of fraud when they entered into the agreement with Ramos. Neither is there a showing that in their
contractual relations with Ramos, the Pascuals were at a disadvantage on account of their moral
dependence, ignorance, mental weakness, tender age or other handicap, which would entitle them
to the vigilant protection of the courts as mandated by Article 24 of the Civil Code.

Page 546 of 845

 G.R. No. 135721
May 27, 2004
CHUA TEE DEE VS. CA

FACTS: J.C. Agricom Development Corporation, Inc. (Agricom), is the owner of a rubber
plantation located at Davao City. Agricom planned to lease the plantation. Chua Tee Dee, married
to Amado Dee, is a businesswoman doing business under the name of Pioneer Enterprises
(Pioneer). Manuel G. Alba, the president of Agricom, had a business meeting in Davao City with
Amado Dee where they discussed the possibility of leasing the rubber plantation to Chua Tee
Dee/Pioneer.

The contract of lease was entered into by Agricom, represented by Alba, and Chua Tee Dee doing
business under the name and style Pioneer. Lillian Carriedo, a stockholder of Agricom, also signed
the contract. Thereafter, Alba informed the employees of the rubber plantation of the impending
termination of their employment due to the companys contract of lease with Chua Tee Dee. The
employees were told that they would be given separation pay. On June 3, 1985, Amado Dee
delivered the amount of Php 270,000.00 to the Spouses Alba as deposit for the lease. In the
meantime, Agricom sent letters to the said employees, confirming the termination of their
employment and informing of their separation pay. The severed employees filed a complaint for
illegal dismissal and unfair labor practice against Agricom, Amado Dee and Pioneer. The labor
arbiter rendered his decision holding that the termination of the complainants employment was
illegal, but the complaint for unfair labor practice was dismissed for lack of merit. On May 24,
1990, the counsel of the Carriedo heirs, the stockholders-owners of Agricom, sent a telegraphic
note to Amado Dee demanding payment of long overdue rentals. Pioneer sent a letter to Agricom
complaining of facts and events which disrupted its operations in the plantation. Pioneer claimed
that it was dragged into labor disputes not of its own making and complained of being pestered by
some individuals who claimed portions of the plantation as their own property. Some of them went
to its office and even presented tax declarations to prove their claims. Agricom informed Pioneer
that, after due investigation, it concluded that the latters complaints were unfounded. It also
demanded the payment of back rentals for June, July and August 1990.

As Pioneer was unable to pay its monthly rentals, Agricom filed, on September 4, 1990, a civil
action for sum of money, damages and attorneys fees against Chua Tee Dee. In her Answer, Chua
Tee Dee asserted that Agricom had no cause of action against her. She claimed that it was Agricom
which failed to comply with the terms and conditions of the contract of lease when it failed to
settle the labor dispute with its former employees, and that Agricom failed to maintain her in the
quiet and peaceful possession and enjoyment of the leased premises during the effectivity of the
lease contract. The RTC rendered judgment dismissing the complaint and declaring the lease
contract terminated for failure of Agricom to implement the terms thereof. Agricom then filed a
Motion for Reconsideration, which was granted by the RTC. Judgment was rendered ordering
Chua Tee Dee to pay to Agricom several amounts due as back rentals, including the first 3 years
of the lease. The CA affirmed the order of the lower court, with modification as to the award of
attorneys fees. Hence, this petition filed by Chua Tee Dee.

Page 547 of 845

ISSUE: Did Agricom fail to maintain Chua Tee Dee in a quiet and peaceful enjoyment of the
leased premises?

HELD: The Supreme Court held that Agricom did not deprived Chua Tee Dee of the quiet and
peaceful enjoyment of the leased premises. As lessor, Agricom had the duty to maintain Chua Tee
Dee in the peaceful and adequate enjoyment of the leased premises. Such duty was made as part
of the contract of lease entered into by the parties. Even if it had not been so, the lessor is still duty-
bound under Art.1654of the Civil Code. The duty to maintain the lessee in the peaceful and
adequate enjoyment of the lease for the duration of the contract mentioned in No. 3 of the article
is merely a warranty that the lessee shall not be disturbed in his legal, and not physical, possession.
In the case at bar, Chua Tee Dee claims that several people presented tax declarations to her and
claimed some portions of the leased premises. However, no case was filed by any of the said
claimants against her or her lessor during the time she occupied the premises.

Patently, then, Chua Tee Dee had not been disturbed in her legal possession of the property in
derogation of Article 1654 of the New Civil Code. When Chua Tee Dees representative saw that
a portion of the leased premises was being fenced by the claimants, she had all the right to sue the
intruders who had disturbed her physical possession as provided for in Article 1654 of the New
Civil Code. However, the petitioner did not file any suit against any of the claimants. Thus, it
cannot be said that Agricom violated the contract of lease Chua Tee Dee failed to prove that she
suffered any loss from the labor case that was filed against her enterprise and her husband. True,
the labor case was instituted during the effectivity of the lease contract until the case was finally
resolved on August 22, 1986. Surprisingly, however, during the interregnum, appellant regularly
paid the monthly rentals for the years 1985 to 1989. It was after the labor case has been resolved
that appellant started to fail to pay her rentals, strongly indicating that the labor case has not
dampened her peaceful and adequate possession of the leased premises. The NLRC case did not
deter the continuance of the possession and occupation of the leased premises. In sum, then, the
petitioner failed to prove that the private respondent breached any of the provisions of the contract
of lease.

Thus, the petitioner had no valid reason to suspend the payment of rentals under Art. 1658 Chua
Tee Dees obligation to pay back rentals should cover only the period of July 1990until the time
that she vacated the leased premises. The CA, thus, erred when it affirmed the order of the trial
court ordering the petitioner to pay back rentals, including the first three (3) years of the lease, as
that period had already been paid by the petitioner. The petitioner should also be credited for the
amount of Php 270,000.00 she paid to the private respondent as deposit for the lease.

G.R. No. 161722

July 20, 2006
G.Q. GARMENTS, INC. v. MIRANDA

FACTS: Angel Miranda is the registered owner of a 9,646 square meters parcel of land located at
Niog, Bacoor, Cavite (Property). The property was a verbal contract leased with his son Angelito
Miranda who established the Executive Machineries and Equipment Corporation (EMECO). The

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lease was on a month-to-month basis for a consideration of Php 8,000.00 per month. EMECO
constructed its factory on the property and paid the said rentals. However when Angelito died,
EMECO failed to pay the rentals but still continued possessing the leased premises. On 1989, the
factory of EMECO was totally razed by fire. Angel demanded the payment of accrued rentals
amounting to Php 280,000.00 as of May 1991 and also informed that the oral contract of lease
would be terminated effective June 30, 1991. After sending another demand letter, EMECO
vacated the leased premised but the accrued rentals remained unpaid.
Sometime in November 1991, Florenda, Angelitos wife, arrived at the office of petitioner and
offered to sublease the property to Wilson Kho, the Officer-in Charge of GQ garments. After
visiting the property, Kho agreed to rent the area upon the condition that its true and registered
owner would personally sign the lease contract in his presence. However, Florenda failed to
present Angel for said purpose, Kho turned down her proposal. Later, Kho was able to locate Angel
and offered in behalf of petitioner, to lease the property, as to which Angel agreed.

On December of that year, Davy John Barlin, the executive president representing the corporation
and Angel executed a contract of lease. The lease was for a period of 15 years for a monthly rental
of Php 30,000.00. Petitioner paid Php 90,000.00 representing two months deposit and advance
rental for one month. As lessee, it was authorized to introduce improvements, structures, and
buildings on the property as it may deem necessary and for the purpose for which it was leased.

Consequently, petitioner secured the necessary documents and permits. The construction of a
building and factory in the leased premises commenced. However, on January 27, 1992, Florenda,
together with several armed men who identified themselves as policemen, forcibly evicted
petitioner from the leased premises, claiming that she was the owner and that the place was already
covered by another existing contract of lease. During the encounter, Florenda and her men took
some equipment, machinery and other properties belonging to petitioner, thereby causing loss and
damage to said properties. In the meantime, Angel secured a copy of the alleged contract of leased
with EMECO. He filed a complaint for declaration of nullity of the contract before the Regional
Trial Court because his signature was forged praying for judgment to be rendered in his favour.

Meanwhile, petitioner sought the help of the Philippine National Police (PNP). General Gerardo
N. Flores, Deputy Director General and Chief Directorial Staff, issued a Memorandum to
Superintendent Wenceslao A. Soberano, Provincial Director of the Cavite PNP Provincial
Command, ordering the latter to prevent his men from interfering with the pending civil case. As
a result, petitioner regained possession over the leased premises. However, Florenda and her group
went back to the place and ousted the guards and other personnel manning the corporations office,
and even removed their equipment, and ransacked anew their raw materials, electric wire and other
valuables inside.

On April 20, 1992, petitioner instituted an action for damages and recovery of possession of the
property before the RTC of Cavite City, Branch 17, with Angel, EMECO and Florenda, as
alternative defendants. Angel was impleaded since he has the obligation to keep and maintain the
plaintiff in peaceful possession of the leased premises. On June 25, 1992, Angel and petitioner, as
plaintiffs, filed a separate complaint for ejectment against Florenda before the Municipal Trial
Court (MTC) of Bacoor, Cavite. After due proceedings, the court rendered judgment on July 2,
1993, ordering the eviction of Florenda and all those claiming the property in her behalf. The

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decision was appealed to the RTC. However, for failure to pay a supersedeas bond, the decision
was executed and Florenda was evicted from the property.

On November 26, 1993, the RTC rendered judgment dismissing the complaint against all the
alternative defendants without prejudice. It declared that plaintiff was entitled to damages, but it
had to dismiss the complaint because of the pendency of other civil cases. However, the RTC
resolved to deny the motion of petitioner prompting it to appeal to the Court of Appeals. Angel
Miranda also appealed the decision. Meantime, on September 22, 1994, the RTC rendered
judgment in favor of Angel and declared the contract of lease purportedly executed by him and
EMECO void. On October 29, 2002, the CA rendered judgment reversing the decision of the RTC.
Accordingly, the judgment appealed was reversed and set aside dismissing the complaint with
prejudice against Angel and ordering Florenda to pay damages and attorneys fees.

The appellate court absolved Angel of any liability due to the absence of evidence showing that
he had participated, directly or indirectly, in the looting of GQ Garments properties and in forcibly
ejecting the latter from the premises in question. According to the CA anchored on Article 1653
and 1654 of the New Civil Code, the evidence on record clearly showed that Florenda disturbed
only the physical possession of the leased premises, and not legal possession. Thus, the complaint
with respect to Angel Miranda should be dismissed with prejudice for lack of cause of action. On
cross-examination, Angel admitted that he received Php 360,000.00 from petitioner. In addition,
the plaintiff asserts that the actual damages sustained when its equipment and machineries were
destroyed are valued at Php 10,000,000.00. With all of this, petitioner filed the instant petition for
review on certiorari.

ISSUE: Whether or not the respondents are liable to petitioner for the amount of Php
10,000,000.00 by way of actual damages?

HELD: With regard to the claim for actual damages of Php 10,000,000.00, the Supreme Court
agreed with the ruling of the appellate courts that petitioners claim for an actual damage was not
properly substantiated by evidence. The alleged loss of articles, machinery and equipment in the
total sum of Php 9,960,000.00 was not proven by clear and convincing evidence. Other than the
bare testimony of Mr. Wilson Kho and the witnesses he presented, there was no poof as to the
existence of these items prior to the taking over of Florenda over the property in question. To be
entitled to an award of actual damages, it is necessary to prove the precise amount of the loss with
a reasonable degree of certainty, premised upon competent proof and on the best evidence
obtainable by the injured party to justify such award. The award of actual damages cannot be
simply based on the mere allegation of a witness without any tangible claim, such as receipts or
other documentary proofs to support such claim. Failing to satisfy the court that petitioner certainly
suffered actual damages, its claim must now fail.

No other proof was adduced to establish the value or price of the equipment, machineries and
valuables taken by respondent Florenda Miranda, as well as the damage to petitioners building.
The bare claim of Kho that the petitioner sustained actual damages in the amount of Php
10,000,000.00 is utterly insufficient on which to anchor a judgment for actual damages in the
amount of Php 10,000,000.00; it is speculative and merely a surmise.

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With Florenda Mirandas admission of trespassing, she is clearly liable for damages to the
equipment, machineries and building of petitioner. We agree with the ruling of the CA that
respondent Angel Miranda is not liable for damages caused to petitioners property. In case of
noncompliance with the obligations stated in article 1654 of the NCC, the lessee may ask for the
rescission of the lease contract and indemnification for damages or only the latter, allowing the
contract to remain in force. It turned out that respondent Florenda Miranda attempted to hoodwink
petitioner and forged respondent Angel Mirandas signature on the contract of lease she showed
to petitioner. It appears that respondent Florenda Miranda tried to coerce the petitioner into
executing a contract of lease with EMECO over the property, only to be rebuffed by the petitioner.

It bears stressing that respondent Angel Miranda was not content in adopting a mere passive stance
in the face of respondent Florenda Mirandas act of trespass. He and the petitioner filed a case for
forcible entry against Florenda Miranda; he also succeeded in having the RTC, declare the contract
of lease which respondent Florenda Miranda showed petitioner as null and void, with the courts
ruling that his signature on the contract was a forgery. The petition is denied.

Page 551 of 845

 G.R. No. 154765
March 29, 2007
PEDRO T. BERCERO VS. CAPITOL DEVELOPMENT CORPORATION

FACTS: Capitol Development Corporation (respondent) leased its commercial building and lot
located at Quezon City to R.C. Nicolas Merchandising, Inc., (Nicolas) for a 10-year period or until
January 31, 1993 with the option for the latter to make additional improvements in the property to
suit its business and to sublease portions thereof to third parties. Nicolas then converted the space
into a bowling and billiards center and subleased separate portions thereof to Midland Commercial
Corporation, Jerry Yu, Romeo Tolentino, Julio Acuin, Nicanor Bas, and Pedro T. Bercero
(petitioner). Petitioners sublease contract with Nicolas was for a three-year period or until August
16, 1988.

For failure to pay rent, respondent filed an ejectment case against Nicolas before the Metropolitan
Trial Court along with the sub-lessees of Nicolas as parties-defendants. During the pendency of
the case, several sub-lessees including petitioner, entered into a compromise settlement with
respondent. In the compromise settlement, the sub-lessees recognized respondent as the lawful and
absolute owner of the property and that the contract between respondent and Nicolas had been
lawfully terminated because of the latters non-payment of rent; and that the sub-lessees
voluntarily surrendered possession of the premises to respondent; that the sub-lessees directly
executed lease contracts with respondent considering the termination of leasehold rights of
Nicolas. Petitioner entered into a lease contract with respondent for a three-year period, from
August 16, 1988 to August 31, 1991.

On October 21, 1988, respondent and petitioner, as well as several other sub-lessees of Nicolas,
filed a Joint Manifestation and Motion in the Civil Case, manifesting to the MeTC- Branch 41 that
they entered into a compromise settlement and moved that the names of the sub-lessees as parties-
defendants be dropped and excluded.
On November 14, 1988, Nicolas filed a complaint for ejectment and collection of unpaid rentals
against petitioner before the Metropolitan Trial Court. On April 18, 1989, MeTC-Branch 39
rendered a Decision in favor of Nicolas and ordered the eviction of petitioner from the leased
premises.

Dissatisfied, petitioner filed an appeal before the Regional Trial Court. Nicolas filed a Motion for
Execution Pending which was opposed by petitioner. In an Order dated October 4, 1990, RTC-
Branch 78 directed the issuance of a writ of execution. Due to the failure to file a supersedeas bond
and periodically deposit the rentals due during the pendency of the appeal, petitioner was evicted
from the leased premises. On September 3, 1991, respondent filed urging MeTC-Branch 41 to
order R.C. Nicolas to desist from harassing respondent and petitioner, and to confirm respondents
right of possession to the premises in the light of the ejectment case filed by R.C. Nicolas against
petitioner.

Two months later, or on November 13, 1991, MeTC-Branch 41 rendered a Decision in in favor of
respondent and ordered R.C. Nicolas to pay its unpaid rentals from September 1986 until October

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1988. Meanwhile, since his eviction in November 1990, petitioner made repeated demands on
respondent for the restoration of his possession of the commercial space leased to him to no avail.
The RTC rendered its decision in favour of the petitioner. Accordingly, the counterclaim filed by
the defendant Capitol Development Corporation is dismissed.

The RTC held that respondent miserably failed to comply with its obligation under Article 1654
of the New Civil Code due to its apathy and failure to extend any assistance to the petitioner and
was, therefore, liable for the restoration of petitioners possession and the payment of actual
damages corresponding to lost profit, cash, generator, and other items petitioner lost due to the
eviction, as well as moral and exemplary damages and attorneys fees.

Dissatisfied, respondent filed an appeal with the CA. On February 11, 2002, the CA rendered its
Decision setting aside the Decision of RTC. Applying the equitable principle of estoppel, the CA
held that although respondent as lessor failed to ensure the peaceful possession of petitioner as its
lessee in the subject premises, the latter is not entitled to damages since he was aware of the facts
which led to his ouster from the subject premises; and that petitioner was well aware that
respondent had a 10-year lease contract with R.C. Nicolas which was subject of an ejectment suit
that was still pending litigation when petitioner executed a lease contract with respondent.
On March 5, 2002, petitioner filed his Motion for Reconsideration. On August 29, 2002, The CA
issued its Resolution denying petitioners Motion for Reconsideration. Hence, this petition.

ISSUE: Whether or not the contract of lease between Bercero and Capitol Development
Corporation during the pendency of the lease contract with Nicolas is valid.

HELD: Void are all contracts in which the cause or object does not exist at the time of the
transaction. In the present case, the lease contract between petitioner and respondent is void for
having an inexistent cause respondent did not have the right to lease the property to petitioner
considering that its lease contract with R.C. Nicolas was still valid and subsisting, albeit pending
litigation. Having granted to R.C. Nicolas the right to use and enjoy its property from 1983 to
1993, respondent could not grant that same right to petitioner in 1988. When petitioner entered
into a lease contract with respondent, the latter was still obliged to maintain R.C. Nicolass
peaceful and adequate possession and enjoyment of its lease for the 10-year duration of the
contract.
Respondents unilateral rescission of its lease contract with R.C. Nicolas, without waiting for the
final outcome of the ejectment case it filed against the latter, is unlawful. A lease is a reciprocal
contract and its continuance, effectivity or fulfilment cannot be made to depend exclusively upon
the free and uncontrolled choice of just one party to a lease contract. Thus, the lease contract
entered into between petitioner and respondent, during the pendency of the lease contract with
R.C. Nicolas, is void.

There is no merit to petitioners claim of good faith in dealing with respondent. Being privy to the
pendency of the ejectment case involving the leasehold rights of R.C. Nicolas since he was
impleaded as a party-defendant in said ejectment case, petitioner cannot feign innocence of the
existence thereof.

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It is well-settled that parties to a void agreement cannot expect the aid of the law; the courts leave
them as they are, because they are deemed in pari delicto or in equal fault. No suit can be
maintained for its specific performance, or to recover the property agreed to be sold or delivered,
or the money agreed to be paid, or damages for its violation and no affirmative relief of any kind
will be given to one against the other.
In sum, the underlying case for sum of money filed by petitioner against respondent cannot
prosper, his right of action being anchored on a contract which, for all intents and purposes, has
no legal existence and effect from the start. A void or inexistent contract is equivalent to nothing;
it is absolutely wanting in civil effects; it cannot be the basis of actions to enforce compliance. The
present petition is denied for lack of merit and the assailed decision and resolution of the Court of
Appeals are affirmed.

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 G.R. No. 107132
October 8, 1999
MAXIMA HEMEDES v. CA

FACTS: Jose Hemedes executed a document entitled Donation Inter Vivos With Resolutory
Conditions conveying ownership a parcel of land, together with all its improvements, in favor of
his third wife, Justa Kauapin, subject to the resolutory condition that upon the latters death or
remarriage, the title to the property donated shall revert to any of the children, or heirs, of the
DONOR expressly designated by the DONEE. Pursuant to said condition, Justa Kausapin executed
a Deed of Conveyance of Unregistered Real Property by Reversion conveying to Maxima
Hemedes the subject property. Maxima Hemedes and her husband Raul Rodriguez constituted a
real estate mortgage over the subject property in favor of R & B Insurance to serve as security for
a loan which they obtained. R & B Insurance extrajudicially foreclosed the mortgage since Maxima
Hemedes failed to pay the loan even. The land was sold at a public auction with R & B Insurance
as the highest bidder. A new title was subsequently issued in favor the R&B. The annotation of
usufruct in favor of Justa Kausapin was maintained in the new title.

Despite the earlier conveyance of the subject land in favor of Maxima Hemedes, Justa Kausapin
executed a Kasunduan whereby she transferred the same land to her stepson Enrique D.
Hemedes, pursuant to the resolutory condition in the deed of donation executed in her favor by her
late husband Jose Hemedes. Enrique D. Hemedes obtained two declarations of real property, when
the assessed value of the property was raised. Also, he has been paying the realty taxes on the
property from the time Justa Kausapin conveyed the property to him. In the cadastral survey, the
property was assigned in the name of Enrique Hemedes. Enrique Hemedes is also the named
owner of the property in the records of the Ministry of Agrarian Reform office at Calamba, Laguna.
Enriques D. Hemedes sold the property to Dominium Realty and Construction Corporation
(Dominium).

Dominium leased the property to its sister corporation Asia Brewery, Inc. (Asia Brewery) who
made constructions therein. Upon learning of Asia Brewerys constructions, R & B Insurance sent
it a letter informing the former of its ownership of the property. A conference was held between R
& B Insurance and Asia Brewery but they failed to arrive at an amicable settlement. Maxima
Hemedes also wrote a letter addressed to Asia Brewery asserting that she is the rightful owner of
the subject property and denying the execution of any real estate mortgage in favor of R&B.
Dominium and Enrique D. Hemedes filed a complaint with the CFI for the annulment of TCT
issued in favor of R & B Insurance and/or the reconveyance to Dominium of the subject property
alleging that Dominion was the absolute owner of the land. The trial court ruled in favor of
Dominium and Enrique Hemedes.

ISSUE: W/N the donation in favor of Enrique Hemedes was valid?

HELD: NO. Enrique D. Hemedes and his transferee, Dominium, did not acquire any rights over
the subject property. Justa Kausapin sought to transfer to her stepson exactly what she had earlier
transferred to Maxima Hemedes the ownership of the subject property pursuant to the first
condition stipulated in the deed of donation executed by her husband. Thus, the donation in favor

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of Enrique D. Hemedes is null and void for the purported object thereof did not exist at the time
of the transfer, having already been transferred to his sister. Similarly, the sale of the subject
property by Enrique D. Hemedes to Dominium is also a nullity for the latter cannot acquire more
rights than its predecessor-in-interest and is definitely not an innocent purchaser for value since
Enrique D. Hemedes did not present any certificate of title upon which it relied.

The declarations of real property by Enrique D. Hemedes, his payment of realty taxes, and his
being designated as owner of the subject property in the cadastral survey of Cabuyao, Laguna and
in the records of the Ministry of Agrarian Reform office in Calamba, Laguna cannot defeat a
certificate of title, which is an absolute and indefeasible evidence of ownership of the property in
favor of the person whose name appears therein. Particularly, with regard to tax declarations and
tax receipts, this Court has held on several occasions that the same do not by them conclusively
prove title to land.

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 G.R. No. 183612
March 15, 2010
PUP V. GOLDEN HORIZON

FACTS: Petitioner National Development Company (NDC) is a government- owned and

controlled corporation, created under Commonwealth Act No. 182, as amended by Com. Act No.
311 and Presidential Decree (P.D.) No. 668. Petitioner Polytechnic University of the Philippines
(PUP) is a public, non-sectarian, non-profit educational institution created in 1978 by virtue of
P.D. No. 1341. In the early sixties, NDC had in its disposal a ten -hectare property located along
Pureza St., Sta. Mesa, Manila. The estate was popularly known as the NDC Compound and
covered by Transfer Certificate of Title Nos. 92885, 110301 and 145470.On September 7, 1977,
NDC entered into a Contract of Lease (C-33-77) with Golden Horizon Realty Corporation (GHRC)
over a portion of the property, with an area of 2,407 square meters for a period of ten years,
renewable for another ten years with mutual consent of the parties.On May 4, 1978, a second
Contract of Lease (C-12-78) was executed between NDC and GHRC covering 3,222.80 square
meters, also renewable upon mutual consent after the expiration of the ten (10)-year lease period.
In addition, GHRC as lessee was granted the "option to purchase the area leased, the price to be
negotiated and determined at the time the option to purchase is exercised." Under the lease
agreements, GHRC was obliged to construct at its own expense buildings of strong material at no
less than the stipulated cost, and other improvements which shall automatically belong to the NDC
as lessor upon the expiration of the lease period. Accordingly, GHRC introduced permanent
improvements and structures as required by the terms of the contract. After the completion of the
industrial complex project, for which GHRC spent P5 million, it was leased to various
manufacturers, industrialists and other businessmen thereby generating hundreds of jobs. On June
13, 1988, before the expiration of the ten (10)-year period under the second lease contract, GHRC
wrote a letter to NDC indicating its exercise of the option to renew the lease for another ten years.
As no response was received from NDC, GHRC sent another letter on August 12, 1988, reiterating
its desire to renew the contract and also requesting for priority to negotiate for its purchase should
NDC opt to sell the leased premises. NDC still did not reply but continued to accept rental
payments from GHRC and allowed the latter to remain in possession of the property. Sometime
after September 1988, GHRC discovered that NDC had decided to secretly dispose the property
to a third party. On October 21, 1988, GHRC filed in the RTC a complaint for specific
performance, damages with preliminary injunction and temporary restraining order.

On February 20, 1989, the RTC issued a writ of preliminary injunction enjoining NDC and its
attorneys, representatives, agents and any other persons assisting it from proceeding with the sale
and disposition of the leased premises. On February 23, 1989, PUP filed a motion to intervene as
party defendant, claiming that as a purchaser pendente lite of a property subject of litigation it is
entitled to intervene in the proceedings. The RTC granted the said motion and directed PUP to file
its Answer-in-Intervention.PUP also demanded that GHRC vacate the premises, insisting that the
latters lease contract had already expired. Its demand letter unheeded by GHRC, PUP filed an
ejectment case (Civil Case No. 134416) before the Metropolitan Trial Court (MeTC) of Manila on
January 14, 1991.

Page 557 of 845

Due to this development, GHRC filed an Amended and/or Supplemental Complaint to include as
additional defendants PUP, Honorable Executive Secretary Oscar Orbos and Judge Ernesto A.
Reyes of the Manila MeTC, and to enjoin the afore-mentioned defendants from prosecuting Civil
Case No. 134416 for ejectment. A temporary restraining order was subsequently issued by the
RTC enjoining PUP from prosecuting and Judge Francisco Brillantes, Jr. from proceeding with
the ejectment case.

On November 14, 2001, this Court rendered a decision in G.R. Nos. 143513 (Polytechnic
University of the Philippines v. Court of Appeals) and 143590 (National Development Corporation
v. Firestone Ceramics, Inc.),15 which declared that the sale to PUP by NDC of the portion leased
by Firestone pursuant to Memorandum Order No. 214 violated the right of first refusal granted to
Firestone under its third lease contract with NDC.

ISSUE: Whether or not our ruling in Polytechnic University of the Philippines v. Court of Appeals
applies in this case involving another lessee of NDC who claimed that the option to purchase the
portion leased to it was similarly violated by the sale of the NDC Compound in favor of
PUP pursuant to Memorandum Order No. 214.

HELD: The CA was correct in declaring that there exists no justifiable reason not to apply the
same rationale in Polytechnic University of the Philippines v. Court of Appeals in the case of
respondent who was similarly prejudiced by petitioner NDCs sale of the property to PUP, as to
entitle the respondent to exercise its option to purchase until October 1988 inasmuch as the May
4, 1978 contract embodied the option to renew the lease for another ten (10) years upon mutual
consent and giving respondent the option to purchase the leased premises for a price to be
negotiated and determined at the time such option was exercised by respondent. It is to be noted
that Memorandum Order No. 214 itself declared that the transfer is "subject to such liens/leases
existing on the subject property."

The option in this case was incorporated in the contracts of lease by NDC for the benefit of
firestone which, in view of the total amount of its investments in the property, wanted to be assured
that it would be given the first opportunity to buy the property at a price for which it would be
offered. Consistent with their agreement, it was then implicit for NDC to have first offered the
leased premises of 2.60 hectares to FIRESTONE prior to the sale in favor of PUP. Only if
FIRESTONE failed to exercise its right of first priority could NDC lawfully sell the property to
petitioner PUP.

In the light of the foregoing, the Court held that respondent, which did not offer any amount to
petitioner NDC, and neither disputed the P1,500.00 per square meter actual value of NDCs
property at that time it was sold to PUP at P554.74 per square meter, as duly considered by this
Court in the Firestone case, should be bound by such determination. Accordingly, the price at
which the leased premises should be sold to respondent in the exercise of its right of first refusal
under the lease contract with petitioner NDC, which was pegged by the RTC at P554.74 per square
meter, should be adjusted to P1, 500.00 per square meter, which more accurately reflects its true
value at that time of the sale in favor of petitioner PUP. Indeed, basic is the rule that a party to a
contract cannot unilaterally withdraw a right of first refusal that stands upon valuable
consideration. We have categorically ruled that it is not correct to say that there is no consideration

Page 558 of 845

for the grant of the right of first refusal if such grant is embodied in the same contract of lease.
Since the stipulation forms part of the entire lease contract, the consideration for the lease includes
the consideration for the grant of the right of first refusal. In entering into the contract, the lessee
is in effect stating that it consents to lease the premises and to pay the price agreed upon provided
the lessor also consents that, should it sell the leased property, then, the lessee shall be given the
right to match the offered purchase price and to buy the property at that price. We have further
stressed that not even the avowed public welfare or the constitutional priority accorded to
education, invoked by petitioner PUP in the Firestone case, would serve as license for us, and any
party for that matter, to destroy the sanctity of binding obligations. While education may be
prioritized for legislative and budgetary purposes, it is doubtful if such importance can be used to
confiscate private property such as the right of first refusal granted to a lessee of petitioner NDC.42
Clearly, no reversible error was committed by the CA in sustaining respondents contractual right
of first refusal and ordering the conveyance of the leased portion of petitioner NDCs property in
its favor. Hence the petition was denied.

Page 559 of 845

 G.R. No. 129977
February 1, 2001
JOSELITO VILLEGAS and DOMINGA VILLEGAS vs. COURT OF APPEALS

FACTS: Before September 6, 1973, Lot B-3-A, with an area of 4 hectares was registered under
TCT No. 68641 in the names of Ciriaco D. Andres and Henson Caigas. This land was also declared
for real estate taxation under Tax Declaration No. C2-4442. On September 6, 1973, Andres and
Caigas, with the consent of their respective spouses, Anita Barrientos and Consolacion Tobias,
sold the land to Fortune Tobacco Corporation for P60, 000.00. Simultaneously, they executed a
joint affidavit declaring that they had no tenants on said lot. On the same date, the sale was
registered in the Office of the Register of Deeds of Isabela. TCT No. 68641 was cancelled and
TCT No. T-68737 was issued in Fortunes name. On August 6, 1976, Andres and Caigas executed
a Deed of Reconveyance of the same lot in favor of Filomena Domingo, the mother of Joselito
Villegas, defendant in the case before the trial court. Although no title was mentioned in this deed,
Domingo succeeded in registering this document in the Office of the Register of Deeds on August
6, 1976, causing the latter to issue TCT No. T-91864 in her name. It appears in this title that the
same was a transfer from TCT No. T-68641. On April 13, 1981, Domingo declared the lot for real
estate taxation under Tax Declaration No. 10-5633. On December 4, 1976, the Office of the
Register of Deeds of Isabela was burned together with all titles in the office. On December
17,1976, the original of TCT No. T-91864 was administratively reconstituted by the Register of
Deeds. On June 2, 1979, a Deed of Absolute Sale of a portion of 20,000 square meters of Lot B-
3-A was executed by Filomena Domingo in favor of Villegas for a consideration of P1,000.00.
This document was registered on June 3, 1981 and as a result TCT No. T-131807 was issued by
the Register of Deeds to Villegas. On the same date, the technical description of Lot B-3-A-2 was
registered and TCT No. T-131808 was issued in the name of Domingo. On January 22, 1991, this
document was registered and TCT No. 154962 was issued to the defendant, Joselito Villegas.

On April 10, 1991, the trial court upon a petition filed by Fortune ordered the reconstitution of the
original of TCT No. T-68737. After trial on the merits, the trial court rendered its assailed decision
in favor of Fortune Tobacco, declaring it to be entitled to the property. Petitioners thus appealed
this decision to the Court of Appeals, which affirmed the trial courts decision.

ISSUE: Whether or not the Court of Appeals was correct in affirming the trial courts decision.

HELD: Even if Fortune had validly acquired the subject property, it would still be barred from
asserting title because of laches. The failure or neglect, for an unreasonable length of time to do
that which by exercising due diligence could or should have been done earlier constitutes laches.
It is negligence or omission to assert a right within a reasonable time, warranting a presumption
that the party entitled to assert it has either abandoned it or declined to assert it. While it is by
express provision of law that no title to registered land in derogation of that of the registered owner
shall be acquired by prescription or adverse possession, it is likewise an enshrined rule that even a
registered owner may be barred from recovering possession of property by virtue of laches. Hence,
petition was GRANTED and the Decision of the Court of Appeals was REVERSED.

Page 560 of 845

 G.R. No. 106063
November 21, 1996
EQUATORIAL REALTY DEVELOPMENT, INC. & CARMELO & BAUERMANN, INC
vs. MAYFAIR THEATER, INC

FACTS: Carmelo owned a parcel of land, together with two 2-storey buildings constructed
thereon. On June 1, 1967 Carmelo entered into a contract of lease with Mayfair for the latters
lease of a portion of Carmelos property. Two years later, on March 31, 1969, Mayfair entered into
a second contract of lease with Carmelo for the lease of another portion of Carmelos property.
Both contracts of lease provide identically worded paragraph 8, which reads:

That if the LESSOR should desire to sell the leased premises, the LESSEE shall be given 30-days
exclusive option to purchase the same.

In the event, however, that the leased premises is sold to someone other than the LESSEE, the
LESSOR is bound and obligated, as it hereby binds and obligates itself, to stipulate in the Deed of
Sale thereof that the purchaser shall recognize this lease and be bound by all the terms and
conditions thereof.

Mr. Henry Pascal of Carmelo informed Mr. Henry Yang, President of Mayfair, through a telephone
conversation that Carmelo was desirous of selling the entire Claro M. Recto property. Mr. Pascal
told Mr. Yang that a certain Jose Araneta was offering to buy the whole property for US Dollars
1,200,000, and Mr. Pascal asked Mr. Yang if the latter was willing to buy the property for Six to
Seven Million Pesos.

Under your companys two lease contracts with our client, it is uniformly provided:

8. That if the LESSOR should desire to sell the leased premises the LESSEE shall be given 30-
days exclusive option to purchase the same. In the event, however, that the leased premises is sold
to someone other than the LESSEE, the LESSOR is bound and obligated, as it here binds and
obligates itself, to stipulate in the Deed of Sale thereof that the purchaser shall recognize this lease
and be bound by all the terms and conditions hereof.

Carmelo did not reply to this letter.

On September 18, 1974, Mayfair sent another letter to Carmelo purporting to express interest in
acquiring not only the leased premises but the entire building and other improvements if the price
is reasonable. However, both Carmelo and Equatorial questioned the authenticity of the second
letter.

Four years later, on July 30, 1978, Carmelo sold its entire C.M. Recto Avenue land and building,
which included the leased premises housing the Maxim and Miramar theatres, to Equatorial by
virtue of a Deed of Absolute Sale, for the total sum of P11,300,000.00.

Page 561 of 845

In September 1978, Mayfair instituted the action a quo for specific performance and annulment of
the sale of the leased premises to Equatorial. It dismissed the complaint with costs against the
plaintiff. The Court of Appeals reversed the decision of the trial court.

ISSUE: Whether or not the decision of the Court of Appeals decision was correct.

HELD: The Court agrees with the Court of Appeals that the aforecited contractual stipulation
provides for a right of first refusal in favor of Mayfair. It is not an option clause or an option
contract. It is a contract of a right of first refusal.

As early as 1916, in the case of Beaumont vs. Prieto, unequivocal was our characterization of an
option contract as one necessarily involving the choice granted to another for a distinct and
separate consideration as to whether or not to purchase a determinate thing at a predetermined
fixed price.

Further, what Carmelo and Mayfair agreed to, by executing the two lease contracts, was that
Mayfair will have the right of first refusal in the event Carmelo sells the leased premises. It is
undisputed that Carmelo did recognize this right of Mayfair, for it informed the latter of its
intention to sell the said property in 1974. There was an exchange of letters evidencing the offer
and counter-offers made by both parties. Carmelo, however, did not pursue the exercise to its
logical end. While it initially recognized Mayfairs right of first refusal, Carmelo violated such
right when without affording its negotiations with Mayfair the full process to ripen to at least an
interface of a definite offer and a possible corresponding acceptance within the 30-day exclusive
option time granted Mayfair, Carmelo abandoned negotiations, kept a low profile for some time,
and then sold, without prior notice to Mayfair, the entire Claro M. Recto property to Equatorial.

Since Equatorial is a buyer in bad faith, this finding renders the sale to it of the property in question
rescissible. We agree with respondent Appellate Court that the records bear out the fact that
Equatorial was aware of the lease contracts because its lawyers had, prior to the sale, studied the
said contracts. As such, Equatorial cannot tenably claim to be a purchaser in good faith, and,
therefore, rescission lies.

Hence, the petition was denied.

G.R. No. 143513

November 14, 2001

Page 562 of 845

POLYTECHNIC UNIVERSITY OF THE PHILIPPINES vs. COURT OF APPEALS and
FIRESTONE CERAMICS, INC.

FACTS: Petitioner National Development Corp., a government owned and controlled corporation,
had in its disposal a 10 hectares property. Sometime in May 1965, private respondent Firestone
Corporation manifested its desire to lease a portion of it for ceramic manufacturing business. On
August 24, 1965, both parties entered into a contract of lease for a term of 10 years renewable for
another 10 years. Prior to the expiration of the aforementioned contract, Firestone wrote NDC
requesting for an extension of their lease agreement. It was renewed with an express grant to
Firestone of the first option to purchase the leased premise in the event that it was decided "to
dispose and sell the properties including the lot..."

Cognizant of the impending expiration of the leased agreement, Firestone informed NDC through
letters and calls that it was renewing its lease. No answer was given. Firestone's predicament
worsened when it learned of NDC's supposed plans to dispose the subject property in favor of
petitioner Polytechnic University of the Philippines. PUP referred to Memorandum Order No. 214
issued by then President Aquino ordering the transfer of the whole NDC compound to the National
Government. The order of conveyance would automatically result in the cancellation of NDC's
total obligation in favor of the National Government.

Firestone instituted an action for specific performance to compel NDC to sell the leased property
in its favor.

ISSUE: Whether or not there is a valid sale between NDC and PUP.

HELD: A contract of sale, as defined in the Civil Code, is a contract where one of the parties
obligates himself to transfer the ownership of and to deliver a determinate thing to the other or
others who shall pay therefore a sum certain in money or its equivalent. It is therefore a general
requisite for the existence of a valid and enforceable contract of sale that it be mutually obligatory,
i.e., there should be a concurrence of the promise of the vendor to sell a determinate thing and the
promise of the vendee to receive and pay for the property so delivered and transferred. The Civil
Code provision is, in effect, a "catch-all" provision which effectively brings within its grasp a
whole gamut of transfers whereby ownership of a thing is ceded for a consideration.

All three (3) essential elements of a valid sale, without which there can be no sale, were attendant
in the "disposition" and "transfer" of the property from NDC to PUP - consent of the parties,
determinate subject matter, and consideration therefor.

Consent to the sale is obvious from the prefatory clauses of Memorandum Order No. 214 which
explicitly states the acquiescence of the parties to the sale of the property. Furthermore, the
cancellation of NDC's liabilities in favor of the National Government constituted the
"consideration" for the sale.

Page 563 of 845

 G.R. No. 143590
November 14, 2001
NATIONAL DEVELOPMENT CORPORATION vs. FIRESTONE CERAMICS INC

Page 564 of 845

FACTS: In the early sixties, petitioner National Development Corporation (NDC), had in its
disposal a ten-hectare property located along Pureza St., Sta. Mesa, Manila. The estate was
popularly known as the NDC compound and covered by Transfer Certificates of Title Nos. 92885,
110301 and 145470. Private respondent Firestone Ceramics Inc. manifested its desire to lease a
portion of the property for its ceramic manufacturing business. NDC and FIRESTONE entered
into a contract of lease denominated as Contract No. C-30-65 covering a portion of the property
measured at 2.90118 hectares for use as a manufacturing plant for a term of ten years, renewable
for another ten years under the same terms and conditions. In consequence of the agreement,
FIRESTONE constructed on the leased premises several warehouses and other improvements
needed for the fabrication of ceramic products. Three and a half years later, FIRESTONE entered
into a second contract of lease with NDC over the latter's four-unit pre-fabricated reparation steel
warehouse stored in Daliao, Davao. FIRESTONE agreed to ship the warehouse to Manila for
eventual assembly within the NDC compound. The second contract, denominated as Contract No.
C-26-68, was for similar use as a ceramic manufacturing plant and was agreed expressly to be "co-
extensive with the lease of LESSEE with LESSOR on the 2.60 hectare-lot. The parties signed a
similar contract concerning a six-unit pre-fabricated steel warehouse which, as agreed upon by the
parties, would expire on 2 December 1978. Prior to the expiration of the aforementioned contract,
FIRESTONE wrote NDC requesting for an extension of their lease agreement. Consequently, the
Board of Directors of NDC adopted the Resolution extending the term of the lease, subject to
several conditions among which was that in the event NDC "with the approval of higher
authorities, decide to dispose and sell these properties including the lot, priority should be given
to the LESSEE". In pursuance of the resolution, the parties entered into a new agreement for a ten-
year lease of the property, renewable for another ten years, expressly granting FIRESTONE the
first option to purchase the leased premises in the event that it decided "to dispose and sell these
properties including the lot.

The parties' lessor-lessee relationship went smoothly until early 1988 when FIRESTONE,
cognizant of the impending expiration of their lease agreement with NDC, informed the latter
through several letters and telephone calls that it was renewing its lease over the property. While
its letter of 17 March 1988 was answered by Antonio A. Henson, General Manager of NDC, who
promised immediate action on the matter, the rest of its communications remained
unacknowledged. FIRESTONE's predicament worsened when rumors of NDC's supposed plans
to dispose of the subject property in favor of petitioner Polytechnic University of the Philippines
came to its knowledge. Forthwith, FIRESTONE served notice on NDC conveying its desire to
purchase the property in the exercise of its contractual right of first refusal. Apprehensive that its
interest in the property would be disregarded, FIRESTONE instituted an action for specific
performance to compel NDC to sell the leased property in its favor. Following the denial of its
petition, FIRESTONE amended its complaint to include PUP and Executive Secretary Catalino
Macaraeg, Jr., as party-defendants, and sought the annulment of Memorandum Order No. 214.

After trial, judgment was rendered declaring the contracts of lease executed between FIRESTONE
and NDC covering the 2.60-hectare property and the warehouses constructed thereon valid and

Page 565 of 845

existing until 2 June 1999. The Court of Appeals affirmed the decision of the trial court ordering
the sale of the property in favor of FIRESTONE.

ISSUE: Whether or not the Court of Appeals decided a question of substance in a way definitely
not in accord with law or jurisprudence.

HELD: The courts a quo did not hypothesize, much less conjure, the sale of the disputed property
by NDC in favor of petitioner PUP. Aside from the fact that the intention of NDC and PUP to enter
into a contract of sale was clearly expressed in the Memorandum Order No. 214, a close perusal
of the circumstances of this case strengthens the theory that the conveyance of the property from
NDC to PUP was one of absolute sale, for a valuable consideration, and not a mere paper transfer
as argued by petitioners.

A contract of sale, as defined in the Civil Code, is a contract where one of the parties obligates
himself to transfer the ownership of and to deliver a determinate thing to the other or others who
shall pay therefore a sum certain in money or its equivalent. It is therefore a general requisite for
the existence of a valid and enforceable contract of sale that it be mutually obligatory, i.e., there
should be a concurrence of the promise of the vendor to sell a determinate thing and the promise
of the vendee to receive and pay for the property so delivered and transferred. The Civil Code
provision is, in effect, a "catch-all" provision which effectively brings within its grasp a whole
gamut of transfers whereby ownership of a thing is ceded for a consideration.
Contrary to what petitioners PUP and NDC propose, there is not just one party involved in the
questioned transaction. Petitioners NDC and PUP have their respective charters and therefore each
possesses a separate and distinct individual personality.

Hence, the petition was denied.

Page 566 of 845

 G.R. No. 130722
December 9, 1999
SPS. LITONJUA vs. L & R CORPORATION

FACTS: This stems from loans obtained by the spouses Litonjua from L&R Corporation in the
aggregate sum of P400,000.00; P200,000.00 of which was obtained on August 6, 1974 and the
remaining P200,000.00 obtained on March 27, 1978. The loans were secured by a mortgage
constituted by the spouses upon their two parcels of land and the improvements thereon The
mortgage was duly registered with the Register of Deeds.

Spouses Litonjua sold to Philippine White House Auto Supply, Inc. (PWHAS) the parcels of land
they had previously mortgaged to L & R Corporation for the sum of P430,000.00. Meanwhile,
with the spouses Litonjua having defaulted in the payment of their loans, L & R Corporation
initiated extrajudicial foreclosure proceedings with the Ex-Oficio Sheriff of Quezon City. The
mortgaged properties were sold at public auction to L & R Corporation as the only bidder for the
amount of P221, 624.58.

The Deputy Sheriff informed L & R Corporation of the payment by PWHAS of the full redemption
price and advised it that it can claim the payment upon surrender of its owners duplicate
certificates of title. The spouses Litonjua presented for registration the Certificate of Redemption
issued in their favor to the Register of Deeds of Quezon City. The Certificate also informed L &
R Corporation of the fact of redemption and directed the latter to surrender the owners duplicate
certificates of title within five days.
On April 22, 1981, L & R Corporation wrote a letter to the Sheriff, copy furnished to the Register
of Deeds, stating: (1) that the sale of the mortgaged properties to PWHAS was without its consent,
in contravention of paragraphs 8 and 9 of their Deed of Real Estate Mortgage; and (2) that it was
not the spouses Litonjua, but PWHAS, who was seeking to redeem the foreclosed properties, when
under Articles 1236 and 1237 of the New Civil Code, the latter had no legal personality or capacity
to redeem the same.

On the other hand, the spouses Litonjua asked the Register of Deeds to annotate their Certificate
of Redemption as an adverse claim on the titles of the subject properties on account of the refusal
of L & R Corporation to surrender the owners duplicate copies of the titles to the subject
properties. With the refusal of the Register of Deeds to annotate their Certificate of Redemption,
the Litonjua spouses filed a Petition on July 17, 1981 against L & R Corporation for the surrender
of the owners duplicate of Transfer Certificates of Title No. 197232 and 197233 before the then
CFI.

While the said case was pending, L & R Corporation executed an Affidavit of Consolidation of
Ownership. The Register of Deeds cancelled Transfer Certificates of Title No. 197232 and 197233
and in lieu thereof, issued Transfer Certificates of Title No. 280054 and 28055 in favor of L & R
Corporation, free of any lien or encumbrance. A complaint for Quieting of Title, Annulment of
Title and Damages with preliminary injunction was filed by the spouses Litonjua and PWHAS
against herein respondents before the then CFI.

Page 567 of 845

ISSUE: Whether or not the Court of Appeals erred in its decision.

HELD: In the case at bar, PWHAS cannot claim ignorance of the right of first refusal granted to
L & R Corporation over the subject properties since the Deed of Real Estate Mortgage containing
such a provision was duly registered with the Register of Deeds. As such, PWHAS is presumed
to have been notified thereof by registration, which equates to notice to the whole world. Thus, the
Decision appealed from was AFFIRMED with the following MODIFICATIONS.

Page 568 of 845

 G.R. NO. 150903
DECEMBER 8, 2003
JOSEFA VS. ZHANDONG TRADING CORPORATION

FACTS: Respondent Zhandong delivered to petitioner Josefa, who was introduced to it as a client
by Mr. Tan, the total volume of 313 crates of boards valued at P4,558,100.00 payable within 60
days from delivery. Instead of paying respondent, petitioner remitted his payments to Tan who in
turn delivered various checks to respondent, who accepted them upon Tans assurance that said
checks came from petitioner. When a number of the checks bounced, Tan issued his own checks
and those of his mother, but Tan later stopped payments. Respondent demanded payment from
Tan and petitioner but was ignored; hence he filed the instant complaint.

In his answer petitioner averred that he had already paid all his obligations to respondent through
Tan. Furthermore, he claimed he is not privy to the agreements between Tan and respondent, and
hence, in case his payments were not remitted to respondent, then it was not his (petitioner) fault
and that respondent should bear the consequences.

ISSUE: Whether or not petitioner is liable for payment of the boards to respondent when he did
not negotiate the transaction with it, rather through Tan as intermediary.

HELD: No. The transaction was negotiated between Tan and petitioner who only received the
goods delivered by respondent. Petitioner was not privy to the arrangement between Tan and
respondent. Petitioner has fully paid for the goods to Tan with whom he had arranged the
transaction. Contracts take effect only between the parties, their successors in interest, heirs, and
assigns. When there is no privity of contract, there is likewise no obligation or liability and thus,
no cause of action arises. Petitioner, being not privy to the transaction between Tan and
respondent, should not be made liable for the failure of Tan to deliver the payment to respondent.

Therefore, respondent should recover the payment from Tan.

Page 569 of 845

 G.R. No. 184041
October 13, 2010
ANICETO G. SALUDO v. SECURITY BANK CORPORATION

FACTS: On 30 May 1996, Booklight was extended an omnibus line credit facility by SBC in the
amount of P10, 000,000.00. Said loan was covered by a Credit Agreement and a Continuing
Suretyship with petitioner as surety, both documents dated 1 August 1996, to secure full payment
and performance of the obligations arising from the credit accommodation. Booklight drew several
availments of the approved credit facility from 1996 to 1997 and faithfully complied with the terms
of the loan. On 30 October 1997, SBC approved the renewal of credit facility of Booklight in the
amount of P10, 000,000.00 under the prevailing security lending rate. From August 3 to 14, 1998,
Booklight executed nine promissory notes in favor of SBC in the aggregate amount of P9,
652,725.00. For failure to settle the loans upon maturity demands were made on Booklight and
petitioner for the payment of the obligation but the duo failed to pay. As of 15 May 2000, the
obligation of Booklight stood at P10, 487,875.41, inclusive of interest past due and penalty. On 16
June 2000, SBC filed against Booklight and herein petitioner an action for collection of sum of
money with the RTC. Book light initially filed a motion to dismiss, which was later on denied for
lack of merit. In his Answer, Booklight asserted that the amount demanded by SBC was not based
on the omnibus credit line facility of 30 May 1996, but rather on the amendment of the credit
facilities on 15 October 1996 increasing the loan line from P8, 000,000.00 to P10,000,000.00.
Booklight denied executing the promissory notes. It also claimed that it was not in default as in
fact, it paid the sum of P1,599,126.11 on 30 September 1999 as a prelude to restructuring its loan
for which it earnestly negotiated for a mutually acceptable agreement until 5 July 2000, without
knowing that SBC had already filed the collection case.

In his Answer to the complaint, herein petitioner alleged that under the Continuing Suretyship, it
was the parties understanding that his undertaking and liability was merely as an accommodation
guarantor of Booklight. He countered that he came to know that Booklight offered to pay SBC
the partial payment of the loan and proposed the restructuring of the obligation. Petitioner argued
that said offer to pay constitutes a valid tender of payment which discharged Booklights obligation
to the extent of the offer. Petitioner also averred that the imposition of the penalty on the supposed
due and unpaid principal obligation based on the penalty rate of 2% per month is clearly
unconscionable. On 7 March 2005, Booklight was declared in default. Consequently, SBC
presented its evidence ex-parte. The case against petitioner, however, proceeded and the latter was
able to present evidence on his behalf. After trial, the RTC ruled that petitioner is jointly and
solidarily liable with Booklight under the Continuing Suretyship Agreement. The Court of
Appeals affirmed in toto the ruling of the RTC. Petitioner filed a motion for reconsideration but
it was denied by the Court of Appeals on 7 August 2008. Hence, the instant petition.

ISSUE: Whether or not petitioner should be held solidarily liable for the second credit facility
extended to Booklight.

Page 570 of 845

HELD: We rule in the affirmative. There is no doubt that Booklight was extended two (2) credit
facilities, each with a one-year term, by SBC. Booklight availed of these two (2) credit lines.
While Booklight was able to comply with its obligation under the first credit line, it defaulted in
the payment of the loan obligation amounting to P9,652,725.00 under the second credit line. There
is likewise no dispute that the first credit line facility, with a term from 30 June 1996 to 30 June
1997, was covered by a Continuing Suretyship with petitioner acting as the surety. The dispute is
on the coverage by the Continuing Suretyship of the loan contracted under the second credit
facility. Comprehensive or continuing surety agreements are, in fact, quite commonplace in present
day financial and commercial practice. A bank or financing company which anticipates entering
into a series of credit transactions with a particular company, normally requires the projected
principal debtor to execute a continuing surety agreement along with its sureties. By executing
such an agreement, the principal places itself in a position to enter into the projected series of
transactions with its creditor; with such suretyship agreement, there would be no need to execute
a separate surety contract or bond for each financing or credit accommodation extended to the
principal debtor.

Petitioner argues that the approval of the second credit facility necessitates his consent considering
the onerous and solidary liability of a surety. This is contrary to the express waiver of his consent
to such renewal, contained in paragraph 12 of the Continuing Suretyship. Respondent, as last
resort, harps on the novation of the first credit facility to exculpate itself from liability from the
second credit facility. At the outset, it must be pointed out that the Credit Agreement is actually
the principal contract and it covers all credit facilities now or hereafter extended by SBC to
Booklight; and that the suretyship agreement was executed precisely to guarantee these
obligations, i.e., the credit facilities arising from the credit agreement. The principal contract is
the credit agreement covered by the Continuing Suretyship. The two loan facilities availed by
Booklight under the credit agreement are the Omnibus Line amounting to P10,000,000.00 granted
to Booklight in 1996 and the other one is the Loan Line of the same amount in 1997. Petitioner
however seeks to muddle the issue by insisting that these two availments were two separate
principal contracts, conveniently ignoring the fact that it is the credit agreement which constitutes
the principal contract signed by Booklight in order to avail of SBCs credit facilities. The two
credit facilities are but loans made available to Booklight pursuant to the credit agreement. On
these facts the novation argument advanced by petitioner must fail. There is no novation to speak
of. It is the first credit facility that expired and not the Credit Agreement. There was a second
loan pursuant to the same credit agreement. The terms and conditions under the Credit Agreement
continue to apply and the Continuing Suretyship continues to guarantee the Credit Agreement.
Hence the petition is denied.

Page 571 of 845

 A.M. No. P-05-1973.
March 18, 2005
EQUITABLE PCI v.NG SHUENG NGOR

FACTS: Complainant EPCIB is the defendant in Civil Case No. CEB-26983 before the Regional
Trial Court (RTC), Branch 16, Cebu City, entitled, Ng Sheung Ngor, doing business under the
name and style Ken Marketing, Ken Appliance Division, Inc. and Benjamin Go, Plaintiffs, vs.
Equitable PCI Bank, Aimee Yu and Ben Apas, Defendants for Annulment and/or Reformation of
Documents and Contracts.
Respondents Antonio A. Bellones and Generoso B. Regalado are the sheriffs in Branches 9 and
16, respectively, of the RTC of Cebu City.

For garnishing accounts maintained by Equitable PCI Bank, Inc. (EPCIB) at Citibank, N.A., and
Hongkong and Shanghai Bank Corporation (HSBC), allegedly in violation of Section 9(b) of Rule
39 of the Rules of Court, a complaint for grave abuse of authority was filed by Atty. Paulino L.
Yusi against Sheriffs Antonio A. Bellones and Generoso B. Regalado. There was an offer of other
real property by petitioner.

ISSUE: Did respondents violate the Rules of Court?

HELD: By serving notices of garnishment on Citibank, N.A., HSBC and PNB, Sheriff Regalado
violated EPCIBs right to choose which property may be levied upon to be sold at auction for the
satisfaction of the judgment debt. Thus, it is clear that when EPCIB offered its real properties, it
exercised its option because it cannot immediately pay the full amount stated in the writ of
execution and all lawful fees in cash, certified bank check or any other mode of payment acceptable
to the judgment obligee.

In the case at bar, EPCIB cannot immediately pay by way of Managers Check so it exercised its
option to choose and offered its real properties. With the exercise of the option, Sheriff Regalado
should have ceased serving notices of garnishment and discontinued their implementation. This
is not true in the instant case. Sheriff Regalado was adamant in his posture even if real properties
have been offered which were sufficient to satisfy the judgment debt.

Page 572 of 845

Page 573 of 845
 G.R. No. 169578
November 30, 2006
TERESITA DIO vs. ST. FERDINAND MEMORIALPARK, INC.

FACTS: On December 11, 1973, Teresita Dio agreed to buy, on installment basis, a memorial lot
from the St. Ferdinand Memorial Park, Inc. (SFMPI) in Lucena City. The purchase was evidenced
by a Pre-Need Purchase Agreement. She obliged herself to abide by all such rules and regulations
governing the SFMPI dated May 25, 1972. SFMPI issued a Deed of Sale and Certificate of
Perpetual. The ownership of Dio over the property was made subject to the rules and regulations
of SFMPI, as well as the government, including all amendments, additions and modifications that
may later be adopted. According to the Rules (Rule 69) Mausoleum building and memorials should
be constructed by the Park Personnel. Lot Owners cannot contract other contractors for the
construction of the said buildings and memorial, however, the lot owner is free to give their own
design for the mausoleum to be constructed, as long as it is in accordance with the park standards.
The construction shall be under the close supervision of the Park Superintendent.

The mortal remains of Dios husband, father and daughter were interred in the lot at her own
expense, without the knowledge and intervention of SFMPI..

In October 1986, Dio informed SFMPI, through its president and controlling stockholder, Mildred
F. Tantoco, that she was planning to build a mausoleum on her lot and sought the approval thereof.
Dio showed to Tantoco the plans and project specifications accomplished by her private contractor
at an estimated cost of P60, 000.00. The plans and specifications were approved, but Tantoco
insisted that the mausoleum be built by it or its agents at a minimum cost of P100, 000.00 as
provided in Rule 69 of the Rules and Regulations the SFMPI issued on May 25, 1972. The total
amount excluded certain specific designs in the approved plan which if included would cost Dio
much more. Dio, through counsel, demanded that she be allowed to construct the mausoleum
within 10 days, otherwise, she would be impelled to file the necessary action/s against SFMPI and
Tantoco. Dio filed a Complaint for Injunction with Damages against SFMPI and Tantoco before
the RTC. She averred that she was not aware of Rule 69 of the SFMPI Rules and Regulations; the
amount of P100,000.00 as construction cost of the mausoleum was unconscionable and oppressive.
She prayed that, after trial, judgment be rendered in her favor, granting a final injunction
perpetually restraining defendants from enforcing the invalid Rule 69 of SFMPIs Rules for
Memorial Work in the Mausoleum of the Park or from refusing or preventing the construction of
any improvement upon her property in the park. The court issued a cease and desist order against
defendants.

The trial court rendered judgment in favor of defendants. On appeal, the CA affirmed the decision
of the trial court.

Page 574 of 845

ISSUE: Whether or not petitioner had knowledge of Rule 69 of SFMPI Rules and Regulations for
memorial works in the mausoleum areas of the park when the Pre-Need Purchase Agreement and
the Deed of Sale was executed and whether the said rule is valid and binding upon petitioner.

HELD: Plaintiffs allegation that she was not aware of the said Rules and Regulations lacks
credence. Admittedly, in her Complaint and during the trial, plaintiff testified that she informed
the defendants of her intention to construct a mausoleum. Even counsel for the plaintiff, who is
the son of the plaintiff, informed the Court during the trial in this case that her mother, the plaintiff
herein, informed the defendants of her plan to construct and erect a mausoleum. This act of the
plaintiff clearly shows that she was fully aware of the said rules and regulations otherwise she
should not consult, inform and seek permission from the defendants of her intention to build a
mausoleum if she is not barred by the rules and regulations to do the same. When she signed the
contract with the defendants, she was estopped to question and attack the legality of said contract
later on. Further, a contract of adhesion, wherein one party imposes a readymade form of contract
on the other, is not strictly against the law. A contract of adhesion is as binding as ordinary
contracts, the reason being that the party who adheres to the contract is free to reject it entirely.
Contrary to petitioners contention, not every contract of adhesion is an invalid agreement. Thus,
the petition was denied.

Page 575 of 845

 G.R. No. 156966
May 7, 2004
PILIPINO TELEPHONE CORPORATION vs. DELFINO TECSON

FACTS: On various dates in 1996, Delfino C. Tecson applied for 6 cellular phone subscriptions
with petitioner Pilipino Telephone Corporation (PILTEL), a company engaged in the
telecommunications business, which applications were each approved and covered, respectively,
by six mobiline service agreements. On 05 April 2001, respondent filed with the Regional Trial
Court a complaint against petitioner for a Sum of Money and Damages. Petitioner moved for
the dismissal of the complaint on the ground of improper venue, citing a common provision in the
mobiline service agreements to the effect that - Venue of all suits arising from this Agreement or
any other suit directly or indirectly arising from the relationship between PILTEL and subscriber
shall be in the proper courts of Makati, Metro Manila. Subscriber hereby expressly waives any
other venues. The Regional Trial Court of Iligan City, Lanao del Norte, denied petitioners motion
to dismiss and required it to file an answer within 15 days from receipt thereof.

Petitioner filed a petition for certiorari before the Court of Appeals. The Court of Appeals saw no
merit in the petition and affirmed the assailed orders of the trial court.

ISSUE: Whether or not the Court of Appeals erred in affirming the orders of the trial court.

HELD: The contract herein involved is a contract of adhesion. But such an agreement is not per
se inefficacious. The rule instead is that, should there be ambiguities in a contract of adhesion,
such ambiguities are to be construed against the party that prepared it. If, however, the stipulations
are not obscure, but are clear and leave no doubt on the intention of the parties, the literal meaning
of its stipulations must be held controlling. A contract of adhesion is just as binding as ordinary
contracts. It is true that this Court has, on occasion, struck down such contracts as being assailable
when the weaker party is left with no choice by the dominant bargaining party and is thus
completely deprived of an opportunity to bargain effectively. Nevertheless, contracts of adhesion
are not prohibited even as the courts remain careful in scrutinizing the factual circumstances
underlying each case to determine the respective claims of contending parties on their efficacy. In
the case at bar, respondent secured 6 subscription contracts for cellular phones on various dates. It
would be difficult to assume that, during each of those times, respondent had no sufficient
opportunity to read and go over the terms and conditions embodied in the agreements. Respondent
continued, in fact, to acquire in the pursuit of his business subsequent subscriptions and remained
a subscriber of petitioner for quite some time.

Hence, the petition was granted by the Court and the decision of the Court of Appeals is reversed
and set aside. The Civil Case pending before the Regional Trial Court of Iligan City, Branch 4,
was DISMISSED without prejudice to the filing of an appropriate complaint by respondent against
petitioner with the court of proper venue.

Page 576 of 845

 G.R. No. 119706
March 14, 1996
PHILIPPINE AIRLINES VS. COURT OF APPEALS

FACTS: On January 27, 1990, plaintiff Gilda C. Mejia shipped thru defendant, Philippine
Airlines, one (1) unit microwave oven under PAL Air Waybill No. 0-79-1013008-3, with a gross
weight of 33 kilograms from San Francisco, U.S.A. to Manila, Philippines. Upon arrival, however,
of said article in Manila, Philippines, plaintiff discovered that its front glass door was broken and
the damage rendered it unserviceable. Demands both oral and written were made by plaintiff
against the defendant for the reimbursement of the value of the damaged microwave oven, and
transportation charges paid by plaintiff to defendant company. But these demands fell on deaf
ears. This is because, according to petitioner, was filed out of time under paragraph 12, a (1) of
the Air Waybill which provides: "(a) the person entitled to delivery must make a complaint to the
carrier in writing in case: (1) of visible damage to the goods, immediately after discovery of the
damage and at the latest within 14 days from the receipt of the goods.

On September 25, 1990, Gilda C. Mejia filed an action for damages against the petitioner in the
lower court. The latter rendered a decision rendering PAL liable to pay, actual, moral and
exemplary damages as well as attorneys fees. On appeal, the Court of Appeals similarly ruled in
favor of private respondent by affirming in full the trial court's judgment, with costs against
petitioner.

ISSUE: Whether or not the respondent court erred in affirming the conclusions of the trial court
that since the air waybill is a contract of adhesion, its provisions should be strictly construed
against herein petitioner.

HELD: The Supreme Court affirmed the appealed decision. The trial court relied on the ruling in
the case of Fieldmen's Insurance Co., Inc. vs. Vda. De Songco, et al. in finding that the provisions
of the air waybill should be strictly construed against petitioner.

The Air Waybill is a contract of adhesion considering that all the provisions thereof are prepared
and drafted only by the carrier. The only participation left of the other party is to affix his signature
thereto. In the earlier case of Angeles v. Calasanz, the Supreme Court ruled that the terms of a
contract of adhesion must be interpreted against the party who drafted the same.

Page 577 of 845

 G.R. No. 127246
April 21, 1999
SPOUSES ERMITAO v. COURT OF APPEALS

FACTS: Petitioner Luis Ermitao applied for a credit card from private respondent BPI Express
Card Corp. (BECC) on October 8, 1986 with his wife, Manuelita, as extension card holder. The
spouses were given credit limit of P10, 000.00. They often exceeded this credit limit without
protest from BCC. On August 9, 1989, Manuelitas bag was snatched from her as she was shopping
at the greenbelt mall in Makati. Among the items inside the bag was her BECC credit card. That
same night she informed, by telephone, BECC of the loss. The call was received by BECC offices
through a certain Gina Banzon. This was followed by a letter dated August 30, 1989. She also
surrendered Luis credit card and requested for replacement cards. In her letter, Manuelita stated
that she shall not be responsible for any and all charges incurred [through the use of the lost card]
after August 29, 1989.

However, when Luis received his monthly billing statement from BECC dated September 20,
1989, the charges included amounts for purchases were made, one amounting to P2, 350.05 and
the other, P607.50. Manuelita received a billing statement dated October 20,1989 which required
her to immediately pay the total amount of P3,197.70 covering the same (unauthorized) purchases.
Manuelita wrote again BECC disclaiming responsibility for those charges, which were made after
she had served BECC with notice of loss of her card.

However, BECC, in a letter dated July 13, 1990, pointed to Luis the stipulation in their contract.
However, Luis stressed that the contract BECC was referring to was a contract of adhesion and
warned that if BECC insisted on charging him and his wife for the unauthorized purchases, they
will sue BECC continued to bill the spouses for said purchases.

ISSUE: Whether or not the Court of Appeals gravely erred in relying on the case of Serra v. Court
of appeals, 229 SCRA 60, because unlike that case, petitioners have no chance at all to contest the
stipulations appearing in the credit card application that was drafted entirely by private respondent,
thus, a clear contract of adhesion.

HELD: The contract between the parties in this case is indeed a contract of adhesion, so-called
because its terms are prepared by only one party while the other party merely affixes his signature
signifying his adhesion thereto. Such contracts are not void in themselves. They are as binding as
ordinary contracts. Parties who enter in to such contracts are free to reject the stipulations entirely.

In this case, the cardholder, Manuelita, has complied with what was required of her under the
contract with BECC, She immediately notified BECC of loss of her card on the same day it was
lost and, the following day, she sent a written notice of the loss to BECC.
Clearly, what happened in this case was that BECC failed to notify promptly the establishment in
which the unauthorized purchases were made with the use of Manuelitas lost card.

Page 578 of 845

 G.R. No. 126619
December 20, 2006
UNIWIDE SALES REALTY AND RESOURCES CORPORATION,
vs. TITAN-IKEDA CONSTRUCTIONAND DEVELOPMENT CORPORATION

FACTS: PROJECT 1. The first agreement was a written Construction Contract entered into by
Titan and Uniwide sometime in May 1991 whereby Titan undertook to construct Uniwides
Warehouse Club and Administration Building in Libis, Quezon City for a fee of P120,936,591.50,
payable in monthly progress billings to be certified to by Uniwides representative. The parties
stipulated that the building shall be completed not later than 30 November 1991. As found by the
CIAC, the building was eventually finished on 15 February 1992 and turned over to Uniwide.

PROJECT 2. Sometime in July 1992, Titan and Uniwide entered into the second agreement
whereby the former agreed to construct an additional floor and to renovate the latters warehouse
located at the EDSA Central Market Area in Mandaluyong City. There was no written contract
executed between the parties for this project. Construction was allegedly to be on the basis of
drawings and specifications provided by Uniwides structural engineers. The parties proceeded on
the basis of a cost estimate of P21,301,075.77 inclusive of Titans 20% mark-up. Titan conceded
in its complaint to having received P15,000,000.00 of this amount. This project was completed in
the latter part of October 1992 and turned over to Uniwide.

PROJECT 3. The parties executed the third agreement in May 1992. In a written
Construction Contract, Titan undertook to construct the Uniwide Sales Department Store
Building in Kalookan City for the price of P118,000,000.00 payable in progress billings to be
certified to by Uniwides representative. It was stipulated that the project shall be completed not
later than 28 February 1993. The project was completed and turned over to Uniwide in June 1993.

Uniwide asserted in its petition that: (a) it overpaid Titan for unauthorized additional works in
Project 1 and Project 3; (b) it is not liable to pay the Value-Added Tax for Project 1; (c) it is entitled
to liquidated damages for the delay incurred in constructing Project 1 and Project 3; and (d) it
should not have been found liable for deficiencies in the defectively constructed Project 2.

ISSUE: Whether or not the decision rendered is correct.

HELD: The petition is DENIED and the Decision of the Court of Appeals was AFFIRMED.

The decision:

On Project 1 Libis: Uniwide is absolved of any liability for the claims made by [Titan] on this
Project.

Project 2 Edsa Central: Uniwide is absolved of any liability for VAT payment on this project,
the same being for the account of Titan. On the other hand, Titan is absolved of any liability on
the counterclaim for defective construction of this project. Uniwide is held liable for the unpaid
balance in the amount of P6,301,075.77 which is ordered to be paid to the Titan with 12% interest
per annum commencing from 19 December 1992 until the date of payment.

Page 579 of 845

On Project 3 Kalookan: Uniwide is held liable for the unpaid balance in the amount of
P5,158,364.63 which is ordered to be paid to Titan with 12% interest per annum commencing from
08 September 1993 until the date of payment. Uniwide is held liable to pay in full the VAT on this
project, in such amount as may be computed by the Bureau of Internal Revenue to be paid directly
thereto. The BIR is hereby notified that Uniwide Sales Realty and Resources Corporation has
assumed responsibility and is held liable for VAT payment on this project. This accordingly
exempts Claimant Titan-Ikeda Construction and Development Corporation from this obligation.

Page 580 of 845

 G.R. NO. 135362
December 13, 1999
HEIRS OF AUGUSTO L. SALAS, JR. vs. LAPERAL REALTY CORPORATION

FACTS: Salas, Jr. was the registered owner of a vast tract of land in Lipa City, Batangas spanning
1,484,354 square meters. On May 15, 1987, he entered into an Owner-Contractor Agreement with
respondent Laperal Realty Corporation to render and provide complete (horizontal) construction
services on his land. On September 23, 1988, Salas, Jr. executed a Special Power of Attorney in
favor of respondent Laperal Realty to exercise general control, supervision and management of
the sale of his land, for cash or on installment basis. On June 10, 1989, Salas, Jr. left his home in
the morning for a business trip to Nueva Ecija. He never returned.On August 6, 1996, Teresita
Diaz Salas filed with the Regional Trial Court a verified petition for the declaration of presumptive
death of her husband, Salas, Jr., who had then been missing for more than seven (7) years. It was
granted on December 12, 1996.

Meantime, respondent Laperal Realty subdivided the land of Salas, Jr. and sold subdivided
portions thereof to respondents Rockway Real Estate Corporation and South Ridge Village, Inc.
on February 22, 1990; to respondent spouses Abrajano and Lava and Oscar Dacillo on June 27,
1991; and to respondents Eduardo Vacuna, Florante de la Cruz and Jesus Vicente Capalan on June
4, 1996.

On February 3, 1998, petitioners as heirs of Salas, Jr. filed in the Regional Trial Court a Complaint
for declaration of nullity of sale, reconveyance, cancellation of contract, accounting and damages
against herein respondents. Laperal Realty filed a Motion to Dismiss on the ground that petitioners
failed to submit their grievance to arbitration as required under Article VI of the Agreement.
Spouses Abrajano and Lava and respondent Dacillo filed a Joint Answer with Counterclaim and
Crossclaim praying for dismissal of petitioners Complaint for the same reason.
The trial court issued an Order dismissing petitioners Complaint for non-compliance with the
arbitration clause.

ISSUE: Whether or not the trial court erred in dismissing the complaint.

HELD: A submission to arbitration is a contract. As such, the Agreement, containing the

stipulation on arbitration, binds the parties thereto, as well as their assigns and heirs. But only they.
Petitioners, as heirs of Salas, Jr., and respondent Laperal Realty are certainly bound by the
Agreement. If respondent Laperal Realty, had assigned its rights under the Agreement to a third
party, making the former, the assignor, and the latter, the assignee, such assignee would also be
bound by the arbitration provision since assignment involves such transfer of rights as to vest in
the assignee the power to enforce them to the same extent as the assignor could have enforced
them against the debtor or in this case, against the heirs of the original party to the Agreement.
However, respondents Rockway Real Estate Corporation, South Ridge Village, Inc., Maharami
Development Corporation, spouses Abrajano, spouses Lava, Oscar Dacillo, Eduardo Vacuna,
Florante de la Cruz and Jesus Vicente Capellan are not assignees of the rights of respondent
Laperal Realty under the Agreement to develop Salas, Jr.s land and sell the same. They are,

Page 581 of 845

rather, buyers of the land that respondent Laperal Realty was given the authority to develop and
sell under the Agreement. As such, they are not assigns contemplated in Art. 1311 of the New
Civil Code which provides that contracts take effect only between the parties, their assigns and
heirs.

Laperal Realty, as a contracting party to the Agreement, has the right to compel petitioners to first
arbitrate before seeking judicial relief. However, to split the proceedings into arbitration for
respondent Laperal Realty and trial for the respondent lot buyers, or to hold trial in abeyance
pending arbitration between petitioners and respondent Laperal Realty, would in effect result in
multiplicity of suits, duplicitous procedure and unnecessary delay. On the other hand, it would be
in the interest of justice if the trial court hears the complaint against all herein respondents and
adjudicates petitioners rights as against theirs in a single and complete proceeding.
Hence, the trial courts decision was nullified and set aside. Said court was ordered to proceed
with the hearing.

Page 582 of 845

 G.R. No. 150678
February 18, 2005
BIENVENIDO R. MEDRANO and IBAAN RURAL BANK vs. CA, PACITA G.
BORBON, JOSEFINA E. ANTONIO and ESTELA A. FLOR

FACTS: Bienvenido R. Medrano was the Vice-Chairman of Ibaan Rural Bank, a bank owned by
the Medrano family. In 1986, Mr. Medrano asked Mrs. Estela Flor, a cousin-in-law, to look for a
buyer of a foreclosed asset of the bank, a 17-hectare mango plantation priced at P2,200,000.00.
Mr. Dominador Lee, a businessman from Makati City, was a client of respondent Mrs. Pacita G.
Borbon, a licensed real estate broker. Borbon relayed to her business associates and friends that
she had a ready buyer for a mango orchard. Flor then advised her that her cousin-in-law owned a
mango plantation which was up for sale. She told Flor to confer with Medrano and to give them a
written authority to negotiate the sale of the property. Thus, Medrano issued the Letter of Authority
in favor of Pacita G. Borbon and Josefina E. Antonio.

A Deed of Sale was eventually executed between the bank, represented by its President/General
Manager Teresa M. Ganzon (as Vendor) and KGB Farms, Inc., represented by Dominador Lee (as
Vendee), for the purchase price of P1,200,000.00. Since the sale of the property was consummated,
the respondents asked from the petitioners their commission, or 5% of the purchase price. The
petitioners refused to pay and offered a measly sum of P5,000.00 each. Hence, the respondents
were constrained to file an action against herein petitioners.

The trial court rendered a Decision in favor of the respondents. It found that the letter of authority
was valid and binding as against Medrano and the Ibaan Rural bank. Medrano signed the said letter
for and in behalf of the bank, and as owner of the property, promising to pay the respondents a 5%
commission for their efforts in looking for a purchaser of the property. He is, therefore, estopped
from denying liability on the basis of the letter of authority he issued in favor of the respondents.
The trial court further stated that the sale of the property could not have been possible without the
representation and intervention of the respondents. As such, they are entitled to the brokers
commission of 5% of the selling price of P1,200,000.00 as evidenced by the deed of sale. On
appeal, the CA affirmed the trial courts decision.

ISSUE: Whether or not the Court of Appeals erred in affirming the trial courts decision.

HELD: There can be no other conclusion than the respondents are indeed the procuring cause of
the sale. If not for the respondents, Lee would not have known about the mango plantation being
sold by the petitioners. The sale was consummated. The bank had profited from such transaction.
It would certainly be iniquitous if the respondents would not be rewarded their commission
pursuant to the letter of authority. Hence, the Court of Appeals decision is affirmed.

Page 583 of 845

 TAN VS. GULLAS
G.R. No. 143978
December 3, 2002
Facts:
Spouses Eduardo R. Gullas and Norma S. Gullas, were the registered owners of a parcel
of land measuring 104,114 sq. m., with Transfer Certificate of Title No. 31465. On June 29, 1992,
they executed a special power of attorney authorizing petitioners Manuel B. Tan, a licensed real
estate broker, and his associates Gregg M. Tecson and Alexander Saldaa, to negotiate for the sale
of the land at Php 550.00per square meter, at a commission of 3% of the gross price. The power
of attorney was non-exclusive and effective for one month from June 29, 1992. On the same date,
petitioner Tan contacted Engineer Ledesma, construction manager of the Sisters of Mary of
Banneaux, Inc. (hereafter, Sisters of Mary), a religious organization interested in acquiring a
property. On 1, 1992, petitioner Tan visited the property with Engineer Ledesma. Thereafter, the
two men accompanied Sisters Michaela Kim and Azucena Gaviola, representing the Sisters of
Mary, who had seen and inspected the land, found the same suitable for their purpose and
expressed their desire to buy it. However, they requested that the selling price be reduced to Php
530.00 per square meter instead of Php 550.00per square meter. Private respondent Eduardo Gullas
referred the prospective buyers to his wife. It was the first time that the buyers came to know that
private respondent Eduardo Gullas was the owner of the property. Private respondents agreed to
sell the property to the Sisters of Mary, and subsequently executed a special power of attorney in
favor of Eufemia Caete, giving her the special authority to sell, transfer and convey the land at a
fixed price of Php 200.00 per square meter. Attorney-in-fact Caete executed a deed of sale in
favor of the Sisters of Mary for the price of Php 20,822,800.00, or at the rate of Php 200.00 per
square meter. The buyers subsequently paid the corresponding taxes. Thereafter, the Register of
Deeds of issued TCT No. 75981 in the name of the Sisters of Mary of Banneaux, Inc. Earlier, on
July 3, 1992, petitioners went to see private respondent Eduardo Gullas to claim their commission,
but the latter told them that he and his wife have already agreed to sell the property to the Sisters
of Mary. Private respondents refused to pay the brokers fee and alleged that another group of
agents was responsible for the sale of land to the Sisters of Mary. Petitioners filed a complaint
against the defendants for recovery of their brokers fee in the sum of Php 1,655,412.60, as well
as moral and exemplary damages and attorneys fees. They alleged that they were the efficient
procuring cause in bringing about the sale of the property to the Sisters of Mary, but that their
efforts in consummating the sale were frustrated by the private respondents who, in evident bad
faith, malice and in order to evade payment of brokers fee, dealt directly with the buyer whom
petitioners introduced to them. They further pointed out that the deed of sale was undervalued
obviously to evade payment of the correct amount of capital gains tax, documentary stamps and
other internal revenue taxes. In their answer, private respondents countered that, contrary to
petitioners claim, they were not the efficient procuring cause in bringing about the consummation
of the sale because another broker, Roberto Pacana, introduced the property to the Sisters of Mary
ahead of the petitioners. Private respondents maintained that when petitioners introduced the
buyers to private respondent Eduardo Gullas, the former were already decided in buying the
property through Pacana, who had been paid his commission. Private respondent Eduardo Gullas
admitted that petitioners were in his office on July 3, 1992, but only to ask for the reimbursement
of their cellular phone expenses. After trial, the lower court rendered judgment in favor of

Page 584 of 845

petitioners. Eduardo and Norma Gullas were ordered to pay jointly and severally plaintiffs Manuel
Tan, Gregg Tecson and Alexander Saldaa the sum of P624,684.00 as brokers fee with legal
interest at the rate of 6% per annum from the date of filing of the complaint; and the sum of
P50,000.00 as attorneys fees and costs of litigation.
Issue:
Whether or not the Court of Appeals erred in dismissing the complaint.
Ruling:
It is readily apparent that private respondents are trying to evade payment of the commission which
rightfully belongs to petitioners as brokers with respect to the sale. There was no dispute as to the
role that petitioners played in the transaction. At the very least, petitioners set the sale in motion.
They were not able to participate in its consummation only because they were prevented from
doing so by the acts of the private respondents. In the case of Alfred Hahn v. Court of Appeals and
Bayerische Motoren Werke Aktiengesellschaft (BMW) the SC ruled that, An agent receives a
commission upon the successful conclusion of a sale. On the other hand, a broker earns his pay
merely by bringing the buyer and the seller together, even if no sale is eventually made. Clearly,
therefore, petitioners, as brokers, should be entitled to the commission whether or not the sale of
the property subject matter of the contract was concluded through their efforts.

Page 585 of 845

 GOZUN VS. MERCADO
G.R. No. 167812
December 19, 2006
Facts:
In the local elections of 1995, respondent vied for the gubernatorial post in Pampanga.
Upon respondents request, petitioner, owner of JMG Publishing House, a printing shop located
in San Fernando, Pampanga, submitted to respondent draft samples and price quotation of
campaign materials. Given the urgency and limited time to do the job order, petitioner availed of
the services and facilities of Metro Angeles Printing and of St. Joseph Printing Press, owned by
his daughter Jennifer Gozun and mother Epifania Macalino Gozun, respectively. Petitioner
delivered the campaign materials to respondents headquarters along Gapan-Olongapo Road in
San Fernando, Pampanga. Meanwhile, on March 31, 1995, respondents sister-in-law, Lilian
Soriano (Lilian) obtained from petitioner "cash advance" of Php 253,000 allegedly for the
allowances of poll watchers who were attending a seminar and for other related expenses.
Petitioner later sent respondent a Statement of Account in the total amount of Php 2,177,906.
Respondents wife partially paid Php 1,000,000 to petitioner who issued a receipt. Despite repeated
demands and respondents promise to pay, respondent failed to settle the balance of his account to
petitioner. After three years of no avail, petitioner is compelled to endorse the matter to his counsel
who sent respondent a demand letter. Respondent, however, failed to heed the demand. Petitioner
thus filed with the Regional Trial Court of Angeles City on November 25, 1998 a complaint against
respondent to collect the remaining amount of Php 1,177,906 plus "inflationary adjustment" and
attorneys fees. Respondent alleged that the various campaign materials delivered to him were
represented as donations from his family, friends and political supporters. He added that all
contracts involving his personal expenses were coursed through and signed by him to ensure
compliance with pertinent election laws. As adverted to earlier, the trial court rendered judgment
in favor of petitioner. The Court of Appeals reversed the trial courts decision and dismissed the
complaint for lack of cause of action. In reversing the trial courts decision, the Court of Appeals
held that other than petitioners testimony, there was no evidence to support his claim that Lilian
was authorized by respondent to borrow money on his behalf. It noted that the acknowledgment
receipt signed by Lilian did not specify in what capacity she received the money. Thus, applying
Article 1317 of the Civil Code, it held that petitioners claim for Php 253,000 is unenforceable.
Issue:
Whether or not the decision rendered is correct.
Ruling:
By the contract of agency a person binds himself to render some service or to do something in
representation or on behalf of another, with the consent or authority of the latter. Contracts entered
into in the name of another person by one who has been given no authority or legal representation
or who has acted beyond his powers are classified as unauthorized contracts and are declared
unenforceable, unless they are ratified.
Generally, the agency may be oral, unless the law requires a specific form. However, a
special power of attorney is necessary for an agent to, as in this case, borrow money, unless it be

Page 586 of 845

urgent and indispensable for the preservation of the things which are under administration. Since
nothing in this case involves the preservation of things under administration, a determination of
whether Soriano had the special authority to borrow money on behalf of respondent is in order. It
is a general rule in the law of agency that, in order to bind the principal by a mortgage on real
property executed by an agent, it must upon its face purport to be made, signed and sealed in the
name of the principal, otherwise, it will bind the agent only. It is not enough merely that the agent
was in fact authorized to make the mortgage, if he has not acted in the name ofthe principal. On
the amount due him and the other two printing presses, petitioner explains that he was the one who
personally and directly contracted with respondent and he merely sub-contracted the two printing
establishments in order to deliver on time the campaign materials ordered by respondent.
Respondent counters that the claim of sub-contracting is a change in petitioners theory of the case
which is not allowed on appeal. In light thereof, petitioner is the real party in interest in this case.
The trial courts findings on the matter were affirmed by the appellate court.39 It erred, however,
in not declaring petitioner as a real party in interest insofar as recovery of the cost of campaign
materials made by petitioners mother and sister are concerned, upon the wrong notion that they
should have been, but were not, impleaded as plaintiffs. In sum, respondent has the obligation to
pay the total cost of printing his campaign materials delivered by petitioner in the total of Php
1,924,906, less the partial payment of Php 1,000,000, or Php 924,906. The petition is granted. The
April 10, 2002 Decision of the Regional Trial Court of Angeles City, Branch 57, is reinstated
mutatis mutandis, in light of the foregoing discussions. The trial courts decision is modified in
that the amount payable by respondent to petitioner is reduced to Php 924,906.

Page 587 of 845

STA. LUCIA REALTY VS. SPOUSES BUENAVENTURA
G.R. No. 177113
October 2, 2009
Facts:
On January 16, 1996, respondent-spouses Francisco Segismundo and Emilia
Buenaventura, represented by Ricardo Segismundo, filed before the Housing and Land Use
Regulatory Board (HLRUB) a Complaint against petitioner Sta. Lucia Realty & Development,
Inc. for Specific Performance, Damages and Attorneys Fees. Respondents alleged that they
bought a lot known as Lot 3, Block 4, Phase II at Greenwood Executive Village, Cainta, Rizal
from Loida Gonzales Alfonso (Alfonso) on August 16, 1989; that the said lot is part of a
subdivision project owned and being developed by petitioner; that in the course of the construction
of their house, respondents discovered that their lot had been subdivided and occupied by
MarilouPanlaque (Panlaque) and Ma. Veronica Banez (Banez); and that like respondents, the two
occupants were also issued a construction permit by petitioner. Respondents thus demanded from
petitioner the rightful possession of their lot; but to no avail. On September 1, 1997, petitioner
filed a third-party complaint against ACL Development Corporation and RCD Realty Corporation.
Petitioner prayed that in the event that it be adjudged liable for any of the claims of respondents,
ACL Development Corporation and RCD Realty Corporation should be held jointly and severally
liable for said claims or an amount equivalent thereto. ACL Development Corporation alleged that
petitioner was responsible for the issuance of all construction permits on the subdivision project;
hence, it was the one that caused the confusion among all parties. On the other hand, RCD Realty
Corporation alleged that it was a builder in good faith; that it constructed the residential building
on Lot 3, Block 4, Phase II upon issuance of a construction permit by petitioner. On June 16, 1998,
the HLURBs Arbiter for the National Capital Region (NCR) Field Office issued a Decision. The
HLURB Arbiter found that while RCD Realty Corporation constructed a residential building on
the wrong lot, such construction was allowed by petitioner as evidenced by the permit it issued..
The HLURB Arbiter thus concluded that it was petitioners neglect that ultimately led to the instant
dispute. On June 24, 1999, the HLURB Board of Commissioners affirmed the Decision of the
HLURB Arbiter with modification that the market value of the subject lot, stated in paragraph 2
of the dispositive portion, be reduced from Php 4,500.00 to Php 3,200.00 per square meter, plus
12% interest per annum from the time of the filing of the complaint On July 18, 2003, the Office
of the President issued a Decision affirming the June 24, 1999 Decision of the HLURB Board of
Commissioners. Subsequently, it issued a Resolution dated November 28, 2003 denying
petitioners Motion for Reconsideration. On December 21, 2006, the Court of Appeals affirmed
the Decision of the Office of the President. The appellate court found that it was petitioner who
caused the confusion in the identity of the lots by its issuance of a construction permit to RCD
Realty Corporation; that petitioner was remiss and negligent in complying with its obligations
towards its buyers, their heirs, assignees, and/or successors-in-interest when it failed to deliver the
property described in respondents title. On March 21, 2007, the Court of Appeals denied
petitioners Motion for Reconsideration. Hence, this Petition for Review on Certiorari.
Issue:
Whether or not Sta. Lucia is liable for specific performance.

Page 588 of 845

Ruling:
The Supreme Court held that the petition is without merit. Petitioner originally sold the subject lot
to Alfonso, and the latter subsequently sold the same to herein respondents. As assignees or
successors-in-interest of Alfonso to Lot 3, Block 4, Phase II in petitioners subdivision project,
respondents succeed to what rights the former had; and what is valid and binding against Alfonso
is also valid and binding as against them. In effect, respondents stepped into the shoes of Alfonso
and such transfer of rights also vests upon them the power to claim ownership and the authority to
demand to build a residential house on the lot to the same extent as Alfonso could have enforced
them against petitioner. Article 1311 of the New Civil Code states that, contracts take effect only
between the parties, their assigns and heirs, except in case where the rights and obligations arising
from the contract are not transmissible by their nature, or by stipulation or by provision of law.
In this case, the rights and obligations between petitioner and Alfonso are transmissible. There was
no mention of a contractual stipulation or provision of law that makes the rights and obligations
under the original sales contract for Lot 3, Block 4, Phase II intransmissible. Hence, Alfonso can
transfer her ownership over the said lot to respondents and petitioner is bound to honor its
corresponding obligations to the transferee or new lot owner in its subdivision project. Having
transferred all rights and obligations over Lot 3, Block 4, Phase II to respondents, Alfonso could
no longer be considered as an indispensable party. An indispensable party is one who has such an
interest in the controversy or subject matter that a final adjudication cannot be made in his absence,
without injuring or affecting that interest. We agree with the appellate courts finding that
petitioner was remiss and negligent in the performance of its obligations towards its buyers, their
heirs, assignees, and/or successors-in-interest; and that it was petitioners negligence which caused
the confusion on the identity of the lot, which likewise resulted to the erroneous construction done
by RCD Realty Corporation. Petitioner cannot pass the blame to RCD Realty Corporation because
it is undisputed that it issued a construction permit for Lot 3, Block 4, Phase II the property of
respondents. For its gross negligence which resulted to the erroneous construction on Lot 3, Block
4, Phase II and caused respondents undue damage and prejudice, petitioner is rightfully adjudged
by the HLURB Arbiter liable for P100,000.00 moral damages, P50,0000.00 exemplary damages,
and P50,000.00 attorneys fees. Although respondents prayed for specific performance to place
them in possession of Lot 3, Block 4, Phase II, the actual occupants therein were not impleaded.
As correctly pointed out by the HLURB Arbiter, the situation created an impossibility to grant the
prayer of respondents despite their ownership of the subject property and the finding that petitioner
was the cause of the inadvertent switching of lots. We agree with the ruling of the HLURB Arbiter
that it will be more equitable and practicable to rescind the obligation of petitioner to deliver
possession of Lot 3, Block 4, Phase II to respondents; and in exchange, pay the value of the lot by
way of reimbursement in accordance with the price modification stated by the HLURB Board of
Commissioners. Moreover, this ruling comes within the purview of respondents final prayer for
other reliefs, just or equitable under the premises and they are evidently in accord with such
outcome as they did not appeal the case or insist on claiming back their lot. However, we find that
the applicable interest rate for the amount to be reimbursed to respondents is 6% per annum,
reckoned from the time of the filing of the complaint, because the case at bar involves a breach of
obligation and not a loan or forbearance of money.

Page 589 of 845

CHAN VS. MACEDA
G.R. No. 142591
April 30, 2003
Facts:
On July 28, 1976, Bonifacio S. Maceda, Jr., herein respondent, obtained a P7.3 million loan from
the Development Bank of the Philippines for the construction of his New Gran Hotel Project in
Tacloban City. Thereafter, on September of the same year, respondent entered into a building
construction contract with Moreman Builders Co., Inc., (Moreman). They agreed that the
construction would be finished not later than December 22, 1977. Respondent purchased various
construction materials and equipment in Manila. Moreman, in turn, deposited them in the
warehouse of Wilson and Lily Chan, herein petitioners. The deposit was free of charge.
Unfortunately, Moreman failed to finish the construction of the hotel at the stipulated time. Hence,
on February 1, 1978, respondent filed with the then Court of First Instance (CFI, now Regional
Trial Court), Branch 39, Manila, an action for rescission and damages against Moreman, docketed
as Civil Case No. 113498. On November 28, 1978, the CFI decided to rescind the contract between
Moreman and respondent and awarding to the latter damages.Moreman interposed an appeal to
the Court of Appeals but the same was dismissed on March 7, 1989 for being dilatory. He elevated
the case to this Court via a petition for review on certiorari. In a Decision dated February 21, 1990,
we denied the petition. On April 23, 1990, an Entry of Judgment was issued. Meanwhile, during
the pendency of the case, respondent ordered petitioners to return to him the construction materials
and equipment which Moreman deposited in their warehouse. Petitioners, however, told them that
Moreman withdrew those construction materials in 1977. Hence, on December 11, 1985,
respondent filed with the Regional Trial Court, Branch 160, Pasig City, an action for damages with
an application for a writ of preliminary attachment against petitioners, docketed as Civil Case No.
53044.In the meantime, on October 30, 1986, respondent was appointed Judge of the Regional
Trial Court, Branch 12, San Jose Antique. On August 25, 1989, or after almost four (4) years, the
trial court dismissed respondents complaint for his failure to prosecute and for lack of interest.On
September 6, 1994, or five years thereafter, respondent filed a motion for reconsideration, but the
same was denied in the Order dated September 9, 1994 because of the failure of respondent and
his counsel to appear on the scheduled hearing.On October 14, 1994, respondent filed a second
motion for reconsideration. This time, the motion was granted and the case was ordered reinstated
on January 10, 1995, or ten (10) years from the time the action was originally filed. On March 2,
1995, counsel for petitioners filed a motion to dismiss on several grounds. Respondent, on the
other hand, moved to declare petitioners in default on the ground that their motion to dismiss was
filed out of time and that it did not contain any notice of hearing. On April 27, 1995, the trial court
issued an order declaring petitioners in default. Petitioners filed with the Court of Appeals a
petition for certiorari. The case reached this Court, and in a Resolution dated October 25, 1995,
we affirmed the assailed order of the Court of Appeals. On November, the corresponding Entry of
Judgment was issued.Thus, upon the return of the records to the RTC, Branch 160, Pasig City,
respondent was allowed to present his evidence ex-parte. Deponent Leonardo Conge, a labor
contractor, testified that on December 14 up to December 24, 1977, he was contracted by petitioner
Lily Chan to get bags of cement from the New Gran Hotel construction site and to store the same
into the latters warehouse in Tacloban City. Aside from those bags of cement, deponent also
hauled about 400 bundles of steel bars from the same construction site, upon order of petitioners.

Page 590 of 845

Deponent Alfredo Maceda testified that he was respondents Disbursement and Payroll Officer
who supervised the construction and kept inventory of the properties of the New Gran Hotel. While
conducting the inventory on November 23, 1977, he found that the approximate total value of the
materials stored in petitioners warehouse was Php 214,310. This amount was accordingly
reflected in the certification signed by Mario Ramos, store clerk and representative of Moreman
who was present during the inventory. Deponent Damiano Nadera testified on the current cost of
the architectural and structural requirements needed to complete the construction of the New Gran
Hotel. The trial court rendered a decision in favor of respondent. There being absolutely nothing
on record to show that the court a quo overlooked, disregarded, or misinterpreted facts of weight
and significance, its factual findings and conclusions must be given great weight and should not
be disturbed on appeal.
Issues:
1. Has respondent presented proof that the construction materials and equipment were actually in
petitioners warehouse when he asked that the same be turned over to him?
2. If so, does respondent have the right to demand the release of the said materials and equipment
or claim for damages?
Ruling:
Succinct is the rule that this Court is not a trier of facts and does not normally undertake the re-
examination of the evidence submitted by the contending parties during the trial of the case
considering that findings of fact of the Court of Appeals are generally binding and conclusive on
this Court.The jurisdiction of this Court in a petition for review on certiorari is limited to reviewing
only errors of law, not of fact, unless it is shown, inter alia, that: (1) the conclusion is a finding
grounded on speculations, surmises or conjectures; (2) the inference is manifestly mistaken, absurd
and impossible; (3) there is grave abuse of discretion; (4) the judgment is based on
misapprehension of facts; (5) the findings of fact are conflicting; and (6) the Court of Appeals, in
making its findings went beyond the issues of the case and the same is contrary to the admission
of both parties. Petitioners submit that this case is an exception to the general rule since both the
trial court and the Court of Appeals based their judgments on misapprehension of facts.We agree.
At the outset, the case should have been dismissed outright by the trial court because of patent
procedural infirmities. It bears stressing that the case was originally filed on December 11, 1985.
Four (4) years thereafter, or on August 25, 1989, the case was dismissed for respondents failure
to prosecute. Five (5) years after, or on September 6, 1994, respondent filed his motion for
reconsideration. From here, the trial court already erred in its ruling because it should have
dismissed the motion for reconsideration outright as it was filed far beyond the fifteen-day
reglementary period. Worse, when respondent filed his second motion for reconsideration on
October 14, 1994, a prohibited pleading, the trial court still granted the same and reinstated the
case on January 10, 1995. This is a glaring gross procedural error committed by both the trial court
and the Court of Appeals. It must be stressed that respondents claim for damages is based on
petitioners failure to return or to release to him the construction materials and equipment
deposited by Moreman to their warehouse. Under Article 1311 of the Civil Code, contracts are
binding upon the parties (and their assigns and heirs) who execute them. When there is no privity
of contract, there is likewise no obligation or liability to speak about and thus no cause of action
arises. Specifically, in an action against the depositary, the burden is on the plaintiff to prove the
bailment or deposit and the performance of conditions precedent to the right of action.A depositary
Page 591 of 845
is obliged to return the thing to the depositor, or to his heirs or successors, or to the person who
may have been designated in the contract. Anent the issue of damages, petitioners are still not
liable because, as expressly provided for in Article 2199 of the Civil Code, actual or compensatory
damages cannot be presumed, but must be proved with reasonable degree of certainty. A court
cannot rely on speculations, conjectures, or guesswork as to the fact and amount of damages, but
must depend upon competent proof that they have been suffered by the injured party and on the
best obtainable evidence of the actual amount thereof. It must point out specific facts which could
afford a basis for measuring whatever compensatory or actual damages are borne.Considering our
findings that there was no contract of deposit between petitioners and respondent or Moreman and
that actually there were no more construction materials or equipment in petitioners warehouse
when respondent made a demand for their return, we hold that he has no right whatsoever to claim
for damages.

Page 592 of 845

BALUYOT VS. COURT OF APPEALS
G.R. No. 122947
July 22, 1999
Facts:
Petitioners are residents of Barangay Cruz-na-Ligas. Diliman, Quezon City. The Cruz-na-
LigasHomesite Association, Inc. is a non-stock corporation of which petitioners and other
residents of Barangay Cruz-na-Ligas are members. Petitioners filed a complaint for specific
performance and damages against private respondent University of the Philippines before the RTC
of Quezon City. The complaint was later on amended to include private respondent Quezon City
government as defendant. As amended, the complaint alleged: that plaintiffs and their ascendants
are owners since memory can no longer recall of that parcel of riceland known SitioLibis, Barrio
Cruz-na-Ligas, Quezon City (now Diliman, Quezon City), while the members of the plaintiff
Association and their ascendants have possessed since time immemorial openly, adversely,
continuously and also in the concept of an owner, the rest of the area embraced by and within the
Barrio Cruz-na-Ligas, Diliman, Quezon City; that since October 1972, the claims of the plaintiffs
and/or members of plaintiff Association have been the subject of quasi-judicial proceedings and
administrative investigations in the different branches of the government penultimately resulting
in the issuance of that Indorsement dated May 7, 1975 by the Bureau of Lands, and ultimately, in
the issuance of the Indorsement of February 12, 1985, by the office of the President of the Rep. of
the Philippines confirming the rights of the bonafide residents of Barrio Cruz-na-Ligas to the
parcel of land they have been possessing or occupying; that defendant UP, pursuant to the said
Indorsement from the Office of the President of the Rep. of the Philippines, issued that Reply
Indorsement wherein it approved the donation of about 9.2 hectares of the site, directly to the
residents of Brgy. Krus Na Ligas. After several negotiations with the residents, the area was
increased to 15.8 hectares (158,379 square meters); that, however, defendant UP backed-out from
the arrangement to donate directly to the plaintiff Association for the benefit of the qualified
residents and high-handedly resumed to negotiate the donation thru the defendant Quezon City
Government under the terms disadvantageous or contrary to the rights of the bonafide residents of
the Barrio; that plaintiff Association forthwith amended its petition and prayed for a writ of
preliminary injunction to restrain defendant UP from donating the area to the defendant Quezon
City Government which was granted; that in the hearing of the Motion for Reconsideration filed
by defendant UP, plaintiff Association finally agreed to the lifting of the said Order granting the
injunction after defendant UP made an assurance in their said Motion that the donation to the
defendant Quezon City Government will be for the benefit of the residents of Cruz-Na-Ligas; that,
however, defendant UP took exception to the aforesaid Order lifting the Order of Injunction and
insisted on the dismissal of the case; that plaintiff manifested its willingness to the dismissal of the
case, provided, that the area to be donated thru the defendant Quezon City government be
subdivided into lots to be given to the qualified residents together with the certificate of titles,
without cost;
that defendant UP failed to deliver the certificate of title covering the property to be donated thus
the defendant Quezon City Government was not able to register the ownership so that the
defendant Quezon City Government can legally and fully comply with their obligations under the
said deed of donation;that upon expiration of the period of eighteen (18) months, for alleged non-
compliance of the defendant Quezon City Government with terms and conditions quoted in par.
Page 593 of 845
16 hereof, defendant UP thru its President, Mr. Jose Abueva, unilaterally, capriciously,
whimsically and unlawfully issued that Administrative Order No. 21 declaring the deed of
donation revoked and the donated property be reverted to defendant UP. The petitioners, then,
prayed that a writ of preliminary injunction or at least a temporary restraining order be issued,
ordering defendant UP to observe status quo; thereafter, after due notice and hearing, a writ of
preliminary injunction be issued; (a) to restrain defendant UP or to their representative from
ejecting the plaintiffs from and demolishing their improvements on the riceland or farmland
situated at SitioLibis; (b) to order defendant UP to refrain from executing another deed of donation
in favor another person or entity and in favor of non-bonafide residents of Barrio Cruz-na-Ligas
different from the Deed of Donation, and after trial on the merits, judgment be rendered:declaring
the Deed of Donation as valid and subsisting and ordering the defendant UP to abide by the terms
and conditions thereof.
Issue:
Whether or not defendant UP could execute another deed of donation infavor of third person.
Ruling:
The Court found all the elements of a cause of action contained in the amended complaint of
petitioners. While, admittedly, petitioners were not parties to the deed of donation, they anchor
their right to seek its enforcement upon their allegation that they are intended beneficiaries of the
donation to the Quezon City government. Art. 1311, second paragraph, of the Civil Code
provides:If a contract should contain some stipulation in favor of a third person, he may demand
its fulfillment provided he communicated his acceptance to the obligor before its revocation. A
mere incidental benefit or interest of a person is not sufficient. The contracting parties must have
clearly and deliberately conferred a favor upon a third person. Under this provision of the Civil
Code, the following requisites must be present in order to have a stipulation pour autrui:(1) there
must be a stipulation in favor of a third person; (2) the stipulation must be a part, not the whole of
the contract;(3) the contracting parties must have clearly and deliberately conferred a favor upon
a third person, not a mere incidental benefit or interest; (4) the third person must have
communicated his acceptance to the obligor before its revocation; and (5) neither of the contracting
parties bears the legal representation or authorization of the third party. The allegations in the
following paragraphs of the amended complaint are sufficient to bring petitioners action within
the purview of the second paragraph of Art. 1311 on stipulations pour autrui 1. Paragraph 17, that
the deed of donation contains a stipulation that the Quezon City government, as donee, is required
to transfer to qualified residents of Cruz-na-Ligas, by way of donations, the lots occupied by them;
2. The same paragraph, that this stipulation is part of conditions and obligations imposed by UP,
as donor, upon the Quezon City government, as donee;
3. Paragraphs 15 and 16, that the intent of the parties to the deed of donation was to confer a favor
upon petitioners by transferring to the latter the lots occupied by them;
4. Paragraph 19, that conferences were held between the parties to convince UP to surrender the
certificates of title to the city government, implying that the donation had been accepted by
petitioners by demanding fulfillment thereof and that private respondents were aware of such
acceptance; and

Page 594 of 845

5. All the allegations considered together from which it can be fairly inferred that neither of private
respondents acted in representation of the other; each of the private respondents had its own
obligations, in view of conferring a favor upon petitioners.
The amended complaint further alleges that respondent UP has an obligation to transfer the subject
parcel of land to the city government so that the latter can in turn comply with its obligations to
make improvements on the land and thereafter transfer the same to petitioners but that, in breach
of this obligation, UP failed to deliver the title to the land to the city government and then revoked
the deed of donation after the latter failed to fulfill its obligations within the time allowed in the
contract. For the purpose of determining the sufficiency of petitioners cause of action, these
allegations of the amended complaint must be deemed to be hypothetically true. So assuming the
truth of the allegations, we hold that petitioners have a cause of action against UP.

Page 595 of 845

CUYCO VS. CUYCO
G.R. No. 168736
April 19, 2006
Facts:
Petitioners obtained a loan in the amount of Php1,500,000.00 from respondents payable within
one year at 18% interest per annum, and secured by a Real Estate Mortgage over a parcel of land
with improvements thereon situated in Cubao, Quezon City covered by a TCT. Subsequently,
petitioners obtained additional loans from the respondents in the aggregate amount of
Php1,250,000.00, broken down as follows: (1) Php150,000.00 on May 30, 1992; (2)
Php150,000.00 on July 1, 1992; (3) Php500,000.00 on September 5, 1992; (4) Php200,000.00 on
October 29, 1992; and (5) Php250,000.00 on January 13, 1993. Petitioners made payments
amounting to Php291,700.00, but failed to settle their outstanding loan obligations. Respondents
filed a complaintfor foreclosure of mortgage with the RTC. They alleged that petitioners loans
were secured by the real estate mortgage; that as of August 31, 1997, their indebtedness amounted
to Php6,967,241.14, inclusive of the 18% interest compounded monthly; and that petitioners
refusal to settle the same entitles the respondents to foreclose the real estate mortgage. Petitioners
filed a motion to dismiss on the ground that the complaint states no cause of action which was
denied by the RTC for lack of merit. Petitioners admitted their loan obligations but argued that
only the original loan of Php1,500,000.00 was secured by the real estate mortgage at 18% per
annum and that there was no agreement that the same will be compounded monthly. The RTC
rendered judgment in favor of the respondents and ordered the petitioners to pay to the Court or to
the respondents the amounts of Php6,332,019.84, plus interest until fully paid, Php25,000.00 as
attorneys fees, and costs of suit, within a period of 120 days from the entry of judgment, and in
case of default of such payment and upon proper motion, the property shall be ordered sold at
public auction to satisfy the judgment. The CA partially granted the petition and modified the RTC
decision insofar as the amount of the loan obligations secured by the real estate mortgage. It held
that by express intention of the parties, the real estate mortgage secured the original
Php1,500,000.00 loan and the subsequent loans of Php150,000.00 and Php500,000.00 obtained on
July 1, 1992 and September 5, 1992, respectively. As regards the loans obtained on May 31, 1992,
October 29, 1992 and January 13, 1993 in the amounts of Php150,000.00, Php200,000.00 and
Php250,000.00, respectively, the appellate tribunal held that the parties never intended the same
to be secured by the real estate mortgage.
Hence, this petition.
Issue:
Whether or not petitioners must pay respondents legal interest of 12% per annum on the stipulated
interest of 18% per annum, computed from the filing of the complaint until fully paid.
Ruling:
Applying the rules in the computation of interest, the principal amount of loans subject of the real
estate mortgage must earn the stipulated interest of 18% per annum, whichinterest, as long as
unpaid, also earns legal interest of 12% per annum, computed from the date of the filing of the
complaint on September 10, 1997 until finality of the Courts Decision. Such interest is not due to

Page 596 of 845

stipulation but due to the mandate of the law as embodied in Article 2212 of the Civil Code. From
such date of finality, the total amount due shall earn interest of 12% per annum until satisfied
Certainly, the computed interest from the filing of the complaint on September 10, 1997 would no
longer be true upon the finality of this Courts decision. In accordance with the rules laid down in
Eastern Shipping Lines, Inc. v. Court of Appeals, the SC derived the following formula for the
RTCs guidance:
TOTAL AMOUNT DUE = [principal + interest + interest on interest] - partial payments made
Interest = principal x 18 % per annum x no. of years from due date until finality of judgment
Interest on interest = Interest computed as of the filing of the complaint (September 10, 1997) x
12% x no. of years until finality of judgment
Total amount due as of the date of finality of judgment will earn an interest of 12% per annum
until fully paid.Hence, the SC affirmed the CA decision with modifications. It ordered petitioners
to pay the respondents (1) the total amount due, as computed by the RTC in accordance with the
formula specified above, (2) the legal interest of 12% per annum on the total amount due from
such finality until fully paid, (3) the reasonable amount of P25,000.00 as attorneys fees, and (4)
the costs of suit, within a period of not less than 90 days nor more than 120 days from the entry of
judgment, and in case of default of such payment the property shall be sold at public auction to
satisfy the judgment

Page 597 of 845

ALLAN C. GO, DOING BUSINESS UNDER THE NAME AND STYLE ACG EXPRESS
LINER, VS. MORTIMER F. CORDERO
G.R. No. 164747
May 4, 2010
Facts:
Mortimer F. Cordero, Vice-President of Pamana Marketing Corporation (Pamana), ventured into
the business of marketing inter-island passenger vessels. After contacting various overseas fast
ferry manufacturers from all over the world, he came to meet Tony Robinson, an Australian
national based in Brisbane, Australia, who is the Managing Director of Aluminium Fast Ferries
Australia (AFFA). Between June and August 1997, Robinson signed documents appointing
Cordero as the exclusive distributor of AFFA catamaran and other fast ferry vessels in the
Philippines. As such exclusive distributor, Cordero offered for sale to prospective buyers the 25-
meter Aluminium Passenger catamaran known as the SEACAT 25. After negotiations with Felipe
Landicho and Vincent Tecson, lawyers of Allan C. Go who is the owner/operator of ACG Express
Liner of Cebu City, a single proprietorship, Cordero was able to close a deal for the purchase of
two SEACAT 25. Accordingly, the parties executed Shipbuilding Contract No. 7825 for one high-
speed catamaran (SEACAT 25) for the price of US$1,465,512.00. Per agreement between
Robinson and Cordero, the latter shall receive commissions totalling US$328,742.00, or 22.43%
of the purchase price, from the sale of each vessel. Cordero made two trips to the AFFA Shipyard
in Brisbane, Australia, and on one occasion even accompanied Go and his family and Landicho,
to monitor the progress of the building of the vessel. He shouldered all the expenses for airfare,
food, hotel accommodations, transportation and entertainment during these trips. He also spent
for long distance telephone calls to communicate regularly with Robinson, Go, Tecson and
Landicho. However, Cordero later discovered that Go was dealing directly with Robinson when
he was informed by Dennis Padua of Wartsila Philippines that Go was canvassing for a second
catamaran engine from their company which provided the ship engine for the first SEACAT 25.
Padua told Cordero that Go instructed him to fax the requested quotation of the second engine to
the Park Royal Hotel in Brisbane where Go was then staying. Cordero tried to contact Go and
Landicho to confirm the matter but they were nowhere to be found, while Robinson refused to
answer his calls. Cordero immediately flew to Brisbane to clarify matters with Robinson, only to
find out that Go and Landicho were already there in Brisbane negotiating for the sale of the second
SEACAT 25. Despite repeated follow-up calls, no explanation was given by Robinson, Go,
Landicho and Tecson who even made Cordero believe there would be no further sale between
AFFA and ACG Express Liner. In a handwritten letter dated June 24, 1998, Cordero informed Go
that such act of dealing directly with Robinson violated his exclusive distributorship and demanded
that they respect the same, without prejudice to legal action against him and Robinson should they
fail to heed the same. Corderos lawyer, Atty. Ernesto A. Tabujara, Jr. of ACCRA law firm, also
wrote ACG Express Liner assailing the fraudulent actuations and misrepresentations committed
by Go in connivance with his lawyers in breach of Corderos exclusive distributorship
appointment. On August 21, 1998, Cordero instituted Civil Case No. 98-35332 seeking to hold
Robinson, Go, Tecson and Landicho liable jointly and solidarily for conniving and conspiring
together in violating his exclusive distributorship in bad faith and wanton disregard of his rights,
thus depriving him of his due commissions (balance of unpaid commission from the sale of the
first vessel in the amount of US$31,522.01 and unpaid commission for the sale of the second vessel

Page 598 of 845

in the amount of US$328,742.00) and causing him actual, moral and exemplary damages,
including P800,000.00 representing expenses for airplane travel to Australia, telecommunications
bills and entertainment, on account of AFFAs untimely cancellation of the exclusive
distributorship agreement. Cordero also prayed for the award of moral and exemplary damages,
as well as attorneys fees and litigation expenses. The trial court rendered its decision in favor of
Plaintiff and against defendants Allan C. Go, Tony Robinson, Felipe Landicho, and Vincent
Tecson. As prayed for, defendants are hereby ordered to pay Plaintiff jointly and solidarilY. On
January 29, 2001, the CA rendered judgment granting the petition for certiorari hence the appeal.
ISSUE:
Whether or not the CA erred in holding the prtitioner liable for the breach.
HELD:
In the case at bar, it was established that petitioner Cordero was not paid the balance of his
commission by respondent Robinson. From the time petitioner Go and respondent Landicho
directly dealt with respondent Robinson in Brisbane, and ceased communicating through petitioner
Cordero as the exclusive distributor of AFFA in the Philippines, Cordero was no longer informed
of payments remitted to AFFA in Brisbane. In other words, Cordero had clearly been cut off from
the transaction until the arrival of the first SEACAT 25 which was sold through his efforts. When
Cordero complained to Go, Robinson, Landicho and Tecson about their acts prejudicial to his
rights and demanded that they respect his exclusive distributorship, Go simply let his lawyers led
by Landicho and Tecson handle the matter and tried to settle it by promising to pay a certain
amount and to purchase high-speed catamarans through Cordero. However, Cordero was not paid
anything and worse, AFFA through its lawyer in Australia even terminated his exclusive
dealership insisting that his services were engaged for only one transaction, that is, the purchase
of the first SEACAT 25 in August 1997.
We find that contrary to the claims of petitioner Cordero, there was indeed no sufficient
evidence that respondents actually purchased a second SEACAT 25 directly from AFFA. But this
circumstance will not absolve respondents from liability for invading Corderos rights under the
exclusive distributorship. Respondents clearly acted in bad faith in bypassing Cordero as they
completed the remaining payments to AFFA without advising him and furnishing him with copies
of the bank transmittals as they previously did, and directly dealt with AFFA through Robinson
regarding arrangements for the arrival of the first SEACAT 25 in Manila and negotiations for the
purchase of the second vessel pursuant to the Memorandum of Agreement which Cordero signed
in behalf of AFFA. As a result of respondents actuations, Cordero incurred losses as he was not
paid the balance of his commission from the sale of the first vessel and his exclusive distributorship
revoked by AFFA. While it is true that a third person cannot possibly be sued for breach of contract
because only parties can breach contractual provisions, a contracting party may sue a third person
not for breach but for inducing another to commit such breach. Article 1314 of the Civil Code
provides that any third person who induces another to violate his contract shall be liable for
damages to the other contracting party. The elements of tort interference are: (1) existence of a
valid contract; (2) knowledge on the part of the third person of the existence of a contract; and (3)
interference of the third person is without legal justification. Thus the petitions was denied. The
Decision dated March 16, 2004 as modified by the Resolution dated July 22, 2004 of the Court of
Appeals in CA-G.R. CV No. 69113 are hereby affirmed with modification in that the awards of
moral and exemplary damages are hereby reduced to P300,000.00 and P200,000.00.
Page 599 of 845
TAYAG VS. COURT OF APPEALS
G.R. No. 134971
March 25, 2004
FACTS:

Petitioners are the heirs of Juan Galicia, Sr. who are seeking to rescind the deed of
conveyance executed by Galicia, Sr. together with Celerina Labuguin, in favor of Albrigido Leyva,
respondent involving the undivided one-half portion of a piece of land situated at Poblacion,
Guimba, Nueva Ecija. They contend that respondent is in breach of the conditions of the deed.
Contained in the deed were stipulations regarding the payment and settlement of the purchase price
of the land. The respondent however did not strictly comply this with. Despite the posterior
payments however, petitioners accepted them. Respondent, on the contention that he fulfilled his
obligation to pay filed this case for specific performance by the petitioners.

The court of origin which tried the suit for specific performance on account of the herein
petitioners reluctance to abide by the covenant, ruled in favor of the vendee while respondent
court practically agreed with the trial court except as to the amount to be paid to petitioners and
the refund to private respondent are concerned.
ISSUE:
The issue is whether or not petitioners prayer for the rescission of the deed can prosper.

RULING:
The Supreme Court affirmed the decision of the lower courts.
The suggestion of petitioners that the covenant must be cancelled in the light of private
respondents so-called breach seems to overlook petitioners demeanor who, instead of
immediately filing the case precisely to rescind the instrument because of non-compliance, allowed
private respondent to effect numerous payments posterior to the grace periods provided in the
contract. This apathy of petitioners, who even permitted private respondent to take the initiative
in filing the suit for specific performance against them, is akin to waiver of abandonment of the
right to rescind.

Page 600 of 845

SO PING BUN VS COURT OF APPEALS
G.R. No. 120554.
September 21, 1999
Facts:
In 1963, TekHua Trading Co, through its managing partner, So PekGiok, entered into lease
agreements with lessor Dee C. Chuan& Sons Inc. (DCCSI). Subjects of four (4) lease contracts
were premises located at Nos. 930, 930-Int., 924-B and 924-C, Soler Street, Binondo, Manila.
TekHua used the areas to store its textiles. The contracts each had a one-year term. They provided
that should the lessee continue to occupy the premises after the term, the lease shall be on a month-
to-month basis.
When the contracts expired, the parties did not renew the contracts, but TekHua continued to
occupy the premises. In 1976, TekHua Trading Co. was dissolved. Later, the original members of
TekHua Trading Co. including Manuel C. Tiong, formed TekHua Enterprising Corp., herein
respondent corporation.So PekGiok, managing partner of TekHua Trading, died in 1986. So
PekGioks grandson, petitioner So Ping Bun, occupied the warehouse for his own textile business,
Trendsetter Marketing.
On August 1, 1989, lessor DCCSI sent letters addressed to TekHua Enterprises, informing the
latter of the 25% increase in rent effective September 1, 1989. The rent increase was later on
reduced to 20% effective January 1, 1990, upon other lessees demand. Again on December 1,
1990, the lessor implemented a 30% rent increase. Private respondents did not answer any of these
letters. Still, the lease contracts were not rescinded.
On March 1, 1991, private respondent Tiong sent a letter to petitioner.Petitioner refused to vacate.
On March 4, 1992, petitioner requested formal contracts of lease with DCCSI in favor Trendsetter
Marketing. So Ping Bun claimed that after the death of his grandfather, So PekGiok, he had been
occupying the premises for his textile business and religiously paid rent.
After trial, the trial court ruled annulling the contracts of Lease and making permanent the writ of
preliminary injunction. Petitioners motion for reconsideration of the above decision was denied.
On appeal by So Ping Bun, the Court of Appeals upheld the trial court. On motion for
reconsideration, the appellate court modified the decision by reducing the award of attorneys fees
from five hundred thousand (Php500,000.00) pesos to two hundred thousand (Php200,000.00)
pesos.
Issue:
What is the correct interpretation of the applicable law on tortuous conduct?
Ruling:
Damage is the loss, hurt, or harm which results from injury, and damages are the recompense or
compensation awarded for the damage suffered. One becomes liable in an action for damages for
a nontrespassory invasion of anothers interest in the private use and enjoyment of asset if (a) the
other has property rights and privileges with respect to the use or enjoyment interfered with, (b)
the invasion is substantial, (c) the defendants conduct is a legal cause of the invasion, and (d) the

Page 601 of 845

invasion is either intentional and unreasonable or unintentional and actionable under general
negligence rules.
The elements of tort interference are: (1) existence of valid contract; (2) knowledge on the part of
the third person of the existence of contract; and (3) interference of the third person is without
legal justification or excuse.
Authorities debate on whether interference may be justified where the defendant acts for the sole
purpose of furthering his own financial or economic interest. One view is that, as a general rule,
justification for interfering with the business relations of another exists where the actors motive
is to benefit himself. Such justification does not exist where his sole motive is to cause harm to the
other. Added to this, some authorities believe that it is not necessary that the interferers interest
outweigh that of the party whose rights are invaded, and that an individual acts under an economic
interest that is substantial, not merely de minimis, such that wrongful and malicious motives are
negatived, for he acts in self-protection.
While we do not encourage tort interferers seeking their economic interest to intrude into existing
contracts at the expense of others, however, we find that the conduct herein complained of did not
transcend the limits forbidding an obligatory award for damages in the absence of any malice. The
business desire is there to make some gain to the detriment of the contracting parties. Lack of
malice, however, precludes damages.
Lastly, the recovery of attorneys fees in the concept of actual or compensatory damages, is
allowed under the circumstances provided for in Article 2208 of the Civil Code. In connection
with attorneys fees, the award should be commensurate to the benefits that would have been
derived from a favorable judgment. Settled is the rule that fairness of the award of damages by the
trial court calls for appellate review such that the award if far too excessive can be reduced.
Considering that the respondent corporations lease contract, at the time when the cause of action
accrued, ran only on a month-to-month basis whence before it was on a yearly basis, we find even
the reduced amount of attorneys fees ordered by the Court of Appeals still exorbitant in the light
of prevailing jurisprudence. Consequently, the amount of two hundred thousand (P200,000.00)
awarded by respondent appellate court should be reduced to one hundred thousand (P100,000.00)
pesos as the reasonable award for attorneys fees in favor of private respondent corporation.

Page 602 of 845

INTERNATIONAL FREEPORT V. DANZAS
G.R. No. 181833
January 26, 2011
Facts:
In March 1997 petitioner International Freeport Traders, Inc. (IFTI) ordered a shipment of
Toblerone chocolates and assorted confectioneries from Jacobs SuchardTobler Ltd. of Switzerland
(Jacobs) through its Philippine agent, Colombo Merchants Phils., Inc., under the delivery term
F.O.B. Ex-Works.
To ship the goods, Jacobs dealt with Danmar Lines of Switzerland (Danmar) which issued to
Jacobs negotiable house bills of lading[1] signed by its agent, respondent Danzas Intercontinental,
Inc. (Danzas). The bills of lading stated that the terms were F.O.B. and freight payable at
destination, with Jacobs as the shipper, China Banking Corporation as the consignee, and IFTI as
the party to be notified of the shipment. The shipment was to be delivered at the Clark Special
Economic Zone with Manila as the port of discharge. The goods were also covered by Letters of
Credit with a freight collect arrangement.
The shipment was to be delivered at Angeles City in Pampanga. Danmar paid OOCL an arbitrary
fee of US$425.00 to process the release of the goods from the port and ship the same to Clark in
Angeles City. The fee was to cover brokerage, trucking, wharfage, arrastre, and processing
expenses.
The goods were loaded on board the OOCL vessel on April 20, 1997 and arrived at the port of
Manila on May 14, 1997. Upon learning from Danmar that the goods had been shipped, Danzas
immediately informed IFTI of its arrival. IFTI prepared the import permit needed for the clearing
and release of the goods from the Bureau of Customs and advised Danzas on May 20, 1997 to pick
up the document. Danzas got the import permit on May 26, 1997. But IFTI did not provide Danzas
a bank guarantee, claiming that letters of credit already covered the shipment. IFTI insisted that
Danzas should already endorse the import permit and bills of lading to OOCL since the latter had
been paid an arbitrary fee. But Danzas did not do this.
Because IFTI did not provide Danzas with the original bills of lading and the bank guarantee, the
latter withheld the processing of the release of the goods. Danzas reiterated to IFTI that it could
secure the release of the goods only if IFTI submitted a bank guarantee. Ultimately, IFTI yielded
to the request and applied for a bank guarantee which was approved on May 23, 1997. It claimed
to have advised Danzas on even date of its availability for pick up but Danzas secured it only on
June 6, 1997.
In a letter dated June 6, 1997, Danzas told IFTI that the issuance of a promissory note would assure
the delivery of the goods to Clark. On June 10, 1997 IFTI faxed a letter to Danzas, stating that
Edwin Mabazza of OOCL confirmed that it had been paid an arbitrary fee. IFTI maintained,
however, that it was not in a position to decide whether Danzas was to be liable for the charges.
Nonetheless, IFTI issued a promissory note and requested that the goods be released to avoid any
further charges.Minutes later, IFTI faxed another letter reiterating its request that the goods be
released pending payment of whatever charges Danzas had incurred for the release and delivery

Page 603 of 845

of the goods to Clark. IFTI promised to pay Danzas any charges within five days upon delivery of
the goods as soon as the investigation as to which company will shoulder the expenses is settled.
On June 13, 1997 Danzas secured the release of the goods and delivered the same to IFTI at Clark
on June 16, 1997. IFTI faxed a letter to Danzas, confirming the delivery. On January 19, 1998,
however, Danzas wrote IFTI, demanding payment of Php181,809.45 for its handling of the
shipment. IFTI ignored the demand. On March 26, 1998 Danzas filed separate complaints for sum
of money against IFTI and OOCL before the Metropolitan Trial Court (MeTC) of Paraaque City,
Branch 78. The court subsequently dismissed the complaint against OOCL after it settled the case
amicably.
In the main, Danzas claimed that IFTI engaged its services for Php181,809.45 to process the
release of the goods from the port and deliver it to IFTI at Clark but the latter reneged on its
obligation, compelling Danzas to file the suit.IFTI countered that it had no liability to Danzas since
IFTI was not privy to the hiring of Danzas. Following normal procedure, IFTI coursed the import
permit to Danzas since it was the party that issued the house bills of lading. IFTI added that under
arbitrary shipments, imported goods are allowed to stay free of charge in the port for three working
days and in the storage for five to six calendar days. Storage fees, electricity charges, and
demurrage become due only after such period. In this case, IFTI informed Danzas on May 20,
1997 to pick up the import permit but Danzas picked it up only on May 26, 1997. And instead of
endorsing it with the bills of lading to OOCL, Danzas itself processed the release of the goods.
Since Danzas failed to process the release or transhipment of the goods within the three-day period,
then it should shoulder all the charges from May 20, 1997 to June 13, 1999.
On January 2, 2002, the MeTC rendered a decision in favor of Danzas. Danzas elevated the case
to the Court of Appeals which reversed the RTC decision.
Issues:
1. Whether or not a contract of lease of service exists between IFTI and Danzas; and
2. Whether or not IFTI is liable to Danzas for the costs of the delay in the release of the goods
from the port.
Ruling:
Every contract has the elements of (1) consent of the contracting parties; (2) object certain which
is the subject matter of the contract; and (3) cause of the obligation which is established. A contract
is perfected by mere consent, which is manifested by the meeting of the offer and the acceptance
upon the thing and the cause which are to constitute the contract.
Generally, contracts undergo three distinct stages: (1) preparation or negotiation; (2) perfection;
and (3) consummation. Negotiation begins from the time the prospective contracting parties
manifest their interest in the contract and ends at the moment of agreement of the parties. The
perfection or birth of the contract takes place when the parties agree upon the essential elements
of the contract. The last stage is the consummation of the contract where the parties fulfill or
perform the terms they agreed on, culminating in its extinguishment. Here, there is no other
conclusion than that the parties entered into a contract of lease of service for the clearing and
delivery of the imported goods.

Page 604 of 845

There is no dispute that under arbitrary shipments, imported goods are allowed to stay, free of
charge, in the port for three working days, and in the storage for five to six calendar days. Beyond
this period, storage fees, electric charges, and the demurrage are due.
Since the delay in the processing of the release of the goods was due to IFTIs fault, the CA rightly
adjudged it liable for electric charges, demurrage, and storage fees of Php122,191.75 from May
20, 1997 to June 13, 1999.

Page 605 of 845

ROCKLAND CONSTRUCTION COMPANY, INC. VS. MID-PASIG LAND
DEVELOPMENT CORPORATION
G.R. No. 164587
February 4, 2008
Facts:
Rockland Construction Company, Inc. (Rockland), in a letterdated March 1, 2000, offered to lease
from Mid-Pasig Land Development Corporation (Mid-Pasig) the latters 3.1-hectare property in
Pasig City. Upon instruction of Mid-Pasig to address the offer to the PCGG, Rockland wrote the
PCGG on April 15, 2000.
Rockland then filed an action for specific performance docketed as Civil Case No. 68350 in the
RTC, Branch 67 of Pasig City. Rockland sought to compel Mid-Pasig to execute in Rocklands
favor, a contract of lease over a 3.1-hectare portionof Mid-Pasigs property in Pasig City.
On September 2, 2002, the trial court rendered its decision to enforce the leaes agreement. On
appeal, the Court of Appeals reversed and set aside the trial courts decision on the following
grounds: (1) there was no meeting of the minds as to the offer and acceptance between the parties;
(2) there was no implied acceptance of the Php1 million check as Mid-Pasig was not aware of its
source at the time Mid-Pasig discovered the existence of the Php1 million in its account; and (3)
Rocklands subsequent acts and/or omissions contradicted its claim that there was already a
contract of lease, as it neither took possession of the property, nor did it pay for the corresponding
monthly rentals. Accordingly, the Court of Appeals dismissed Rocklands complaint, as well as
Mid-Pasigs counterclaim. Rockland sought reconsideration, but it was denied.
Issue:
Was there a perfected contract of lease? Had estoppel in paisset in?
Ruling:
A contract has three distinct stages: preparation, perfection, and consummation. Preparation or
negotiation begins when the prospective contracting parties manifest their interest in the contract
and ends at the moment of their agreement. Perfection or birth of the contract occurs when they
agree upon the essential elements thereof. Consummation, the last stage, occurs when the parties
fulfill or perform the terms agreed upon in the contract, culminating in the extinguishment
thereof.
Negotiation is formally initiated by an offer. Accordingly, an offer that is not accepted, either
expressly or impliedly, precludes the existence of consent, which is one of the essential elementsof
a contract. Consent, under Article 1319 of the Civil Code, is manifested by the meeting of the offer
and acceptance upon the thing which are to constitute a contract. To produce a contract, the offer
must be certain and the acceptance absolute.
Mid-Pasig is also not in estoppel in pais. The doctrine of estoppel is based on the grounds of public
policy, fair dealing, good faith and justice, and its purpose is to forbid one to speak against his own
act, representations, or commitments to the injury of one to whom they were directed and who
reasonably relied thereon.Since estoppel is based on equity and justice, it is essential that before a
person can be barred from asserting a fact contrary to his act or conduct, it must be shown that
Page 606 of 845
such act or conduct has been intended and would unjustly cause harm to those who are misled if
the principle were not applied against him.
The petition is denied.

Page 607 of 845

METROPOLITAN MANILA DEVELOPMENT AUTHORITY VS. JANCOM
ENVIRONMENTAL CORPORATION
G.R. No. 147465
January 30, 2002
Facts:
The Philippine Government under the Ramos Administration, and through the Metro Manila
Development Authority (MMDA) Chairman, and the Cabinet Officer for Regional Development-
National Capital Region (CORD-NCR), entered into a contract with herein respondent JANCOM,
on waste-to-energy projects for the waste disposal sites in San Mateo, Rizal and Carmona, Cavite
under the build-operate-transfer (BOT) scheme. However, before President Ramos could have
signed the said contract, there was a change in the Administration and EXECOM. Said change
caused the passage of the law, the Clean Air Act, prohibiting the incineration of garbage and thus,
against the contents of said contract. The Philippine Government, through the MMDA Chairman,
declared said contract inexistent for several reasons. Herein respondent filed a suit against
petitioner. The Regional Trial Court ruled in favor of the respondent. Instead of filing an appeal to
the decision, petitioner filed a writ of certiorari on the Court of Appeals, which the latter granted.
The Regional Trial Court declared its decision final and executory, for which the petitioner
appealed to the CA, which the CA denied such appeal and affirming RTCs decision.
Issue:
Whether or not a valid contract is existing between petitioner and respondent.
Ruling:
Under Article 1305 of the Civil Code, a contract is a meeting of minds between two persons
whereby one binds himself, with respect to the other, to give something or to render some service.
A contract undergoes three distinct stages - preparation or negotiation, its perfection, and finally,
its consummation. Negotiation begins from the time the prospective contracting parties manifest
their interest in the contract and ends at the moment of agreement of the parties. The perfection or
birth of the contract takes place when the parties agree upon the essential elements of the contract.
The last stage is the consummation of the contract wherein the parties fulfill or perform the terms
agreed upon in the contract, culminating in the extinguishment thereof. Article 1315 of the Civil
Code, provides that a contract is perfected by mere consent. Consent, on the other hand, is
manifested by the meeting of the offer and the acceptance upon the thing and the cause which are
to constitute the contract. In the case at bar, the signing and execution of the contract by the parties
clearly show that, as between the parties, there was a concurrence of offer and acceptance with
respect to the material details of the contract, thereby giving rise to the perfection of the contract.
The execution and signing of the contract is not disputed by the parties. As the Court of Appeals
aptly held: Contrary to petitioners insistence that there was no perfected contract, the meeting of
the offer and acceptance upon the thing and the cause, which are to constitute the contract (Arts.
1315 and 1319, New Civil Code), is borne out by the records.
Admittedly, when petitioners accepted private respondents bid proposal (offer), there was, in
effect, a meeting of the minds upon the object (waste management project) and the cause (BOT
scheme).Hence, the perfection of the contract.In City of Cebu vs. Heirs of CandidoRubi, the

Page 608 of 845

Supreme Court held that the effect of an unqualified acceptance of the offer or proposal of the
bidder is to perfect a contract, upon notice of the award to the bidder.In fact, in asserting that there
is no valid and binding contract between the parties, MMDA can only allege that there was no
valid notice of award; that the contract does not bear the signature of the President of the
Philippines; and that the conditions precedent specified in the contract were not complied with.
In asserting that the notice of award to JANCOM is not a proper notice of award, MMDA points
to the Implementing Rules and Regulations of Republic Act No. 6957, otherwise known as the
BOT Law, which require that i) prior to the notice of award, an Investment Coordinating
Committee clearance must first be obtained; and ii) the notice of award indicate the time within
which the awardee shall submit the prescribed performance security, proof of commitment of
equity contributions and indications of financing resources.
Admittedly, the notice of award has not complied with these requirements. However, the defect
was cured by the subsequent execution of the contract entered into and signed by authorized
representatives of the parties; hence, it may not be gainsaid that there is a perfected contract
existing between the parties giving to them certain rights and obligations (conditions precedents)
in accordance with the terms and conditions thereof. We borrow the words of the Court of Appeals:
Petitioners belabor the point that there was no valid notice of award as to constitute acceptance of
private respondents offer. They maintain that former MMDA Chairman Oretas letter to
JANCOM EC dated February 27, 1997 cannot be considered as a valid notice of award as it does
not comply with the rules implementing Rep. Act No. 6957, as amended. The argument is
untenable.

Page 609 of 845

KOREAN AIR CO., LTD. and SUK KYOO KIM, vs. ADELINA A.S. YUSON,

G.R. No. 170369

June 16, 2010

Facts:
In July 1975, Korean Air Co., Ltd. (Korean Air) hired Adelina A.S. Yuson (Yuson) as
reservations agent. Korean Air promoted Yuson to assistant manager in 1993, and to passenger
sales manager in 1999. Korean Air had an International Passenger Manual (IPM) which
contained, among others, travel benefit to its employees. However, Korean Air never implemented
the travel benefit under the manual. Instead, Korean Air granted all its employees travel benefit as
contained in the collective bargaining agreement (CBA). Yuson availed of the travel benefit under
the CBA during her stay in the company.

In April 2001, Yuson requested Korean Air that she be transferred from the passenger sales
department to the cargo department because she intended to pursue a cargo agency business after
her retirement. Korean Air then temporarily transferred Yuson to the cargo department as cargo
dispatch. Yuson continued to receive the same compensation and exercise the same authority as
passenger sales manager.

In view of its net loss of over $367,000,000 in 2000 and in order to cut costs, Korean Air
offered its employees an early retirement program (ERP) not only for Head Office staffs but
throughout all Korean Air branches abroad. Yuson accepted the offer for early retirement.
However, Korean Airs Philippine general manager Suk informed Yuson that she was excluded
from the ERP because she was retiring on 8 January 2002. Consequently, in a letter dated 1
September 2001 and addressed to Suk, Yuson claimed that Korean Air was bound by the perfected
contract and accused the company of harassment and discrimination.

In her reply, Suk stated that the Early Retirement Program (ERP) was not an absolute
offer but rather an invitation to possible qualified employees to consider the ERP subject to the
approval and acceptance by the Company, through the Head Office, in the exercise of its discretion.
The ERP is supposedly for employees who have still a number of years to serve the Company in
order to prevent further losses.

Thus, on 28 November 2001, Yuson filed with the arbitration branch of the NLRC a complaint
against Korean Air and Suk for payment of benefit under the ERP, moral damages, exemplary
damages, and attorneys fees.

Consequently, on 8 January 2002, her 60th birthday, Yuson availed of the optional retirement
under Article 287 of the Labor Code, as amended.

In a Resolution dated 30 July 2002, the Bureau dismissed the complaint. Labor Arbiter Santos
denied for lack of merit Yusons claims for benefit under the ERP, for moral and exemplary
damages, and for attorneys fees but directed to pay complainant her retirement benefits.

Page 610 of 845

 On 14 February 2003, Tae and Yuson entered into a compromise agreement and amicably
settled the criminal case wherein Yuson accepted P1,671,546.92 as retirement benefit under Article
287.

Yuson filed with the NLRC an appeal memorandum challenging Labor Arbiter Santos
decision. NLRCs decision adopted the report and recommendations of Labor Arbiter Tamayo to
order Korean Air and Suk to pay Yuson her benefit under the ERP and to give her 10 Korean Air
economy tickets. Korean Air and Suk filed with the NLRC a motion for reconsideration. In its
resolution, NLRC set aside its previous decision and affirmed Labor Arbiter Santos
decision. Yuson filed with the Court of Appeals a petition for certiorari under Rule 65 of the Rules
of Court. The Court of Appeals set aside the NLRCs resolution and affirmed the commissions
decision.

Issues

1. Whether or not Yusons claim for benefit under the ERP became moot when she availed of the
optional retirement under Article 287 of the Labor Code.
2. Whether or not Yuson may claim benefit under the ERP.
3. Whether or not Korean Air forced Yuson to retire on 8 January 2002.
4. Whether or not Korean Air should award Yuson 10 Korean Air economy tickets.

Ruling:

1. Yes, Yusons claim for benefit under the ERP became moot when she availed of the optional
retirement under Article 287 and accepted the benefit. By her acceptance of the benefit, Yuson
is deemed to have opted to retire under Article 287.

The third paragraph of Article 287 states that:

In the absence of a retirement plan or agreement providing for retirement

benefits of employees in the establishment, an employee upon reaching the age of
sixty (60) years or more, but not beyond sixty-five (65) years which is hereby
declared the compulsory retirement age, who has served at least five (5) years in
the said establishment, may retire and shall be entitled to retirement pay equivalent
to at least one-half (1/2) month salary for every year of service, a fraction of at least
six (6) months being considered as one whole year.

2. No, Yuson may not claim benefit under the ERP as there was no perfected contract. Approval
of applications for the ERP is within Korean Airs management prerogatives. The exercise of
management prerogative is valid as long as it is not done in a malicious, harsh, oppressive,
vindictive, or wanton manner. In the present case, the Court sees no bad faith on Korean Airs
part. The 21 August 2001 memorandum clearly states that Korean Air, on its discretion, was
offering ERP to its employees. The memorandum also states that the reason for the ERP was
to prevent further losses. Korean Air did not abuse its discretion when it excluded Yuson in
the ERP. To allow Yuson to avail of the ERP would have been contrary to the purpose of the
ERP.

Page 611 of 845

3. No. Korean Air did not force Yuson to retire on 8 January 2002. The surrounding
circumstances show that Korean Air did not force Yuson to retire on 8 January 2002. As
admitted by complainant, she was set to retire by January 2002 ; and in it was shown in
the records of the case that Yuson was about to retire sometime in January 2002, which in fact
happened.

4. Yuson was not entitled to the tickets. Korean Air had never implemented the IPM in the
Philippines. Its, employees, including Yuson, received the travel benefit under the
CBA. During her 26-year stay in Korean Air, Yuson already received more than 10 tickets.

The SC granted the petition and affirmed the Resolution of the National Labor Relations
Commission which, in turn, affirmed the Decision of the Labor Arbiter.

Page 612 of 845

Rockland Construction Company, Inc. vs. Mid-Pasig Land Development Corporation
G.R. No. 164587

February 04, 2008

Facts:

Rockland Construction Company, Inc. in a letter dated March 1, 2000, offered to lease from Mid-
Pasig Land Development Corporation the latters 3.1-hectare property in Pasig City. This property
is covered by Transfer Certificate of Title Nos. 469702 and 337158 under the control of the
Presidential Commission on Good Government. Upon instruction of Mid-Pasig to address the offer
to the PCGG, Rockland wrote the PCGG on April 15, 2000. The letter, addressed to PCGG
Chairman Magdangal Elma, included Rockland proposed terms and conditions for the lease. This
letter was also received by Mid-Pasig on April 18, 2000, but Mid-Pasig made no response.

Again, in another letter dated June 8, 2000 addressed to the Chairman of Mid-Pasig, Mr.
Ronaldo Salonga, Rockland sent a Metropolitan Bank and Trust Company Check No. 2930050168
for Php1 million as a sign of its good faith and readiness to enter into the lease agreement under
the certain terms and conditions stipulated in the letter. Mid-Pasig received this letter on July 28,
2000.

In a subsequent follow-up letterdated February 2, 2001, Rockland then said that it

presumed that Mid-Pasig had accepted its offer because the Php1 million checks it issued had been
credited to Mid-Pasigs account on December 5, 2000.Mid-Pasig, however, denied it accepted
Rocklands offer and claimed that no check was attached to the said letter. It also vehemently
denied receiving the P1 million check, much less depositing it in its account.

In its letter dated February 6, 2001, Mid-Pasig replied to Rockland that it was only upon
receipt of the latters February 2 letter that the former came to know where the check came from
and what it was for. Nevertheless, it categorically informed Rockland that it could not entertain
the latters lease application. Mid-Pasig reiterated its refusal of Rocklands offer in a letter dated
February 13, 2001.

Rockland then filed an action for specific performance. Rockland sought to compel Mid-
Pasig to execute in Rocklands favor, a contract of lease over a 3.1-hectare portion of Mid-Pasigs
property in Pasig City.

The RTCs decision:the plaintiff and the defendant have duly agreed upon a valid and
enforceable lease agreement of subject portions of defendants properties comprising an area of
5,000 square meters, 11,000 square meters and 15,000 square meters, or a total of 31,000 square
meters;the principal terms and conditions of the aforesaid lease agreement are as stated in
plaintiffs June 8, 2000 letter; the defendant to execute a written lease contract in favor of the
plaintiff containing the principal terms and conditions mentioned in the next-preceding paragraph,
within sixty (60) days from finality of this judgment, and likewise ordering the plaintiff to pay rent
to the defendant as specified in said terms and conditions; the defendant to keep and maintain the
plaintiff in the peaceful possession and enjoyment of the leased premises during the term of said

Page 613 of 845

contract; the defendant to pay plaintiff attorneys fees in the sum of One Million Pesos
(P1,000,000.00), plus P2,000.00 for every appearance made by counsel in court;
The temporary restraining order dated April 2, 2001 is made PERMANENT. The Court of Appeals
reversed the trial courts decision.

Issue:

Was there a perfected contract of lease?

Ruling:

A close review of the events in this case, in the light of the parties evidence, shows that there was
no perfected contract of lease between the parties. Mid-Pasig was not aware that Rockland
deposited the Php1 million check in its account. It only learned of Rocklands check when it
received Rocklands February 2, 2001 letter. Mid-Pasig, upon investigation, also learned that the
check was deposited at the Philippine National Bank San Juan Branch, instead of PNB Ortigas
Branch where Mid-Pasig maintains its account. Immediately, Mid-Pasig wrote Rockland on
February 6, 2001 rejecting the offer, and proposed that Rockland apply the Php1 million to its
other existing lease instead. These circumstances clearly show that there was no concurrence of
Rocklands offer and Mid-Pasigs acceptance.

Mid-Pasig is also not in estoppel in pais. The doctrine of estoppel is based on the grounds
of public policy, fair dealing, good faith and justice, and its purpose is to forbid one to speak
against his own act, representations, or commitments to the injury of one to whom they were
directed and who reasonably relied thereon. Since estoppel is based on equity and justice, it is
essential that before a person can be barred from asserting a fact contrary to his act or conduct, it
must be shown that such act or conduct has been intended and would unjustly cause harm to those
who are misled if the principle were not applied against him.Hence, the petition was denied.

Manila Metal Container Corporation vs. Philippine National Bank

G.R. No. 166862

December 20, 2006

Page 614 of 845
Facts:

Petitioner was the owner of 8,015 square meter parcel of land located in Mandaluyong (now a
City), Metro Manila. To secure a Php 900,000.00 loan it had obtained from respondent Philippine
National Bank (PNB), petitioner executed a real estate mortgage over the lot. Respondent PNB
later granted petitioner a new credit accommodation of Php 1,000,000.00; and, on November 16,
1973, petitioner executed an Amendment of Real Estate Mortgage over its property. On March 31,
1981, petitioner secured another loan of Php 653,000.00 from respondent PNB, payable in
quarterly installments of Php 32,650.00, plus interests and other charges.

On August 5, 1982, respondent PNB filed a petition for extrajudicial foreclosure of the real
estate mortgage and sought to have the property sold at public auction for Php 911,532.21,
petitioner's outstanding obligation to respondent PNB as of June 30, 1982, plus interests and
attorney's fees.

After due notice and publication, the property was sold at public auction on September 28,
1982 where respondent PNB was declared the winning bidder for Php 1,000,000.00. The
Certificate of Sale issued in its favor was registered and annotated at the dorsal portion of the title
on February 17, 1983. Thus, the period to redeem the property was to expire on February 17, 1984.

Petitioner sent a letter dated August 25, 1983 to respondent PNB, requesting that it be
granted an extension of time to redeem/repurchase the property. Another letter was sent reiterating
petitioners request for a one-year extension within which to repurchase the property on instalment.
PNB replied that it does not accept partial payments. Since petitioner failed to redeem the property,
a new title was issued in favour of PNB.

Meanwhile, the Special Assets Management Department (SAMD) had prepared a

statement of account, and as of June 25, 1984 petitioner's obligation amounted to Php
1,574,560.47. When apprised of the statement of account, petitioner remitted Php 725,000.00 to
respondent PNB as "deposit to repurchase." In a letter dated November 14, 1984, the PNB
management informed petitioner that it was rejecting the offer and the recommendation of the
SAMD. It was suggested that petitioner purchase the property for Php 2,660,000.00, its minimum
market value. Respondent PNB gave petitioner until December 15, 1984 to act on the proposal;
otherwise, its Php 725,000.00 deposit would be returned and the property would be sold to other
interested buyers.

Petitioner, however, did not agree to respondent PNB's proposal. Instead, it wrote another
letter dated December 12, 1984 requesting for reconsideration. Respondent PNB replied in a letter
dated December 28, 1984, wherein it reiterated its proposal that petitioner purchase the property
for Php 2,660,000.00.

On June 4, 1985, respondent PNB informed petitioner that the PNB Board of Directors had
accepted petitioner's offer to purchase the property, but for Php 1,931,389.53 in cash less the
Php725,000.00 already deposited with it. The petitioner did not respond to the said letter. On

Page 615 of 845

August 28, 1989, petitioner filed a complaint against respondent PNB for "Annulment of Mortgage
and Mortgage Foreclosure, Delivery of Title, or Specific Performance with Damages."
During pre-trial, the parties agreed to submit the case for decision, based on their stipulation of
facts. While the case was pending, respondent PNB demanded, on September 20, 1989, that
petitioner vacate the property within 15 days from notice, but petitioners refused to do so.

On March 18, 1993, petitioner offered to repurchase the property for Php 3,500,000.00 and
subsequently Php 4,000,000. Both offers were rejected by PNB since as a matter of their policy
they could not sell a property for less than its market value which is Php 30,000,000.00.

On May 31, 1994, the trial court rendered judgment dismissing the amended complaint and
respondent PNB's counterclaim. It ordered respondent PNB to refund the Php725,000.00 deposit
petitioner had made. The trial court ruled that there was no perfected contract of sale between the
parties; hence, petitioner had no cause of action for specific performance against respondent. The
trial court declared that respondent had rejected petitioner's offer to repurchase the property.
Petitioner, in turn, rejected the terms and conditions contained in the June 4, 1985 letter of the
SAMD. While petitioner had offered to repurchase the property per its letter of July 14, 1988, the
amount of Php 643,422.34 was way below the Php 1,206,389.53 which respondent PNB had
demanded. It further declared that the Php 725,000.00 remitted by petitioner to respondent PNB
on June 4, 1985 was a "deposit," and not a down payment or earnest money.

Meanwhile, on June 17, 1993, petitioner's Board of Directors approved Resolution No. 3-
004, where it waived, assigned and transferred its rights over the property in favor of Bayani
Gabriel, one of its Directors. Thereafter, Bayani Gabriel executed a Deed of Assignment over 51%
of the ownership and management of the property in favor of Reynaldo Tolentino, who later moved
for leave to intervene as plaintiff-appellant. On July 14, 1993, the CA issued a resolution granting
the motion, and likewise granted the motion of Reynaldo Tolentino substituting petitioner MMCC,
as plaintiff-appellant, and his motion to withdraw as intervenor.

The CA rendered judgment on May 11, 2000 affirming the decision of the RTC. It declared
that petitioner obviously never agreed to the selling price proposed by respondent PNB
(Php1,931,389.53) since petitioner had kept on insisting that the selling price should be lowered
to Php1,574,560.47. Clearly therefore, there was no meeting of the minds between the parties as
to the price or consideration of the sale.

Petitioner filed a motion for reconsideration, which the CA likewise denied. Thus,
petitioner filed the instant petition for review on certiorari.

Issue: Whether or not petitioner and respondent PNB had entered into a perfected contract for
petitioner to repurchase the property from respondent.

Ruling: The ruling of the appellate court that there was no perfected contract of sale between the
parties on June 4, 1985 is correct. A contract is a meeting of minds between two persons whereby
one binds himself, with respect to the other, to give something or to render some service. Under
Article 1318 of the New Civil Code, there is no contract unless the following requisites concur:

Page 616 of 845

(1) Consent of the contracting parties; (2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established.

Contracts are perfected by mere consent which is manifested by the meeting of the offer
and the acceptance upon the thing and the cause which are to constitute the contract. By the
contract of sale, one of the contracting parties obligates himself to transfer the ownership of and
deliver a determinate thing, and the other to pay there for a price certain in money or its equivalent.
The absence of any of the essential elements will negate the existence of a perfected contract of
sale.

A contract of sale is consensual in nature and is perfected upon mere meeting of the minds.
When there is merely an offer by one party without acceptance of the other, there is no contract.
When the contract of sale is not perfected, it cannot, as an independent source of obligation, serve
as a binding juridical relation between the parties.

A negotiation is formally initiated by an offer, which, however, must be certain. At any

time prior to the perfection of the contract, either negotiating party may stop the negotiation. At
this stage, the offer may be withdrawn; the withdrawal is effective immediately after its
manifestation. To convert the offer into a contract, the acceptance must be absolute and must not
qualify the terms of the offer; it must be plain, unequivocal, unconditional and without variance of
any sort from the proposal.

A qualified acceptance or one that involves a new proposal constitutes a counter-offer and
a rejection of the original offer. A counter-offer is considered in law, a rejection of the original
offer and an attempt to end the negotiation between the parties on a different basis. Consequently,
when something is desired which is not exactly what is proposed in the offer, such acceptance is
not sufficient to guarantee consent because any modification or variation from the terms of the
offer annuls the offer. The acceptance must be identical in all respects with that of the offer so as
to produce consent or meeting of the minds.

We do not agree with petitioner's contention that the Php 725,000.00 it had remitted to
respondent was "earnest money" which could be considered as proof of the perfection of a contract
of sale under Article 1482 of the New Civil Code. Thus, the Php 725,000.00 was merely a deposit
to be applied as part of the purchase price of the property, in the event that respondent would
approve the recommendation of SAMD for respondent to accept petitioner's offer to purchase the
property for Php 1,574,560.47.

In sum, then, there was no perfected contract of sale between petitioner and respondent
over the subject property.

Rido Montecillo vs. IgnaciaReynes

G.R. No. 138018.

Page 617 of 845

July 26, 2002

Facts:

Respondents IgnaciaReynes and spouses Abucay filed on June 20, 1984 a complaint for
Declaration of Nullity and Quieting of Title against petitioner Rico Montecillo. Reynes asserted
that she is the owner of a lot situated in Mabolo, CebuCity. In 1981 Reynes sold 185 square meters
of the Mabolo Lot to the Abucay Spouses who built a residential house on the lot they bought.

Reynes alleged further that on March 1, 1984, she signed a Deed of Sale of the Mabolo Lot
in favor of Montecillo. Reynes, being illiterate signed by affixing her thumb- mark on the
document.Montecillo promised to pay the agreed Php47,000.00 purchase price within one month
from the signing of the Deed of Sale.Reynes further alleged that Montecillo failed to pay the
purchase price after the lapse of the one-month period, prompting Reynes to demand from
Montecillothe return of the Deed of Sale. Since Montecillo refused to return the Deed of Sale,
Reynes executed a document unilaterally revoking the sale and gave a copy of the document to
Montecillo.

Subsequently, on May 23, 1984 Reynes signed a Deed of Sale transferring to the Abucay
Spouses the entire Mabolo Lot, at the same time confirming the previous sale in 1981 of a 185
square meter portion of the lot.Reynes and the Abucay Spouses alleged that on June 18, 1984 they
received information that the Register of Deeds of Cebu City issued Certificate of Title No. 90805
in the name of Montecillo for the Mabolo Lot.

Reynes and the Abucay Spouses argued that for lack for consideration there (was) no
meeting of the minds) between Reynes and Montecillo. Thus, the trial court should declare null
and void ab initio Monticellos Deed of sale, and order the cancellation of certificates of title No.
90805 in the name of Montecillo.

In his Answer, Montecillo a bank executive with a BS Commerce degree, claimed he was
a buyer in good faith and had actually paid the Php47,000.00 consideration stated on his Deed of
Sale. Montecillo however admitted he still owned Reynes a balance of Php10,000.00. He also
alleged that he paid Php50,000.00 for the release of the chattel mortgage which he argued
constituted a lien on the Mabolo Lot. He further alleged that he paid for the real property tax as
well as the capital gains tax on the sale of the Mabolo Lot.

In their reply, Reynes and the Abucay Spouses contended that Montecillo did not have
authority to discharge the chattel mortgage especially after Reynes revoked Montecillos Deed of
Sale and gave the mortgagee a copy of the document of revocation. Reynes and the Abucay
Spouses claimed that Montecillo secured the release of the chattel mortgage through machination.
They further asserted that Montecillo took advantage of the real property taxes paid by the Abucay
Spouses and surreptitiously caused the transfer of the title to the Mabolo Lot in his name.

During pre-trial Montecillo claimed that the consideration for the sale of the Mabolo Lot
was the amount he paid to Cebu Iced and Cold Storage Corporation for the mortgage debt. Of

Page 618 of 845

BienvenidoJayag.Montecillo argued that the release of the mortgage was necessary since the
mortgage constituted a lien on the Mabolo Lot.

Reynes, however stated that she had nothing to do with Jayags mortgage debt except that
the house mortgaged by Jayag stood on a portion of the Mabolo Lot. Reynes further stated that the
payment by Montecillo to release the mortgage on Jayags house is a matter between Montecillo
andJayag. The mortgage on the house being a chattel mortgage could not be interpreted in any way
as an encumbrance on the Mabolo Lot.Reynes further claimed that the mortgage debt had long
prescribed since the Php47,000.00 mortgage debt was due for payment on January 30,1967.

Issue:

Whether or not there was a valid consent in the case at bar to have a valid contract.

Ruling:

One of the three essential requisites of a valid contract is consent of the parties on the object and
cause of the contract. In a contract of sale, the parties must agree not only on the p[rice, but also
on the manner of payment of the price. An agreement on the price but a disagreement on the
manner of its payment will not result in consent, thus preventing the existence of a valid contract
for a lack of consent. This lack of consent is separate and distinct for lack of consideration where
the contract states that the price has been paid when in fact it has never been paid.

Reynes expected Montecillo to pay him directly the P47, 000.00 purchase price within one
month after the signing of the Deed of Sale. On the other hand, Montecillo thought that his
agreement with Reynes required him to pay the P47, 000.00-purchase price to Cebu Ice Storage to
settle Jayags mortgage debt. Montecillo also acknowledged a balance of P10, 000.00 in favor of
Reynes although this amount is not stated in Montecillos Deed of Sale. Thus, there was no
consent or meeting of the minds, between Reynes and Montecillo on the manner of payment. This
prevented the existence of a valid contract because of lack of consent.

In summary, Montecillos Deed of Sale is null and void ab initio not only for lack of
consideration, but also for lack of consent. The cancellation of TCT No. 90805 in the name of
Montecillo is in order as there was no valid contract transferring ownership of the Mabolo Lot
from Reynes to Montecillo.

Jasmin Soler vs. Court of Appeals

G.R. No. 123892
May 21, 2001

Page 619 of 845

Facts:

Petitioner JazminSoler is a Fine Arts graduate of the University of Sto. Tomas, Manila. She is a
well-known licensed professional interior designer. In November 1986, her friend Rosario Pardo
asked her to talk to Nida Lopez, who was manager of the COMBANK Ermita Branch for they
were planning to renovate the branch offices.

During their meeting, petitioner was hesitant to accept the job because of her many out of
town commitments, and also considering that Ms. Lopez was asking that the designs be submitted
by December 1986, which was such a short notice. Ms. Lopez insisted, however, because she really
wanted petitioner to do the design for renovation. Petitioner acceded to the request. Ms. Lopez
assured her that she would be compensated for her services. Petitioner even told Ms. Lopez that
her professional fee was ten thousand pesos (P10,000.00), to which Ms. Lopez acceded.

After a few days, petitioner requested for the blueprint of the building so that the proper
design, plans and specifications could be given to Ms. Lopez in time for the board meeting in
December 1986. Petitioner then asked her draftsman Jackie Barcelon to go to the jobsite to make
the proper measurements using the blue print. Petitioner also did her research on the designs and
individual drawings of what the bank wanted. Petitioner hired Engineer Ortanez to make the
electrical layout, architects Frison Cruz and De Mesa to do the drafting. For the services rendered
by these individuals, petitioner paid the engineer Php4,000.00, architects Cruz and de Mesa
Php5,000.00 and architect BarcelonPhp6,000.00. Petitioner also contacted the suppliers of the
wallpaper and the sash makers for their quotation. So come December 1986, the lay out and the
design were submitted to Ms. Lopez. She even told petitioner that she liked the designs.

Subsequently, petitioner repeatedly demanded payment for her services but Ms. Lopez just
ignored the demands. In February 1987, by chance petitioner and Ms. Lopez saw each other in a
concert at the Cultural Center of the Philippines. Petitioner inquired about the payment for her
services, Ms. Lopez curtly replied that she was not entitled to it because her designs did not
conform to the bank's policy of having a standard design, and that there was no agreement between
her and the bank.
On October 13, 1987, petitioner filed at the Regional Trial Court of Pasig, Branch 153 a
complaint against COMBANK and Ms. Lopez for collection of professional fees and damages. In
its answer, COMBANK stated that there was no contract between COMBANK and petitioner; that
Ms. Lopez merely invited petitioner to participate in a bid for the renovation of the COMBANK
Ermita Branch; that any proposal was still subject to the approval of the COMBANK's head office.

After due trial, on November 19, 1990, the trial court rendered a decision, judgment is
hereby rendered in favor of plaintiff. On November 29, 1990, COMBANK, and Ms. Nida Lopez,
filed their notice of appeal.On December 5, 1990, the trial court orderedthe records of the case
elevated to the Court of Appeals.

On October 26, 1995, the Court of Appeals reversed the decision of the Regional Trial
Court. Hence, this petition.

Page 620 of 845

Issues:
1. Whether or not there was a perfected contract between petitioner JazminSoler and
respondents COMBANK and Nida Lopez
2. Whether or not Nida Lopez, the manager of the bank branch, had authority to bind the bank
in the transaction.

Ruling:

The discussions between petitioner and Ms. Lopez were to the effect that she had authority to
engage the services of petitioner. During their meeting, she even gave petitioner specifications as
to what was to be renovated in the branch premises and when petitioners requested for the
blueprints of the building, Ms. Lopez supplied the same. Ms. Lopez was aware that petitioner hired
the services of people to help her come up with the designs for the December, 1986 board meeting
of the bank. Ms. Lopez even insisted that the designs be rushed in time for presentation to the
bank. With all these discussion and transactions, it was apparent to petitioner that Ms. Lopez
indeed had authority to engage the services of petitioner.

The next issue is whether there was a perfected contract between petitioner and the
Bank."A contract is a meeting of the minds between two persons whereby one binds himself to
give something or to render some service to bind himself to give something to render some service
to another for consideration. There is no contract unless the following requisites concur: 1. Consent
of the contracting parties; 2. Object certain which is the subject matter of the contract; and 3. Cause
of the obligation which is established.

A contract undergoes three stages:(a) preparation, conception, or generation, which is the

period of negotiation and bargaining, ending at the moment of agreement of the parties; (b)
perfection or birth of the contract, which is the moment when the parties come to agree on the
terms of the contract; and (c) consummation or death, which is the fulfillment or performance of
the terms agreed upon in the contract.

In the case at bar, there was a perfected oral contract. When Ms. Lopez and petitioner met
in November 1986, and discussed the details of the work, the first stage of the contract commenced.
When they agreed to the payment of the ten thousand pesos (Php10,000.00) as professional fees
of petitioner and that she should give the designs before the December 1986 board meeting of the
bank, the second stage of the contract proceeded, and when finally petitioner gave the designs to
Ms. Lopez, the contract was consummated.

It is familiar doctrine that if a corporation knowingly permits one of its officers, or any
other agent, to act within the scope of an apparent authority, it holds him out to the public as
possessing the power to do those acts; and thus, the corporation will, as against anyone who has in
good faith dealt with it through such agent, be estopped from denying the agent's authority.

Also, petitioner may be paid on the basis of quantum meruit. "It is essential for the proper
operation of the principle that there is an acceptance of the benefits by one sought to be charged
for the services rendered under circumstances as reasonably to notify him that the lawyer
performing the task was expecting to be paid compensation therefor. The doctrine of quantum

Page 621 of 845

meruitis a device to prevent undue enrichment based on the equitable postulate that it is unjust for
a person to retain benefit without paying for it."

The decision of the trial court is reinstated and affirmed.

Yolanda Palattao vs. Court of Appeals

G.R. No. 131726
May 7, 2002

Facts:

Petitioner Yolanda Palattaoentered into a lease contract whereby she leased to private respondent
a house and a 490-square-meter lot located in 101 Caimito Road, Caloocan City, covered by
Transfer Certificate of Title No. 247536 and registered in the name of petitioner. The duration of
the lease contract was for three years, commencing from January 1, 1991, to December 31, 1993,
renewable at the option of the parties. The agreed monthly rental was Php 7,500.00 for the first

Page 622 of 845

year; Php8,000.00 for the second year: and Php 8,500.00 for the third year. The contract gave
respondent lessee the first option to purchase the leased property.

During the last year of the contract, the parties began negotiations for the sale of the leased
premises to private respondent. In a letter dated April 2, 1993, petitioner offered to sell to private
respondents 413.28 square meters of the leased lot at Php7,800.00 per square meter, or for the total
amount of Php 3,223,548.00. Private respondents replied on April 15, 1993 wherein he informed
petitioner that he shall definitely exercise his option to buy the leased property. Private
respondent, however, manifested his desire to buy the whole 490-square meters inquired from
petitioner the reason why only 413.28 square meters of the leased lot were being offered for sale.
In a letter dated November 6, 1993, petitioner made a final offer to sell the lot at Php 7,500.00 per
square meter with a down payment of 50% upon the signing of the contract of conditional sale, the
balance payable in one year with a monthly lease/interest payment Php 14,000.00 which must be
paid on or before the fifth day every month that the balance is still outstanding. On November 7,
1993, private respondents accepted petitioners offer and reiterated his request for respondent
accepted petitioners offers and reiterated his request for clarification as to the size of the lot for
sale. Petitioner acknowledged private respondents acceptance of the offer in his letter dated
November 10, 1993.

Petitioner gave private respondent on or before November 24, 1993, within which to pay
the 50% downpayment in cash or managers check. Petitioner stressed that failure to pay the
downpayment on the stipulated period will enable petitioner to freely sell her property to others.
Petitioner likewise notified private respondent, that she is no longer renewing the lease agreement
upon its expiration on December 31, 1993.

Private respondent did not accept the terms proposed by petitioner. Neither were there any
documents of sale nor payment by private respondent of the required downpayment. Private
respondent wrote a letter to petitioner on November 29, 1993 manifesting his intention to exercise
his option to renew their lease contract for another three years, starting January 1, 1994 to
December 31, 1996. This was rejected by petitioner, reiterating that she was no longer renewing
the lease. Petitioner demanded that private respondent vacate the premises, but the latter refused.

Hence, private respondent filed with the Regional Trial Court of Caloocan, Branch 127, a
case for specified performance, docketed as Civil Case No, 16287, seeking to compel petitioner to
sell to him the leased property. Private respondent further prayed for the issuance of a writ
preliminary injunction to prevent petitioner from filing an ejectment case upon the expiration of
the lease contract on December 31, 1993.

During the proceedings in the specific performance case, the parties agreed to maintain the
status quo. After they failed to reach an amicable settlement, petitioner filed the instant ejectment
case before the MetropolitanTrialCourtofCaloocanCity, Branch 53. In his answer, private
respondent alleged that he refused to vacate the leased premises because there was a perfected
contract of sale of the leased property between him and petitioner. Private respondent argued that
he did not abandon his option to buy the leased property and that his proposal to renew the lease
was but an alternative proposal to the sale. He further contended that the filing of the ejectment
case violated their agreement to maintain the status quo.

Page 623 of 845

Issue:

Whether or not there was a valid consent in the case at bar.

Ruling:

There was no valid consent in the case at bar.Contracts that are consensual in nature, like a contract
of sale, are perfected upon mere meeting of the minds. Once there is concurrence between the
offer and the acceptance upon the subject matter, consideration, and terns of payment, a contract
is produced. The offer must be certain. To convert the offer into a contract, the acceptance must
be absolute and must not qualify the terms of the offer; it must be plain, unequivocal,
unconditional, and without variance of any sort from the proposal. A qualified acceptance, or one
that involves a new proposal, constitutes a counter-offer and is a rejection of the original offer.
Consequently, when something is desired which is not exactly is proposed in the offer, such
acceptance is not sufficient to generate consent because any modification or variation from the
terms of the offer annuals the offer.

In the case at bar, while it is true that private respondent informed petitioner that he is
accepting the latters offer to sell the leased property, it appears that they did not reach an
agreement as to the extent of the lot subject of the proposed sale.

Letters reveal that private respondent did not give his consent to buy only 413.28 square
meters of the leased lot, as he desired to purchase the whole 490 square-meter- leased premises
which, however, was not what was exactly proposed in petitioners offer. Clearly, therefore,
private respondents acceptance of petitioners offer was not absolute, and will consequently not
generate consent that would perfect a contract.

ABS-CBN vs. Court of Appeals

G.R. No. 128690
January 21, 1999

Facts:

In 1990, ABS-CBN and VIVA executed a Film Exhibition Agreement whereby Viva gave ABS-
CBN an exclusive right to exhibit some Viva films. Viva, through defendant Del Rosario, offered
ABS-CBN, through its vice-president Charo Santos-Concio, a list of three (3) film packages (36
title) from which ABS-CBN may exercise its right of first refusal under the afore-said agreement.
ABS-CBN, however through Mrs.Concio, "can tick off only ten (10) titles" (from the list) "we can
purchase" and therefore did not accept said list. The titles ticked off by Mrs.Concio are not the
subject of the case at bar except the film "Maging Sino Ka Man."
Page 624 of 845
 On February 27, 1992, defendant Del Rosario approached ABS-CBNs Ms.Concio, with a
list consisting of 52 original movie titles (i.e., not yet aired on television) including the 14 titles
subject of the present case, as well as 104 re-runs (previously aired on television) from which
ABS-CBN may choose another 52 titles, as a total of 156 titles, proposing to sell to ABS-CBN
airing rights over this package of 52 originals and 52 re-runs for Php60,000,000.00 of which
Php30,000,000.00 will be in cash and Php30,000,000.00 worth of television spots.

On April 2, 1992, defendant Del Rosario and ABS-CBNs general manager, Eugenio
Lopez III, met at the Tamarind Grill Restaurant in Quezon City to discuss the package proposal of
VIVA. Mr. Lopez testified that he and Mr. Del Rosario allegedly agreed that ABS-CBN was
granted exclusive film rights to fourteen (14) films for a total consideration of P36 million; that he
allegedly put this agreement as to the price and number of films in a "napkin" and signed it and
gave it to Mr. Del Rosario. On the other hand, Del Rosario denied having made any agreement
with Lopez regarding the 14 Viva films; denied the existence of a napkin in which Lopez wrote
something; and insisted that what he and Lopez discussed at the lunch meeting was Vivas film
package offer of 104 films (52 originals and 52 re-runs) for a total price of P60 million.

On April 06, 1992, Del Rosario and Mr.GracianoGozon of RBS Senior vice-president for
Finance discussed the terms and conditions of Vivas offer to sell the 104 films, after the rejection
of the same package by ABS-CBN. On the following day, Del Rosario received a draft contract
from Ms.Concio which contains a counter-proposal of ABS-CBN on the offer made by VIVA
including the right of first refusal to 1992 Viva Films. However, the proposal was rejected by the
Board of Directors of VIVA and such was relayed to Ms.Concio.
On April 29, 1992, after the rejection of ABS-CBN and following several negotiations and
meetings defendant Del Rosario and Vivas President Teresita Cruz, in consideration of P60
million, signed a letter of agreement dated April 24, 1992, granting RBS the exclusive right to air
104 Viva-produced and/or acquired films including the fourteen (14) films subject of the present
case.

On May 27, 1992, ABS-CBN filed before the RTC a complaint for specific performance
with a prayer for a writ of preliminary injunction and/or temporary restraining order against private
respondentsRepublic Broadcasting System (now GMA Network Inc.) On 28 May 1992, the RTC
issued a temporary restraining order.

The RTC then rendered decision in favor of RBS and against ABS-CBN. On appeal, the
same decision was affirmed.Hence, this decision.

Issue:

Whether or not there exists a perfected contract between ABS-CBN and VIVA.

Ruling:
A contract is a meeting of minds between two persons whereby one binds himself to give
something or render some service to another [Art. 1305, Civil Code.] for a consideration. There

Page 625 of 845

is no contract unless the following requisites concur:consent of the contracting parties;object
certain which is the subject of the contract; and cause of the obligation, which is established.

A contract undergoes three stages: (a) preparation, conception, or generation, which is the
period of negotiation and bargaining rending at the moment of agreement of the parties;(b)
perfection or birth of the contract, which is the moment when the parties come to agree on the
terms of the contract; and (c) consummation or death, which is the fulfillment or performance of
the terms agreed upon in the contract.

Contracts that are consensual in nature are perfected upon mere meeting of the minds.
Once there is concurrence between the offer and the acceptance upon the subject matter,
consideration, and terms of payment a contract is produced. The offer must be certain. To convert
the offer into a contract, the acceptance must be absolute and must not qualify the terms of the
offer; it must be plain, unequivocal, unconditional, and without variance of any sort from the
proposal. A qualified acceptance, or one that involves a new proposal, constitutes a counter-offer
and is a rejection of the original offer. Consequently, when something is desired which is not
exactly what is proposed in the offer, such acceptance is not sufficient to generate consent because
any modification or variation from the terms of the offer annuls the offer.

In the present case, when Mr. Del Rosario of Viva met Mr. Lopez of ABS-CBN at the
Tamarind Grill on 2 April 1992 to discuss the package of films, said package of 104 VIVA films
was VIVAs offer to ABS-CBN to enter into a new Film Exhibition Agreement. But ABS-CBN,
sent through Ms.Concio, counter-proposal in the form a draft contract proposing exhibition of 53
films for a consideration of P35 million. This counter-proposal could be nothing less than the
counter-offer of Mr. Lopez during his conference with Del Rosario at Tamarind Grill Restaurant.
Clearly, there was no acceptance of VIVAs offer, for it was met by a counter-offer which
substantially varied the terms of the offer.

Furthermore, ABS-CBN made no acceptance of VIVAs offer hence, they underwent

period of bargaining. ABS-CBN then formalized its counter-proposals or counter-offer in a draft
contract. VIVA through its Board of Directors, rejected such counter-offer. Even if it be conceded
arguendo that Del Rosario had accepted the counter-offer, the acceptance did not bind VIVA, as
there was no proof whatsoever that Del Rosario had the specific authority to do so.
Lourdes Ong Limson vs. Court of Appeals
G. R. No. 135929
April 20, 2001

Facts:
In July 1978, respondent spouses Lorenzo de Vera and Asuncion Santos-de Vera, through their
agent Marcosa Sanchez, offered to sell to petitioner Lourdes OngLimson a parcel of land situated
in Barrio San Dionisio, Paranaque, Metro Manila. The respondent spouses were the owners of the
subject property.

On July 31, 1978, she agreed to the property at the price of P34. 00 per square meter and
gave P20, 000.00 as earnest money. The respondent spouses signed a receipt thereafter and gave
her a 10-day option period to purchase the property. Respondent spouses informed petitioner that

Page 626 of 845

the subject property was mortgaged to Emilio Ramos and Isidro Ramos. Petitioner was asked to
pay the balance of the purchase price to enable the respondent spouses to settle their obligation
with the Ramoses. Petitioner agreed to meet respondent spouses and the Ramoses on August 5,
1978, to consummate the transaction; however, the respondent spouses and the Ramoses did not
appear, same with their second meeting.

On August 23, 1978, petitioner allegedly gave respondent spouses three checks for the
settlement the back taxes of property. On September 5, 1978, the agent of the respondent spouses
informed petitioner that the property was the subject of a negotiation for the sale to respondent
Sunvar Realty Development Corporation.

Petitioner alleged that it was only on September 15, 1978, that TCT No. S-72946 covering
the property was issued to respondent spouses. On the same day, petitioner filed an Affidavit of
Adverse Claim with the Office of the Registry of Deeds of Makati, Metro Manila. The Deed of
Sale between respondent spouses and respondent Sunvar was executed on September 15, 1978 and
TCT No. S-72377 was issued in favor of Sunvar on September 26, 1978 with the Adverse Claim
of petitioner annotated thereon.

Respondent spouses and Sunvar filed their Answers and Answers to Cross-Claim,
respectively. On appeal, the Court of Appeals completely reversed the decision of the trial court
and ordered the Register of Deeds of Makati City to lift the Adverse Claim and ordered petitioner
to pay respondent Sunvar and respondent spouses exemplary and nominal damages and attorneys
fees. Hence, this petition.

Issue:
Whether or not the agreement between petitioner and respondent spouses was a mere option or a
contract to sell.

Ruling:

The Supreme Court held that the agreement between the parties was a contract of option and not a
contract to sell. An option is continuing offer or contract by which the owner stipulates with
another that the latter shall have the right to buy the property at a fixed price within a time certain,
or under, or in compliance with, certain terms and conditions, or which gives the owner of the
property the right to sell or demand a sale. It is also sometimes called an unaccepted offer. An
option is not of itself a purchase, but merely secures the privilege to buy. It is not a sale of property
but a sale of the right to purchase. Its distinguishing characteristic is that it imposes no binding
obligation on the person holding the option, aside from the consideration for the offer.

Hence, the assailed decision is affirmed, with the modification that the award of nominal
and exemplary damages as well as attorneys fees is deleted. The petition is denied.

Page 627 of 845

Reynaldo Villanueva vs. Philippine National Bank
G.R. No. 154493
December 6, 2006

Facts:
The defendant through Vice-President Guevara negotiated with the plaintiff in connection with the
offer of the plaintiff to buy Lots 17 & 19. The offer of plaintiff to buy, however, was accepted by
the defendant only insofar as Lot 19 is concerned as exemplified by its letter dated July 6, 1990
where the plaintiff signified his concurrence after conferring with the defendant's vice-president.
The conformity of the plaintiff was typewritten by the defendant's own people where the plaintiff
accepted the price of Php2,883,300.00. The defendant also issued a receipt to the plaintiff on the
same day when the plaintiff paid the amount of Php200,000.00 to complete the down payment of
Php600,000.00. With this development, the plaintiff was also given the go signal by the defendant
to improve Lot 19 because it was already in effect sold to him and because of that the defendant
fenced the lot and completed his two houses on the property. On October 11, 1990, however,
Guevara wrote Villanueva that, upon orders of the PNB Board of Directors to conduct another

Page 628 of 845

appraisal and public bidding of Lot No. 19, SAMD is deferring negotiations with him over said
property and returning his deposit of Php580,000.00.

Hence, Villanueva filed with the RTC a Complaint for specific performance and damages
against PNB. In its September 14, 1995 Decision, the RTC granted the Complaint. PNB appealed
to the CA which reversed and set aside the September 14, 1995 RTC Decision.

Issues:
1. Whether a perfected contract of sale exists between petitioner and respondent PNB;
2. Whether the conduct and actuation of respondent constitutes bad faith as to entitle
petitioner to moral and exemplary damages and attorney's fees.

Ruling:
The Court sustains the CA on both issues. Contracts of sale are perfected by mutual consent
whereby the seller obligates himself, for a price certain, to deliver and transfer ownership of a
specified thing or right to the buyer over which the latter agrees. Mutual consent being a state of
mind, its existence may only be inferred from the confluence of two acts of the parties: an offer
certain as to the object of the contract and its consideration, and an acceptance of the offer which
is absolute in that it refers to the exact object and consideration embodied in said offer. While it is
impossible to expect the acceptance to echo every nuance of the offer, it is imperative that it assents
to those points in the offer which, under the operative facts of each contract, are not only material
but motivating as well. Anything short of that level of mutuality produces not a contract but a mere
counter-offer awaiting acceptance. More particularly on the matter of the consideration of the
contract, the offer and its acceptance must be unanimous both on the rate of the payment and on
its term. An acceptance of an offer which agrees to the rate but varies the term is ineffective.

Moreover, there is merit in the ruling of the CA that the July 11, 1990 marginal note was a
further counter-offer which did not lead to the perfection of a contract of sale between the parties.
Petitioners on June 28, 1990 offer quoted the price of Php3,677,000.00 for two lots but was silent
on the term of payment. Respondent's July 6, 1990 counter-offer quoted the price of
Php2,833,300.00 and was also silent on the term of payment. Up to that point, the term or schedule
of payment was not on the negotiation table.

In sum, the amounts paid by petitioner were not in the nature of downpayment or earnest
money but were mere deposits or proof of his interest in the purchase of Lot No. 19. Acceptance
of said amounts by respondent does not presuppose perfection of any contract. It must be noted
that petitioner has expressly admitted that he had withdrawn the entire amount of Php580,000.00
deposit from PNB-General Santos Branch.

With the foregoing disquisition, the Court foregoes resolution of the second issue as it is
evident that respondent acted well within its rights when it rejected the last counter-offer of
petitioner.

In fine, petitioner's petition lacks merit.

Page 629 of 845

Catalan vs. Basa
G.R. No. 159567
July 31, 2007

Facts:
On October 20, 1948, FELICIANO CATALAN Feliciano was discharged from active military
service. The Board of Medical Officers of the Department of Veteran Affairs found that he was
unfit to render military service due to his schizophrenic reaction, catatonic type, which
incapacitates him because of flattening of mood and affect, preoccupation with worries,
withdrawal, and sparse and pointless speech.

On September 28, 1949, Feliciano married Corazon Cerezo. On June 16, 1951, a document
was executed, titled Absolute Deed of Donation, wherein Feliciano allegedly donated to his
sister MERCEDES CATALAN one-half of the real property described, viz:A parcel of land
located at Barangay Basing, Binmaley, Pangasinan. Bounded on the North by heirs of Felipe Basa;
on the South by Barrio Road; On the East by heirs of Segundo Catalan; and on the West by Roman
Basa.Containing an area of Eight Hundred One (801) square meters, more or less. The donation
was registered with the Register of Deeds.

On December 11, 1953, Peoples Bank and Trust Company filed a Special Proceedings
before the Court of First Instance to declare Feliciano incompetent. On December 22, 1953, the

Page 630 of 845

trial court issued its Order for Adjudication of Incompetency for Appointing Guardian for the
Estate and Fixing Allowance of Feliciano. The following day, the trial court appointed Peoples
Bank and Trust Company as Felicianos guardian. Peoples Bank and Trust Company has been
subsequently renamed, and is presently known as the Bank of the Philippine Islands (BPI).

On November 22, 1978, Feliciano and Corazon Cerezo donated Lots 1 and 3 of their
property, registered under Original Certificate of Title (OCT) No. 18920, to their son Eulogio
Catalan.Mercedes sold the property in issue in favor of her children Delia and Jesus Basa. The
Deed of Absolute Sale was registered with the Register of Deeds and a Tax Declaration was issued
in the name of respondents.

Feliciano and Corazon Cerezo donated Lot 2 of the aforementioned property registered
under OCT No. 18920 to their children Alex Catalan, Librada Catalan and Zenaida Catalan. On
February 14, 1983, Feliciano and Corazon Cerezo donated Lot 4 (Plan Psu-215956) of the same
OCT No. 18920 to Eulogio and Florida Catalan.
BPI, acting as Felicianos guardian, filed a case for Declaration of Nullity of Documents,
Recovery of Possession and Ownership, as well as damages against the herein respondents. BPI
alleged that the Deed of Absolute Donation to Mercedes was void ab initio, as Feliciano never
donated the property to Mercedes. In addition, BPI averred that even if Feliciano had truly intended
to give the property to her, the donation would still be void, as he was not of sound mind and was
therefore incapable of giving valid consent. Thus, it claimed that if the Deed of Absolute Donation
was void ab initio, the subsequent Deed of Absolute Sale to Delia and Jesus Basa should likewise
be nullified, for Mercedes Catalan had no right to sell the property to anyone. BPI raised doubts
about the authenticity of the deed of sale, saying that its registration long after the death of
Mercedes Catalan indicated fraud. Thus, BPI sought remuneration for incurred damages and
litigation expenses.

On August 14, 1997, Feliciano passed away. The original complaint was amended to
substitute his heirs in lieu of BPI as complainants in Civil Case No. 17666.The trial court found
that the evidence presented by the complainants was insufficient to overcome the presumption that
Feliciano was sane and competent at the time he executed the deed of donation in favor of
Mercedes Catalan. Thus, the court declared, the presumption of sanity or competency not having
been duly impugned, the presumption of due execution of the donation in question must be upheld.
The Court of Appeals upheld the trial courts decision.

Issue:
Whether said decision of the lower courts is correct.

Ruling:
Petitioners questioned Felicianos capacity at the time he donated the property, yet did not see fit
to question his mental competence when he entered into a contract of marriage with Corazon
Cerezo or when he executed deeds of donation of his other properties in their favor. The
presumption that Feliciano remained competent to execute contracts, despite his illness, is
bolstered by the existence of these other contracts. Competency and freedom from undue
influence, shown to have existed in the other acts done or contracts executed, are presumed to
continue until the contrary is shown.

Page 631 of 845

 Needless to state, since the donation was valid, Mercedes had the right to sell the property
to whomever she chose. Not a shred of evidence has been presented to prove the claim that
Mercedes sale of the property to her children was tainted with fraud or falsehood. It is of little
bearing that the Deed of Sale was registered only after the death of Mercedes. What is material is
that the sale of the property to Delia and Jesus Basa was legal and binding at the time of its
execution. Thus, the property in question belongs to Delia and Jesus Basa.
petitioners raised the issue of prescription and laches for the first time on appeal before this Court.
It is sufficient for this Court to note that even if the present appeal had prospered, the Deed of
Donation was still a voidable, not a void, contract. As such, it remained binding as it was not
annulled in a proper action in court within four years.

Domingo vs. Court of Appeals

G.R. No. 127540
October 17, 2001

Facts:
Paulina Rigonan owned three parcels of land including the house and warehouse on one parcel.
She allegedly sold them to private respondents, the spouses Felipe and Concepcion Rigonan, who
claim to be her relatives. In 1966, petitioners who claim to be her closest surviving relatives,
allegedly took possession of the properties by means of stealth, force and intimidation, and refused
to vacate the same. According to defendants, the alleged deed of absolute sale was void for being
spurious as well as lacking consideration. They said that Paulina Rigonan did not sell her
properties to anyone. As her nearest surviving kin within the fifth degree of consanguinity, they
inherited the three lots and the permanent improvements thereon when Paulina died. They said
they had been in possession of the contested properties for more than 10 years.

Issues:
1. Whether or not the consideration in Deed of Sale can be used to impugn the validity of
the Contract of Sale.
2. Whether or not the alleged Deed of Sale executed by Paulina Rigonan in favor of the
private respondents is valid.
Ruling:

Page 632 of 845

Consideration is the why of a contract, the essential reason which moves the contracting parties to
enter into the contract. The Court had seen no apparent and compelling reason for her to sell the
subject 9 parcels of land with a house and warehouse at a meager price of P850 only. On record,
there is unrebutted testimony that Paulina as landowner was financially well off. She loaned money
to several people. Undisputably, the P850.00 consideration for the nine (9) parcels of land
including the house and bodega is grossly and shockingly inadequate, and the sale is null and void
ab initio.

The Court ruled in the negative. Private respondents presented only a carbon copy of this
deed. When the Register of Deeds was subpoenaed to produce the deed, no original typewritten
deed but only a carbon copy was presented to the trial court. None of the witnesses directly
testified to prove positively and convincingly Paulinas execution of the original deed of sale. The
carbon copy did not bear her signature, but only her alleged thumbprint. Juan Franco testified
during the direct examination that he was an instrumental witness to the deed. However, when
cross-examined and shown a copy of the subject deed, he retracted and said that said deed of sale
was not the document he signed as witness.

Heirs of Rosendo Sevilla Florencio vs. Heirs of Teresa Sevilla De Leon

G.R. No. 149570
March 12, 2004
Facts:
Teresa Sevilla de Leon, owned a residential lot with an area of 828 square meters located in San
Miguel, Bulacan. In the 1960s, De Leon allowed the spouses Rosendo and Consuelo Florencio to
construct a house on the said property and stay therein without any rentals therefor.

In November 1978, De Leon, then already a widow, died intestate. In deference to her wishes, her
heirs allowed Rosendo Florencio to continue staying in the property. In March 1995, Florencio
died intestate, but his heirs, the respondents, remained in the property. On April 26, 1995, the heirs
of De Leon, through counsel, sent a letter to the heirs of Florencio, demanding that they vacate the
property within ninety (90) days from receipt thereof. The latter refused and failed to vacate the
property.

De Leon's heirs contends the following: a). Defendants possession of the premises was merely on
the tolerance of the late Teresa de Leon. b). The alleged Deed of Donation does not exist, is patently
a falsified document and can never be the source of any right whatsoever.

At their very first answer to the complaint, Florencio's heirs contend that the plaintiffs had no cause
of action against them, as Teresa de Leon had executed a Deed of Donation on October 1, 1976
over the said parcel of land in favor of their predecessor, Rosendo Florencio. The latter accepted
the donation, as shown by his signature above his typewritten name on page one of the deed.

Page 633 of 845

Florencio's heirs argue further that: a). Defendants do not have only a better right of possession
over the questioned parcel of land and they do not have only the absolute and lawful possession of
the same but they have the absolute and lawful ownership of the same not only against the plaintiffs
but against the whole world. b). Defendants are entitled to their counterclaim.

Issue:
Whether or not the petitioners, as heirs of Rosendo Florencio, who appears to be the donee under
the unregistered Deed of Donation, have a better right to the physical or material possession of the
property over the respondents, the heirs of Teresa de Leon, the registered owner of the property.

Ruling:
The petition has no merit.

As a mode of acquiring ownership, donation results in an effective transfer of title over the property
from the donor to the donee, and is perfected from the moment the donor is made aware of the
acceptance by the donee, provided that the donee is not disqualified or prohibited by law from
accepting the donation. Once the donation is accepted, it is generally considered irrevocable, and
the donee becomes the absolute owner of the property, except on account of officiousness, failure
by the donee to comply with the charge imposed in the donation, or ingratitude. The acceptance,
to be valid, must be made during the lifetime of both the donor and the donee. It must be made in
the same deed or in a separate public document, and the donees acceptance must come to the
knowledge of the donor. In order that the donation of an immovable property may be valid, it must
be made in a public document. Registration of the deed in the Office of the Register of Deeds or
in the Assessors Office is not necessary for it to be considered valid and official. Registration
does not vest title; it is merely evidence of such title over a particular parcel of land. The necessity
of registration comes into play only when the rights of third persons are affected. Furthermore, the
heirs are bound by the deed of contracts executed by their predecessors-in-interest.

Page 634 of 845

Mendezana vs. Ozamiz
G.R. No. 143370
February 6, 2002

Facts:
Petitioner spouses Mario J. Mendezona and Teresita M. Mendezona, petitioner spouses Luis J.
Mendezona and Maricar L. Mendezona, and petitioner TeresitaAdadVda. de Mendezona own a
parcel of land each with almost similar areas of 3,462 square meters, 3,466 square meters and
3,468 square meters. The petitioners ultimately traced their titles of ownership over their respective
properties from a notarized Deed of Absolute Sale executed in their favor by Carmen Ozamiz.

The petitioners initiated the suit to remove a cloud on their said respective titles caused by
the inscription thereon. The respondents opposed the petitioners claim of ownership of the said
parcels of land alleging that the titles issued in the petitioners names are defective and illegal, and
the ownership of the said property was acquired in bad faith and without value inasmuch as the
consideration for the sale is grossly inadequate and unconscionable.

Respondents further alleged that at the time of the sale as alleged, Carmen Ozamiz was
already ailing and not in full possession of her mental faculties; and that her properties having been
placed in administration, she was in effect incapacitated to contract with petitioners. They argue
that the Deed of Absolute sale is a simulated contract.

Issue:
Whether or not the Deed of Absolute Sale in the case at bar was simulated.

Ruling:

Page 635 of 845

The Court ruled that the Deed in the case at bar is not a simulated contract. Simulation is defined
as the declaration of a fictitious will, deliberately made by agreement of the parties, in order to
produce, for the purposes of deception, the appearances of a juridical act which does not exist or
is different from what that which was really executed. The requisites of simulation are: (a) an
outward declaration of will different from the will of the parties; (b) the false appearance must
have been intended by mutual agreement; and (c) the purpose is to deceive third persons.

None of these were clearly shown to exist in the case at bar. The Deed of Absolute Sale is
a notarized document duly acknowledged before a notary public. As such, it has in its favor the
presumption of regularity, and it carries the evidentiary weight conferred upon it with respect to
its due execution. It is admissible in evidence without further proof of its authenticity and is
entitled to full faith and credit upon its face. The burden fell upon the respondents to prove their
allegations attacking the validity and due execution of the said Deed of Absolute Sale. Respondents
failed to discharge that burden; hence, the presumption in favor of the said deed stands.

Lim vs. Court of Appeals

G.R. No. L-55201
February 3, 1994

Facts:
The case involves the partition of the properties of the deceased spouses Tan Quico and
JosefaOraa. The former died on May 11, 1932 and the latter on August 6, 1932. Both died intestate.
They left some ninety six hectares of land located in the municipality of Guinobatan and Camalig,
Albay. The late spouses were survived by four children; Cresencia, Lorenzo, Hermogenes and
Elias. Elias died on May 2, 1935, without issue. Cresencia died on December 20, 1967. She was
survived by her husband, Lim Chay Sing, and children, Mariano, Jaime, Jose Jovita, Anacoreta,
Antonietta, Ruben, Benjamin and Rogelio. They are the petitioners in the case at bench. The sad
spectacle of the heirs squabbling over the properties of their deceased parents was again replayed
in the case at bench. The protagonists were the widower and children of Cresencia on one side,
and Lorenzo and Hermogenes on the other side.

The late Cresencia and Lorenzo had contrasting educational background. Cresencia only
reached the second grade of elementary school. She could not read or write in English. On the
other hand, Lorenzo is a lawyer and a CPA. Heirs of Cresencia alleged that since the demise of the
spouses Tan Quico and JosefaOraa, the subject properties had been administered by respondent
Lorenzo. They claimed that before her death, Cresencia had demanded their partition from
Lorenzo. After Cresencias death, they likewise clamored for their partition. Their effort proved
fruitless.

Respondents Lorenzo and Hermogenes adamant stance against partition is based on

various contentions. Principally, they urge: 1) that the properties had already been partitioned,
albeit, orally; and 2) during her lifetime, the late Cresencia had sold and conveyed all her interests

Page 636 of 845

in said properties to respondent Lorenzo. They cited as evidence the Deed of Confirmation of
Extra Judicial Settlement of the Estate of Tan Quico and JosefaOraa and a receipt of payment.

Issue:
Whether or not there is error in the signing of the Deed.

Ruling:
In the petition at bench, the questioned Deed is written in English, a language not understood by
the late Cresencia an illiterate. It was prepared by the respondent Lorenzo, a lawyer and CPA.
Respondent Lorenzo did not cause the notarization of the Deed. Considering these circumstances,
the burden was on private respondents to prove that the content of the Deed was explained to the
illiterate Cresencia before she signed it. In this regard, the evidence adduced by the respondents
failed to discharge their burden.

The conclusion drawn by the Honorable of Appeals that there was no undue influence
exerted on Cresencia O. Tan by her (Lawyer-CPA) brother Lorenzo O. Tan based on facts stated
in the questioned judgment is clearly incorrect.As it is contrary to the provision of Art.1337, Civil
Code.

The respondent court, reversing the trial court, held that the evidence failed to establish
that it was signed by the late Cresencia as a result of fraud, mistake or undue influence. The Court
upheld this ruling erroneous.

In calibrating the credibility of the witnesses on this issue, we take our mandate from
Article 1332 of the Civil Code which provides: When one of the parties is unable to read, or if
the contract is in a language not understood by him, and mistake or fraud is alleged, the person
enforcing the contract must show that the terms thereof have been fully explained to the former.

This substantive law came into being due to the finding of the Code Commission that there
is still a fairly large number of illiterates in this country, and documents are usually drawn up in
English or Spanish. It is also in accord with our state policy of promoting social justice. It also
supplements Article 24 of the Civil Code which calls on court to be vigilant in the protection of
the rights of those who are disadvantaged in life. In the petition at bench, the questioned Deed is
written in English, a language not understood by the late Cresencia an illiterate.

Page 637 of 845

Ruiz vs. Court of Appeals
G.R. No. 146942
April 22, 2003

Facts:
Petitioner Corazon Ruiz is engaged in the business of buying and selling jewelry. She obtained
loans from private respondent Consuelo Torres on different occasions and in different amounts.
Prior to their maturity, the loans were consolidated under 1 promissory note dated March 22, 1995.

The consolidated loan of P750, 000.00 was secured by a real estate mortgage on a lot in
Quezon City, covered by Transfer of Certificate of Title No. RT-96686, and registered in the name
of petitioner. The mortgage was signed by petitioner for herself and as attorney-in-fact of her
husband Rogelio. It was executed on 20 March 1995, or 2 days before the execution of the subject
promissory note.

Thereafter, petitioner obtained 3 more loans from private respondent, under the following
promissory notes: 1) promissory note dated 21 April 1995, in the amount of Php100,000.00; 2)
promissory note dated 23 May !995 in the amount of P100,000.00, and 3) promissory note dated
21 December 1995, in the amount of Php100,000.00. These combined loans of Php300, 000.00
were secured by Php571,000.00 worth of jewelry pledged by petitioner to private respondent.

Page 638 of 845

 From April 1995 to March 1996, petitioner paid the stipulated 3% monthly interest on the
Php750,000.00 loan, amounting to Php270,000. After March 1996, petitioner was unable to make
interest payments as she had difficulties collecting from her clients in her jewelry business.

Because of petitioners failure to pay the principal loan of P750,000.00, as well as the
interest payment for April 1996, private respondent demanded payment not only of the
P750,000.00 loan but also of the P300,000.00 loan. When petitioner failed to pay, private
respondent sought the extrajudicial foreclosure of the aforementioned real estate mortgage.

Issue:
Whether or not there is undue influence in the signing of the promissory note, which determines if
foreclosure proceedings could proceed.

Ruling:
The promissory note in question did not contain any fine print provision which could have escaped
the attention of the petitioner. Petitioner had all the time to go over and study the stipulations
embodied in the promissory note. Aside from the March 22, 1995 promissory note for
Php750,000.00, three other promissory notes of different dates and amounts were executed by
petitioner in favor of private respondent. These promissory notes contain similar terms and
conditions, with a little variance in the terms of interests and surcharges. The fact that petitioner
and private respondent had entered into not only one but several loan transactions shows that
petitioner was not in any way compelled to accept the terms allegedly imposed by private
respondent. Moreover, petitioner, in her complaint dated October 7, 1996 filed with the trial court,
never claimed that she was forced to sign the subject note. Therefore, the foreclosure proceedings
may now proceed.
Dela Cruz vs. Sison, 451 SCRA 754
G.R. No. 163770
February 17, 2005

Facts:
Sometime in 1992, Epifania dela Cruz discovered that her rice land in Salomague Sur, Bugallon,
Pangasinan, had been transferred and registered in the name of her nephew, Eduardo Sison,
without her knowledge and consent, on the strength of a Deed of Sale she executed on November
24, 1989. Dela Cruz filed a complaint to declare the Deed null and void, claiming that Eduardo
tricked her into signing the Deed, by inserting it among the documents she signed transferring her
residential land, house and camarin, in favor of Demetrio, her foster child and the brother of Sison.
The Sps. Sison, however, denied this, claiming that they purchased the property from Epifania
for P20,000.00. They averred that Dela Cruz could not have been deceived into signing the Deed
of Absolute Sale because it was duly notarized before Notary Public Maximo V. Cuesta, Jr.; and
they have complied with all requisites for its registration, as evidenced by the Investigation Report
by the DAR, Affidavit of Sellor/Transferor, Affidavit of Buyer/Transferee, Certification issued by
the Provincial Agrarian Reform Officer, Letter for the Secretary of Agrarian Reform, Certificate
Authorizing Payment of Capital Gains Tax, and the payment of the registration fees, some of which
documents even bore the signature of Dela Cruz. They also claimed to have been in open,
continuous, and peaceful possession and have been receiving the fruits and produce of the land
since they purchased the same.

Page 639 of 845

Issues: (1) Whether the deed of absolute sale is valid. (2) Whether fraud attended the execution of
a contract.

Ruling: On the issue of whether fraud attended the execution of a contract is factual in
nature. Normally, this Court is bound by the appellate courts findings, unless they are contrary
to those of the trial court, in which case we may wade into the factual dispute to settle it with
finality. After a careful perusal of the records, we sustain the Court of Appeals ruling that the
Deed of Absolute Sale dated November 24, 1989 is valid.

There being no evidence adduced to support her bare allegations, thus, Epifania failed to
satisfactorily establish her inability to read and understand the English language.

Although Epifania was 79 years old at the time of the execution of the assailed contract,
her age did not impair her mental faculties as to prevent her from properly and intelligently
protecting her rights. Even at 83 years, she exhibited mental astuteness when she testified in
court. It is, therefore, inconceivable for her to sign the assailed documents without ascertaining
their contents, especially if, as she alleges, she did not direct Eduardo to prepare the same.

A comparison of the deed of sale in favor of Demetrio and the deed of sale in favor
Eduardo, draws out the conclusion that there was no trickery employed. One can readily see that
the first deed of sale is in all significant respects different from the second deed of sale. A casual
perusal, even by someone as old as Epifania, would enable one to easily spot the
differences. Epifania could not have failed to miss them.

Indeed, if the intention was to deceive, both deeds of sale should have been mirror images
as to mislead Epifania into thinking that she was signing what appeared to be the same document.

The deed of sale was also duly notarized. It is a settled rule that one who denies the due
execution of a deed where ones signature appears has the burden of proving that, contrary to the
recital in the jurat, one never appeared before the notary public and acknowledged the deed to be
a voluntary act. Epifania never claimed her signatures as forgeries. In fact, Epifania never
questioned the deed of sale in favor of Demetrio, accepting it as a valid and binding document. It
is only with respect to the deed of sale in favor of Eduardo that she denies knowledge of affixing
her signature. Unfortunately, for both parties, the notary public, Atty. Maximo V. Cuesta, Jr.
before whom they appeared, died prior to the filing of the case.

Documents acknowledged before notaries public are public documents which are
admissible in evidence without necessity of preliminary proof as to their authenticity and due
execution. They have in their favor the presumption of regularity.

Page 640 of 845

Rural Bank of Sta. Maria, Pangasinan vs. Court of Appeals, 314 SCRA 255
G.R. No. 110672
September 14, 1999

Facts:
A Deed of Absolute Sale with Assumption of Mortgage was executed between Behis as
vendor/assignor and private respondents Rayandayan and Arceno as vendees/assignees for the sum
of P250,000. On the same day, private respondents, together with Behis, executed another
Agreement embodying the real consideration of the sale of the land in the sum of
P2,400,000. Thereafter, private respondents negotiated with the principal stockholder of the bank,
Engr. Natividad, for the assumption of the indebtedness of Behis and the subsequent release of the
mortgage on the property by the bank. Private respondents did not show to the bank the Agreement

Page 641 of 845

with Behis providing for the real consideration of P2,400,000. Subsequently, the bank consented
to the substitution of private respondents as mortgage debtors in place of Behis in a Memorandum
of Agreement. Instead of the bank foreclosing immediately for non-payment of the delinquent
account of Behis, petitioner bank agreed to receive only a partial payment of P143,000 by
installment on specific dates. After payment thereof, the bank agreed to release the mortgage of
Behis; to give its consent to the transfer of title to the private respondents; and to the payment of
the balance of P200,000 under new terms with a new mortgage to be executed by the private
respondent over the same land. Despite repeated demands by the private respondents, the bank
refused to perform its obligations under the Memorandum of Agreement on the ground of fraud
for withholding from the said bank the real consideration of the sale.

Issue:
Is the Memorandum of Agreement voidable on the ground of bad faith or fraud on the part of the
private respondents in concealing the real consideration of the sale during negotiations with the
petitioner bank on the assumption of the mortgage debt?

Ruling:
No. The kind of fraud that will vitiate a contract refers to those insidious word or machinations
resorted to by one of the contracting parties to induce the other to enter into a contract which
without them he would not have agreed to. Simply stated, the fraud must be the determining cause
of the contract, or must have caused the consent to be given. It is believed that the non-disclosure
to the bank of the purchase price of the sale of the land between private respondents and Behis
cannot be fraud contemplated by Article 1338 of the Civil Code. First of all, the consideration
could not have been the determining cause for the petitioner bank to enter into the memorandum
of agreement. To all intents and purposes, the bank entered into said agreement in order to effect
payment on the indebtedness of Behis.

Pursuant to Article 1339, silence or concealment, does not constitute fraud unless there is
a special duty to disclose certain facts, or unless according to good faith and the usages of
commerce the communication should be made. Verily, private respondents had no duty and
therefore did not act in bad faith in failing to disclose the real consideration. Thirdly, the bank had
other means and opportunity of verifying the financial capacity of private
respondents. Furthermore, the bank security remained unimpaired regardless of the consideration
of the sale.

Consequently, not all elements of fraud vitiating consent for purposes of annulling a
contract concur to wit: (a) It was employed by a contracting party upon the other; (b) It induced
the other party to enter into contract; (c) It was serious; and (d) It resulted in damages and injury
to the party seeking annulment. Petitioner bank has not sufficiently shown that it was induced to
enter into the agreement by the non-disclosure of the purchase price, and that the same resulted in
damages to the bank

Page 642 of 845

Carabeo vs. Sps Dingco
G.R. No. 190823
April 04, 2011

Facts:
On July 10, 1990, Domingo Carabeo entered into a contract denominated as "Kasunduan sa
Bilihan ng Karapatan sa Lupa" with Spouses Norberto and Susan Dingco whereby petitioner
agreed to sell his rights over a 648 square meter parcel of unregistered land situated in Purok III,
Tugatog, Orani, Bataan to respondents for P38,000. Respondents tendered their initial payment of
P10,000 upon signing of the contract, the remaining balance to be paid on September 1990.
Respondents were later to claim that when they were about to hand in the balance of the purchase
price, petitioner requested them to keep it first as he was yet to settle an on-going "squabble" over

Page 643 of 845

the land. Nevertheless, respondents gave petitioner small sums of money from time to time which
totaled P9,100, on petitioner's request according to them; due to respondents' inability to pay the
amount of the remaining balance in full, according to petitioner. By respondents' claim, despite
the alleged problem over the land, they insisted on petitioner's acceptance of the remaining balance
of P18,900 but petitioner remained firm in his refusal, proffering as reason therefore that he would
register the land first.
Sometime in 1994, respondents learned that the alleged problem over the land had been settled
and that petitioner had caused its registration in his name on December 21, 1993 under Transfer
Certificate of Title No. 161806. They thereupon offered to pay the balance but petitioner declined,
drawing them to file a complaint before the Katarungan Pambarangay. No settlement was
reached, however, hence, respondent filed a complaint for specific performance before the
Regional Trial Court (RTC) of Balanga, Bataan. Petitioner countered in his Answer to the
Complaint that the sale was void for lack of object certain, the kasunduan not having specified the
metes and bounds of the land. In any event, petitioner alleged that if the validity of
the kasunduan is upheld, respondents' failure to comply with their reciprocal obligation to pay the
balance of the purchase price would render the action premature. For, contrary to respondents'
claim, petitioner maintained that they failed to pay the balance of P28,000 on September 1990 to
thus constrain him to accept installment payments totaling P9,100. After the case was submitted
for decision or on January 31, 2001, petitioner passed away. The records do not show that
petitioner's counsel informed Branch 1 of the Bataan RTC, where the complaint was lodged, of his
death and that proper substitution was effected in accordance with Section 16, Rule 3, Rules of
Court.

Issue:
Whether the object for the sale is determinate

Ruling:
That the kasunduan did not specify the technical boundaries of the property did not render the sale
a nullity. The requirement that a sale must have for its object a determinate thing is satisfied as
long as, at the time the contract is entered into, the object of the sale is capable of being made
determinate without the necessity of a new or further agreement between the parties. As portion
of the kasunduan shows, there is no doubt that the object of the sale is determinate.

The causes of action survives because the case involves primarily and principally property
and property rights. Trial court was not informed of the death of Carabeo but its decision being
concluded before the petitioner died may be valid and subsisting upon his legal representatives or
successors in interest; Death of the party automatically divests his counsel with authority.

Page 644 of 845

Page 645 of 845
Chavez vs. Public Estates Authority,
415 SCRA 403
G.R. No. 133250
July 9, 2002

Facts:
Two Senate Committees, the Senate Blue Ribbon Committee and Committee on Accountability
of Public Officers, conducted extensive public hearings to determine the actual market value of
the public lands; and found out that the sale of such was grossly undervalued based on official
documents submitted by the proper government agencies during the investigations. It was found
out that the Public Estates Authority (PEA), under the Joint Venture Agreement (JVA), sold to
Amari Coastal Bay Development Corporation 157.84 hectares of reclaimed public lands totaling
to P 1.89 B or P 1,200 per square meter. However during the investigation process, the BIR pitted
the value at P 7,800 per square meter, while the Municipal Assessor of Paraaque at P 6,000 per
square meter and by the Commission on Audit (COA) at P21,333 per square meter. Based on the
official appraisal of the COA, the actual loss on the part of the government is a gargantuan value
of P 31.78 B. However, PEA justified the purchase price based from the various appraisals of
private real estate corporations, amounting from P 500 1,000 per square meter. Further, it was
also found out that there were various offers from different private entities to buy the reclaimed
public land at a rate higher than the offer of Amari, but still, PEA finalized the JVA with Amari.
During the process of investigation, Amari did not hide the fact that they agreed to pay huge
commissions and bonuses to various persons for professional efforts and services in successfully
negotiating and securing for Amari the JVA. The amount constituting the commissions and
bonuses totaled to a huge P 1.76 B; an indicia of great bribery.

Issues:
(1) Whether or not the petitioner has legal standing to bring the suit. (2) Whether or not the sale
between PEA and Amari is unconstitutional.

Ruling:
The petitioner has standing to bring the taxpayers suit because the petition seeks to compel
PEA to comply with its constitutional duties. This duties are particularly in answer of the right of
citizens to information on matters of public concern, and of a constitutional provision intended to
insure the equitable distribution of alienable lands of the public domain among Filipino citizens.
Furthermore, the court considered that the petition raised matters of transcendental importance to
the public. The mere fact that the petitioner is a citizen satisfies the requirement of personal interest
when the proceeding involves the assertion of a public right. Also, ordinary taxpayers have a right
to initiate and prosecute actions questioning the validity of acts or orders of government agencies
or instrumentalities if the issues raise are of paramount public interest and if they immediately
affect the social, economic and moral well being of the people. The amended JVA does not make
the issue moot and academic since this compels the court to insure the government itself does not
violate a provision of the Constitution intended to safeguard the national patrimony. The content
of the amended JVA seeks to transfer title and ownership of reclaimed lands to a single
corporation. The court does not hesitate to resolve the legal or constitutional issues raised to
formulate controlling principles to guide the bench, bar and the public. The instant case raises

Page 646 of 845

constitutional issues of transcendental importance to the public. Court can resolve this case without
determining any factual issue related to the case. The instant case is a petition for mandamus which
falls under the original jurisdiction of the Court. Furthermore, PEA was under a positive legal duty
to disclose to the public the terms and conditions for the sale of its lands. The principle of
exhaustion of administrative remedies does not apply when the issue involved is purely legal or
constitutional question. The right to information includes official information on on-going
negotiations before a final agreement as required by the constitution. The Supreme Court granted
the petition. PEA and Amari Coastal Bay Development Corporation are permanently enjoined
from implementing the amended JVA which is hereby declared null and void ab initio.

On whether the sale between PEA and Amari is unconstitutional - YES, it is

unconstitutional for what was sold or alienated are lands of the public domain. Further, the Ponce
doctrine, to which the respondent seeks refuge and sanctuary, does not fall squarely in the case.

First, the subject of the sale was a submerged land; i.e., 78% of the total area sold by PEA
to Amari is still submerged land. Submerged lands, like foreshore lands, is of the public domain
and cannot be alienated. As unequivocally stated in Article XII, Section 2 of the Constitution, all
lands of the public domain, waters, minerals, coals, petroleum, forces which are potential energies,
fisheries, forests or timber, wildlife, flora and fauna, and other natural resources, with the exception
of agricultural lands, are inalienable. Submerged lands fall within the scope of such provision.

Second, in the Ponce case, the irrevocable option to purchase portions of the foreshore
lands shall be enforceable only upon reclamation, not prior to reclamation. In the case at bar, even
without actual reclamation, the submerged lands were immediately transferred and sold to Amari.

Third, the Ponce doctrine has been superseded by the provisions of the Government
Auditing Code, which has been bolstered by the provisions of the Local Government Code, which
states that any sale of the public land must be made only thru a public bidding. There being no
public bidding in the subject sale of land; the amended JVA is a negotiated contract in patent
violation of such law.

Fourth, the Ponce doctrine which involved the validity to reclaim foreshore lands based on
RA 1899 (authorizing municipalities and chartered cities to reclaim foreshore lands) is not
applicable in the instant case because what is involved in the case at bar are submerged lands.

Fifth, in the Ponce case, the City of Cebu was sanctioned to reclaim foreshore lands under
RA 1899 for it is a qualified end user government agency; therefore, can sell patrimonial property
to private parties. But PEA is not an end user agency with respect to reclaimed lands under the
amended JVA for reclaimed lands are public and therefore are inalienable.

Finally, the Ponce case was decided under the 1935 Constitution (1965-66), which allowed
private corporations to acquire alienable lands of the public domain. The case at bar falls within
the ambit of the 1987 Constitution which prohibits corporations from acquiring alienable lands of
the public domain.

Page 647 of 845

 Ergo, the submerged lands, being inalienable and outside the commerce of man, could not
be the subject of the commercial transactions specified in the Amended JVA. Hence, the contract
between Amari and the PEA is void.

Page 648 of 845

Page 649 of 845
Carabeo vs. Sps Dingco
G.R. No. 190823
April 04, 2011

Facts:
On July 10, 1990, Domingo Carabeo entered into a contract denominated as "Kasunduan sa
Bilihan ng Karapatan sa Lupa" with Spouses Norberto and Susan Dingco whereby petitioner
agreed to sell his rights over a 648 square meter parcel of unregistered land situated in Purok III,
Tugatog, Orani, Bataan to respondents for P38,000. Respondents tendered their initial payment of
P10,000 upon signing of the contract, the remaining balance to be paid on September 1990.
Respondents were later to claim that when they were about to hand in the balance of the purchase
price, petitioner requested them to keep it first as he was yet to settle an on-going "squabble" over
the land. Nevertheless, respondents gave petitioner small sums of money from time to time which
totaled P9,100, on petitioner's request according to them; due to respondents' inability to pay the
amount of the remaining balance in full, according to petitioner. By respondents' claim, despite
the alleged problem over the land, they insisted on petitioner's acceptance of the remaining balance
of P18,900 but petitioner remained firm in his refusal, proffering as reason therefore that he would
register the land first.
Sometime in 1994, respondents learned that the alleged problem over the land had been settled
and that petitioner had caused its registration in his name on December 21, 1993 under Transfer
Certificate of Title No. 161806. They thereupon offered to pay the balance but petitioner declined,
drawing them to file a complaint before the Katarungan Pambarangay. No settlement was
reached, however, hence, respondent filed a complaint for specific performance before the
Regional Trial Court (RTC) of Balanga, Bataan. Petitioner countered in his Answer to the
Complaint that the sale was void for lack of object certain, the kasunduan not having specified the
metes and bounds of the land. In any event, petitioner alleged that if the validity of
the kasunduan is upheld, respondents' failure to comply with their reciprocal obligation to pay the
balance of the purchase price would render the action premature. For, contrary to respondents'
claim, petitioner maintained that they failed to pay the balance of P28,000 on September 1990 to
thus constrain him to accept installment payments totaling P9,100. After the case was submitted
for decision or on January 31, 2001, petitioner passed away. The records do not show that
petitioner's counsel informed Branch 1 of the Bataan RTC, where the complaint was lodged, of his
death and that proper substitution was effected in accordance with Section 16, Rule 3, Rules of
Court.

Issue:
Whether the object for the sale is determinate

Ruling:
That the kasunduan did not specify the technical boundaries of the property did not render the sale
a nullity. The requirement that a sale must have for its object a determinate thing is satisfied as
long as, at the time the contract is entered into, the object of the sale is capable of being made
determinate without the necessity of a new or further agreement between the parties. As portion
of the kasunduan shows, there is no doubt that the object of the sale is determinate.

Page 650 of 845

 The causes of action survives because the case involves primarily and principally property
and property rights. Trial court was not informed of the death of Carabeo but its decision being
concluded before the petitioner died may be valid and subsisting upon his legal representatives or
successors in interest; Death of the party automatically divests his counsel with authority.

Page 651 of 845

Page 652 of 845
Melliza vs. City of Iloilo
23 SCRA 477
G.R. No. L-24732
April 30, 1968

Facts:
Juliana Melliza during her lifetime owned three parcels of residential land in Iloilo City. On 1932,
she donated to the then Municipality of Iloilo a certain lot to serve as site for the municipal hall.
The donation was however revoked by the parties for the reason that area was found inadequate to
meet the requirements of the development plan. Subsequently the said lot was divided into several
divisions.

Sometime in 1938, Juliana Melliza sold her remaining interest on the said lot to Remedios
San Villanueva. Remedios in turn transferred the rights to said portion of land to Pio Sian Melliza.
The transfer Certificate of title in Mellizas name bears on annotation stating that a portion of said
lot belongs to the Municipality of Iloilo.

Later the City of Iloilo, which succeeds to the Municipality of Iloilo, donated the city hall
sit to the University of the Philippines, Iloilo Branch. On 1952, the University of the Philippines
enclosed the site donated with a wire fence.

Pio Sian Melliza then filed action in the Court of First Instance of Iloilo against IloiloCity
and the University of the Philippines for recovery of the parcel of land or of its value specifically
LOT 1214-B.

Petitioner contends that LOT 1214-B was not included in those lots which were sold by
Juliana Melliza to the then municipality of Iloilo and to say he would render the Deed of Sale
invalid because the law requires as an essential element of sale, determinate object.

Issue:
Whether or not IF Lot 1214 B is included in the Deed of Sale, it would render the contract invalid
because the object would allegedly not be determinate as required by law.

Ruling:
No. Paragraph 2, Art. 1460. "The requirement of the law that a sale must have for its object a
determinate thing, is fulfilled as long as, at the time the contract is entered into, the object of the
sale is capable of being made determinate without the necessity of a new or further agreement
between the parties (Art. 1273, old Civil Code; Art. 1460, New Civil Code). The specific mention
of some of the lots plus the statement that the lots object of the sale are the ones needed for city
hall site, avenues and parks, according to the Arellano plan, sufficiently provides a basis, as of the
time of the execution of the contract, for rendering determinate said lots without the need of a new
and further agreement of the parties."

The requirement of the law specifically Article 1460 of the Civil Code that the sale must
have for its object a determinate thing, is fulfilled as long as, at the time the contract is entered

Page 653 of 845

into, the object of the sale is cable of being determinate without the necessity of a new or further
agreement between the parties.

The specific mention of some of the lots plus the statement that the lots object of the sale
are the ones needed for city hall site sufficient provides a basis, as of the time, of the execution of
the contract, for rendering determinate said lots without the need of a new further agreement of
the parties.

Page 654 of 845

Catindig vs. Vda. De Meneses
G.R. No. 165851
February 2, 2011

Page 655 of 845

Facts:
The property subject of this controversy pertains to a parcel of land situated in Malolos, Bulacan,
titled in the name of the late Rosendo Meneses, Sr., under Transfer Certificate of Title (TCT) No.
T-1749 (hereinafter referred to as the Masusuwi Fishpond).

Respondent alleged that in September 1975, petitioner Catindig, the first cousin of her
husband, deprived her of the possession over the Masusuwi Fishpond, through fraud, undue
influence and intimidation. Since then, petitioner Catindig unlawfully leased the property to
petitioner Roxas. Respondent verbally demanded that petitioners vacate the Masusuwi Fishpond,
but all were futile, thus, forcing respondent to send demand letters to petitioners Roxas and
Catindig. However, petitioners still ignored said demands. Hence, respondent filed a suit against
the petitioners to recover the property and demanded payment of unearned income, damages,
attorney's fees and costs of suit.

Petitioner Catindig maintained that he bought the Masusuwi Fishpond from respondent and
her children in January 1978, as evidenced by a Deed of Absolute Sale. Catindig further argued
that even assuming that respondent was indeed divested of her possession of the Masusuwi
Fishpond by fraud, her cause of action had already prescribed considering the lapse of about 20
years from 1975, which was allegedly the year when she was fraudulently deprived of her
possession over the property.

Petitioner Roxas, on the other hand, asserted in his own Answer that respondent has no cause
of action against him, because Catindig is the lawful owner of the Masusuwi Fishpond, to whom
he had paid his rentals in advance until the year 2001.
The trial court found that the Deed of Absolute Sale executed between respondent and
petitioner Catindig was simulated and fictitious, and therefore, did not convey title over the
Masusuwi Fishpond to petitioner Catindig. The court a quo was further convinced that the Deed
of Absolute Sale lacked consideration, because respondent and her children never received the
stipulated purchase price for the Masusuwi Fishpond which was pegged at PhP150,000.00. Since
ownership over the property never transferred to Catindig, the trial court declared that he has no
right to lease it to Roxas. The court also found that petitioner Roxas cannot claim good faith in
leasing the Masusuwi Fishpond, because he relied on an incomplete and unnotarized Deed of Sale.

Petitioners separately challenged the trial court's Decision before the CA. The CA dismissed
both the petitioners' appeals and affirmed the RTC. The CA ruled that the trial court properly
rejected petitioners' reliance on the deed of absolute sale executed between respondent and
petitioner Catindig. The CA also found that since it is settled that a Torrens title is a constructive
notice to the whole world of a property's lawful owner, petitioner Roxas could not invoke good
faith by relying on the Deed of Absolute Sale in favor of his lessor, petitioner Catindig.

Issue:
Whether or not the deed of sale is genuine or simulated.

Ruling:

Page 656 of 845

 The Supreme Court upheld the findings of the trial court, affirmed by the Court of Appeals, that
the Deed of Absolute Sale executed between respondent and petitioner was simulated and
fictitious, and therefore, did not convey title over the subject property to petitioner. Apparently,
respondent was convinced by petitioner to sign the said deed of sale because it was intended to be
a mere proposal subject to the approval of the trial court wherein the proceedings for the settlement
of the estate owning the property was still pending. The Supreme Court also agreed to the
observation that the deed lacked consideration because respondent never received the stipulated
purchase price for the subject property.

According to the Supreme Court, a sale that lacks consideration is void from the beginning
and produces no legal effect. The right to declare it as such does not prescribe either:

It is a well-entrenched rule that where the deed of sale states that the purchase price has
been paid but in fact has never been paid, the deed of sale is null and void ab initio for lack of
consideration. Moreover, Article 1471 of the Civil Code, provides that if the price is simulated,
the sale is void, which applies to the instant case, since the price purportedly paid as indicated in
the contract of sale was simulated for no payment was actually made.

Since it was well established that the Deed of Sale is simulated and, therefore void,
petitioners claim that respondent's cause of action is one for annulment of contract, which already
prescribed, is unavailing, because only voidable contracts may be annulled. On the other hand,
respondent's defense for the declaration of the inexistence of the contract does not prescribe.

Page 657 of 845

Ordua, et al. vs. Fuentebella
G.R. No. 176841
June 29, 2010

Facts:
Antonita Ordua purchased a residential lot from Gabriel Sr.payable in installments but no deed
of sale was executed. The installments were paid to Gabriel Sr. and later to Gabriel Jr. after
the death of the former. Improvements were thereafter introduced by petitioner and the latter even
paid its real property tax since 1979. Unknown to Ordua, the property has been subject to further
alienations until the same was ceded to respondent, Fuentebilla, Jr. Ordua, after being demanded
by Fuentebilla to vacate the disputed land, then filed a Complaint for Annulment of Sale, Title,
Reconveyance with Damages with a prayer to acquire ownership over the subject lot upon payment
of their remaining balance. The Regional Trial Court dismissed the petition because the verbal sale
between Gabriel Sr. and Ordua was unenforceable under the Statute of Frauds. This was later
affirmed by the Court of Appeals.

Issue:
Whether or not the sale of the subject lot by Gabriel Sr. to Antonita is unenforceable under the
Statute of Frauds.

Ruling:

Page 658 of 845

No. The Statute of Frauds expressed in Article 1403, par. (2), of the Civil Code, provides that a
contract for the sale of real property or of an interest therein shall be unenforceable unless the sale
or some note or memorandum thereof is in writing and subscribed by the party or his
agent. However, where the verbal contract of sale has been partially executed through the partial
payments made by one party duly received by the vendor, as in the present case, the contract is
taken out of the scope of the Statute.

It is a well-settled rule that the Statute of Frauds as expressed in Article 1403, par. (2), of
the Civil Code is applicable only to purely executory contracts and not to contracts which have
already been executed either totally or partially. Here, the verbal contract of sale has been partially
executed through the partial payments made by Ordua duly received by both
Gabriel Jr. and his father. The purpose of the Statute of Fraud is prevention of fraud and perjury
in the enforcement of obligations depending for their evidence on the unassisted memory of
witnesses, by requiring some contracts and transactions to be evidenced by a writing signed by the
party to be charged. Since there is already ratification of the verbal contract through the acceptance
of benefits through the partial payments, it is thus withdrawn from the purview of the Statute of
Frauds.

Brobio Mangahas vs. Brobio

G.R. No. 183852
October 20, 2010

Facts:
On January 10, 2002, Pacifico S. Brobio (Pacifico) died intestate, leaving three parcels of land. He
was survived by his wife, respondent Eufrocina A. Brobio, and four legitimate and three
illegitimate children; petitioner Carmela Brobio Mangahas is one of the illegitimate children. On
May 12, 2002, the heirs of the deceased executed a Deed of Extrajudicial Settlement of Estate of
the Late Pacifico Brobio with Waiver. In the Deed, petitioner and Pacificos other children, in
consideration of their love and affection for respondent and the sum of P150,000.00, waived and
ceded their respective shares over the three parcels of land in favor of respondent. According to
petitioner, respondent promised to give her an additional amount for her share in her fathers estate.
Thus, after the signing of the Deed, petitioner demanded from respondent the promised additional
amount, but respondent refused to pay, claiming that she had no more money.

A year later, while processing her tax obligations with the Bureau of Internal Revenue
(BIR), respondent was required to submit an original copy of the Deed. Left with no more original
copy of the Deed, respondent summoned petitioner to her office on May 31, 2003 and asked her

Page 659 of 845

to countersign a copy of the Deed. Petitioner refused to countersign the document, demanding that
respondent first give her the additional amount that she promised. Considering the value of the
three parcels of land (which she claimed to be worth P20M), petitioner asked for P1M, but
respondent begged her to lower the amount. Petitioner agreed to lower it to P600,000.00. Because
respondent did not have the money at that time and petitioner refused to countersign the Deed
without any assurance that the amount would be paid, respondent executed a promissory note.
Petitioner agreed to sign the Deed when respondent signed the promissory note. When the
promissory note fell due, respondent failed and refused to pay despite demand. Petitioner made
several more demands upon respondent but the latter kept on insisting that she had no money.

Issues:
(1) Whether or not the Court of Appeals erred in the appreciation of the facts of this case when it
found that intimidation attended the execution of the promissory note subject of this case. (2)
Whether or not the Court of Appeals erred when it found that the promissory note was without
consideration.

Ruling:
(1) Yes. Eufrocina insists that she was "forced" into signing the promissory note because Carmela
would not sign the document required by the BIR. Being forced into a situation does not amount
to vitiated consent where it is not shown that the party is deprived of free will and choice. There
is undue influence when a person takes improper advantage of his power over the will of another,
depriving the latter of a reasonable freedom of choice. For undue influence to be present, the
influence exerted must have so overpowered the mind of a contracting party as to destroy his free
agency, making him express the will of another rather than his own. Eufrocina may have
desperately needed petitioners signature on the Deed, but there is no showing that she was
deprived of free agency when she signed the promissory note.
Section 24 of the NIL provides that A contract is presumed to be supported by cause or
consideration. The presumption that a contract has sufficient consideration cannot be overthrown
by a mere assertion that it has no consideration.
To overcome the presumption, the alleged lack of consideration must be shown by
preponderance of evidence. The burden to prove lack of consideration rests upon whoever alleges
it, which, in the present case, is Eufrocina.

(2) Yes. Eufrocina failed to prove that the promissory note was not supported by any consideration.
From her testimony and her assertions in the pleadings, it is clear that the promissory note was
issued for a cause or consideration, which, at the very least, was Carmelas signature on the
document.

It may very well be argued that if such was the consideration, it was inadequate.
Nonetheless, even if the consideration is inadequate, the contract would not be invalidated, unless
there has been fraud, mistake, or undue influence. As previously stated, none of these grounds had
been proven present in this case.

Page 660 of 845

Golden Apple Realty vs. Sierra Grande Realty
G.R. No. 119857
July 28, 2010

Facts:
On December 1, 1981, Hayari Trading Corporation, through a Loan Agreement, borrowed from
Manphil Investment Corporation the amount of Two Million Five Hundred Thousand Pesos
(P2,500,000.00) for the benefit of Filipinas Textile Mills, Inc. On the same date, Hayari President
Yu Han Yat, Jr., his wife Terry Villanueva Yu and the latter's uncle, Bernardino Villanueva,
executed an Assumption of Joint and Solidary Liability for and in consideration of the loan granted
to Hayari, assuming joint and solidary liability with Hayari for the due and punctual payment of
all and/or any amortizations on the loan, as well as all amounts payable to Manphil, in connection
therewith and for the strict performance and fulfillment of the obligation of Hayari. Valiant Realty

Page 661 of 845

and Development Corporation and Sierra Grande Realty Corporation executed a Third Party Real
Estate Mortgage in favor of Manphil over a parcel of land, otherwise known as the Roberts
property.

Filtex also constituted a real estate mortgage over certain parcels of land that it owned and
also constituted a chattel mortgage over the machinery of Hayari in order to secure payment of the
loan. Thereafter, Bernardino Villanueva suggested that the Roberts property be subdivided to
make it easier for Sierra Grande to sell the same. On June 22, 1985, the Board of Directors of
Sierra Grande, passed a resolution authorizing General Manager Bernardino Villanueva, to hire a
geodetic engineer and cause the subdivision plan to be approved by the Land Registration
Commission, and to sell the subdivided lots after approval of the subdivision plan, if found to be
necessary and for which the corporation may need to carry its purpose.

Eventually, on June 22, 1985, Bernardino Villanueva executed a Contract to

Sell the Roberts property with Golden Apple Realty and Development, Inc. for the amount of
P441,032.00. The amount of P10,000.00 of the purchase price will have to be paid to the vendor
upon the signing of the contract and the balance to be paid to the mortgagee Manphil, on or before
October 31, 1987. On July 26, 1985, Sierra Grande, through Bernardino Villanueva, finally
executed a Deed of Sale of Lots 1, 2 and 3, with a total land area of 1,402 square meters, to Golden
Apple, for P382,080.00 and another Deed of Sale of Lot 4, with a total land area of 499 sq. m., to
Rosvibon for P119,760.00.

Meanwhile, Sierra Grande's Board, on August 29, 1985, passed a resolution revoking the
authority of Bernardo Villanueva to sell the Roberts property. Sometime in January 1986, Sierra
Grande learned that Bernardino Villanueva tried to secure the duplicate original title of the subject
parcel of land from Manphil claiming to be the President of Hayari. As a result, on November 20,
1986, Sierra Grande, through Susan Villanueva Tan, the Corporate Secretary, wrote Manphil
stating that Bernardino Villanueva was not in any way connected officially with Sierra Grande and
was not authorized to deal in any way with the Roberts property nor borrow the transfer certificate
title to the same property. Susan Tan also wrote the Bangko Sentral ng Pilipinas (BSP) informing
the latter of the following: that Hayari had not made any request to borrow any duplicate original
title; that Bernardino Villanueva was not connected in any way with Hayari; that Bernardino
Villanueva had no authority to borrow any duplicate original title; and that whatever authorization
Bernardo Villanueva had in dealing with the Roberts property had been withdrawn and abrogated
under a board resolution. The letter also requested that even if payments were made on the loan
of Hayari by a third party, the subject duplicate original title must not be released without the
express consent of Hayari.

Later, on August 15, 1988, Terry Villanueva Yu, the President of Sierra Grande at that
time, informed Manphil that Bernardino Villanueva and Elmer Tan had attempted to pre-terminate
Hayari's loan in order to obtain the duplicate original title of the subject lot. It was also mentioned
in the letter that Hayari may opt to pre-terminate the loan itself and be subrogated in the right of
action against Bernardino Villanueva. However, on October 20, 1988, Manphil allowed Elmer Tan
to pre-terminate Hayari's obligation after making total payments to Manphil in the amount of
P3,134,921.00.

Page 662 of 845

 Hence, Golden Apple and Rosvibon, on November 28, 1988, filed with the Regional Trial
Court of Pasay City, a Complaint against Sierra Grande and Manphil for specific performance and
damages. On April 3, 1991, Sierra Grande filed a Motion for Reconsideration of the decision,
which was eventually denied by the trial court. The respondents filed their appeal with the CA,
which reversed the decision of the trial court in its Decision dated January 23, 1995.

Issues:
(1) The Court of Appeals erred in invalidating the contracts on the ground of insufficiency of
consideration (2) The Court of Appeals erred in the invalidation of the contracts on ground of
notarial infirmity (3) The Court of Appeals misused the term badges of fraud in reaching its
decision

Ruling:
(1) The Supreme Court upheld the finding of the Court of Appeals that there was insufficient of
consideration, and that while inadequacy of price does not invalidate a contract, the said rule is not
without an exception. As provided in the Civil Code: Art. 1355. Except in cases specified by law,
lesion or inadequacy of cause shall not invalidate a contract, unless there has been fraud, mistake
or undue influence.

The Court of Appeals was clear as to its main reason for invalidating the contracts in
question there was fraud. The inadequacy of price was merely one of the circumstances upon
which the Court of Appeals was able to find the existence of fraud and was not the main cause for
the invalidation of the subject contracts.

(2) Petitioners claim that, since the representatives of the corporations which executed the
Deed of Absolute Sale appeared before the Notary Public, the acknowledgment was complied
with, even if they admitted that the representatives did not present their residence certificates nor
indicate the number, date and place of issue of the same residence certificates in the
acknowledgment. As shown in the records and in the testimony of the notary, the requirement of
the presentation of the residence certificate was missing.

(3) Petitioners claim that the Court of Appeals misused the term badges of fraud in reaching
its decision. According to them, Article 1602, upon which the term badges of fraud refers to, is
not applicable, because the said article refers to a sale with a right to repurchase, whereas the
subject invalidated contracts were absolute sales. They cited a case where this Court pronounced
that, badges of fraud is a circumstance in Article 1602 of the Civil Code, which, if present in any
given transaction, gives rise to the presumption that it is not a sale but an equitable mortgage. Thus,
according to petitioners, the CA confused Article 1602 (1) with that of Article 1470, because both
articles deal with sale in general and have inadequacy of price as subject matter. Either way, they
argue, the inadequacy of the price does not result in the cancellation or invalidation of contracts.

However, a close reading of the Court of Appeals decision would reveal that the said court
used the phrase badges of fraud to refer to certain fraudulent acts that attended the execution of
the Contract to Sell and the Deeds of Absolute Sale which would eventually tend to prove that the
same transactions were indeed suspicious as the said contracts were antedated, simulated and
fraudulent. As used by the Court of Appeals, the phrase did not refer to any particular provision of

Page 663 of 845

a law. Hence, the general and ordinary meaning of the phrase prevails. In the same manner, this
Court, in numerous cases concerning various subjects, has used the same phrase in its rulings
referring to the said phrases general and ordinary meaning.

Askay vs. Cosalan, 46 PHIL 179

G.R. No. 21943
September 15, 1924

Facts:
The plaintiff in this case is Askay, an illiterate Igorrote between 70 and 80 years of age, residing
in the municipal district of Tublay, Province of Benguet, who at various times has been the owner
of mining property. The defendant is Fernando A. Cosalan, the nephew by marriage of Askay,
and municipal president of Tublay, who likewise has been interested along with his uncle in mining
enterprises

Page 664 of 845

 About 1907, Askay obtained title to the Pet Kel Mineral Claim located in Tublay, Benguet.
On November 23, 1914, if we are to accept defendant's Exhibit 1, Askay sold this claim to Cosalan.
Nine years later, in 1923, Askay instituted action in the Court of First Instance of Benguet to have
the sale of the Pet Kel Mineral Claim declared null, to secure possession of the mineral claim, and
to obtain damages from the defendant in the amount of P10,500. Following the presentation of
various pleadings including the answer of the defendant, and following trial before Judge of First
Instance Harvey, judgment was rendered dismissing the complaint and absolving the defendant
from the same, with costs against the plaintiff. On being informed of the judgment of the trial
court, plaintiff attacked it on two grounds: The first, jurisdictional, and the second, formal. Both
motions were denied and an appeal was perfected.

Issue:
Whether or not the plaintiff has established his cause of action by a preponderance of the evidence.

Ruling:
The provisions of the Code on the date when laws become effective apply only when the particular
statute does not provide its own date of effectivity. Thus, where the statute provides that it shall be
effective upon approval, no publication is necessary before it becomes effective.
Plaintiff contends that the sale of the Pet Kel Mineral Claim was accomplished through
fraud and deceit on the part of the defendant. Plaintiff may be right but in our judgment he has
failed to establish his claim. Fraud must be both alleged and proved. One fact exists in plaintiffs
favor, and this is the age and ignorance of the plaintiff who could be easily by the defendant, a
man of greater intelligence. Another fact is the inadequacy of the consideration for the transfer
which, according to the conveyance, consisted of P1 and other valuable consideration, and which,
according to the oral testimony, in reality consisted of P107 in cash, a bill-fold, one sheet, one
cow, and two carabaos. Gross inadequacy naturally suggest fraud is some evidence thereof, so
that it may be sufficient to show it when taken in connection with other circumstances, such as
ignorance or the fact that one of the parties has an advantage over the other. But the fact that the
bargain was a hard one, coupled with mere inadequacy of price when both parties are in a position
to form an independent judgment concerning the transaction, is not a sufficient ground for the
cancellation of a contract.

Against the plaintiff and in favor of the defendant, the Court had the document itself
executed in the presence of witnesses and before a notary public and filed with the mining recorder.
The notary public, Nicanor Sison, and one of the attesting witnesses, Apolonio Ramos, testified to
the effect that in the presence of the plaintiff and the defendant and of the notary public and the
subscribing witnesses, the deed of sale was interpreted to the plaintiff and that thereupon he placed
his thumb mark on the document. Two finger print experts, Dr. Charles S. Banks and A. Simkus,
have declared in depositions that the thumb mark on exhibit is that of Askay. No less than four
other witnesses testified that at various times Askay had admitted to them that he had sold the Pet
Kel Mine to Fernando A. Cosalan.

Having in mind of these circumstances, how can the plaintiff expect the courts to nullify
the deed of sale on mere suspicion? Having waited nine years from the date when the deed was
executed, nine years from the time Fernando A. Cosalan started developing the mine, nine years

Page 665 of 845

from the time Askay himself had been deprived of the possession of the mine, and nine years
permitting of a third party to obtain a contract of lease from Cosalan, how can the court overlook
plaintiff's silent acquiescence in the legal rights of the defendant? On the facts of record, the trial
judge could have done nothing less than dismiss the action.

The Court concludes, therefore, that the complaint was properly dismissed. As a result,
judgment is affirmed.

Heirs of Balite vs. Lim, 446 SCRA 56

G.R. No. 152168
December 10, 2004

Facts:

Page 666 of 845

 A deed of sale that allegedly states a price lower than the true consideration is nonetheless binding
between the parties and their successors in interest. Furthermore, a deed of sale in which the parties
clearly intended to transfer ownership of the property cannot be presumed to be an equitable
mortgage under Article 1602 of the Civil Code. Finally, an agreement that purports to sell in metes
and bounds a specific portion of an unpartitioned co-owned property is not void; it shall effectively
transfer the sellers ideal share in the co-ownership.

The spouses Aurelio and Esperanza Balite were the owners of a parcel of land at Catarman,
Northern Samar. When Aurelio died intestate, his wife Esperanza and their children inherited the
subject property and became co-owners thereof. In the meantime, Esperanza became ill and was
in dire need of money fro her hospital expenses. She, through her daughter, Cristeta, offered to
sell to Rodrigo Lim, her undivided share for the price of P1,000,000.00. Esperanza and Rodrigo
agreed that under the Deed of Absolute Sale, it will be made to appear that the purchase price of
the property would be P150,000.00 although the actual price agreed upon by them for the property
was P1,000,000.00. On April 16, 1996, Esperanza executed a Deed of Absolute Sale in favor of
Rodrigo. They also executed on the same day a Joint Affidavit under which they declared that the
real price of the property was P1,000,000.00 payable to Esperanza by installments. Only
Esperanza and two of her children Antonio and Cristeta knew about the said transaction. When
the rest of the children knew of the sale, they wrote to the Register of Deeds saying that their
mother did not inform them of the sale of a portion of the said property nor did they give consent
thereto. Nonetheless, Rodrigo made partial payments to Antonio who is authorized by his mother
through a Special Power of Attorney.

On October 23, 1996, Esperanza signed a letter addressed to Rodrigo informing the latter
that her children did not agree to the sale of the property to him and that she was withdrawing all
her commitments until the validity of the sale is finally resolved. On October 31, 1996, Esperanza
died intestate and was survived by her children. Meanwhile, Rodrigo caused to be published in
the Samar Reporter the Deed of Absolute Sale.

On June 27, 1997, petitioners filed a complaint against Rodrigo with the Regional Trial Court for
the annulment of sale, quieting of title, injunction and damages. Subsequently, Rodrigo secured a
loan from the Rizal Commercial Banking Corporation in the amount of P2,000,000.00 and
executed a Real Estate Mortgage over the property as security thereof. On motion of the
petitioners, they were granted leave to file an amended complaint impleading the bank as
additional party defendant. On March 30, 1998, the court issued an order rejecting the amended
complaint of the petitioners. Likewise, the trial court dismissed the complaint. It held that
pursuant to Article 493 of the Civil Code, a co-owner is not invalidated by the absence of the
consent of the other co-owners. Hence, the sale by Esperanza of the property was valid; the excess
from her undivided share should be taken from the undivided shares of Cristeta and Antonio, who
expressly agreed to and benefit from the sale. The Court of Appeals likewise held that the sale
was valid and binding insofar as Esperanza Balites undivided share of the property was concerned.
It affirmed the trial courts ruling that the lack of consent of the co-owners did not nullify the sale.

Issue:
Whether or not the Deed of Absolute Sale is null and void.

Page 667 of 845

Ruling:
No. Since the Deed of Absolute Sale was merely relatively simulated, it remains valid and
enforceable. All the essential requisites prescribed by law for the validity and perfection of
contracts is present. However, the parties shall be bound by their real agreement for a
consideration of P1,000,000 as reflected by their Joint Affidavit. The contract is an example of a
simulated contract. Article 1345 of the Civil Code provides that the simulation of a contract may
either be absolute or relative. In absolute simulation, there is a colorable contract but without any
substance, because the parties have no intention to be bound by it. An absolutely simulated
contract is void, and the parties may recover from each other what they may have given under the
contract. On the other hand, if the parties state a false cause is relatively simulated. Here, the
parties real agreement binds them. In the present case, the parties intended to be bound by the
Contract, even if it did not reflect the actual purchase price of the property. The letter of Esperanza
to respondent and petitioners admission that there was partial payment made on the basis of the
Absolute Sale reveals that the parties intended the agreement to produce legal effect. The petition
is denied and the assailed decision affirmed.

Suntay vs. CA, 252 S 430

G.R. No. 114950
December 19, 1995

Page 668 of 845

Facts:
Respondent Federico Suntay is the owner of a parcel of land and a rice mill, warehouse, and other
improvements situated in the said land. A rice miller, Federico, in a letter applied as a miller-
contractor of the National Rice and Corn Corporation (NARIC). He informed the NARIC that he
had a daily rice mill output of 400 cavans of palay and warehouse storage capacity of 150,000
cavans of palay.His application, although prepared by his nephew-lawyer, Rafael Suntay, was
disapproved,because at that time he was tied up with several unpaid loans.

For purposes of circumvention, he had thought of allowing Rafael to make the application
for him. Rafael preparedan absolute deed of salewhereby Federico, for and in consideration of
P20,000.00 conveyed to Rafael said parcel of land with all its existing structures. Said deed was
notarized as Document No. 57 and recorded on Page 13 of Book 1, Series of 1962, of the Notarial
Register of Atty. Herminio V. Flores. Less than three months after this conveyance, a counter sale
was prepared and signed by Rafael who also caused its delivery to Federico. Through this counter
conveyance, the same parcel of land with all its existing structures was sold by Rafael back to
Federico for the same consideration of P20,000.00. Although on its face, this second deed appears
to have been notarized as Document No. 56 and recorded on Page 15 of Book 1, Series of 1962,
of the notarial register of Atty. Herminio V. Flores, an examination thereof will show that, recorded
as Document No. 56 on Page 13, is not the said deed of sale but a certain "real estate mortgage on
a parcel of land with TCT No. 16157 to secure a loan of P3,500.00 in favor of the Hagonoy Rural
Bank."

Nowhere on page 13 of the same notarial register could be found any entry pertaining to
Rafael's deed of sale. Testifying on this irregularity, Atty. Flores admitted that he failed to submit
to the Clerk of Court a copy of the second deed. Neither was he able to enter the same in his
notarial register. Even Federico himself alleged in his Complaint that, when Rafael delivered the
second deed to him, it was neither dated nor notarized.

Upon the execution and registration of the first deed, Certificate of Title No. 0-2015 in the
name of Federico was cancelled and in lieu thereof, TCT No. T-36714 was issued in the name of
Rafael. Even after the execution of the deed, Federico remained in possession of the property sold
in concept of owner. Significantly, notwithstanding the fact that Rafael became the titled owner
of said land and rice mill, he never made any attempt to take possession thereof at any time, while
Federico continued to exercise rights of absolute ownership over the property.

In a letter, dated August 14, 1969, Federico, through his new counsel, Agrava & Agrava,
requested that Rafael deliver his copy of TCT No. T-36714 so that Federico could have the counter
deed of sale in his favor registered in his name. The request having been obviously turned down,
Agrava & Agrava filed a petition with the Court of First Instance of Bulacan asking Rafael to
surrender his owner's duplicate certificate of TCT No. T-36714. In opposition thereto, Rafael
chronicled the discrepancy in the notarization of the second deed of sale upon which said petition
was premised and ultimately concluded that said deed was a counterfeit or "at least not a public
document which is sufficient to transfer real rights according to law." On September 8, 1969,
Agrava & Agrava filed a motion to withdraw said petition, and, on September 13, 1969, the Court
granted the same.

Page 669 of 845

 On July 8, 1970, Federico filed a complaint for reconveyance and damages against Rafael.
In his answer, Rafael scoffed at the attack against the validity and genuineness of the sale to him
of Federico's land and rice mill. Rafael insisted that said property was "absolutely sold and
conveyed . . . for a consideration of P20,000.00, Philippine currency, and for other valuable
consideration".

While the trial court upheld the validity and genuineness of the deed of sale executed by
Federico in favor of Rafael, which deed is referred to above as Exhibit A, it ruled that the counter-
deed, referred to as Exhibit B, executed by Rafael in favor of Federico, was simulated and without
consideration, hence, null and void ab initio.

Moreover, while the trial court adjudged Rafael as the owner of the property in dispute, it
did not go to the extent of ordering Federico to pay back rentals for the use of the property as the
court made the evidential finding that Rafael simply allowed his uncle to have continuous
possession of the property because or their understanding that Federico would subsequently
repurchase the same.

From the aforecited decision of the trial court, both Federico and Rafael appealed. The
Court of Appeals rendered judgment affirming the trial court's decision, with a modification that
Federico was ordered to surrender the possession of the disputed property to Rafael. Counsel of
Federico filed a motion for reconsideration of the aforecited decision. While the motion was
pending resolution, Atty. Ricardo M. Fojas entered his appearance in behalf of the heirs of Rafael
who had passed away on November 23, 1988. Atty. Fojas prayed that said heirs be substituted as
defendants-appellants in the case. The prayer for substitution was duly noted by the court in a
resolution dated April 6, 1993. Thereafter, Atty. Fojas filed in behalf of the heirs an opposition to
the motion for reconsideration. The parties to the case were heard on oral argument on October
12, 1993. On December 15, 1993, the Court of Appeals reversed itself and rendered an amended
judgment.

Issue:
Whether or not the deed of sale executed by Federico in favor of Rafael is simulated and fictitious
and, hence, null and void.

Ruling:
In the aggregate, the evidence on record demonstrate a combination of circumstances from which
may be reasonably inferred certain badges of simulation that attach themselves to the deed of sale
in question. The complete absence of an attempt on the part of the buyer to assert his rights of
ownership over the land and rice mill in question is the most protuberant index of simulation.

The deed of sale executed by Federico in favor of his now deceased nephew, Rafael, is
absolutely simulated and fictitious and, hence, null and void, said parties having entered into a sale
transaction to which they did not intend to be legally bound. As no property was validly conveyed
under the deed, the second deed of sale executed by the late Rafael in favor of his uncle, should be
considered ineffective and unavailing.

Page 670 of 845

 The allegation of Rafael that the lapse of seven years before Federico sought the issuance
of a new title in his name necessarily makes Federico's claim stale and unenforceable does not
hold water. Federico's title was not in the hands of a stranger or mere acquaintance; it was in the
possession of his nephew who, being his lawyer, had served him faithfully for many years.
Federico had been all the while in possession of the land covered by his title and so there was no
pressing reason for Federico to have a title in his name issued. Even when the relationship between
the late Rafael and Federico deteriorated, and eventually ended, it is not at all strange for Federico
to have been complacent and unconcerned about the status of his title over the disputed property
since he has been possessing the same actually, openly, and adversely, to the exclusion of Rafael.
It was only when Federico needed the title in order to obtain a collaterized loan that Federico began
to attend to the task of obtaining a title in his name over the subject land and rice mill.

Page 671 of 845

Uy vs. CA, 314 SCRA 69
G.R. No. 120465
September 9, 1999

Facts:
Petitioners William Uy and Rodel Roxas are agents authorized to sell eight (8) parcels of land by
the owners thereof. By virtue of such authority, petitioners offered to sell the lands, located in
Tuba, Tadiangan, Benguet to respondent National Housing Authority (NHA) to be utilized and
developed as a housing project.

Page 672 of 845

 On February 14, 1989, NHA approved the acquisition of the said parcels of land with an
area of 31.8231 hectares at the cost of P23.867 million, pursuant to which the parties executed a
series of Deeds of Absolute Sale covering the subject lands. Of the eight parcels of lands, however,
only five were paid for by the NHA because of the report it received from the Land Geosciences
Bureau of the Department of Environment and Natural Resources that the remaining area is located
at an active landslide area and therefore, not suitable for development into a housing project. NHA
eventually cancelled the sale over the remaining three (3) parcels of land.

On March 9, 1992, petitioners filed a complaint for damages. After trial, the RTC of
Quezon City rendered the cancellation of contract to be justified and awarded P1.255 million as
damages in favor of petitioners.

Upon appeal by petitioners, the Court of Appeals reversed the decision and entered a new
one dismissing the complaint including the award of damages.

The motion for reconsideration having been denied, petitioners seek relief from this court
contending, inter alia, that the CA erred in declaring that NHA had any legal basis to rescind the
subject sale.

Issues:
(1) Whether or not the contention of petitioner is correct. (2) Whether or not a partys entry into a
contract affects the validity of the contract.

Ruling:
Anent the 1st issue, NO. Petitioners confuse the cancellation of the contract by the NHA as a
rescission of the contract under Article 1191 of the Civil Code. The right to rescission is predicated
on a breach of faith by the other party that violates the reciprocity between them. The power to
rescind is given to the injured party. In this case, the NHA did not rescind the contract. Indeed, it
did not have the right to do so for the other parties to the contract, the vendors did not commit any
breach, much less a substantial breach, of their obligation. The NHA did not suffer any injury.
The cancellation was not therefore a rescission under Article 1191. Rather, it was based on the
negation of the cause arising from the realization that the lands, which were the objects of the sale,
were not suitable for housing.

Anent the 2nd issue, as a general rule, a partys motives for entering into a contract do not
affect the contract. However, when the motive predetermines the cause, the motive may be
regarded as the cause. As held in Liguez v. CA, ... It is well to note, however, that Manresa himself,
while maintaining the distinction and upholding the inoperativess of the motives of the parties to
determine the validity of the contract, expressly excepts from the rule those contracts that are
conditioned upon the attainment of the motives of either party. The same view is held by the
Supreme Court of Spain, in its decisions of February 4, 1941 and December 4, 1946, holdinmg
that the motive may be regarded as causa when it predermones the purpose of the contract.

Page 673 of 845

Pentacapital vs. Makilito Mahinay
G.R. No. 171736

Page 674 of 845

July 5, 2010

Facts:
Petitioner filed a complaint for a sum of money against respondent Makilito Mahinay based on
two separate loans obtained by the latter, amounting to P1,520,000.00 and P416,800.00, or a total
amount of P1,936,800.00. These loans were evidenced by two promissory notes dated February
23, 1996. Despite repeated demands, respondent failed to pay the loans, hence, the complaint.

In his Answer with Compulsory Counterclaim, respondent claimed that petitioner had no
cause of action because the promissory notes on which its complaint was based were subject to a
condition that did not occur. While admitting that he indeed signed the promissory notes, he
insisted that he never took out a loan and that the notes were not intended to be evidences of
indebtedness. By way of counterclaim, respondent prayed for the payment of moral and exemplary
damages plus attorneys fees.

Respondent explained that he was the counsel of Ciudad Real Development Inc. (CRDI).
In 1994, Pentacapital Realty Corporation (Pentacapital Realty) offered to buy parcels of land
known as the Molino Properties, owned by CRDI, located in Molino, Bacoor, Cavite. The Molino
Properties, with a total area of 127,708 square meters, were sold at P400.00 per sq m. As the
Molino Properties were the subject of a pending case, Pentacapital Realty paid only the down
payment amounting to P12,000,000.00. CRDI allegedly instructed Pentacapital Realty to pay the
formers creditors, including respondent who thus received a check worth P1,715,156.90. It was
further agreed that the balance would be payable upon the submission of an Entry of Judgment
showing that the case involving the Molino Properties had been decided in favor of CRDI.

Respondent, Pentacapital Realty and CRDI allegedly agreed that respondent had a charging
lien equivalent to 20% of the total consideration of the sale in the amount of P10,277,040.00.
Pending the submission of the Entry of Judgment and as a sign of good faith, respondent
purportedly returned the P1,715,156.90 check to Pentacapital Realty. However, the Molino
Properties continued to be haunted by the seemingly interminable court actions initiated by
different parties which thus prevented respondent from collecting his commission.

On motion of respondent, the Regional Trial Court (RTC) allowed him to file a Third Party
Complaint against CRDI, subject to the payment of docket fees.

Admittedly, respondent earlier instituted an action for Specific Performance against

Pentacapital Realty before the RTC of Cebu City, Branch 57, praying for the payment of his
commission on the sale of the Molino Properties. In an Amended Complaint, respondent referred
to the action he instituted as one of Preliminary Mandatory Injunction instead of Specific
Performance. Acting on Pentacapital Realtys Motion to Dismiss, the RTC dismissed the case for
lack of cause of action. The dismissal became final and executory.

With the dismissal of the aforesaid case, respondent filed a Motion to Permit Supplemental
Compulsory Counterclaim. In addition to the damages that respondent prayed for in his
compulsory counterclaim, he sought the payment of his commission amounting to P10,316,640.00,
plus interest at the rate of 16% per annum, as well as attorneys fees equivalent to 12% of his

Page 675 of 845

principal claim. Respondent claimed that Pentacapital Realty is a 100% subsidiary of petitioner.
Thus, although petitioner did not directly participate in the transaction between Pentacapital
Realty, CRDI and respondent, the latters claim against petitioner was based on the doctrine of
piercing the veil of corporate fiction. Simply stated, respondent alleged that petitioner and
Pentacapital Realty are one and the same entity belonging to the Pentacapital Group of Companies.

Over the opposition of petitioner, the RTC, in an Order dated August 22, 2002, allowed
the filing of the supplemental counterclaim. Aggrieved, petitioner sought recourse in the CA
through a special civil action for certiorari, seeking to reverse and set aside the RTC Order. The
case was docketed as CA-G.R. SP No. 74851. On December 20, 2005, the CA rendered the assailed
Decision dismissing the petition. The appellate court sustained the allowance of the supplemental
compulsory counterclaim based on the allegations in respondents pleading. The CA further
concluded that there was a logical relationship between the claims of petitioner in its complaint
and those of respondent in his supplemental compulsory counterclaim. The CA declared that it
was inconsequential that respondent did not clearly allege the facts required to pierce the corporate
separateness of petitioner and its subsidiary, the Pentacapital Realty.

Issues:
(1) Whether the interest rate is unconscionable. (2) Whether or not respondent is bound by the
promissory notes.

Ruling:
(1) Aside from the payment of the principal obligation of P1,936,800.00, the parties agreed that
respondent pay interest at the rate of 25% from February 17, 1997 until fully paid. Such rate,
however, is excessive and thus, void. Since the stipulation on the interest rate is void, it is as if
there was no express contract thereon. To be sure, courts may reduce the interest rate as reason
and equity demand. In this case, 12% interest is reasonable.

(2) To ascertain whether or not respondent is bound by the promissory notes, it must be
established that all the elements of a contract of loan are present. Like any other contract, a contract
of loan is subject to the rules governing the requisites and validity of contracts in general. It is
elementary in this jurisdiction that what determines the validity of a contract, in general, is the
presence of the following elements: (1) consent of the contracting parties; (2) object certain which
is the subject matter of the contract; and (3) cause of the obligation which is established.

Under Article 1354 of the Civil Code, it is presumed that consideration exists and is lawful
unless the debtor proves the contrary. Moreover, under Section 3, Rule 131 of the Rules of Court,
the following are disputable presumptions: (1) private transactions have been fair and regular; (2)
the ordinary course of business has been followed; and (3) there was sufficient consideration for a
contract.

Heirs of Gaite vs. The Plaza, Inc.

G.R. No. 177685
January 26, 2011

Page 676 of 845

Facts:
On July 16, 1980, The Plaza, Inc., a corporation engaged in the restaurant business, through its
President, Jose C. Reyes, entered into a contract with Rhogen Builders, represented by Ramon C.
Gaite, for the construction of a restaurant building in Greenbelt, Makati, Metro Manila for the price
of P7,600,000.00. On July 18, 1980, to secure Rhogens compliance with its obligation under the
contract, Gaite and FGU Insurance Corporation executed a surety bond in the amount
of P1,155,000.00 in favor of The Plaza. On July 28, 1980, The Plaza paid P1,155,000.00 less
withholding taxes as down payment to Gaite. Thereafter, Rhogen commenced construction of the
restaurant building. In a letter dated September 10, 1980, Engineer Angelito Z. Gonzales, the
Acting Building Official of the Municipality of Makati, ordered Gaite to cease and desist from
continuing with the construction of the building for violation of Sections 301 and 302 of
the National Building Code (P.D. 1096) and its implementing rules and regulations. On September
15, 1980, Engr. Gonzales informed Gaite that the building permit for the construction of the
restaurant was revoked for non-compliance with the provisions of the National Building Code and
for the additional temporary construction without permit. On September 19, 1980, the Project
Manager (Tayzon) in his Construction Memo #23 reported on his evaluation of Progress Billing
#1 submitted by Rhogen. Tayzon stated that actual jobsite assessment showed that the finished
works fall short of Rhogens claimed percentage of accomplishment and Rhogen was entitled to
only P32,684.16 and not P260,649.91 being demanded by Rhogen.

On October 7, 1980, Gaite wrote Mr. Jose C. Reyes, President of The Plaza regarding his
actions/observations on the stoppage order issued. On the refusal of the secretary and construction
foreman to receive the stoppage order dated September 10, 1980, Gaite took responsibility but
insisted it was not a violation of the National Building Code. On the same day, Gaite notified
Reyes that he is suspending all construction works until Reyes and the Project Manager cooperate
to resolve the issue he had raised to address the problem. This was followed by another letter
dated November 18, 1980 in which Gaite expressed his sentiments on their aborted project and
reiterated that they can still resolve the matter with cooperation from the side of The
Plaza. Subsequently, the correspondence between Gaite and Reyes involved the custody of
remaining bags of cement in the jobsite, in the course of which Gaite was charged with estafa for
ordering the removal of said items. Gaite complained that Reyes continued to be uncooperative
in refusing to meet with him to resolve the delay.

On January 9, 1981, Gaite informed The Plaza that he is terminating their contract based
on the Contractors Right to Stop Work or Terminate Contracts as provided for in the General
Conditions of the Contract. Additionally, Gaite demanded the payment of P63,058.50 from The
Plaza representing the work that has already been completed by Rhogen. On January 13, 1981, The
Plaza, through Reyes, countered that it will hold Gaite and Rhogen fully responsible for failure to
comply with the terms of the contract and to deliver the finished structure on the stipulated
date. Reyes argued that the down payment made by The Plaza was more than enough to cover
Rhogens expenses.

On March 3, 1981, The Plaza notified Gaite that it could no longer credit any payment to
Rhogen for the work it had completed because the evaluation of the extent, condition, and cost of
work done revealed that in addition to the violations committed during the construction of the

Page 677 of 845

building, the structure was not in accordance with plans approved by the government and accepted
by Ayala. Hence, The Plaza demanded the reimbursement of the down payment, the cost of
uprooting or removal of the defective structures, the value of owner-furnished materials, and
payment of liquidated damages.

On March 26, 1981, The Plaza filed Civil Case No. 40755 for breach of contract, sum of
money and damages against Gaite and FGU in the Court of First Instance (CFI) of Rizal. The Plaza
later amended its complaint to include Cynthia G. Gaite and Rhogen. The Plaza likewise filed Civil
Case No. 1328 (43083) against Ramon C. Gaite, Cynthia G. Gaite and/or Rhogen Builders also
in the CFI of Rizal for nullification of the project development contract executed prior to the
General Construction Contract subject of Civil Case No. 40755, which was allegedly in violation
of the provisions of R.A. No. 545 (Architectural Law of the Philippines). After the reorganization
of the Judiciary in 1983, the cases were transferred to the RTC of Makati and eventually
consolidated.

On July 3, 1997, Branch 63 of the RTC Makati rendered its decision granting the claims
of The Plaza against Rhogen, the Gaites and FGU, and the cross-claim of FGU against Rhogen
and the Gaites. On June 27, 2006, the CA affirmed the Decision of the trial court but modified the
award of damages.

Issues:
(1) Is the petitioners contention correct under the principle of Quantum Meruit? (2) Is the
rescission of the contract valid?

Ruling:
(1) Under the principle of quantum meruit, a contractor is allowed to recover the reasonable value
of the thing or services rendered despite the lack of a written contract, in order to avoid
unjust enrichment. Quantum meruit means that in an action for work and labor, payment shall be
made in such amount as the plaintiff reasonably deserves. To deny payment for a building almost
completed and already occupied would be to permit unjust enrichment at the expense of the
contractor.

(2) No. Reciprocal obligations are those which arise from the same cause, and in which each party
is a debtor and a creditor of the other, such that the obligation of one is dependent upon the
obligation of the other. They are to be performed simultaneously such that the performance of one
is conditioned upon the simultaneous fulfillment of the other. Respondent The Plaza predicated its
action on Article 1191 of the Civil Code, which provides for the remedy of rescission or more
properly resolution, a principal action based on breach of faith by the other party who violates the
reciprocity between them. The breach contemplated in the provision is the obligors failure to
comply with an existing obligation. Thus, the power to rescind is given only to the injured party.
The injured party is the party who has faithfully fulfilled his obligation or is ready and willing to
perform his obligation.

Petitioners may not justify Rhogens termination of the contract upon grounds of non-payment of
progress billing and uncooperative attitude of respondent The Plaza and its employees in rectifying
the violations which were the basis for issuance of the stoppage order. Having breached the

Page 678 of 845

contractual obligation it had expressly assumed, i.e., to comply with all laws, rules and
regulations of the local authorities, Rhogen was already at fault. Respondent The Plaza, on the
other hand, was justified in withholding payment on Rhogens first progress billing, on account of
the stoppage order and additionally due to disappearance of owner-furnished materials at the
jobsite.

Page 679 of 845

Catly vs. Navarro, et.al
G.R. No. 167239
May 5, 2010

Page 680 of 845

Facts:
Respondents Navarro, et. al. filed a Complaint against Las Pias Ventures, Inc., was substituted
by Ayala Land Inc. (ALI) because of merger, for annulment of TCT No. T-5332 and recovery of
possession with damages. Respondents were represented by petitioner Atty. Catly, now deceased
and substituted in this case by his wife, Lourdes Catly. Later on, Respondents Navarro, et.al., and
ALI executed a Memorandum of Agreement (MOA), expressing their desire toward an amicable
settlement. Petitioner later on filed a Manifestation and Motion alleging that should there be an
amicable settlement of the case, his attorneys fees should be awarded in full as stipulation in the
Contract for Legal and Other Valuable Services. Hence, petitioner, respondents Navarro et. al.,
and ALI executed an Amendatory Agreement incorporating the provision that, in addition to the
ten million attorneys fees as previously agreed upon, petitioner would also be entitled to the
amount of twenty million pesos as additional attorneys fees.

Issues:
Whether the attorneys fees are reasonable.

Ruling:
According to the SC, the high standards of the legal profession as prescribed by law and the Canons
of Professional Ethics regulate if not limit the lawyers freedom in fixing his professional fees.
The moment he takes his oath, ready to undertake his duties first, as a practitioner in the exercise
of his profession, and second, as an officer of the court in the administration of justice, the lawyer
submits himself to the authority of the court. It becomes axiomatic therefore, that power to
determine the reasonableness or the unconscionable character of attorney's fees stipulated by the
parties is a matter falling within the regulatory prerogative of the courts. And this Court has
consistently ruled that even with the presence of an agreement between the parties, the court may
nevertheless reduce attorney's fees though fixed in the contract when the amount thereof appears
to be unconscionable or unreasonable. For the law recognizes the validity of stipulations included
in documents such as negotiable instruments and mortgages with respect to attorney's fees in the
form of penalty provided that they are not unreasonable or unconscionable.

The principle of quantum meruit (as much as he deserves) may be a basis for determining
the reasonable amount of attorneys fees. Quantum meruit is a device to prevent undue
enrichment based on the equitable postulate that it is unjust for a person to retain benefit without
paying for it. It is applicable even if there was a formal written contract for attorneys fees as long
as the agreed fee was found by the court to be unconscionable. In fixing a reasonable compensation
for the services rendered by a lawyer on the basis of quantum meruit, factors such as the time
spent, and extent of services rendered; novelty and difficulty of the questions involved; importance
of the subject matter; skill demanded; probability of losing other employment as a result of
acceptance of the preferred case; customary charges for similar services; amount involved in the
controversy and the benefits resulting to the client; certainty of compensation; character of
employment; and professional standing of the lawyer, may be considered. Indubitably entwined
with a lawyers duty to charge only reasonable fee is the power of the Court to reduce the amount
of attorneys fees if the same is excessive and unconscionable in relation to Sec. 24, Rule 138 of
the Rules. Attorneys fees are unconscionable if they affront ones sense of justice, decency
or unreasonableness.

Page 681 of 845

 The determination of the amount of reasonable attorneys fees requires the presentation
of evidence and a full-blown trial. It would be only after due hearing and evaluation of the evidence
presented by the parties that the trial court can render judgment as to the propriety of the amount to
be awarded.

The SC finds that the trial court failed to hear the parties as to confirm the reasonableness
of the attorneys fees in favor of petitioner. Hence, the case was reprimanded to the trial court
which shall forthwith conduct hearings with dispatch to resolve the issue of the amount of
reasonable attorneys fees, on quantum of meruit basis

Page 682 of 845

Liguez vs. CA, 102 P 577
G.R. No. L-11240
December 18, 1957

Facts:
The case began upon complaint filed by petitioner-appellant against the widow and heirs of the
late Salvador P. Lopez to recover a parcel of 51.84 hectares of land, situated in Barrio Bogac-
Linot, of the municipality of Mati, Province of Davao. Plaintiff averred to be its legal owner,
pursuant to a deed of donation of said land, executed in her favor by the late owner, Salvador P.

Page 683 of 845

Lopez, on 18 May 1943. The defense interposed was that the donation was null and void for
having an illicit causa or consideration, which was plaintiff's entering into marital relations with
Salvador P. Lopez, a married man; and that the property had been adjudicated to the appellees as
heirs of Lopez by the Court of First Instance, since 1949.

The Court of Appeals found that the deed of donation was prepared by the Justice of the
Peace of Mati, Davao, before whom it was signed and ratified on the date aforesaid. At the time,
appellant Liguez was a minor, only 16 years of age. Salvador donated it to Liguez out of his love
and affection to her. The Court of Appeals found that when the donation was made, Lopez had
been living with the parents of appellant for barely a month; that the donation was made in view
of the desire of Salvador P. Lopez, a man of mature years to have sexual relations with appellant
Conchita Liguez; that Lopez had confessed to his love for appellant to the instrumental witnesses,
with the remark that her parents would not allow Lopez to live with her unless he first donated the
land in question; that after the donation, Conchita Liguez and Salvador P. Lopez lived together in
the house that was built upon the latter's orders, until Lopez was killed on July 1st, 1943, by some
guerrillas who believed him to be pro-Japanese.

It was also ascertained by the Court of Appeals that the donated land originally belonged
to the conjugal partnership of Salvador P. Lopez and his wife, Maria Ngo; that the latter had met
and berated Conchita for living maritally with her husband, sometime during June of 1943; that
the widow and children of Lopez were in possession of the land and made improvements thereon;
that the land was assessed in the tax rolls first in the name of Lopez and later in that of his widow;
and that the need of donation was never recorded.

Upon these facts, the Court of Appeals held that the deed of donation was inoperative, and
null and void (1) because the husband, Lopez, had no right to donate conjugal property to the
plaintiff appellant; and (2) because the donation was tainted with illegal causa or consideration, of
which donor and donee were participants.

Appellant vigorously contends that the Court of First Instance as well as the Court of
Appeals erred in holding the donation void for having an illicit causa or consideration. It is argued
that under Article 1274 of the Civil Code of 1889 (which was the governing law in 1943, when
the donation was executed), "in contracts of pure beneficence the consideration is the liberality of
the donor", and that liberality per se can never be illegal, since it is neither against law or morals
or public policy.

Issue:
Whether or not the deed of donation made by Lopez in favor of Liguez was valid.

Ruling:
Under Article 1274, liberality of the donor is deemed causa only in those contracts that are of
"pure" beneficence; that is to say, contracts designed solely and exclusively to procure the welfare
of the beneficiary, without any intent of producing any satisfaction for the donor; contracts, in
other words, in which the idea of self-interest is totally absent on the part of the transferor.

Page 684 of 845

 For this very reason, the same Article 1274 provides that in remuneratory contracts, the
consideration is the service or benefit for which the remuneration is given; causa is not liberality
in these cases because the contract or conveyance is not made out of pure beneficence, but
"solvendi animo." In consonance with this view, the Court in Philippine Long Distance Co. vs.
Jeturian* G. R. L-7756, July 30, 1955, like the Supreme Court of Spain in its decision of 16 Feb.
1899, has ruled that bonuses granted to employees to excite their zeal and efficiency, with
consequent benefit for the employer, do not constitute donation having liberality for a
consideration.

Here the facts as found by the Court of Appeals, which the Supreme Court could not vary,
demonstrate that in making the donation in question, the late Salvador P. Lopez was not moved
exclusively by the desire to benefit appellant Conchita Liguez, but also to secure her cohabiting
with him, so that he could gratify his sexual impulses. This is clear from the confession of Lopez
to the witnesses Rodriguez and Ragay, that he was in love with appellant, but her parents would
not agree unless he donated the land in question to her. Actually, therefore, the donation was but
one part of an onerous transaction (at least with appellant's parents) that must be viewed in its
totality. Thus considered, the conveyance was clearly predicated upon an illicit causa.

Appellant seeks to differentiate between the alleged liberality of Lopez, as causa for the
donation in her favor, and his desire for cohabiting with appellant, as motives that impelled him to
make the donation, and quotes from Manresa and the jurisprudence of this Court on the distinction
that must be maintained between causa and motives. It is well to note, however, that Manresa
himself, while maintaining the distinction and upholding the inoperativeness of the motives of the
parties to determine the validity of the contract, expressly excepts from the rule those contracts
that are conditioned upon the attainment of the motives of either party.

Appellees, as successors of the late donor, being thus precluded from pleading the defense
of immorality or illegal causa of the donation, the total or partial ineffectiveness of the same must
be decided by different legal principles. In this regard, the Court of Appeals correctly held that
Lopez could not donate the entirety of the property in litigation, to the prejudice of his wife Maria
Ngo, because said property was conjugal in character, and the right of the husband to donate
community property is strictly limited by law.

The situation of the children and forced heirs of Lopez approximates that of the widow.
As privies of their parent, they are barred from invoking the illegality of the donation. But their
right to a legitime out of his estate is not thereby affected, since the legitime is granted them by
the law itself, over and above the wishes of the deceased. Hence, the forced heirs are entitled to
have the donation set aside in so far as inofficious: i.e., in excess of the portion of free disposal ,
computed as provided in Articles 818 and 819, and bearing in mind that "collationable gifts" under
Article 818 should include gifts made not only in favor of the forced heirs, but even those made in
favor of strangers, as decided by the Supreme Court of Spain in its decisions of 4 May 1899 and
16 June 1902. So that in computing the legitimes, the value of the property donated to herein
appellant, Conchita Liguez, should be considered part of the donor's estate. Only the court of
origin has the requisite date to determine whether the donation is inofficious or not. With regard
to the improvements in the land in question, the same should be governed by the rules of accession

Page 685 of 845

and possession in good faith, it being undisputed that the widow and heirs of Lopez were unaware
of the donation in favor of the appellant when the improvements were made.

Appellant Conchita Liguez was declared by the Supreme Court entitled to so much of the
donated property as may be found, upon proper liquidation, not to prejudice the share of the widow
Maria Ngo in the conjugal partnership with Salvador P. Lopez or the legitimes of the forced heirs
of the latter.

Page 686 of 845

Philbank vs. Lui She, 21 SCRA 52
G.R. No. L-17587
September 12, 1967

Facts:
Justina Santos and her sister Lorenza were the owners in common of a piece of land in Manila. In
it are two residential houses. The sisters lived in one of the houses, while Wong Heng, a Chinese,
lived with his family in the restaurant. Wong had been a long time lessee of a portion of the
property, paying monthly rentals. On September 22, 1957, Justina became the owner of the entire
property as her sister died with no other heir.

On November 1, 1957, Justina executed a contract of lease in favor of Wong, covering a

portion already leased to him and another portion of the property. The lease was for 50 years,
although the lessee was give the right to withdraw at anytime from the agreement with a stipulated
monthly rental.

On December 1, she executed another contract giving Wong the option to buy the leased
premises for P120,000 payable within 10 years at monthly installment of P1,000. The option was
conditioned on his obtaining Philippine citizenship, which was then pending. His application for
naturalization was withdrawn when it was discovered that he was a resident of Rizal.

On November 18,1958, she executed two other contracts one extending the term to 99 years
and the term fixing the term of the option of 50 years. In the two wills, she bade her legatees to
respect the contract she had entered into with Wong, but it appears to have a change of heart in a
codicil. Claiming that the various contracts were made because of her machinations and
inducements practiced by him, she now directed her executor to secure the annulment of the
contracts.

On November 18, the action was filed in the CFI of Manila. The complaint alleged that
Wong obtained the contracts through fraud. Wong denied having taken advantage of her trust in
order to secure the execution of the contracts on question. He insisted that the various contracts
were freely and voluntarily entered into by the parties.

The lower court declared all the contracts null and void with the exception of the first,
which is the contract of lease of November 15, 1957. From this decision, both parties appealed
directly to the Court. After the case were submitted for decision, both parties died, Wong on 1962,
and Justina on 1964. Wong as substituted by his wife Lui She while Justina by the Philippine
Banking Corporation.

Issue:
Whether or not the contracts entered into by the parties are void being in violation of the
Constitutional prohibition on transfer of lands to aliens or those who are not citizens of the
Philippines.

Page 687 of 845

Ruling:
Yes. The Court held the lease and the rest of the contracts were obtained with the consent of Justina
freely given and voluntarily. However the contacts are not necessarily valid on the ground that it
circumvents the Constitutional prohibition against the transfer of lands to aliens. The illicit
purpose then becomes the illegal causa, rendering the contracts void.

It does not follow from what has been said that because the parties are in pari delicto they
will be left where they are, without relief. For one thing, the original parties who were guilty of
violation of fundamental charter have died and have since substituted by their administrators to
whom it would e unjust to impute their guilt. For another thing, Article 1416 of the Civil Code
provides an exception to the pari de licto, that when the agreement is not illegal per se but is merely
prohibited, and the prohibition of the law is designed for the protection of the plaintiff, he may
recover what he has paid or delivered.

Page 688 of 845

Londres vs. CA, 394 S 133
G.R. No. 136427
Dec 17, 2002

Facts:
The present case stemmed from a battle of ownership over Lots 1320 and 1333 both located in
Barrio Baybay, RoxasCity, Capiz. Paulina originally owned these two parcels of land. After
Paulinas death, ownership of the lots passed to her daughter, Filomena. The surviving children of
Filomena, namely, Sonia Fuentes Londres, Armando V. Fuentes, Chi-Chita Fuentes Quintia,
Roberto V. Fuentes, Leopoldo V. Fuentes and Marilou Fuentes Esplana, herein petitioners, now
claim ownership over Lots 1320 and 1333. On the other hand, private respondents Consolacion
and Elena anchor their right of ownership over Lots 1320 and 1333 on the Absolute Sale executed
by Filomena on April 24, 1959. Filomena sold the two lots in favor of Consolacion and her
husband, Julian. Elena is the daughter of Consolacion and Julian.

On March 30, 1989, petitioners filed a complaint for the declaration of nullity of contract,
damages and just compensation. Petitioners sought to nullify the Absolute Sale conveying Lots
1320 and 1333 and to recover just compensation from public respondents DPWH and DOTC.
Petitioners claimed that as the surviving children of Filomena, they are the owners of Lots 1320
and 1333. Petitioners claimed that these two lots were never sold to Julian. Petitioners doubt the
validity of the Absolute Sale because it was tampered. The cadastral lot number of the second lot
mentioned in the Absolute Sale was altered to read Lot 1333 when it was originally written as Lot
2034. Petitioners pointed out that Lot 2034, situated in Barrio Culasi, RoxasCity, Capiz, was also
owned by their grandmother, Paulina. And that it was only recently that they learned of the claim
of private respondents when Consolacion filed a petition for the judicial reconstitution of the
original certificates of title of Lots 1320 and 1333 with the Capiz Cadastre. Upon further inquiry,
petitioners discovered that there exists a notarized Absolute Sale executed on April 24, 1959
registered only on September 22, 1982 in the Office of the Register of Deeds of Roxas City. The
private respondents copy of the Absolute Sale was tampered so that the second parcel of lot sold,
Lot 2034 would read as Lot1333. However, the Records Management and Archives Office kept
an unaltered copy of the Absolute Sale. This other copy shows that the objects of the sale were
Lots 1320 and 2034.

Private respondents maintained that they are the legal owners of Lots 1333 and 1320. Julian
purchased the lots from Filomena in good faith and for a valid consideration. Private respondents
explained that Julian was deaf and dumb and as such, was placed in a disadvantageous position
compared to Filomena. Julian had to rely on the representation of other persons in his business
transactions. After the sale, Julian and Consolacion took possession of the lots. Up to now, the
spouses successors-in-interest are in possession of the lots in the concept owners. Private
respondents claimed that the alteration in the Absolute Sale was made by Filomena to make it
conform to the description of the lot in the Absolute Sale. Private respondents filed a counterclaim
with damages.

The cross-claim of petitioners against public respondents was for the recovery of just
compensation. Petitioners claimed that during the lifetime of Paulina, public respondents took a

Page 689 of 845

3,200-square meter portion of Lot 1320. The land was used as part of the Arnaldo Boulevard in
RoxasCity without any payment of just compensation. In 1988, public respondents also
appropriated a 1,786-square meter portion of Lot 1333 as a vehicular parking area for the
RoxasCityAirport. Sonia, one of the petitioners, executed a deed of absolute sale in favor of the
Republic of the Philippines over this portion of Lot 1333. According to petitioners, the vendee
agreed to pay petitioners P214,320.00. Despite demands, the vendee failed to pay the stipulated
amount.

The trial court issued its decision upholding the validity of the Absolute Sale. This was
affirmed by the Court of Appeals.

Issue:
Whether or not the notarized copy should prevail.

Ruling:
Among others, petitioners harp on the fact that the notarized and registered copy of the Absolute
Sale should have, been correspondingly corrected. Petitioners believe that the notarized and
archived copy should prevail. We disagree. A contract of sale is perfected at the moment there is
a meeting of the minds upon the thing which is the object of the contract and upon the price. Being
consensual, a contract of sale has the force of law between the contracting parties and they are
expected to abide in good faith with their respective contractual commitments. Article 1358 of the
Civil Code, which requires certain contracts to be embodied in a public instrument, is only for
convenience, and registration of the instrument is needed only to adversely affect third parties.
Formal requirements are, therefore, for the purpose of binding or informing third parties. Non-
compliance with formal requirements does not adversely affect the validity of the contract or the
contractual rights and obligations of the parties.

Page 690 of 845

Page 691 of 845
Spouses Antonio and Leticia Vega vs. Social Security System & Pilar Development Corporation

G.R. No. 181672

20 September 2010

FACTS:

Magdalena V. Reyes got a housing loan from respondent Social Security System (SSS) for which
she mortgaged a piece of titled land in Pilar Village, Las Pias City. When Reyes decided to
emigrate, she asked petitioner spouses Antonio and Leticia Vega to assume the loan and buy her
house and lot. Reyes left the country after promising the Vegas that she will update the
amortizations, and gave her sister, Julieta Reyes Ofilada, a special power of attorney. Ofilada
belatedly executed in the Vegas favor a deed of assignment of real property with assumption of
mortgage. She kept the original of the deed and gave the Vegas two copies. The Vegas gave one
of the copies to the Home Development Mortgage Fund and kept the other but the copy they kept
was destroyed by a flood due to a storm.

Reyes did not update the amortizations. Moroever, Pilar Development Corporation (PDC) filed an
action for sum of money against Reyes before the Regional Trial Court (RTC) of Manila, claiming
that Reyes borrowed from Apex Mortgage and Loans Corporation P46,500.00 to buy the lot and
construct a house on it. The Vegas requested the SSS to acknowledge their status as subrogees and
to give them an update of the account so they could settle it in full but the SSS did not reply.
Meantime, the RTC sheriff published a notice for the auction sale of the property.

The RTC directed the sheriff to proceed with the execution. The Vegas offered to pay the housing
debt Reyes owed to SSS and sent a managers check that was refused by SSS. The Vegas thus
filed an action for consignation, damages, and injunction with application for preliminary
injunction and temporary restraining order against the SSS, the PDC, the sheriff of RTC Branch
19, and the Register of Deeds before the RTC of Las Pias. While the case was pending, SSS
released the mortgage to the PDC. The Register of Deeds issued the land title to the PDC. A writ
of possession subsequently evicted the Vegas from the property.

The RTC ruled in favor of the Vegas. The Court of Appeals reversed the RTC decision due to
the reason that the Vegas were unable to produce the deed of assignment of the property in their
favor and that such assignment was not valid as to PDC.

ISSUE:

Did the Vegas present adequate proof of Reyes sale of the subject property to them?

HELD:

Page 692 of 845

Yes. The rule requiring the presentation of the original of the deed of assignment is not absolute.
Secondary evidence of the contents of the original can be adduced when the original has been lost
without bad faith on the part of the party offering it. Not only did the Vegas prove the loss of the
deed of assignment in their favor and what the same contained, they offered strong corroboration
of the fact of Reyes sale of the property to them. They took possession of the house and lot after
they bought it. They lived on it and held it in the concept of an owner for 13 years before PDC
came into the picture. They also paid all the amortizations to the SSS, even those that Reyes
promised to settle but did not. When the SSS wanted to foreclose the property, the Vegas sent a
managers check to it for the balance of the loan. Neither Reyes nor any of her relatives came
forward to claim the property. The Vegas amply proved the sale to them.

Page 693 of 845

Clara M. Balatbat vs. Court of Appeals and Spouses Jose Repuyan and Aurora Repuyan

G.R. No. 109410

8 August 1996

FACTS:

Aurelio Roque and Maria Mesina bought a lot during their conjugal union and constructed a house
thereon. Plaintiff and Maria Mesina had four children who are the defendants in this case. When
Maria Mesina died, Aurelio got six-tenths share of the house and lot while each of his children got
one-tenth share. Aurelio sold his six-tenths share to spouses Aurora Tuazon-Repuyan and Jose
Repuyan as evidenced by a Deed of Absolute Sale, but later filed a complaint for Rescission of
Contract due to the spouses Repuyans failure to pay the balance of P45,000.00 of the purchase
price.

Page 694 of 845

A deed of absolute sale was executed between Aurelio S. Roque, Corazon Roque, Feliciano Roque,
Severa Roque and Osmundo Roque and Clara Balatbat, married to Alejandro Balatbat. Clara
Balatbat filed a motion for the issuance of a writ of possession which was granted by the trial court
subject, however, to valid rights and interest of third persons over the same portion thereof, other
than vendor or any other person or persons privy to or claiming any rights or interest under it. A
corresponding writ of possession was issued.

Petitioner Clara Balatbat filed a motion to intervene, which was granted, but failed to file her
complaint in intervention. The trial court thus rendered a decision dismissing the complaint, and
deemed the contract of sale denominated as Deed of Absolute Sale valid and enforceable. The
Court of Appeals affirmed the trial courts decision.

ISSUE:

Is the alleged sale to private respondents merely executory and not a consummated transaction?

HELD:

No. Ownership of a thing sold is acquired only from the time of delivery thereof, either actual or
constructive. Article 1498 of the Civil Code provides that when the sale is made through a public
instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object
of the contract, if from the deed the contrary does not appear or cannot be inferred. The execution
of the public instrument, without actual delivery of the thing, transfers the ownership from the
vendor to the vendee, who may thereafter exercise the rights of an owner over the same.

Vendor Roque delivered the owners certificate of title to private respondent. It is not necessary
that vendee be physically present at every square inch of the land bought by him. Possession of
the public instrument of the land is sufficient to accord him the rights of ownership. Thus, delivery
of a parcel of land may be done by placing the vendee in control and possession of the land (real)
or by embodying the sale in a public instrument (constructive). The provision of Article 1358 on
the necessity of a public document is only for convenience, not for validity or enforceability. It is
not a requirement for the validity of a contract of sale of a parcel of land that this be embodied in
a public instrument.

Page 695 of 845

Universal Robina Sugar Milling Corporation vs. Heirs of Angel Teves

G. R. No. 128574

September 18, 2002

FACTS:

Andres Abanto owned two parcels of land, one registered in his name while the other was
unregistered. When Andres Abanto died, his heirs executed an Extrajudicial Settlement of the
Estate of the Deceased Andres Abanto and Simultaneous Sale and sold the unregistered lot to the

Page 696 of 845

United Planters Sugar Milling Company, Inc. (UPSUMCO), and the registered lot to Angel M.
Teves. The sale was not registered.

Out of respect for his uncle Ignacio Montenegro, who was UPSUMCOs founder and president,
Teves verbally allowed UPSUMCO to use the lot he bought, free of charge, subject to the condition
that UPSUMCO shall shoulder the payment of real property taxes and that its occupation shall be
co-terminus with its corporate existence.

Years later, UPSUMCOs properties were acquired by the Philippine National Bank (PNB) which
transferred the properties to the Asset Privatization Trust (APT) which, in turn, sold the same to
the Universal Robina Sugar Milling Corporation (URSUMCO). URSUMCO then took possession
of UPSUMCOs properties, including Teves lot. Upon learning of this, Teves sent demand letters
formally asking the corporation to turn over to him possession of the lot but URSUMCO
refused. Teves thus filed with the Regional Trial Court (RTC) a complaint for recovery of
possession of real property with damages against URSUMCO.

The RTC rendered its Decision holding that Teves failure to have the sale registered with the
Registry of Deeds would not vitiate his right of ownership, unless a third party has acquired the
land in good faith and for value and has registered the subsequent deed; that the list of properties
acquired by URSUMCO from the PNB does not include the disputed lot and, therefore, was not
among those conveyed by UPSUMCO to URSUMCO. The Court of Appeals affirmed the RTC
decision.

ISSUE:

Is petitioner correct in contending that the Extrajudicial Settlement of the Estate of the Deceased
Andres Abanto and Simultaneous Sale is merely a promise to sell and not an absolute deed of sale,
hence, did not transfer ownership of the disputed lot to Angel Teves?

HELD:

No. The transaction is not merely a contract to sell but a contract of sale. In a contract of sale, title
to the property passes to the vendee upon delivery of the thing sold; while in a contract to sell,
ownership is, by agreement, reserved in the vendor and is not to pass to the vendee until full
payment of the purchase price.

That the contract of sale was not registered does not affect its validity. Being consensual in nature,
it is binding between the parties, the Abanto heirs and Teves. Article 1358 of the New Civil Code,
which requires the embodiment of certain contracts in a public instrument, is only for convenience,
and the registration of the instrument would merely affect third persons. Formalities intended for
greater efficacy or convenience or to bind third persons, if not done, would not adversely affect
the validity or enforceability of the contract between the contracting parties themselves. Thus, by
virtue of the valid sale, Angel Teves stepped into the shoes of the heirs of Andres Abanto and
acquired all their rights to the property.

Page 697 of 845

Rita Sarming, Rufino Sarming, Manuel Sarming, Leonora Vda. de Loy, Erlinda Sarming, Nicandra
Sarming, Mansueta Sarming, Arturo Corsame, Fely Corsame, Federico Corsame, Isabelita
Corsame, Norma Corsame, Cesar Corsame, Rudy Corsame, Robverta Corsame, Artemio Corsame,
Elpidio Corsame, Enriquita Corsame, and Gudalupe Corsame Tan vs. Cresencio Dy, Ludivina Dy-
Chan, Trinidad Flores, Luisa Flores, Saturnina Organista, Remedios Organista, Ofelia Organista,
Lydia Organista, Zosimo Organista, Domisiano Flores, Florita Flores, Eduardo Flores, Benigna
Flores, Angelina Flores, Marcial Flores, and Mario Flores

G.R. No. 133643

June 6, 2002

FACTS:

Valentina Unto Flores owned two lots: Lot 5734 and Lot 4163. When Valentina died, her three
children namely Jose, Venancio, and Silveria equally divided Lot 5734 among themselves. Lot

Page 698 of 845

4163, which was solely registered under the name of Silveria, was sub-divided between Silveria
and Jose.

Joses grandchildren later sold Joses half portion of Lot 4163 to Alejandra Delfino. When
Alejandras lawyer, Atty. Deogracias Pinili, asked for the title of the land, Silveria mistakenly gave
the title to Lot 5734. Pinili thus prepared a notarized Settlement of Estate and Sale, which was duly
signed by the parties, based on the title given.

Two years later, Alejandra purchased the adjoining portion of the lot she had been occupying and
discovered that what was designated in the deed, Lot 5734, was the wrong lot. She sought the
assistance of Pinili who approached Silveria to obtain the title to Lot 4163 from the Registry of
Deeds, but Silveria reneged on her promise to turn over the title to Alejandra. Alejandra thus filed
a complaint against Silveria for reformation of the deed of sale with damages before the Regional
Trial Court (RTC). The RTC rendered a decision in favor of Alejandra. The Court of Appeals
affirmed the RTC decision.

ISSUE:

Is reformation of the subject deed proper by reason of mistake in designating the correct lot
number?

HELD:

Yes. An action for reformation of instrument may prosper only upon the concurrence of the
following requisites: (1) there must have been a meeting of the minds of the parties to the contact;
(2) the instrument does not express the true intention of the parties; and (3) the failure of the
instrument to express the true intention of the parties is due to mistake, fraud, inequitable conduct
or accident. In this case, there was a meeting of the minds between the parties to the contract but
the deed did not express the true intention of the parties due to mistake in the designation of the
lot subject of the deed. There is no dispute as to the intention of the parties to sell the land to
Alejandra Delfino but there was a mistake as to the designation of the lot intended to be sold as
stated in the Settlement of Estate and Sale. The designation of the lot in the deed of sale as Lot
5734 was a mistake in the preparation of the document. Thus, reformation of the instrument is
proper.

Page 699 of 845

Cebu Contractors Consortium Co. vs. Court of Appeals and Makati Leasing and Finance
Corporation

G.R. No. 107199

July 22, 2003

FACTS:

Makati Leasing and Finance Corporation (MLFC) entered into a lease agreement as lessor leasing
various equipment to lessee Cebu Contractors Consortium Company (CCCC). To secure the lease

Page 700 of 845

rentals, a chattel mortgage, and a subsequent amendment thereto, were executed in favor of MLFC
over other various equipment owned by CCCC.

When CCCC began defaulting on the lease rentals, MLFC sent demand letters which went
unheeded. MLFC filed before the Regional Trial Court (RTC) a complaint for the payment of the
rentals due and prayed that a writ of replevin be issued in order to obtain possession of the
equipment leased and to foreclose on the equipment mortgaged.

CCCC alleges that it had a contract with the then Ministry of Public Highways and approached
MLFC to secure a loan. MLFC induced CCCC to adopt and apply a sale and lease back scheme in
which the equipment of CCCC was made to appear as sold to MLFC and then leased back to
CCCC which will then pay lease rentals to MLFC. The rentals will be treated as installment
payments to repurchase the equipment. To facilitate payment of the rentals, MLFC required CCCC
to execute a deed of assignment of its collectibles from the Ministry of Public Highways. CCCC
was also required to execute a chattel mortgage over its other properties as a security.

CCCC thus claims it is no longer indebted to MLFC because the total amounts collected by the
latter from the Ministry of Public Highways, by virtue of the deed of assignment, and from the
proceeds of the foreclosed chattels were more than enough to cover CCCCs liabilities. The RTC,
however, upheld the lease agreement and found CCCC liable to MLFC for P1,067,861.79 in lease
rentals. The appellate court affirmed the trial courts decision.

ISSUE:

Did the appellate court err in upholding the so-called sale-lease back scheme when the same is in
reality nothing but an equitable mortgage?

HELD:

Yes. MLFC admits that the transaction with CCCC involved the purchase of already-owned
equipment. Thus, the transaction between the parties is not one of financial leasing but simply a
loan secured by a chattel mortgage over CCCCs equipment.

When the true intention of the parties to a contract is not expressed in the instrument purporting to
embody their agreement by reason of mistake, fraud, inequitable conduct or accident, the remedy
of the aggrieved party is to ask for reformation of the instrument under Articles 1359 and 1362 of
the Civil Code, to the end that their true agreement may be expressed therein. Under Article 1144
of the Civil Code, the prescriptive period for actions based upon a written contract and for
reformation of an instrument is ten years. The right of action for reformation accrued from the date
of execution of the contract of lease. This was properly exercised by CCCC when it filed its answer
with counterclaim to MLFCs complaint and asked for the reformation of the lease contract.

Page 701 of 845

ADR Shipping Services, Inc. vs. Marcelino Gallardo and the Honorable Court of Appeals

G.R. No. 134873

September 17, 2002

FACTS:

Marcelino Gallardo, a timber concessionaire and log dealer, entered into a charter agreement with
ADR Shipping Services, Inc. for the use of the MV Pacific Breeze to transport logs to Kaoshung,
Taiwan. The logs were the subject of a sales agreement between Gallardo as seller and Stywood
Philippines, Inc. as buyer. Gallardo paid an advance charter fee of P242,000 representing ten
percent of the agreed charter fee, evidenced by two official receipts issued by ADR to Mar
Gallardo Trading, the name under which Marcelino Gallardo does business.

Under the charter agreement, the boat should be ready to load by February 5, 1988 but MV Pacific
Breeze failed to arrive on time. Gallardo sent a letter dated that same day to ADR stating that they

Page 702 of 845

are cancelling the charter contract in view of the failure of Stywood to fulfill its commitment, and
indicated that they are withdrawing their deposit. ADR refused to return the P242,000, however,
prompting Gallardo to file a case for sum of money and damages in the Regional Trial Court (RTC)
of Manila, Branch 50. The RTC rendered judgment ordering ADR Shipping Services, Inc. to pay
plaintiff the sum of P242,000.00 with 6% interest per annum from date of filing of the complaint,
plus P20,000 as attorneys fees and the costs of suit. The Court of Appeals affirmed the RTC
decision.

ISSUE:

Is Gallardo entitled to the refund in the sum of P242,000 representing his deposit for the charter
of the ship provided by ADR?

HELD:

Yes. Paragraph 10 of the Charter Party for MV Pacific Breeze provides:

Should the vessel not be ready to load (whether in berth or not) on or before the date indicated in
Box 19 [16 February, 1988], Charterers have the option of cancelling this contract, such option to
be declared, if demanded, at least 48 hours before vessels expected arrival at port of loading.
Should the vessel be delayed on account of average or otherwise. Charterers to be informed as
soon as possible, and if the vessel is delayed for more than 10 days after the day she is stated to be
expected ready to load, Charterers have the option of cancelling this contract, unless a cancelling
date has been agreed upon.

Paragraph 10 presents an ambiguity. Ambiguities in a contract are interpreted strictly against the
drafter thereof when justified in light of the operative facts and surrounding circumstances.
Moreoever, considering that the subject contract contains the foregoing express provision that
February 5, 1988 is the date when the vessel is expected ready to load, that provision leaves the
parties with no other recourse but to apply the literal meaning of such stipulation. The cardinal rule
is that where the terms of the contract are clear, leaving no doubt as to the intention of the
contracting parties, the literal meaning of its stipulations is controlling.

Page 703 of 845

Valentin Movido substituted by Marginito Movido vs. Luis Reyes Pastor

G.R. No. 172279

February 11, 2010

FACTS:

Luis Reyes Pastor and Valentin Movido executed a kasunduan sa bilihan ng lupa where Movido
agreed to sell a parcel of land located in Paliparan, Dasmarias, Cavite. Another kasunduan was
later executed providing that if a Napocor power line traversed the subject lot, the purchase price

Page 704 of 845

would be lowered. Respondent claims that petitioner promised to have the property surveyed to
determine the portion affected by the Napocor power line but afterwards refused to do so despite
incessant demands. Respondent thus refused to pay his unpaid balance.

Petitioner, on the other hand, charged respondent with delay in paying several installments and
contends that this is a material breach since they agreed that the survey of the property would only
be done after respondent pays the 7th installment of P1 million. Respondents failure to fulfill his
obligations left petitioner with no choice but to rescind the kasunduan sa bilihan ng lupa although
petitioner is willing to reimburse 50% of whatever respondent had paid him so far.

The Regional Trial Court (RTC) ruled in favor of petitioner. The Court of Appeals, however,
reversed the RTC.

ISSUE:

Is rescission of the contract proper?

HELD:

No. Rescission is only allowed when the breach is so substantial and fundamental as to defeat the
object of the parties in entering into the contract. While it is true that respondent failed to pay the
7th and 8th installments of the purchase price, respondent cannot be deemed to have committed a
serious breach especially since respondent was not in default as petitioner never made a demand
for payment.

Moreover, the kasunduan sa bilihan ng lupa and the kasunduan should both be given effect rather
than be declared conflicting, if there is a way of reconciling them. Taken together, the two
agreements actually constitute a single contract pertaining to the sale of a land to respondent by
petitioner. Their stipulations must therefore be interpreted together, attributing to the doubtful ones
that sense that may result from all of them taken jointly. Their proper construction must be one
that gives effect to all.

Page 705 of 845

TSPIC Corporation vs. TSPIC Employees Union

G.R. No. 163419

February 13, 2008

Page 706 of 845

FACTS:

TSPIC is engaged in the business of designing, manufacturing, and marketing integrated circuits
to serve the communication, automotive, data processing, and aerospace industries. TSPIC
Employees Union (FFW) is the registered bargaining agent of the rank-and-file employees of
TSPIC.

In 1999, TSPIC and the Union entered into a Collective Bargaining Agreement (CBA)
that included a provision on yearly salary increases. Consequently, on January 1, 2000, all the
regular rank-and-file employees of TSPIC received a 10% increase in their salary.

On October 6, 2000, the Regional Tripartite Wage and Productivity Board, National Capital
Region, issued Wage Order No. NCR-08 which caused a raise in the daily minimum wage of
TSPICs probationary employees. When these probationary employees attained regular
employment and the new wage rates mandated by the CBA were implemented, the newly
regularized employees received higher wages than those employees senior to them.

A few weeks after the salary increase for the year 2001 became effective, TSPICs Human
Resources Department notified 24 employees that due to an error in the automated payroll system,
they were overpaid and the overpayment would be deducted from their salaries in a staggered
basis. The Union asserted that the deduction of the alleged overpayment constituted diminution of
pay. The issue was brought to the grievance machinery but TSPIC and the Union failed to reach
an agreement.

Consequently, TSPIC and the Union agreed to undergo voluntary arbitration. On September 13,
2001, Arbitrator Jimenez rendered a Decision, holding that the unilateral deduction made by
TSPIC violated Art. 100 of the Labor Code. The Court of Appeals affirmed in toto the decision of
the voluntary arbitrator.

ISSUE:

Does the TSPICs decision to deduct the alleged overpayment from the salaries of the affected
members of the Union constitute diminution of benefits in violation of the Labor Code?

HELD:

No. Diminution of benefits is the unilateral withdrawal by the employer of benefits already enjoyed
by the employees. There is diminution of benefits when it is shown that: (1) the grant or benefit is
founded on a policy or has ripened into a practice over a long period; (2) the practice is consistent
and deliberate; (3) the practice is not due to error in the construction or application of a doubtful
or difficult question of law; and (4) the diminution or discontinuance is done unilaterally by the
employer.

Page 707 of 845

TSPIC correctly pointed out that the overpayment of its employees was a result of an error which
TSPIC immediately rectified upon its discovery. The Supreme Court has previously ruled
in Globe-Mackay Cable and Radio Corp. v. NLRC that an erroneously granted benefit may be
withdrawn without violating the prohibition against non-diminution of benefits.

The CBA is the law between the parties and they are obliged to comply with its provisions. In this
case, although the provisions of the CBA seem clear and unambiguous, as a general rule, in the
interpretation of a contract, the intention of the parties is to be pursued. An instrument must be
interpreted according to the intention of the parties. It is the duty of the courts to place a practical
and realistic construction upon it, giving due consideration to the context in which it is negotiated
and the purpose which it is intended to serve. Absurd and illogical interpretations should also be
avoided. Considering that the parties have unequivocally agreed to substitute the benefits granted
under the CBA with those granted under wage orders, the agreement must prevail and be given
full effect.

Moreoever, although it is the States responsibility to afford protection to labor, this policy should
not be used as an instrument to oppress management and capital. The Supreme Court ruled
inNorkis Union v. Norkis Trading that the resolution of labor cases is guided by the State policy
enshrined in the Constitution: social justice and protection of the working class. Social justice does
not, however, mandate that every dispute should be automatically decided in favor of labor. In
any case, justice is to be granted to the deserving and dispensed in the light of the established facts
and the applicable law and doctrine.

Spouses Rafael P. Estanislao and Zenaida Estanislao vs. East West Banking Corporation

G.R. No. 178537

February 11, 2008

FACTS:

Page 708 of 845

Petitioners obtained a loan from the respondent in the amount of P3,925,000 evidenced by a
promissory note and secured by two deeds of chattel mortgage: one covering two dump trucks and
a bulldozer; and another covering a bulldozer and a wheel loader. Petitioners defaulted in the
amortizations and the entire obligation became due and demandable.

On April 10, 2000, respondent bank filed a suit for replevin with damages but subsequently moved
for suspension of the proceedings on account of an earnest attempt to arrive at an amicable
settlement of the case. During the course of negotiations, a deed of assignment was drafted by the
respondent. Petitioners affixed their signatures on the deed of assignment but respondent banks
duly authorized representative failed to sign the deed.

Petitioners completed the delivery of the heavy equipment mentioned in the deed of assignment to
respondent, which accepted the same without protest or objection. However, respondent later filed
a manifestation and motion to admit an amended complaint for the seizure and delivery of two
more heavy equipment covered under the second deed of chattel mortgage, claiming that its
representative inadvertently failed to include the second deed of chattel mortgage among the
documents forwarded to its counsel when the original complaint was being drafted.

The trial court dismissed the amended complaint for lack of merit. The Court of Appeals reversed
the trial courts decision.

ISSUE:

Did the deed of assignment which expressly provides that the transfer and conveyance to
respondent of the three units of heavy equipment, and its acceptance thereof, shall be in full
payment of the petitioners total outstanding obligation to the latter, operate to extinguish
petitioners debt to respondent, such that the replevin suit could no longer prosper?

HELD:

Yes. The deed of assignment was a perfected agreement which extinguished petitioners total
outstanding obligation to the respondent. The nature of the assignment was a dation in payment,
whereby property is alienated to the creditor in satisfaction of a debt in money. Even if the
agreement were to be considered a compromise agreement, there was no need for respondents
signature on the same because with the delivery of the heavy equipment which the latter accepted,
the agreement was consummated. Respondents approval may be inferred from its unqualified
acceptance of the heavy equipment.

The legal presumption is always on the validity of contracts. In order to judge the intention of the
contracting parties, their contemporaneous and subsequent acts shall be principally
considered. When respondent accepted delivery of all three units of heavy equipment under the
deed of assignment, there could be no doubt that it intended to be bound under the agreement.

Page 709 of 845

Since the agreement was consummated by the delivery of the last unit of heavy equipment under
the deed, petitioners are deemed to have been released from all their obligations to
respondent. Since there is no more credit to collect, no principal obligation to speak of, then there
is no more second deed of chattel mortgage that may subsist. A chattel mortgage cannot exist as
an independent contract since its consideration is the same as that of the principal contract. Being
a mere accessory contract, its validity would depend on the validity of the loan secured by it. This
being so, the amended complaint for replevin should be dismissed because the chattel mortgage
agreement upon which it is based had been rendered ineffectual.

Agrifina Aquintey vs. Spouses Felicidad and Rico Tibong

G.R. No. 166704

December 20, 2006

FACTS:

Petitioner Agrifina Aquintey filed a complaint for sum of money and damages against the
respondents, spouses Felicidad and Rico Tibong. Felicidad had secured loans from Agrifina at
monthly interest rates of 6% to 7% and, despite demands, the spouses Tibong failed to pay their
outstanding loan which amounted to P773,000.00 exclusive of interests.

Page 710 of 845

The spouses Tibong admitted that they had secured loans from Agrifina which the spouses in turn
re-lent to other borrowers at higher interest rates. They alleged that they had executed deeds of
assignment in favor of Agrifina, and that their debtors had executed promissory notes in Agrifinas
favor. This, according to the spouses Tibong, resulted in a novation of the original obligation to
Agrifina since Agrifina became the new collector of their debtors and the obligation to pay the
balance of their loans had been extinguished.

Felicidad was able to pay only her loans amounting to P122,600. Following the execution of the
deeds of assignment and promissory notes, Agrifina was able to collect the total amount
ofP301,000.00 from Felicidads debtors.

The trial court ruled that Felicidads obligation had not been novated by the deeds of assignment
and the promissory notes executed by Felicidads borrowers. The appellate court sustained the trial
courts ruling that Felicidads obligation to Agrifina had not been novated but held that the legal
effects of the deeds of assignment could not be totally disregarded. The assignments of credits
were onerous, hence, had the effect of payment pro tanto of the outstanding obligation. The fact
that Agrifina never repudiated or rescinded such assignments only shows that she had accepted
and conformed to it. Consequently, she cannot collect both from Felicidad and her individual
debtors without running afoul to the principle of unjust enrichment. Agrifinas primary recourse
then is against Felicidads individual debtors on the basis of the deeds of assignment and
promissory notes.

ISSUE:

Was the obligation of respondents to pay the balance of their loans, including interest, partially
extinguished by the execution of the deeds of assignment in favor of petitioner?

HELD:

Yes. An assignment of credit is an agreement by virtue of which the owner of a credit, known as
the assignor, by a legal cause, such as sale, dation in payment, exchange or donation, and without
the consent of the debtor, transfers his credit and accessory rights to another, known as the
assignee, who acquires the power to enforce it to the same extent as the assignor could enforce it
against the debtor.

In Vda. de Jayme v. Court of Appeals, the Court held that dacion en pago is the delivery and
transmission of ownership of a thing by the debtor to the creditor as an accepted equivalent of the
performance of the obligation. It is a special mode of payment where the debtor offers another
thing to the creditor who accepts it as equivalent of payment of an outstanding debt. The requisites
for dacion en pago are: (1) there must be a performance of the prestation in lieu of payment (animo
solvendi) which may consist in the delivery of a corporeal thing or a real right or a credit against
the third person; (2) there must be some difference between the prestation due and that which is
given in substitution (aliud pro alio); and (3) there must be an agreement between the creditor and

Page 711 of 845

debtor that the obligation is immediately extinguished by reason of the performance of a prestation
different from that due. All the requisites for a valid dation in payment are present in this case.

Petitioner and respondent Felicidad agreed that the amounts due from respondents debtors were
intended to make good in part the account of respondents. Case law is that, an assignment will,
ordinarily, be interpreted or construed in accordance with the rules of construction governing
contracts generally, the primary object being always to ascertain and carry out the intention of the
parties. This intention is to be derived from a consideration of the whole instrument, all parts of
which should be given effect, and is to be sought in the words and language employed.

The Court must not go beyond the rational scope of the words used in construing an assignment.
Words should be construed according to their ordinary meaning, unless something in the
assignment indicates that they are being used in a special sense. If the words are free from
ambiguity and express plainly the purpose of the instrument, there is no occasion for interpretation;
but where necessary, words must be interpreted in the light of the particular subject matter.
Surrounding circumstances may be considered in order to understand more perfectly the intention
of the parties. Thus, the object to be accomplished through the assignment, and the relations and
conduct of the parties may be considered in construing the document.

Although it has been said that an ambiguous or uncertain assignment should be construed most
strictly against the assignor, the general rule is that any ambiguity or uncertainty in the meaning
of an assignment will be resolved against the party who prepared it; hence, if the assignment was
prepared by the assignee, it will be construed most strictly against him or her. One who chooses
the words by which a right is given ought to be held to the strict interpretation of them, rather than
the other who only accepts them.

Adoracion E. Cruz, Thelma Debbie E. Cruz, Gerry E. Cruz and Nerissa Cruz Tamayo vs. The
Honorable Court of Appeals, Summit Financing Corp., Victor S. Sta. Ana, Maximo C. Contreras,
Ramon G. Manalastas and Vicente Torres

G.R. No. 122904

April 15, 2005

FACTS:

Adoracion Cruz is the mother of Thelma Cruz, Gerry Cruz, Nerissa Cruz Tamayo, and Arnel Cruz.
They inherited properties upon the death of Delfin Cruz, husband of Adoracion Cruz. One of those
properties is a parcel of land registered only in the name of Arnel and covered by Transfer
Certificate of Title (TCT) No. 495225.

Petitioners and Arnel Cruz executed a Deed of Partial Partition, distributing to each of them their
shares consisting of several lots previously held by them. They also agreed in writing to share
equally in the proceeds of the sale of the properties which was embodied in a Memorandum of

Page 712 of 845

Agreement. Later, however, Thelma discovered that TCT No. 495225 had already been cancelled
by TCT No. 514477 which was issued in the name of Summit Financing Corporation. Petitioners
learned that Arnel Cruz had executed a Special Power of Attorney in favor of Nelson Tamayo,
husband of Nerissa, authorizing him to obtain a loan of P104,000 from respondent Summit to be
secured by a real estate mortgage on the subject parcel of land. The loan remained outstanding on
maturity which prompted Summit to institute extrajudicial foreclosure proceedings. Summit was
declared the highest bidder at the foreclosure sale. Sheriff Victor Sta. Ana issued a Certificate of
Sale to respondent Summit. The Acting Register of Deeds, Ramon G. Manalastas, cancelled TCT
No. 495225 and issued, in lieu thereof, TCT No. 514477 in the name of respondent Summit.

Petitioners asserted in their complaint before the Regional Trial Court (RTC) that they co-owned
the properties with Arnel Cruz, as evidenced by the Memorandum of Agreement. Hence, they
argued that the mortgage was void since they did not consent to it. The trial court ruled in favor of
petitioners, and declared that only the undivided share of Arnel in the mortgaged property was
validly transferred to respondent Summit. The Court of Appeals (CA), however, reversed the trial
courts decision.

ISSUE:

Is the real estate mortgage on the property then covered by TCT No. 495225 valid?

HELD:

Yes. From a reading of the provisions of the Deed of Partial Partition, no other meaning can be
gathered other than that petitioners and Arnel Cruz had put an end to the co-ownership. In the
deed, the shares of petitioners and Arnel Cruzs in the mass of co-owned properties were concretely
determined and distributed to each of them. The disputed property in particular was assigned to
Arnel Cruz.

On the other hand, there is absolutely nothing in the Memorandum of Agreement which diminishes
the right of Arnel Cruz to alienate or encumber the properties allotted to him in the deed of
partition. The parties only bound themselves to share in the proceeds of the sale of the properties.
The agreement does not direct reconveyance of the properties to reinstate the common ownership
of the parties. To insist that the parties also intended to re-establish co-ownership after the
properties had been partitioned is to read beyond the clear import of the agreement and to render
nugatory the effects of partition, which is not the obvious or implied intent of the parties.

To ascertain the intent of the parties in a contractual relationship, it is imperative that the various
stipulations provided for in the contracts be construed together, consistent with the parties
contemporaneous and subsequent acts as regards the execution of the contract. Subsequent to the
execution of the Deed of Partition and Memorandum of Agreement, the properties were titled
individually in the names of the co-owners to which they were respectively adjudicated, to the
exclusion of the other co-owners. Petitioners Adoracion Cruz and Thelma Cruz separately sold the
properties distributed to them as absolute owners thereof. Being clear manifestations of sole and

Page 713 of 845

exclusive dominion over the properties affected, the acts signify total incongruence with the state
of co-ownership claimed by petitioners.

Napoleon H. Gonzales vs. Honorable Court of Appeals and Spouses Gabriel and Luzviminda
Caballero

G.R. No. 122611

March 8, 2001

FACTS:

Private respondents, Mr. and Mrs. Gabriel Caballero, are the registered owners of two parcels of
land which they mortgaged to secure a loan they obtained from the Cavite Development Bank. To
pay the loan they offered Lot 1 for sale. The offer was advertised in the Bulletin Today. A certain
Mrs. Lagrimas offered to broker the sale which the spouses refused but Mrs. Lagrimas nevertheless
brought petitioner Napoleon H. Gonzales to the spouses as buyer.

Petitioner bargained for a lower price with the suggestion that on paper the price will be markedly
lower so the spouses would pay lower capital gains tax. The spouses agreed to sell at P470,000.
Petitioner paid the bank P375,000 which cancelled the mortgage and released the two titles.
Gonzales asked for the deeds of sale of the two lots and delivery of the titles to him. Defendants
signed the deed of sale covering only Lot 1 but refused to deliver its title until petitioner paid the
remaining balance of P70,000. This prompted petitioner to file a complaint for specific
performance and damages before the Regional Trial Court (RTC). The RTC dismissed the
complaint but ordered the spouses to deliver the title of Lot 1 upon payment of the balance of the
purchase price. The Court of Appeals affirmed the decision of the trial court in toto.

Page 714 of 845

ISSUE:

Does the contract of sale between the parties involve both lots as claimed by petitioner?

HELD:

No. Even if it were true that two lots were mortgaged and were about to be foreclosed, the ads
private respondents placed in the Bulletin Today offered only Lot 1 and was a strong indication
that they did not intend to sell Lot 2. The 501 square meter lot was offered for P1,150 per square
meter. It alone would have fetched P576,150. The loan still to be paid the bank was only P375,000
which was what petitioner actually paid the bank. It is incomprehensible why the spouses would
part with two lots, one with a 2-storey house, and both situated at a prime commercial district for
less than the price of one lot.

The reasons and the surrounding circumstances behind a contracts execution are of paramount
importance to place the interpreter in the situation occupied by the parties concerned at the time
the writing was executed. Scrutinizing the documents presented as evidence and studying the
contemporaneous acts surrounding the execution of the contract to sell, no good nor compelling
reason was found to make the Court depart from the findings of the lower court, the appellate
court, the Prosecutors Office and the Secretary of Justice that the sale involved only the sale of Lot
1.

Page 715 of 845

Juana Almira, Renato Garcia, Rogelio Garcia, Rodolfo Garcia, Rosita Garcia, Rhodora Garcia,
Rosalinda Garcia, Rolando Garcia and Rafael Garcia Represented in this suit by Edgardo Alvarez
vs. Court of Appeals and Federico Briones

G.R. No. 115966

March 20, 2003

FACTS:

Page 716 of 845

Petitioners are the wife and the children of the late Julio Garcia who inherited from his mother,
Maria Alibudbud, a parcel of land with an area of 21,460 square meters which is part of a 90,655
square-meter property denominated as Lot 1642 of the Sta. Rosa Estate in Barangay Caingin, Sta.
Rosa, Laguna and covered by TCT No. RT-1076. Lot 1642 was co-owned and registered in the
names of Vicente de Guzman, Enrique Hemedes, and Francisco Alibudbud, the father of Maria
Alibudbud. There was no separate title in the name of Julio Garcia but there were tax declarations
in his name to the extent of his grandfathers share of the property.

Petitioners and respondent Federico Briones entered into a Kasunduan ng Pagbibilihan over the
21,460 square-meter portion for the sum of P150,000. Respondent paid P65,000 upon execution
of the contract and the remaining balance was made payable within six months from the date of
the execution of the instrument. Petitioners allegedly informed respondent that their
cousin, Conchalina Alibudbud, was in possession of TCT No. RT-1076 since Conchalina had
bought Vicente de Guzmans share of the property and owned the bigger portion of Lot 1642.
Respondent still willingly entered into the Kasunduan provided that the full payment of the
purchase price will be made upon delivery to him of the title.

Respondent took possession of the property and made various payments to petitioners but
afterwards refused to make any further payments when petitioners failed to deliver to him a
separate title to the property. Petitioners thus filed a civil action before the Regional Trial Court
for (a) rescission of the Kasunduan; (b) return by respondent to petitioners of the possession of the
subject parcel of land; and (c) payment by respondent of damages in favor of petitioners. The trial
court rendered a decision in favor of petitioners. The Court of Appeals, however, reversed the
decision of the trial court.

ISSUE:

Is payment of the balance of the purchase price conditioned upon delivery of a separate title in the
name of Julio Garcia?

HELD:

Yes. A provision in the Kasunduan stated:

Na pinatutunayan ng UNANG BAHAGI na tinanggap nila sa buong kasiyahan ng kalooban buhat

sa IKALAWANG BAHAGI ang halagang ANIMNAPU AT LIMANG LIBO (P65,000.00) PISO,
Salaping Pilipino, bilang paunang bayad, at ang nalalabing WALUMPU AT LIMANG LIBONG
(85,000.00) PISO ay babayaran ng IKALAWANG BAHAGI sa UNANG BAHAGI sa loob ng
anim na buwan simula sa takda ng kasulatang ito, sa pasubali na ang kaukulang titulo ng lupang
nabanggit ay maipagkakaloob ng UNANG BAHAGI sa IKALAWANG BAHAGI.

Furthermore, correspondence between the petitioners and respondent shows that the parties
intended that a separate title to the property in the name of Julio Garcia shall be delivered to
respondent as a condition for the latters payment of the balance of the purchase price.

Page 717 of 845

It is basic in the interpretation and construction of contracts that the literal meaning of the
stipulations shall control if the terms of the contract are clear and leave no doubt on the intention
of the contracting parties. However, if the terms of the agreement are ambiguous, resort is made
to contract interpretation which is the determination of the meaning attached to written or spoken
words that make the contract. To ascertain the true intention of the parties, their subsequent or
contemporaneous actions must be principally considered.

Moreover, there is no reason to apply Article 1377 of the Civil Code in this case since the evident
intention of the parties can be readily discerned by their subsequent and contemporaneous acts.
While it is true that the Kasunduan was prepared by the counsel of respondent, there is no
indication that respondent took unfair advantage of petitioners when he had the terms of the
Kasunduan drawn by his counsel. Petitioners freely assented to the Kasunduan which is written
entirely in a language spoken and understood by both parties. That petitioners were fully aware of
the terms of the Kasunduan is evidenced by their attempts to comply with their obligation by
securing a subdivision plan and technical description of the property subject of sale.

Philippine Bank of Communications vs. Elena Lim, Ramon Calderon, and Tri-Oro International
Trading and Manufacturing Corporation

G.R. No. 158138

April 12, 2005

FACTS:

Respondents obtained a loan from petitioner Philippine Bank of Communications and executed a
continuing Surety Agreement (SA) in favor of petitioner for all loans, credits, etc., that were
extended or may be extended in the future to respondents. Upon respondents request, petitioner
granted a renewal of said loan as evidenced by Promissory Note (PN) Renewal BD-Variable No.
8298021001 in the amount of P3,000,000. It was expressly stipulated therein that the venue for
any legal action that may arise out of said promissory note shall be Makati City, to the exclusion
of all other courts.

Page 718 of 845

Respondents failed to pay said obligation upon maturity such that petitioner foreclosed the real
estate mortgage executed by respondents valued at P1,081,600, leaving a deficiency balance
ofP4,014,297.23. Petitioner filed a complaint against respondents with the Regional Trial Court of
Manila for the collection of the deficiency exclusive of interest.

Respondents moved to dismiss the complaint on the ground of improper venue. The trial court
denied said motion asseverating that petitioner had separate causes of action arising from the
Promissory Note and the continuing surety agreement. The Court of Appeals ruled that
respondents alleged debt was based on the Promissory Note, which had provided an exclusionary
stipulation on venue to the exclusion of all other courts. The parties Surety Agreement, though
silent as to venue, was an accessory contract that should have been interpreted in consonance with
the Promissory Note.

ISSUE:

Did the Court of Appeals decide the issue of venue in a way not in accord with law and applicable
decisions of the Supreme Court and had thereby departed from the accepted and usual course of
judicial proceedings?

HELD:

No. In enforcing a surety contract, the complementary-contracts-construed-together doctrine finds

application. According to this principle, an accessory contract must be read in its entirety and
together with the principal agreement. This principle is used in construing contractual stipulations
in order to arrive at their true meaning; certain stipulations cannot be segregated and then made to
control. This no-segregation principle is based on Article 1374 of the Civil Code.

The aforementioned doctrine is applicable to the present case. Incapable of standing by itself, the
SA can be enforced only in conjunction with the PN. The latter documents the debt that is sought
to be collected in the action against the sureties.

The PN was a contract of adhesion that petitioner required the principal debtor to execute as a
condition of the approval of the loan. It was made in the form and language prepared by the bank.
By inserting the provision that Makati City would be the venue for any legal action that may arise
out of the Promissory Note, petitioner also restricted the venue of actions against the sureties. The
legal action against the sureties arose not only from the SA but also from the PN.

Page 719 of 845

Spouses Efren N. Rigor and Zosima D. Rigor, for themselves and as owners of Chiara Construction
vs. Consolidated Orix Leasing and Finance Corporation

G.R. No. 136423

August 20, 2002

FACTS:

Petitioners obtained a loan from private respondent Consolidated Orix Leasing and Finance
Corporation, and executed a promissory note promising to pay the loan in 24 equal monthly
installments. The promissory note also provides that default in paying any installment renders the
entire unpaid amount due and payable. To secure payment of the loan, petitioners executed in favor
of private respondent a deed of chattel mortgage over two dump trucks.

Petitioners failed to pay several installments despite demand from private respondent. Private
respondent sought to foreclose the chattel mortgage by filing a complaint for Replevin with
Page 720 of 845
Damages against petitioners before the Regional Trial Court of Dagupan City. Petitioners moved
to dismiss the complaint on the ground of improper venue based on a provision in the promissory
note stating that all legal actions arising out of the note or in connection with the chattels subject
of the note shall only be brought in or submitted to the proper court in Makati City, Philippines.

The Dagupan trial court denied petitioners motion to dismiss. Petitioners filed a petition for
certiorari before the Court of Appeals imputing grave abuse of discretion by the Dagupan trial
court. The Court of Appeals dismissed the petition.

ISSUE:

Was the venue properly laid under the provisions of the chattel mortgage contract in the light of
Article 1374 of the Civil Code?

HELD:

Yes. The chattel mortgage is an accessory contract to the loan obligation as embodied in the
promissory note. The chattel mortgage cannot exist as an independent contract since its
consideration is the same as that of the principal contract. A principal obligation is an indispensable
condition for the existence of an accessory contract. Contracts may be classified according to the
degree of dependence. Loans, sales or leases are classified as principal contracts while pledges,
mortgages and suretyships are classified as accessory contracts because their existence is
dependent upon the principal obligations they guarantee or secure.

The Court held in National Power Corporation vs. Court of Appeals that the provisions of an
accessory contract must be read in its entirety and together with the principal contract between the
parties. The promissory note and the deed of chattel mortgage construed together show that the
Court of Appeals did not err in ruling that venue was properly laid in Dagupan City as provided in
the deed of chattel mortgage.

The rules on venue are intended to assure convenience for the plaintiff and his witnesses and to
promote the ends of justice. Dagupan City is the more convenient venue for both parties
considering that private respondent has a branch office in the city while petitioners reside in nearby
Tarlac. Petitioners futile insistence on an exclusive venue in Makati City smacks of a dilatory
tactic to evade or at the very least, prolong the payment of a just obligation. The case has been
pending for four years on account of the question of venue to the detriment of private respondent
which is simply collecting on an outstanding loan obligation.

Page 721 of 845

Rodolfo P. Velasquez vs. Court of Appeals and Philippine Commercial International Bank, Inc.

G.R. No. 124049

June 30, 1999

FACTS:

Rodolfo Velasquez was an officer and stockholder of Pick-up Fresh Farms, Inc. (PUFFI).
PUFFI filed an application for a loan of P7,500,000 with Philippine Commercial International
Bank (PCIB) under the governments Guarantee Fund for Small and Medium Enterprises
(GFSME). The parties executed a loan agreement and, as security for the loan, promissory notes
were signed by Inigo A. Nebrida and Mariano N. Canilao, Jr. as officers of and for both PUFFI
and Aircon and Refrigeration Industries, Inc. (ARII). ARII also executed a chattel mortgage over
its equipment and machineries in favor of PCIB, while petitioner along with other officers executed
deeds of suretyship in favor of PCIB. Separate deeds of suretyship were further executed.

Page 722 of 845

When PUFFI defaulted in the payment of its obligations, PCIB foreclosed the chattel mortgage.
The proceeds of the sale amounted only to P678,000, hence, PCIB filed an action to recover the
remaining balance of the entire obligation including interests, penalties and other charges as well
as exemplary damages and attorneys fees. A writ of preliminary attachment was granted by the
trial court. The trial court rendered a summary judgment in favor of PCIB holding petitioner and
Canilao solidarily liable to pay P7,227,624.48 plus annual interest of 17%, 700,000.00 as
attorneys fees, and the costs of suit. The case was dismissed without prejudice with regard to the
other defendants as they were not properly served with summons. The Court of Appeals affirmed in
totothe judgment of the trial court.

ISSUE:

Did the appellate court commit a reversible error in sustaining or affirming the summary judgment
despite the existence of genuine triable issues of facts and in refusing to set aside the default order
against petitioner?

HELD:

No. The surety bond must be read in its entirety and together with the loan agreement. The
provisions must be construed together to arrive at their true meaning. Certain stipulations cannot
be segregated and then made to control. That the complementary contracts construed together
doctrine applies in this case finds support in the principle that the surety contract is merely an
accessory contract and must be interpreted with its principal contract, which in this case was the
loan agreement. This doctrine closely adheres to the spirit of Article 1374 of the Civil
Code. Applying the complementary contracts construed together doctrine leaves no doubt that it
was the intention of the parties that petitioner would be personally liable in the deed of suretyship.

Page 723 of 845

Samuel U. Lee and Pauline Lee and Asiatrust Development Bank, Inc. vs. Bangkok Bank Public
Company, Limited

G.R. No. 173349

February 9, 2011

Page 724 of 845

FACTS:

Midas Diversified Export Corporation (MDEC) and Manila Home Textile, Inc. (MHI) entered into
two separate Credit Line Agreements (CLAs) with respondent Bangkok Bank Public Company,
Limited. MDEC and MHI are owned and controlled by the Lee family: Thelma U. Lee, Maybelle
L. Lim, Daniel U. Lee and Samuel U. Lee (Samuel). MDEC was likewise granted by Asiatrust
Development Bank, Inc. a loan facility having an available credit line of P40,000,000 for letters
of credit, advances on bills and export packing; and a separate credit line of US$2,000,000 for bills
purchase.

Samuel bought several parcels of land in Cupang, Antipolo, and later entered into a joint venture
with Louisville Realty and Development Corporation to develop the properties into a residential
subdivision. When MDEC defaulted on the payment of its loan, the spouses Samuel and Pauline
Lee executed a real estate mortgage (REM) over the properties in favor of Asiatrust.

Eventually, the Lee corporations defaulted in their obligations with other creditors. MDEC, MHI,
and three other corporations owned by the Lee family filed before the Securities and Exchange
Commission (SEC) a Consolidated Petition for the Declaration of a State of Suspension of
Payments and for Appointment of a Management Committee/Rehabilitation Receiver. The SEC
issued a Suspension Order enjoining the Lee corporations from disposing of their property in any
manner except in the ordinary course of business, and from making any payments outside the
legitimate expenses of their business during the pendency of the petition.

Bangkok Bank filed an action before the Regional Trial Court (RTC) to recover the loans extended
to MDEC and MHI under the guarantees. The RTC dismissed the case. The Court of Appeals
(CA), however, reversed and set aside the RTC decision.

ISSUE:

Were the REM executed over the subject Antipolo properties and the foreclosure sale committed
in fraud of petitioners other creditors such that, as a consequence of such fraud, the questioned
mortgage could, therefore, be rescinded?

HELD:

No. The presumption of fraud established under Article 1387 does not apply to registered lands
if the judgment or attachment made is not also registered. Even assuming that Article 1387 of the
Code applies, the execution of a mortgage is not contemplated within the meaning of alienation by
onerous title under the said provision.

Under Article 1387 of the Code, fraud is presumed only in alienations by onerous title of a person
against whom a judgment or attachment has been issued. The term alienation connotes the
transfer of the property and possession of lands, tenements, or other things, from one person to

Page 725 of 845

another. This term is particularly applied to absolute conveyances of real property and must
involve a complete transfer from one person to another.

A mortgage does not contemplate a transfer or an absolute conveyance of a real property. It is an

interest in land created by a written instrument providing security for the performance of a duty or
the payment of a debt. When a debtor mortgages his property, he merely subjects it to a lien but
ownership thereof is not parted with. It is merely a lien that neither creates a title nor an estate. It
is, therefore, certainly not the alienation by onerous title that is contemplated in Article 1387 where
fraud is to be presumed.

Equatorial Realty Development, Inc. & Carmelo & Bauermann, Inc. vs. Mayfair Theater, Inc.

G.R. No. 106063

November 21, 1996

FACTS:

Carmelo & Bauermann, Inc. owned a parcel of land with two two-storey buildings constructed
thereon located at Claro M Recto Avenue, Manila. On June 1, 1967, Carmelo entered into a lease

Page 726 of 845

with Mayfair Theater, Inc. for a period of 20 years. The lease covered a portion of the second floor
and mezzanine. Two years later, Mayfair entered into a second lease with Carmelo for the lease of
a part of the second floor and two spaces on the ground floor. The lease was also for a period of
20 years. Both leases contained a provision granting Mayfair a right of first refusal to purchase the
said properties.

Sometime in August 1974, Mr. Henry Pascal of Carmelo informed Mr. Henry Yang, President of
Mayfair, that Carmelo was desirous of selling the entire Claro M. Recto property and that a certain
Jose Araneta was offering to buy the whole property for US$ 1,200,000. Mr. Pascal asked Mr.
Yang if the latter was willing to buy the property for six to seven million pesos. Mr. Yang replied
that he would let Mr. Pascal know of his decision. On August 23, 1974, Mayfair replied through a
letter but without a definite answer. Carmelo did not reply to this letter.

On September 18, 1974, Mayfair sent another letter to Carmelo purporting to express interest in
acquiring not only the leased premises but the entire building and other improvements if the price
is reasonable. Both Carmelo and Equatorial questioned the authenticity of the second letter.

On July 30, 1978, within the 20-year-lease term, Carmelo sold the subject properties to Equatorial
Realty Development, Inc. Mayfair thus filed a complaint for specific performance and damages.
The trial court ruled in favor of Equatorial. The Court of Appeals (CA) reversed and set aside the
judgment of the lower court.

ISSUE:

Is the sale of the property to Equatorial valid?

HELD:

No. What Carmelo and Mayfair agreed to, by executing the two lease contracts, was that Mayfair
will have the right of first refusal in the event Carmelo sells the leased premises. It is undisputed
that Carmelo did recognize this right of Mayfair, for it informed the latter of its intention to sell
the said property in 1974. There was an exchange of letters evidencing the offer and counter-offers
made by both parties. Carmelo, however, did not pursue the exercise to its logical end. While it
initially recognized Mayfairs right of first refusal, Carmelo violated such right when, without
affording its negotiations with Mayfair the full process to ripen to at least an interface of a definite
offer and a possible corresponding acceptance within the 30-day exclusive option time granted
Mayfair, Carmelo abandoned negotiations, kept a low profile for some time, and then sold, without
prior notice to Mayfair, the entire Claro M. Recto property to Equatorial.

Records bear out the fact that Equatorial was aware of the lease contracts because its lawyers had,
prior to the sale, studied the said contracts. As such, Equatorial cannot tenably claim to be a
purchaser in good faith, and, therefore, rescission lies.Since Equatorial is a buyer in bad faith, this
finding renders the sale to it of the property in question rescissible.

Page 727 of 845

Maria Antonia Siguan vs. Rosa Lim, Linde Lim, Ingrid Lim and Neil Lim

G.R. No. 134685

November 19, 1999

FACTS:

On 25 and 26 August 1990, Rosa Lim issued two Metrobank checks in the sums of P300,000 and
P241,668. The checks were dishonored for the reason account closed when petitioner Maria
Antonia Siguan presented the checks with the drawee bank. Demands to make good the checks
proved futile such that petitioner filed a criminal case for violation of B.P. 22 against Lim. The
court a quo convicted Lim as charged.

On 2 July 1991, a Deed of Donation conveying parcels of land and purportedly executed by Lim
on 10 August 1989 in favor of her children, Linde, Ingrid and Neil, was registered with the Office

Page 728 of 845

of the Register of Deeds of Cebu City. New transfer certificates of title were thereafter issued in
the names of the donees.

On 23 June 1993, petitioner filed an accion pauliana against Lim and her children before Branch
18 of the Regional Trial Court (RTC) of Cebu City to rescind the questioned Deed of Donation
and to declare as null and void the new transfer certificates of title issued for the lots covered by
the questioned Deed. Petitioner claimed Lim, through the Deed of Donation, fraudulently
transferred all her real property to her children in bad faith and in fraud of creditors, including her;
that Lim conspired and confederated with her children in antedating the questioned Deed of
Donation, to petitioners and other creditors prejudice; and that Lim, at the time of the fraudulent
conveyance, left no sufficient properties to pay her obligations.

The trial court ordered the rescission of the questioned deed of donation; declared null and void
the transfer certificates of title issued in the names of private respondents Linde, Ingrid and Neil
Lim; ordered the Register of Deeds of Cebu City to cancel said titles and to reinstate the previous
titles in the name of Rosa Lim; and directed the Lims to pay the petitioner, jointly and severally,
the sum of P10,000 as moral damages; P10,000 as attorneys fees; and P5,000 as expenses of
litigation. On appeal, the Court of Appeals reversed the decision of the trial court.

ISSUE:

May the Deed of Donation executed by respondent Rosa Lim in favor of her children be rescinded
for being in fraud of her alleged creditor, petitioner Maria Antonia Siguan?

HELD:

No. Article 1381 of the Civil Code enumerates the contracts which are rescissible, and among
them are those contracts undertaken in fraud of creditors when the latter cannot in any other manner
collect the claims due them.

The action to rescind contracts in fraud of creditors is known as accion pauliana. For this action
to prosper, the following requisites must be present: (1) the plaintiff asking for rescission has a
credit prior to the alienation, although demandable later; (2) the debtor has made a subsequent
contract conveying a patrimonial benefit to a third person; (3) the creditor has no other legal
remedy to satisfy his claim; (4) the act being impugned is fraudulent; (5) the third person who
received the property conveyed, if it is by onerous title, has been an accomplice in the fraud.

The general rule is that rescission requires the existence of creditors at the time of the alleged
fraudulent alienation, and this must be proved as one of the bases of the judicial pronouncement
setting aside the contract. Without any prior existing debt, there can neither be injury nor fraud.
While it is necessary that the credit of the plaintiff in the accion pauliana must exist prior to the
fraudulent alienation, the date of the judgment enforcing it is immaterial. Even if the judgment be
subsequent to the alienation, it is merely declaratory, with retroactive effect to the date when the
credit was constituted.

Page 729 of 845

In the instant case, the alleged debt of Lim in favor of petitioner was incurred in August 1990,
while the deed of donation was purportedly executed on 10 August 1989. The Court is not
convinced with petitioners allegation that the questioned deed was antedated to make it appear
that it was made prior to petitioners credit. That deed is a public document, it having been
acknowledged before a notary public. As such, it is evidence of the fact which gave rise to its
execution and of its date, pursuant to Section 23, Rule 132 of the Rules of Court.

Khe Hong Cheng, alias Felix Khe, Sandra Joy Khe and Ray Steven Khe vs. Court of Appeals,
Hon. Teofilo Guadiz, RTC 147, Makati City and Philam Insurance Co., Inc.

G.R. No. 144169

March 28, 2001

FACTS:

Petitioner Khe Hong Cheng is the owner of Butuan Shipping Lines. On or about October 4, 1985,
the Philippine Agricultural Trading Corporation shipped on board the vessel M/V Prince Eric,
owned by petitioner, 3,400 bags of copra at Masbate, Masbate, for delivery to Dipolog City,
Zamboanga del Norte. The said shipment was covered by a marine insurance policy issued by
American Home Insurance Company (respondent Philams assured). M/V Prince Eric sank
somewhere between Negros Island and Northeastern Mindanao, resulting in the total loss of the
shipment. Because of the loss, the insurer, American Home, paid the amount of P354,000, which
was the equivalent value of the copra, to the consignee.

Having been subrogated into the rights of the consignee, American Home instituted a civil case to
recover the money paid to the consignee, based on breach of contract of carriage. While the case
was still pending, petitioner Khe Hong Cheng executed deeds of donations of parcels of land in
favor of his children, co-petitioners Sandra Joy and Ray Steven.

Page 730 of 845

The trial court rendered judgment against petitioner Khe Hong Cheng in the civil case filed by
American Home four years after the donations were made and the transfer certificates of title were
registered in the donees names. After the decision became final and executory, a writ of execution
was issued but was not served. An alias writ of execution was, thereafter, applied for and granted.
Despite earnest efforts, the sheriff found no property under the name of Butuan Shipping Lines
and/or petitioner Khe Hong Cheng to levy or garnish for the satisfaction of the trial courts
decision. When the sheriff, accompanied by counsel of respondent Philam, went to Butuan City,
however, they discovered that petitioner no longer had any property and that he had conveyed the
subject properties to his children.

Respondent Philam filed a complaint with the Regional Trial Court (RTC) of Makati City, Branch
147, for the rescission of the deeds of donation executed by petitioner Khe Hong Cheng in favor
of his children and for the nullification of their titles. Respondent alleged, inter alia, that petitioner
Khe Hong Cheng executed the aforesaid deeds in fraud of his creditors, including respondent
Philam. The trial court ruled in favor of Philam. The Court of Appeals (CA) affirmed the trial
courts decision.

ISSUE:

Has the action to rescind the donations prescribed?

HELD:

No. Article 1389 of the Civil Code simply provides that the action to claim rescission must be
commenced within four years. Since 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. Article 1150 of the Civil Code is particularly instructive:

Art. 1150. The time for prescription for all kinds of actions, when there is no special provision
which ordains otherwise, shall be counted from the day they may be brought.

It is the legal possibility of bringing the action which determines the starting point for the
computation of the prescriptive period for the action. Moreover, Article 1383 of the Civil Code
provides as follows:

Art. 1383. An action for rescission is subsidiary; it cannot be instituted except when the party
suffering damage has no other legal means to obtain reparation for the same.

It is thus apparent that an action to rescind or an accion pauliana must be of last resort, availed of
only after all other legal remedies have been exhausted and have been proven futile. For an accion
pauliana to accrue, the following requisites must concur:

Page 731 of 845

1) That the plaintiff asking for rescission has a credit prior to the alienation, although demandable
later; 2) That the debtor has made a subsequent contract conveying a patrimonial benefit to a third
person; 3) That the creditor has no other legal remedy to satisfy his claim, but would benefit by
rescission of the conveyance to the third person; 4) That the act being impugned is fraudulent; 5)
That the third person who received the property conveyed, if by onerous title, has been an
accomplice in the fraud.

Respondent Philam only learned about the unlawful conveyances made by petitioner Khe Hong
Cheng in January 1997 when its counsel accompanied the sheriff to Butuan City to attach the
properties of petitioner Khe Hong Cheng. There they found that he no longer had any properties
in his name. It was only then that respondent Philams action for rescission of the deeds of donation
accrued because then it could be said that respondent Philam had exhausted all legal means to
satisfy the trial courts judgment in its favor. Since respondent Philam filed its complaint for accion
pauliana against petitioners barely a month from its discovery that petitioner Khe Hong Cheng
had no other property to satisfy the judgment award against him, its action for rescission of the
subject deeds clearly had not yet prescribed.

Rafael G. Suntay, substituted by his heirs, namely: Rosario, Rafael, Jr., Apolinario, Raymund,
Maria Victoria, Maria Rosario and Maria Lourdes, all surnamed Suntay vs. The Honorable Court
of Appeals and Federico C. Suntay

G.R. No. 114950

December 19, 1995

FACTS:

Federico Suntay applied as a miller-contractor of the National Rice and Corn Corporation
(NARIC) but the same was disapproved by NARIC because he was tied up with several unpaid
loans. For purposes of circumvention, Federico asked his nephew-lawyer, Rafael, to prepare an
absolute deed of sale of a parcel of land, of which Federico is the registered owner, in consideration
of P20,000 in favor of Rafael.

Less that three months after his conveyance, the same parcel of land was sold back to Federico for
the same consideration. On the second sale, however, there was an irregularity because it appeared
that said land was not sold but was mortgaged in favor of the Hagonoy Rural Bank. Moreover,
after the execution of the deed, Federico remained in possession of the property sold. Federico
requested Rafael to deliver his copy of the transfer certificate of title so that Federico could have
the counter deed of sale in his favor registered on his name. Rafael refused. Federico thus filed a
complaint for reconveyance and damages against Rafael.

Page 732 of 845

The trial court rendered its decision holding that Rafael is the owner of the property in dispute but
not to the extent of ordering Federico to pay back rentals for the use of the property. The Court of
Appeals (CA) rendered its decision in favor of Federico.

ISSUE:

Is the second deed of absolute sale null and void?

HELD:

Yes. The cumulative effect of the evidence on record identified badges of simulation proving that
the sale by Federico to his deceased nephew of his land and rice mill, was not intended to have
any legal effect between them. Though the notarization of the deed of sale in question vests in its
favor the presumption of regularity, it is not the intention nor the function of the notary public to
validate and make binding an instrument never, in the first place, intended to have any binding
legal effect upon the parties thereto. The intention of the parties still and always is the primary
consideration in determining the true nature of a contract.

Carmela Brobio Mangahas vs. Eufrocina A. Brobio

G.R. No. 183852

October 20, 2010

FACTS:

Pacifico S. Brobio died intestate, leaving three parcels of land. He was survived by his wife,
respondent Eufrocina A. Brobio, and four legitimate and three illegitimate children. Petitioner
Carmela Brobio Mangahas is one of the illegitimate children.

The heirs of the deceased executed a Deed of Extrajudicial Settlement of Estate of the Late Pacifico
Brobio with Waiver in which petitioner and Pacificos other children waived and ceded their
respective shares over the three parcels of land in favor of respondent. Petitioner alleges that
respondent promised to give her an additional amount for her share in her fathers estate but, after
the signing of the Deed, respondent refused to pay, claiming that she had no more money.

A year later, while processing her tax obligations, respondent was required to submit an original
copy of the Deed. Left with no more original copy of the Deed, respondent asked petitioner to
countersign a copy of the Deed but petitioner refused and demanded that respondent first give her
the additional amount that she promised. Because respondent did not have the money at that time
and petitioner refused to countersign the Deed without any assurance that the amount would be
paid, respondent executed a promissory note. Petitioner agreed to sign the Deed when respondent
signed the promissory note.

Page 733 of 845

When the promissory note fell due, respondent failed and refused to pay despite demand. Petitioner
made several more demands upon respondent but the latter kept on insisting that she had no money.
Petitioner thus filed a Complaint for Specific Performance with damages against respondent. The
Regional Trial Court (RTC) rendered a decision in favor of petitioner. The Court of Appeals (CA)
reversed the RTC decision and dismissed the complaint.

ISSUE:

Is the promissory note void for lack of consent and consideration?

HELD:

No. Contracts are voidable where consent thereto is given through mistake, violence, intimidation,
undue influence, or fraud. In determining whether consent is vitiated by any of these
circumstances, courts are given a wide latitude in weighing the facts or circumstances in a given
case and in deciding in favor of what they believe actually occurred, considering the age, physical
infirmity, intelligence, relationship, and conduct of the parties at the time of the execution of the
contract and subsequent thereto, irrespective of whether the contract is in a public or private
writing.

Nowhere is it alleged that mistake, violence, fraud, or intimidation attended the execution of the
promissory note. Still, respondent insists that she was forced into signing the promissory note
because petitioner would not sign the document required by the BIR. In one case, the Court in
characterizing a similar argument by respondents therein held that such allegation is tantamount
to saying that the other party exerted undue influence upon them. However, the Court said that the
fact that respondents were forced to sign the documents does not amount to vitiated consent.

There is undue influence when a person takes improper advantage of his power over the will of
another, depriving the latter of a reasonable freedom of choice. For undue influence to be present,
the influence exerted must have so overpowered or subjugated the mind of a contracting party as
to destroy his free agency, making him express the will of another rather than his own.

Respondent may have desperately needed petitioners signature on the Deed, but there is no
showing that she was deprived of free agency when she signed the promissory note. Being forced
into a situation does not amount to vitiated consent where it is not shown that the party is deprived
of free will and choice. Respondent still had a choice: she could have refused to execute the
promissory note and resorted to judicial means to obtain petitioners signature. Instead, respondent
chose to execute the promissory note to obtain petitioners signature, thereby agreeing to pay the
amount demanded by petitioner.

Page 734 of 845

Cornelia M. Hernandez vs. Cecilio F. Hernandez

G.R. No. 158576

March 9, 2011

FACTS:

The Republic of the Philippines, through the Department of Public Works and Highways (DPWH),
offered to purchase a portion of a parcel of land with an area of 80,133 square meters and located
at San Rafael, Sto. Tomas, Batangas, for use in the expansion of the South Luzon Expressway.
The land is pro-indiviso owned by petitioner Cornelia M. Hernandez; Atty. Jose M. Hernandez,
deceased father of respondent Cecilio F. Hernandez represented by Paciencia Hernandez; and
Mena Hernandez, also deceased and represented by her heirs.

After a series of negotiations with the DPWH, the last offer made by the government stood at
P70.00 per square meter. The owners did not accept the offer, prompting the government to file an
expropriation case. Cornelia, and her other co-owners executed an irrevocable Special Power of
Attorney (SPA) appointing Cecilio Hernandez as their true and lawful attorney with respect to
the expropriation of the subject property. The SPA stated that the authority shall continue to be
binding all throughout the negotiation, and shall bind all successors and assigns in regard to any
negotiation with the government until its consummation and binding transfer of a portion to be
sold to that entity with Cecilio as the sole signatory in regard to the rights and interests of the
signatories therein. There was no mention of the compensation scheme for Cecilio.

The just compensation for the condemned properties was fixed subsequently, with Cornelias share
amounting to P7,321,500, the amount a pro-indiviso owner is to receive. At this point, Cecilios
SPA was revoked by Cornelia. However, Cornelia received from Cecilio a check amounting to
P1,123,000. The check was accompanied by a Receipt and Quitclaim document in favor of Cecilio
stating that: (1) the amount received will be the share of Cornelia in the just compensation paid by

Page 735 of 845

the government in the expropriated property; (2) in consideration of the payment, it will release
and forever discharge Cecilio from any action, damages, claims or demands; and (3) Cornelia will
not institute any action and will not pursue her complaint or opposition to the release to Cecilio or
his heirs or assigns.

After she learned of her true share in the expropriation proceedings, Cornelia, through a letter,
demanded the accounting of the proceeds.The letter was left unanswered. She then decided to have
the courts settle the issue. A Complaint for the Annulment of Quitclaim and Recovery of Sum of
Money and Damages was filed before the Regional Trial Court (RTC). Cecilio was declared in
default, but this was reversed by the Court of Appeals (CA).

ISSUE:

Did the Court of Appeals err in holding the validity of the receipt and quitclaim document?

HELD:

Yes. The service contract gave Cecilio compensation based on the 1998 skyrocketed price that
essentially will give Cecilio 83.07% of the just compensation due Cornelia as the co-owner of the
land. No evidence on record showed that Cornelia agreed to give Cecilio 83.07% of the proceeds
of the sale of her land. Furthermore, quitclaims are also contracts and can be voided if there was
fraud or intimidation that leads to lack of consent.The facts show that a simple accounting of the
proceeds of the just compensation will be enough to satisfy the curiosity of Cornelia. However,
Cecilio did not disclose the truth and instead of coming up with the request of his aunt, he made a
contract intended to bar Cornelia from recovering any further sum of money from the sale of her
property.

Moreover, when Cecilio accepted the position as commissioner, he created a barrier that prevented
his performance of his duties under the SPA. Cecilio could not have been a hearing officer and a
defendant at the same time. Indeed, Cecilio foisted fraud on both the Court and the Hernandezes
when, after his appointment as commissioner, he accepted the appointment by the Hernandezes to
represent and sue for them.

A contract where consent is given through mistake, violence, intimidation, undue influence, or
fraud is voidable. In determining whether consent is vitiated by any of the circumstances
mentioned, courts are given a wide latitude in weighing the facts or circumstances in a given case
and in deciding in their favor what they believe to have actually occurred, considering the age,
physical infirmity, intelligence, relationship, and the conduct of the parties at the time of the
making of the contract and subsequent thereto, irrespective of whether the contract is in public or
private writing. In order that mistake may invalidate consent, it should refer to the substance of the
thing which is the object of the contract, or those conditions which have principally moved one or
both parties to enter the contract.

Page 736 of 845

Manuel O. Fuentes and Leticia L. Fuentes vs. Conrado G. Roca, Annabelle R. Joson, Rose Marie
R. Cristobal and Pilar Malcampo

G.R. No. 178902

April 21, 2010

FACTS:

On, Oct 11, 1982, Tarciano Roca bought a 358-square meter lot in Zambales from his mother. In
1988, Tarciano offered to sell the lot to petitioners Fuentes spouses through the help of Atty.
Romulo D. Plagata who would prepare the documents and requirements to complete the sale.
Their agreement stipulated that the Fuentes spouses will pay a down payment of P60,000, and
another P140,000 will be paid upon the removal of Tarciano of certain structures on the land and
after the consent of Tarcianos estranged wife, Rosario, is attained. Atty. Plagata went to Manila
to get Rosarios signature but notarized the document in Zamboanga . The deed of sale was
executed January 11, 1989.

When Tarciano and Rosario died, their children filed a case to annul the sale and reconvey the
property on grounds that the sale was void since Rosarios consent was not attained and that
Rosarios signature was a mere forgery. The Fuentes spouses claimed that the action had
prescribed since an action to annul a sale on the ground of fraud is four years from discovery. The
Regional Trial Court (RTC) ruled in favor of the Fuentes spouses. The Court of Appeals (CA)
reversed the RTC ruling.

ISSUE:

Has the Rocas action for the declaration of nullity of sale to the spouses already prescribed?

HELD:

Page 737 of 845

No. The law that applies to this case is the Family Code, not the Civil Code. Although Tarciano
and Rosario got married in 1950, Tarciano sold the conjugal property to the Fuentes spouses on
January 11, 1989, a few months after the Family Code took effect on August 3, 1988. The
provisions of the Family Code apply to Conjugal Partnerships already established at the enactment
of the Family Code.

In contrast to Article 173 of the Civil Code which gives the wife right to have the sale annulled
during the marriage within ten years from the date of the sale, Article 124 of the Family Code does
not provide a period within which the wife who gave no consent may assail her husbands sale of
the real property. It simply provides that without the other spouses written consent or a court order
allowing the sale, the same would be void. The passage of time did not erode the right to bring
such an action.

Page 738 of 845

Associated Bank vs. Spouses Justiniano S. and Ligaya Montano and Tres Cruces Agro-Industrial
Corporation

G.R. No. 166383

October 16, 2009

Page 739 of 845

FACTS:

In 1964, spouses Justiniano and Ligaya Montano owned three parcels of land in Tanza, Cavite
which were utilized as an integrated farm and a stud farm used for raising horses. During the
Martial Law regime, Justiniano went on self-exile to the United States of America to avoid the
harrasment of Pres. Marcos. The Montanos transferred said properties to Tres Cruces Agro-
Industrial Corporation (TCAIC) in exchange for shares of stocks in the company with a 98%
control over TCAIC.

After a year, the TCAIC sold the properties to International Country Club Incorporation (ICCI)
for P6 million. The title of the properties was transferred to the ICCI which then mortgaged the
parcels of land to the Citizens Bank and Trust Corporation, now Associated Bank, for P2 million.
The loan matured but remained unpaid, prompting Associated Bank to foreclose the mortgage and
put it in public auction. Associated Bank, as the highest bidder, bought the property for P5.7
million.

When the Montanos returned to the country and discovered the transfer of the properties, they
immediately took physical possession of the same and began cultivating the land. They also filed
for a petition of reconveyance and prayed that the transfer of properties from TCAIC to ICCI, and
from ICCI to Associated Bank, be declared null and void. The trial court dismissed the complaint.
The Court of Appeals set aside the trial courts decision.

ISSUE:

Should the complaint for reconveyance be dismissed?

HELD:

No. An action for reconveyance of real property resulting from fraud may be barred by the statute
of limitations, which requires that the action shall be filed within four years from the discovery of
the fraud. The trial court, however, seemed to have overlooked the fact that the basis of
respondents complaint for reconveyance is not fraud but threat, duress and intimidation, allegedly
employed by Marcos cronies upon the relatives of the Montanos while the latter were on self-exile.

In the circumstances prevailing in this case, the threat or intimidation upon respondents is deemed
to have ceased only upon the ouster of then President Marcos from power on February 21, 1986.
The four-year prescriptive period must, therefore, be reckoned from the said date. Thus, when
respondents filed their complaint for reconveyance on September 15, 1989, the period provided
for by law had not yet prescribed. Therefore, petitioners motion to dismiss should be denied.

Page 740 of 845

William Alain Miailhe vs. Court of Appeals and Republic of the Philippines

G.R. No. 108991

March 20, 2001

FACTS:

Page 741 of 845

Petitioner, William Alain Miailhe, on his own behalf and on behalf of Victoria Desbarats-Miailhe,
Monique Miailhe-Sichere and Elaine Miailhe-Lencquesaing filed a Complaint for Annulment of
Sale, Reconveyance and Damages against respondent Republic of the Philippines and defendant
Development Bank of the Philippines (DBP). Petitioners were the former registered owners of
three parcels of land located at J.P. Laurel St., San Miguel, Manila with an aggregate area of
5,574.30 square meters, and a one-storey building erected thereon. Petitioners alleged that during
the height of the martial law regime of the late President Ferdinand Marcos, the Office of the
President showed interest in the subject properties and directed defendant DBP to acquire for the
government the subject properties from petitioners. Through threats and intimidation employed by
defendants, petitioners, under duress, were coerced into selling the subject properties to defendant
DBP for a grossly low price. The Regional Trial Court denied the motion for a preliminary hearing
filed by DBP. The Court of Appeals ruled that petitioners action had prescribed.

ISSUE:

Is the Court of Appeals correct in ruling that petitioners action had prescribed?

HELD:

Yes. A perusal of the Complaint shows that the threat and intimidation ceased after then President
Marcos left the country on February 24, 1986. In fact, it was only then that petitioner was allegedly
able to muster the courage to make extrajudicial demands on the Republic of the Philippines. Since
an action for the annulment of contracts must be filed within four years from the time the cause of
vitiation ceases, the suit before the trial court should have been filed anytime on or before February
24, 1990. In this case, petitioner did so only on March 23, 1990. Clearly, his action had prescribed
by then.

First Philippine Holdings Corporation vs. Trans Middle East Equities Inc.

G.R. No. 179505

December 4, 2009

FACTS:

First Philippine Holdings Corporations (FPHC), formerly known as Meralco Securities

Corporation, sold its P6,299,179 shares of common stock in Philippine Commercial International

Page 742 of 845

Bank (PCIB), now Equitable PCIB, to Trans Middle East Equities Inc. (TMEE). The 6,299,179
shares of common stock in PCIB are part of the sequestered properties that were allegedly illegally
amassed by Benjamin Romualdez during the twenty-year reign of former President Ferdinand E.
Marcos, and are among the purported ill-gotten wealth sought to be recovered by the Presidential
Commission on Good Government (PCGG). According to FHPC, the shares were obtained by
TMEE through fraud, acts contrary to law, morals, good customs and public policy, thus, such
acquisition was either voidable, void or unforceable.

FPHC filed before the Sandiganbayan its Motion for Leave to Intervene and to Admit Complaint
in Intervention which was granted by the court. TMEE, on the other hand, filed its Motion to
Dismiss the Complaint-in-Intervention by the FHPC on the ground that the action of FHPC has
already prescribed under Article 1391 of the Civil Code. TMEE averred that since the action was
filed only on 28 December 1988 and the sale was 24 May 1984, the action was already seven
months late from the prescriptive period. The Sandiganbayan ruled in TMEEs favor by granting
its motion to dismiss.

ISSUE:

Is the sale of the property void?

HELD:

No. A complaint may be dismissed when the facts establishing prescription are apparent in the
complaint or from the records. Here, the pleadings filed before the anti-graft court are replete with
averments and proof that PCIB shares of stock were sold on 24 May 1984, and that FPHC filed its
complaint-in-intervention on 28 December 1988. From the execution of the sale to the filing of the
complaint, it is readily apparent that four years and seven months had lapsed. Certainly the
complaint was filed beyond the four-year prescriptive period.

Page 743 of 845

Manuel Luis Sanchez vs. Mapalad Realty Corporation

G.R. No. 148516

December 27, 2007

FACTS:

Respondent Mapalad Realty Corporation was the registered owner of four parcels of land located
along Roxas Boulevard, Baclaran, Paraaque. On March 21, 1986, shortly after the EDSA
revolution, Jose Campos executed an affidavit admitting that Mapalad was one of the companies
he held in trust for former President Marcos. Campos turned over all assets, properties, records
and documents pertaining to Mapalad to the new administration led by President Corazon Aquino.
The Presidential Commission on Good Government (PCGG) issued writs of sequestration for
Mapalad and all its properties.
Rolando Josef, appointed Vice President/Treasurer and General Manager of Mapalad, discovered
that there were four transfer certificates of title missing. Josef inquired about it and discovered
Felicito Manalili, Mapalads former director and general manager, had taken them. On November
16, 1992, Nordelak Development Corporation filed a notice of adverse claim over the subject
properties based on a deed of sale purportedly executed by Miguel Magsaysay in his capacity as
President and board chairman of Mapalad. A. Magsaysay Inc., a corporation controlled by Miguel
Magsaysay, acquired ownership of all the shares of stock of Mapalad but its interest was however
terminated after Miguel Magsaysay sold all his shares to Novo Properties on December 3, 1982.
Mapalad filed an action for annulment of deed of sale and reconveyance of title with damages
against Nordelak. The Regional Trial Court (RTC) ruled in favor of Nordelak. The Court of
Appeals reversed the decision of RTC.

ISSUE:

Was there a valid sale between Mapalad and Nordelak?

HELD:

No. In the present case, consent was purportedly given by Miguel Magsaysay, the person who
signed for and in behalf of Mapalad in the deed of absolute sale dated November 2, 1989. However,
as he categorically stated on the witness stand during trial, he was no longer connected with
Mapalad on the said date because he already divested all his interests in said corporation as early
as 1982. Even assuming, for the sake of argument, that the signatures purporting to be his were
genuine, it would still be voidable for lack of authority resulting in his incapacity to give consent
for and in behalf of the corporation. Lack of consideration makes a contract of sale fictitious. A
fictitious sale is void ab initio. The alleged deed of absolute sale dated November 2, 1989
notwithstanding, the contract of sale between Mapalad and Nordelak is not only voidable on
account of lack of valid consent on the part of the purported seller, but also void ab initio for being
fictitious on account of lack of consideration.

Page 744 of 845

Rizalino, substituted by his heirs, Josefina, Rolando and Fernando, Ernesto, Leonora,
Bibiano, Jr., Librado and Enriqueta, all surnamed Oesmer vs. Paraiso Development
Corporation

G.R. No. 157493

February 5, 2007

FACTS:

Petitioners Rizalino, Ernesto, Leonora, Bibiano, Jr., Librado, and Enriqueta, all surnamed Oesmer,
together with Adolfo Oesmer and Jesus Oesmer, are brothers and sisters, and the co-owners of
undivided shares of two parcels of agricultural and tenanted land situated in Barangay Ulong
Tubig, Carmona, Cavite. Ernesto met with a certain Sotero Lee, President of respondent Paraiso
Development Corporation, at Otani Hotel in Manila for the purpose of brokering the sale of
petitioners properties to respondent corporation.

A Contract to Sell was drafted. A check in the amount of P100,000, payable to Ernesto, was given
as option money. Sometime thereafter, Rizalino, Leonora, Bibiano, Jr., and Librado also signed
the said Contract to Sell. However, Adolfo and Jesus did not sign the document. Later, petitioners
sent a letter informing respondent corporation about their intention to rescind the Contract to Sell
and to return the amount of Php 100,000. Respondent did not respond to the letter. Petitioners thus
filed a complaint for Declaration of Nullity or for Annulment of Option Agreement or Contract to
Sell with damages. The Regional Trial Court (RTC) rendered its decision in favor of respondent.
The Court of Appeals affirmed the decision of the RTC with modification.

ISSUE:

Is the Contract to Sell void considering that petitioners did affix their signatures but then later
contending that their co-owner had no written authority to sell the property?

HELD:

No. Contracts are perfected by mere consent, upon the acceptance by the offeree of the offer made
by the offeror. From that moment, the parties are bound not only to the fulfillment of what has
been expressly stipulated but also to all the consequences which, according to their nature, may be
in keeping with good faith, usage and law. To produce a contract, the acceptance must not qualify
the terms of the offer. However, the acceptance may be express or implied. For a contract to arise,
the acceptance must be made known to the offeror. Accordingly, the acceptance can be withdrawn
or revoked before it is made known to the offeror.

In the case at bar, the Contract to Sell was perfected when the petitioners consented to the sale to
the respondent of their shares in the subject parcels of land by affixing their signatures on the said
contract. Such signatures show their acceptance of what has been stipulated in the Contract to Sell

Page 745 of 845

and such acceptance was made known to respondent corporation when the duplicate copy of the
Contract to Sell was returned to the latter bearing petitioners signatures.

Page 746 of 845

Perpetua Vda. de Ape vs. The Honorable Court of Appeals and Generosa Cawit Vda. de
Lumayno

G.R. No. 133638

April 15, 2005

FACTS:

Cleopas Ape died in 1950, leaving behind a parcel of land (Lot 2319) to his 11 children. The
children never formally divided the property among themselves except through hantal-hantal in
which each just occupied and developed a certain portion of the land.

The spouses Lumayno became interested in the land and started buying the portion of land each of
the heirs occupied. On 11 April 1973, one of Cleopas children, Fortunato, entered into a contract
of sale with the Lumaynos. The Lumaynos agreed to pay P5,000 for Fortunatos lot and paid P30
in advance. Fortunato was given a receipt prepared by Lumaynos son-in-law, Andres Flores, who
also acted as witness. Lumayno also executed sales transactions with Fortunatos siblings
separately.

In 1973, Generosa Lumayno prayed that Fortunato be ordered to deliver to her the registrable deed
of sale over Fortunatos portion of Lot No. 2319. Fortunato assailed the validity of the contract of
sale. He also invoked his right to redeem (as a co-owner) the portions of land sold by his siblings
to Lumayno. Fortunato died during the pendency of the case.

ISSUE:

Was there a valid contract of sale?

HELD:

No. Article 1332 of the Civil Code provides that [w]hen one of the parties is unable to read, or if
the contract is in a language not understood by him, and mistake or fraud is alleged, the person
enforcing the contract must show that the terms thereof have been fully explained to the former.

As can be gleaned from Floress testimony, while he was very much aware of Fortunatos inability
to read and write in the English language, he did not bother to fully explain to the latter the
substance of the receipt. He even dismissed the idea of asking somebody else to assist Fortunato
considering that a measly sum of thirty pesos was involved. Evidently, it did not occur to Flores
that the document he himself prepared pertains to the transfer altogether of Fortunatos property
to his mother-in-law. It is precisely in situations such as this when the wisdom of Article 1332 of

Page 747 of 845

the Civil Code readily becomes apparent which is to protect a party to a contract disadvantaged by
illiteracy, ignorance, mental weakness or some other handicap.

Page 748 of 845

Julian Francisco (Substituted by his Heirs, namely: Carlos Altea Francisco; the heirs of late
Arcadio Francisco, namely: Conchita Salangsang-Francisco (surviving spouse), and his children
namely: Teodulo S. Francisco, Emiliano S. Francisco, Maria Theresa S. Francisco, Paulina S.
Francisco, Thomas S. Francisco; Pedro Altea Francisco; Carina Francisco-Alcantara; Efren Altea
Francisco; Dominga Lea Francisco-Regondon; Benedicto Altea Francisco and Antonio Altea
Francisco), petitioner, vs. Pastor Herrera

Page 749 of 845

G.R. No. 139982

November 21, 2002

FACTS:

Respondents father, Eligio Herrera, Sr., was the owner of two parcels of land both located at
Barangay San Andres, Cainta, Rizal. On January 3, 1991, petitioner bought from said landowner
the first parcel for the price of P1,000,000, paid in installments from November 30, 1990 to August
10, 1991. On March 12, 1991, petitioner bought the second parcel for P750,000.

Contending that the contract price for the two parcels of land was grossly inadequate, Eligios
children tried to negotiate with petitioner to increase the purchase price. Petitioner refused.
Respondent thus filed a complaint for annulment of sale with the Regional Trial Court (RTC) of
Antipolo City. The RTC declared the deeds of sale null and void. The Court of Appeals affirmed
the decision of the RTC.

ISSUE:

Is the contract void?

HELD:

No. It was established in the present case that the vendor Eligio, Sr. entered into an agreement with
petitioner, but that the formers capacity to consent was vitiated by senile dementia. Hence, the
assailed contracts are not void or inexistent per se; rather, these are contracts that are valid and
binding unless annulled through a proper action filed in court seasonably.

An annullable contract may be rendered perfectly valid by ratification, which can be express or
implied. Implied ratification may take the form of accepting and retaining the benefits of a
contract. This is what happened in this case. Respondents contention that he merely received
payments on behalf of his father merely to avoid their misuse and that he did not intend to concur
with the contracts is unconvincing. If he was not agreeable with the contracts, he could have
prevented petitioner from delivering the payments, or if this was impossible, he could have
immediately instituted the action for reconveyance and have the payments consigned with the
court. None of these happened.

As found by the trial court and the Court of Appeals, upon learning of the sale, respondent
negotiated for the increase of the purchase price while receiving the installment payments. It was
only when respondent failed to convince petitioner to increase the price that the former instituted
the complaint for reconveyance of the properties. Clearly, respondent was agreeable to the
contracts, only he wanted to get more. Further, there is no showing that respondent returned the
payments or made an offer to do so. This bolsters the view that indeed there was ratification. One

Page 750 of 845

cannot negotiate for an increase in the price in one breath and in the same breath contend that the
contract of sale is void.

Rosario L. de Braganza, et. al. vs. Fernando F. de Villa Abrille

G.R. No. L-12471

April 13, 1959

FACTS:

Rosario Braganza and her sons loaned from De Villa Abrille P70,000 in Japanese war notes and,
in consideration thereof, promised in writing to pay him P10,000 plus 2% per annum in legal
currency of the Philippines two years after the cessation of the war. Payment, however, was not
made and Abrille instituted a suit. The Manila Court of First Instance and Court of Appeals held

Page 751 of 845

the family solidarily liable to pay according to the contract they signed despite the fact that
Guillermo and Rodolfo were minors .

ISSUE:

Are Rosarios sons, who were 16 and 18 respectively, bound by the contract of loan that they
signed?

HELD:

No. Being minors, Rodolfo and Guillermo could not be legally bound by their obligation.
However, these minors may not be entirely absolved from monetary responsibility. In accordance
with the provisions of Civil Code, even if their written contact is unenforceable because of non-
age, they shall make restitution to the extent that they have profited by the money they received.
There is testimony that the funds delivered to them by Villa Abrille were used for their support
during the Japanese occupation. Such being the case, it is but fair to hold that they had profited to
the extent of the value of such money.

Miguel Katipunan, Inocencio Valdez, Edgardo Balguma and Leopoldo Balguma, Jr. vs. Braulio
Katipunan, Jr.

G.R. No. 132415

January 30, 2002

FACTS:

Respondent Braulio Katipunan Jr. is the registered owner of a lot and a five-door apartment
constructed thereon, which was occupied by lessees. Respondent, assisted by his brother, petitioner
Miguel, entered into a Deed of Absolute Sale with brothers Edgardo Balguma and Leopoldo
Balguma, Jr., represented by their lawyer-father, involving the subject property for a consideration
of P187,000. The title was registered in the names of the Balguma brothers and they started
collecting rentals on the property.

Page 752 of 845

Later, however, Braulio filed a complaint for annulment of the Deed of Absolute Sale, contending
that his brother Miguel, Atty. Balguma and Inocencio Valdez convinced him to work abroad.
Through insidious words and machinations, they made him sign a document, purportedly a
contract of employment, which document turned out to be a Deed of Absolute Sale. He further
alleged that he did not receive the consideration stated in the contract. He claimed that there was
evident bad faith and conspiracy in taking advantage of his ignorance, he being only a third grader.

The Regional Trial Court (RTC) dismissed the complaint. The Court of Appeals set aside the RTC
decision.

ISSUE:

Was there a valid contract of sale between the parties?

HELD:

No. There was vitiated consent on the part of the respondent as he signed the Deed of Absolute
Sale without the remotest idea of what it was and received no consideration thereof. The contract
entered into by the parties, being a voidable contract, was correctly annulled on appeal.

A contract where one of the parties is incapable of giving consent or where consent is vitiated by
mistake, fraud, or intimidation is not void ab initio but only voidable, and is binding upon the
parties unless annulled by proper court action. The effect of annulment is to restore the parties to
the status quo ante insofar as legally and equitably possible. This much is dictated by Article 1398
which provides that when the defect of the contract consists in the incapacity of one of the parties,
the incapacitated person is not obliged to make any restitution, except when he has been benefited
by the things or price received by him. Thus, since the Deed of Absolute Sale between respondent
and Balguma brothers is voidable and hereby annulled, then the restitution of the property and its
fruits to respondent is just and proper.

Page 753 of 845

Nilo R. Jumalon vs. Court of Appeals, Hon. Ruben D. Torres, in his capacity as Executive
Secretary, Housing and Land Use Regulatory Board, and Ma. Asuncion de Leon

G.R. No. 127767

January 30, 2002

FACTS:

Page 754 of 845

Ma. Asuncion de Leon and petitioner, Nilo R. Jumalon, executed a conditional sales agreement
whereby the former purchased from the latter a house and lot. Jumalon executed in favor of de
Leon a Deed of Absolute Sale. De Leon learned of the danger posed by the wires over the property,
and was informed by Housing and Land Use Regulatory Board (HLURB) Enforcement Center
that construction of houses and buildings of whatever nature is strictly prohibited within the right-
ofway of the transmission lines.

De Leon filed a case for declaration of nullity or annulment of sale of real property which was
subsequently dismissed. De Leon then filed a complaint before the HLURB seeking the rescission
of the conditional sales agreement and the Absolute Deed of Sale. The HLURB arbiter rendered
judgement in favor of de Leon. The Board of Commissioners of HLURB affirmed the decision of
the arbiter. The Court of Appeals affirmed the appealed decision.

ISSUE:

Did the Court of Appeals err in affirming the decision of Executive Secretary Ruben D. Torres and
the HLURB declaring the rescission of the contract of sale of a house and lot between the petitioner
and private respondent?

HELD:

No. Respondent de Leon is entitled to annul the sale as there was fraud in the sale of the subject
house and the house is not safely habitable. It is built in a subdivision area where there is an existing
30-meter right of way of the Manila Electric Company (Meralco) with high-tension wires over the
property, posing a danger to life and property. The construction of houses underneath the high
tension wires is prohibited as hazardous to life and property because the line carries 115,000 volts
of electricity, generates tremendous static electricity and produces electric sparks whenever it
rained.

Nelson Cabales and Rito Cabales vs. Court of Appeals, Jesus Feliano, and Anunciacion Feliano

G.R. No. 16242

August 31, 2007

FACTS:

Rufino Cabales died on July 4, 1966 and left a 5,714-square meter parcel of land located in Brgy.
Rizal, Sogod, Southern Leyte to his surviving wife Saturnina and children Bonifacio, Albino,
Francisco, Leonora, Alberto and petitioner Rito. They sold the property to Dr. Cayetano

Page 755 of 845

Corrompido with a right to repurchase within eight years. Alberto died before the eight years was
up, leaving behind a wife and son, petitioner Nelson.

The family was able to repurchase the land back from Dr. Corrompido but Saturnina and her four
children Bonifacio, Albino, Francisco and Leonora sold it again, this time to respondents-spouses
Jesus and Anunciacion Feliano for P8,000. On July 24, 1986, 24-year old petitioner Rito Cabales
acknowledged receipt of the sum of P1,143 from respondent Jesus Feliano, representing the
formers share in the proceeds of the sale of subject property.

When Saturnina died in 1988, Nelson learned from his uncle, petitioner Rito, of the sale of subject
property at the time when both of them were minors. Nelson signified his intention to redeem the
subject land during a barangay conciliation process that he initiated. On January 12, 1995,
contending that they could not have sold their respective shares in subject property when they were
minors, petitioners filed before the Regional Trial Court of Maasin, Southern Leyte, a complaint
for redemption of the subject land plus damages. The trial court ruled against petitioners. The
Court of Appeals modified the decision of the trial court.

ISSUE:

Is the sale valid and binding?

HELD:

Article 1403 of the New Civil Code provides, thus:

Art. 1403. The following contracts are unenforceable, unless they are ratified:

(1) Those entered into in the name of another person by one who has been given no authority or
legal representation, or who has acted beyond his powers;

Accordingly, the contract of sale as to the pro-indiviso share of petitioner Rito was unenforceable.
However, when he acknowledged receipt of the proceeds of the sale, petitioner Rito effectively
ratified it. This act of ratification rendered the sale valid and binding as to him.

With respect to petitioner Nelson, on the other hand, the contract of sale was void. He was a minor
at the time of the sale. Saturnina or any and all the other co-owners were not his legal guardians
with judicial authority to alienate or encumber his property. It was his mother who was his legal
guardian and, if duly authorized by the courts, could validly sell his undivided share to the
property. She did not. Necessarily, when Saturnina and the others sold the subject property in its
entirety to respondents-spouses, they only sold and transferred title to their pro-indiviso shares and
not that part which pertained to petitioner Nelson and his mother. Consequently, petitioner Nelson
and his mother retained ownership over their undivided share of subject property.

Page 756 of 845

Anunciacion Vda. de Ouano, Mario P. Ouano, Leticia Ouano Arnaiz, and Cielo Ouano
Martinez vs. The Republic of the Philippines, Mactan-Cebu International Airport Authority,
and the Register of Deeds for the City of Cebu

G.R. No. 168770

February 9, 2011

FACTS:

In 1949, the National Airport Corporation (NAC) pursued a program to expand the Lahug Airport
in Cebu City. Through its team of negotiators, NAC met and negotiated with the owners of the
properties situated around the airport, which included several lots of the Banilad Estate. The
landowners later claimed that the government negotiating team assured them that they could
repurchase their respective lands should the Lahug Airport expansion project not push through or
once the Lahug Airport closes or its operations transferred toMactan-Cebu Airport. Some of the
landowners accepted the assurance and executed deeds of sale with a right of repurchase. Others,

Page 757 of 845

however, including the owners of the Banilad Estate lots, refused to sell because the purchase price
offered was viewed as way below market.

The Republic, as represented by the then Civil Aeronautics Administration (CAA), as successor
agency of the NAC, filed a complaint for the expropriation of the lots. The Court of First Instance
(CFI) of Cebu rendered judgment for the Republic. When the Lahug Airport expansion project
was jettisoned, informal settlers entered and occupied the lot belonging to the Ouanos before its
expropriation. The Ouanos then formally asked to be allowed to exercise their right to repurchase
the lot, but their demand was ignored. The Ouanos thus instituted a complaint before the Cebu
City Regional Trial Court (RTC) for reconveyance. The RTC initially ruled in favor of the Ouanos
but later dismissed the Ouanos complaint. The Ouanos filed an appeal to the Court of Appeals
(CA) which was denied.

ISSUE:

Are the testimonials of the petitioners proving the promises, assurances and representations by the
airport officials and lawyers inadmissible under the Statue of Frauds?

HELD:

Since the respondent did not object during trial to the admissibility of petitioners testimonial
evidence under the Statute of Frauds, this indicates that they have waived their objection and are
now barred from raising the same. However, the Statute of Frauds is not applicable herein.
Consequently, petitioners pieces of evidence are admissible and should be duly given weight and
credence since the records tend to support that the MCIAA did not object to the introduction of
parol evidence to prove its commitment to allow the former landowners to repurchase their
properties upon the occurrence of certain events.

At any rate, the objection on the admissibility of evidence on the basis of the Statute of Frauds
may be waived if not timely raised. Records tend to support the conclusion that MCIAA did not
object to the introduction of parol evidence to prove its commitment to allow the former
landowners to repurchase their respective properties upon the occurrence of certain events.

Page 758 of 845

Anthony Ordua, Dennis Ordua and Antonita Ordua vs. Eduardo J. Fuentebella, Marcos S. Cid,
Benjamin F. Cid, Bernard G. Banta, and Armando Gabriel, Jr.

G.R. No. 176841

June 29, 2010

FACTS:

Sometime in 1996, Armando Gabriel Sr. sold a residential lot, which was registered in his name,
to petitioner Antonita Ordua, but no formal deed was executed to document the sale. The contract

Page 759 of 845

price was apparently payable in installments as Antonita remitted from time to time and Gabriel
Sr. accepted partial payments. One of the Orduas would later testify that Gabriel Sr. agreed to
execute a final deed of sale upon full payment of the purchase price.

In 1979, Antonita and her sons, Dennis and Anthony, were already occupying the subject lot on
the basis of some arrangement undisclosed in the records and even constructed their house thereon.
They also paid real property taxes for the house and declared it for tax purposes, as evidenced by
Tax Declaration in which they place the assessed value of the structure at P20,090.

After the death of Gabriel Sr., his son and namesake, respondent Gabriel Jr., secured TCT No. T-
71499 over the subject lot and continued accepting payments from the petitioners. On December
12, 1996, Gabriel Jr. wrote Antonita authorizing her to fence off the said lot and to construct a road
in the adjacent lot. On December 13, 1996, Gabriel Jr. acknowledged receipt of a P40,000 payment
from petitioners. Through a letter dated May 1, 1997, Gabriel Jr. acknowledged that petitioner had
so far made an aggregate payment of P65,000, leaving an outstanding balance of P60,000. A
receipt Gabriel Jr. issued dated November 24, 1997 reflected a P10,000 payment.

Despite all those payments made for the subject lot, Gabriel Jr. would later sell it to Bernard Banta
without the knowledge of petitioners. On July 3, 2001, petitioners, joined by Teresita, estranged
wife of Gabriel Jr., filed a Complaint for Annulment of Title, Reconveyance with Damages against
the respondents before the Regional Trial Court (RTC). The RTC ruled for the respondents. The
CA dismissed the appeal.

ISSUE:

Does the Statute of Frauds bar the enforcement of the verbal sale contract between Gabriel Sr. and
Antonita?

HELD:

No. The Statute of Frauds provides that a contract for the sale of real property or of an interest
therein shall be unenforceable unless the sale or some note or memorandum thereof is in writing
and subscribed by the party or his agent. However, where the verbal contract of sale has been
partially executed through the partial payments made by one party duly received by the vendor, as
in the present case, the contract is taken out of the scope of the Statute.

The purpose of the Statute is to prevent fraud and perjury in the enforcement of obligations
depending for their evidence on the unassisted memory of witnesses, by requiring certain
enumerated contracts and transactions to be evidenced by a writing signed by the party to be
charged. The Statute requires certain contracts to be evidenced by some note or memorandum in
order to be enforceable. The term Statute of Frauds is descriptive of statutes that require certain
classes of contracts to be in writing. The Statute does not deprive the parties of the right to contract
with respect to the matters therein involved, but merely regulates the formalities of the contract
necessary to render it enforceable.

Page 760 of 845

Since contracts are generally obligatory in whatever form they may have been entered into,
provided all the essential requisites for their validity are present, the Statute simply provides the
method by which the contracts enumerated in Article 1403 (2) may be proved but does not declare
them invalid because they are not reduced to writing. In fine, the form required under the Statute
is for convenience or evidentiary purposes only.

A contract that infringes the Statute of Frauds is ratified by the acceptance of benefits under the
contract. Evidently, Gabriel, Jr., as his father earlier, had benefited from the partial payments made
by the petitioners. Thus, neither Gabriel Jr. nor the other respondents could plausibly set up the
Statute of Frauds to thwart petitioners efforts towards establishing their lawful right over the
subject lot and removing any cloud in their title. As it were, petitioners need only to pay the
outstanding balance of the purchase price and that would complete the execution of the oral sale.

The Municipality of Hagonoy, Bulacan, represented by the Hon. Felix V. Ople, Municipal Mayor,
and Felix V. Ople, in his personal capacity vs. Hon. Simeon P. Dumdum, Jr., in his capacity as the
Presiding Judge of the Regional Trial Court, Branch 7, Cebu City; Hon. Clerk of Court & Ex-
Officio Sheriff of the Regional Trial Court of Cebu City; Hon. Clerk of Court & Ex-Officio Sheriff
of the Regional Trial Court of Bulacan and his Deputies; and Emily Rose Go Ko Lim Chao, doing
business under the name and style KD Surplus

G.R. No. 168289

March 22, 2010

FACTS:

Emily Rose Go Ko Lim Chao who is engaged in the buy and sell business of surplus business,
equipment machineries, spare parts and related supplies, filed a complaint against the Municipality
of Hagonoy, Bulacan for collection of sum of money and damages. The complaint alleged that a
contract was entered into by Lim Chao and the Municipality for the delivery of motor vehicles,
which supposedly were needed to carry out certain developmental undertakings in the
Municipality. Lim Chao had delivered to the Municipality of Hagonoy 21 motor vehicles
Page 761 of 845
amounting to P5,820,000. However, despite having made several deliveries, the Municipality
allegedly did not heed Lim Chaos claim for payment. Thus, she filed a complaint for full payment
of the said amount, with interest and damages and prayed for the issuance of a writ of preliminary
attachment against the Municipality.

The trial court issued the Writ of Preliminary Attachment directing the sheriff to attach the estate,
real and personal properties of the Municipality. The Municipality filed a Motion to Dismiss on
the ground that the claim on which the action had been brought was unenforceable under the
Statute of Frauds, and pointing out that there was no written contract or document that would
evince the supposed agreement they entered into with respondent. It also filed a Motion to Dissolve
and/or Discharge the Writ of Preliminary Attachment already issued, invoking, among others,
immunity of the state from suit. The Municipality argued that as a municipal corporation, it is
immune from suit, and that its properties are by law exempt from execution and garnishment. Lim
Chao on her part, counters that the Municipalitys claim of immunity from suit is negated by the
Local Government Code, which vests municipal corporations with the power to sue and be sued.
The trial court ruled in favor of Lim Chao. The Court of Appeals affirmed the trial courts decision.

ISSUE:

Is the complaint unenforceable under the Statutes of Fraud?

HELD:

No. The Statute of Frauds only lays down the method by which the enumerated contracts may be
proved but it does not declare them invalid because they are not reduced to writing inasmuch as,
by law, contracts are obligatory in whatever form they may have been entered into, provided all
the essential requisites for their validity are present. The object is to prevent fraud and perjury in
the enforcement of obligations depending, for evidence thereof, on the unassisted memory of
witnesses by requiring certain enumerated contracts and transactions to be evidenced by a writing
signed by the party to be charged. The effect of non-compliance with this requirement is simply
that no action can be enforced under the given contracts. If an action is nevertheless filed in court,
it shall warrant a dismissal under Section 1(i), Rule 16 of the Rules of Court, unless there has been,
among others, total or partial performance of the obligation on the part of either party

It has been private respondents consistent stand, since the inception of the instant case, that she
has entered into a contract with petitioners. As far as she is concerned, she has already performed
her part of the obligation under the agreement by undertaking the delivery of the 21 motor vehicles
contracted for by Ople in the name of petitioner Municipality. This claim is well substantiated at
least for the initial purpose of setting out a valid cause of action against petitioners by copies of
the bills of lading attached to the complaint, naming petitioner Municipality as consignee of the
shipment. Petitioners have not at any time expressly denied this allegation and, hence, the same is
binding on the trial court for the purpose of ruling on the motion to dismiss. In other words, since
there exists an indication by way of allegation that there has been performance of the obligation
on the part of respondent, the case is excluded from the coverage of the rule on dismissals based

Page 762 of 845

on unenforceability under the Statute of Frauds, and either party may then enforce its claims
against the other.

Harry Ives Shoemaker vs. La Tondea, Inc.

G.R. No. L-45667

May 9, 1939

FACTS:

Defendant company, La Tondea, Inc., through its president and principal stockholder, Carlos
Palanca, entered into a written contract with plaintiff whereby La Tondea, Inc. employed plaintiff,
Harry Ives Shoemaker, as technical manager of its factories, La Tondea, Inc., Philippine Motor
Alcohol Corporation, and the Bais Distilleries, Inc., for a period of five years with compensation
plus an additional benefit in Shoemakers last year of six months of vacation leave with full
compensation or salary. However, defendant company modified the contract and even made
deductions from the plaintiffs salary. Plaintiff thus filed a complaint against defendant company.
The defendant interposed a demurrer based on the ground that the facts therein alleged do not
constitute a cause of action since it is not averred that the alleged mutual agreement modifying the
contract of lease of services has been put in writing, whereas it states that its terms and conditions
may only be modified upon the written consent of both parties.

ISSUE:

Page 763 of 845

Did the court a quo err in sustaining the demurrer interposed by the defendant company on the
ground that the facts alleged therein do not constitute a cause of action?

HELD:

Yes. In the present case, it is hypothetically admitted that plaintiff complied with all the obligations
he had bound himself to fulfill under the modified oral contract. It is also hypothetically admitted
that the defendant corporation benefited from the fulfillment of said obligations by the plaintiff;
hence, it cannot, in equity and justice, avoid its own obligations assumed under the same modified
oral contract, for to allow it to do so under the protection of the statute of frauds would make of
the latter a shield of and not a protection against frauds.

Page 764 of 845

The Philippine National Bank vs. The Philippine Vegetable Oil Co., Inc., Phil. C. Whitaker

G.R. No. L-25400

January 14, 1927

FACTS:

In 1920, the Philippine Vegetable Oil Co. found itself in debt of approximately P30 million. The
company owed the Philippine National Bank (PNB) P17 million. Over P13 million were due the
other creditors. The PNB was secured principally by a real and chattel mortgage for P3.5 million.
On January 10, 1921, the Vegetable Oil Company executed another chattel mortgage in favor of
the bank on its vessels Tankerville and H. S. Everett to guarantee the payment of sums not to
exceed P4 million.

On January 1, 1921, General Manager Phil. C. Whitaker made his first offer to pledge certain
private properties to secure the creditors of the company. In February of the same year, a creditors
meeting was held. A receiver for the Vegetable Oil Company was appointed by the Court of First
Instance of Manila on March 11, 1921. During the period when a receiver was in control of the
property of the Vegetable Oil Company, a number of events occurred which prompted PNB to
foreclose its mortgage on the property of the Vegetable Oil Company.

ISSUE:

Did the plaintiff fail to comply with the contract after promising that it would furnish funds to the
defendant so that it could continue operating its factory?

HELD:

No. There was no indication in any action taken by the Board of Directors that it had ever
consented to an agreement for practically unlimited backing of the Vegetable Oil Company, or
that it had ratified any such promise made by its General Manager. That is all the evidence,
documentary and oral, at all pertinent to the issue. Taking it entirely into consideration, it discloses
no binding promise, tacit or express, made by the Philippine National Bank to continue indefinitely
its backing of the Vegetable Oil Company.

Page 765 of 845

Anunciacion Vda. de Ouano, Mario P. Ouano, Leticia Ouano Arnaiz, and Cielo Ouano
Martinez vs. The Republic of the Philippines, Mactan-Cebu International Airport Authority,
and the Register of Deeds for the City of Cebu

G.R. No. 168770

February 9, 2011

FACTS:

In 1949, the National Airport Corporation (NAC) pursued a program to expand the Lahug Airport
in Cebu City. Through its team of negotiators, NAC met and negotiated with the owners of the
properties situated around the airport, which included several lots of the Banilad Estate. The
landowners later claimed that the government negotiating team assured them that they could
repurchase their respective lands should the Lahug Airport expansion project not push through or
once the Lahug Airport closes or its operations transferred toMactan-Cebu Airport. Some of the
landowners accepted the assurance and executed deeds of sale with a right of repurchase. Others,
however, including the owners of the Banilad Estate lots, refused to sell because the purchase price
offered was viewed as way below market.

The Republic, as represented by the then Civil Aeronautics Administration (CAA), as successor
agency of the NAC, filed a complaint for the expropriation of the lots. The Court of First Instance
(CFI) of Cebu rendered judgment for the Republic. When the Lahug Airport expansion project
was jettisoned, informal settlers entered and occupied the lot belonging to the Ouanos before its
expropriation. The Ouanos then formally asked to be allowed to exercise their right to repurchase
the lot, but their demand was ignored. The Ouanos thus instituted a complaint before the Cebu
City Regional Trial Court (RTC) for reconveyance. The RTC initially ruled in favor of the Ouanos
but later dismissed the Ouanos complaint. The Ouanos filed an appeal to the Court of Appeals
(CA) which was denied.

ISSUE:

Are petitioners entitled to reconveyance of the subject properties simply on the basis of an alleged
verbal promise or assurance of some NAC officials that the subject properties will be returned if
the airport project would be abandoned?

HELD:

Yes. Analyzing the situation of the cases at bar, there can be no serious objection to the proposition
that the agreement package between the government and the private lot owners was already
partially performed by the government through the acquisition of the lots for the expansion of the
Lahug airport. The parties, however, failed to accomplish the more important condition in the CFI
decision decreeing the expropriation of the lots litigated upon: the expansion of the Lahug Airport.
Page 766 of 845
The project, the public purpose behind the forced property taking, was in fact never pursued and,
as a consequence, the lots expropriated were abandoned. Be that as it may, the two groups of
landowners can, in an action to compel MCIAA to make good its oral undertaking to allow
repurchase, adduce parol evidence to prove the transaction.

Page 767 of 845

The Municipality of Hagonoy, Bulacan, represented by the Hon. Felix V. Ople, Municipal
Mayor, and Felix V. Ople, in his personal capacity vs. Hon. Simeon P. Dumdum, Jr., in his
capacity as the Presiding Judge of the Regional Trial Court, Branch 7, Cebu City; Hon.
Clerk of Court & Ex-Officio Sheriff of the Regional Trial Court of Cebu City; Hon. Clerk of
Court & Ex-Officio Sheriff of the Regional Trial Court of Bulacan and his Deputies; and
Emily Rose Go Ko Lim Chao, doing business under the name and style KD Surplus

G.R. No. 168289

March 22, 2010

FACTS:

Emily Rose Go Ko Lim Chao who is engaged in the buy and sell business of surplus business,
equipment machineries, spare parts and related supplies, filed a complaint against the Municipality
of Hagonoy, Bulacan for collection of sum of money and damages. The complaint alleged that a
contract was entered into by Lim Chao and the Municipality for the delivery of motor vehicles,
which supposedly were needed to carry out certain developmental undertakings in the
Municipality. Lim Chao had delivered to the Municipality of Hagonoy 21 motor vehicles
amounting to P5,820,000. However, despite having made several deliveries, the Municipality
allegedly did not heed Lim Chaos claim for payment. Thus, she filed a complaint for full payment
of the said amount, with interest and damages and prayed for the issuance of a writ of preliminary
attachment against the Municipality.

The trial court issued the Writ of Preliminary Attachment directing the sheriff to attach the estate,
real and personal properties of the Municipality. The Municipality filed a Motion to Dismiss on
the ground that the claim on which the action had been brought was unenforceable under the
Statute of Frauds, and pointing out that there was no written contract or document that would
evince the supposed agreement they entered into with respondent. It also filed a Motion to Dissolve
and/or Discharge the Writ of Preliminary Attachment already issued, invoking, among others,
immunity of the state from suit. The Municipality argued that as a municipal corporation, it is
immune from suit, and that its properties are by law exempt from execution and garnishment. Lim
Chao on her part, counters that the Municipalitys claim of immunity from suit is negated by the
Local Government Code, which vests municipal corporations with the power to sue and be sued.
The trial court ruled in favor of Lim Chao. The Court of Appeals affirmed the trial courts decision.

ISSUE:

Is there a valid reason to deny petitioners motion to dismiss the Writ of Preliminary Attachment?

HELD:

The Supreme Court held that the Writ of Preliminary Attachment should be dismissed as it would
only prove to be useless and unnecessary under the premises since the property of the Municipality

Page 768 of 845

may not, in the event that respondents claim is validated, be subjected to writs of execution and
garnishment, unless there has been a valid appropriation provided by law.

Page 769 of 845

Spouses Antonio and Lolita Tan vs. Carmelito Villapaz

G.R. No. 160892

November 22, 2005

FACTS:

On February 6, 1992, respondent issued a Philippine Bank of Communications (PBCom) crossed

check in the amount of P250,000 payable to the order of petitioner Tony Tan. On even date, the
check was deposited at the drawee bank to the account of petitioner Antonio Tan also at said bank.
The Davao del Sur Police issued an invitation-request to petitioner Antonio Tan inviting him to
appear before the Deputy Chief of Police Office in connection with the request of respondent
Carmelito Villapaz, for conference of vital importance. Upon the advice of his lawyer, Tan did
not show up.

Respondent filed a Complaint for sum of money against petitioners-spouses, alleging that, inter
alia, on February 6, 1992, petitioners-spouses repaired to his place of business at Malita, Davao
and obtained a loan of P250,000, hence, his issuance of the February 6, 1992 PBCom crossed
check. The loan was to be settled interest-free in six months but petitioner Antonio Tan failed to
settle the same. The spouses never settled the loan despite repeated demands, drawing respondent
to file the complaint.

Petitioners alleged that the check was issued by respondent in Davao City in exchange for
equivalent cash; they never received from respondent any demand for payment, be it verbal or
written, respecting the alleged loan; since the alleged loan was one with a period (payable in six
months), it should have been expressly stipulated upon in writing by the parties but it was not,
hence, the essential requisite for the validity and enforceability of a loan is wanting; and the check
is inadmissible to prove the existence of a loan for P250,000. The Regional Trial Court (RTC)
dismissed the complaint. The Court of Appeals reversed the trial courts decision.

ISSUE:

Did the Court of Appeals err in concluding that the transaction in dispute was a contract of loan
and not a mere matter of check encashment as found by the trial court?

HELD:

No. Petitioners version was correctly denied credit by the appellate court. That apart from the
check no written proof of the grant of the loan was executed was credibly explained by respondent
when he declared that petitioners son being his godson, he, out of trust and respect, believed that
the crossed check sufficed to prove their transaction. As for petitioners reliance on Art.1358 of
the Civil Code, the same is misplaced for the requirement that contracts where the amount involved

Page 770 of 845

exceeds P500 must appear in writing is only for convenience. At all events, a check, the entries of
which are no doubt in writing, could prove a loan transaction.

That petitioner Antonio Tan had, on February 6, 1992, an outstanding balance of more than
P950,000 in his account at PBCom where he was later to deposit respondents check did not rule
out petitioners securing a loan. It is pure naivete to believe that if a businessman has such an
outstanding balance in his bank account, he would have no need to borrow a lesser amount. In fine,
as petitioners side of the case is incredible as it is inconsistent with the principles by which men
similarly situated are governed, whereas respondents claim that the proceeds of the check, which
were admittedly received by petitioners, represented a loan extended to petitioner Antonio Tan is
credible, the preponderance of evidence inclines on respondent.

Page 771 of 845

Spouses Venancio David and Patricia Miranda David and Florencia Ventura Vda. de Basco
vs. Alejandro and Guadalupe Tiongson

G.R. No. 108169

August 25, 1999

FACTS:

Three sets of plaintiffs, namely spouses Feliciano and Macaria Ventura, spouses Venancio and
Patricia David and Florencia Ventura Vda. De Basco, filed a complaint for specific performance
with damages against private respondents spouses Alejandro and Guadalupe Tiongson, alleging
that the latter sold to them lots located in Pampanga. The parties expressly agreed that in case
payment is fully paid, respondents would execute an individual deed of absolute sale in plaintiffs
favor. The respondents demanded the execution of a deed of sale and issuance of a certificate of
title but the respondents refused to issue the same. The trial court rendered its decision in favor of
the respondents. However, the Court of Appeals ruled that the contract of sale had not been
perfercted between spouses David and/or Vda. De Basco and respondents. As with regard to the
spouses Ventura, the Court of Appeals affirmed the decision of the trial court.

ISSUE:

Was the Court of Appeals correct in holding that the contract of sale between spouses David and/or
Vda. De Basco and respondents was not perfected?

HELD:

No. The Supreme Court ruled that there was a perfected contact. The Statute of Frauds is, however,
inapplicable. The rule is settled that the Statute of Frauds applies only to executor and not to
completed, executed or partially executed contracts. In the case of spouses David, the payment
made rendered the sales contract beyond the ambit of the Statute of Frauds. However, in view of
the stipulation of the parties that the deed of sale and corresponding certificate of title would be
issued after full payment, then they had entered into a contract to sell and not a contract of sale.

Page 772 of 845

 Genaro Cordial vs. David Miranda

G.R. No. 135495

December 14, 2000

FACTS:

David Miranda, a businessman from Angeles City, was engaged in the rattan business. Gener
Buelva was the supplier of David but the former met an accident and died. Genero Cordial and
Miranda met through Buelvas widow, Cecilla. They agreed for Cordial to be Mirandas
new supplier of rattan poles. Cordial shipped rattan poles as to the agreed number of pieces and
sizes but Miranda refused to pay the cost of the rattan poles delivered. Miranda alleged that there
exists no privity of contract between Miranda and Cordial. Cordial filed a complaint againt
Miranda. The Regional Trial Court (RTC) rendered its decision in favor of petitioner. The Court
of Appeals reversed the decision of the RTC.

ISSUE:

Is the Statute of Frauds applicable in this case?

HELD:

No. The Court of Appeals and respondent Miranda stress the absence of a written memorandum
of the alleged contract between the parties. Respondent implicitly argues that the alleged contract
is unenforceable under the Statute of Frauds. However, the Statute of Frauds applies only to
executor and not to completed, executed, or partially executed contracts. Thus, if one party has
performed ones obligation, oral evidence will be admitted to prove the agreement. In the present
case, it has already been established that petitioner had delivered the rattan poles to respondent.
The contract was partially executed; therefore, the Statute of Frauds does not apply.

Page 773 of 845

 Josefina Villanueva-Mijares, Waldetrudes Villanueva-Nolasco, Godofredo Villanueva,
Eduardo Villanueva, Germelina Villanueva-Fulgencio, Milagros Villanueva-Arquisola, and
Concepcion Macahilas Vda. de Villanueva vs. The Court of Appeals, Procerfina
Villanueva, Prosperidad Villanueva, Ramon Villanueva, Rosa Villanueva, Virginia
Nepomuceno, Paula Nepomuceno, Tarcela Nepomuceno, Mercedes Villanueva, Adelaida
Villanueva, Aparicion Villanueva, Josefina Villanueva, Betty Villanueva, Bobby
Villanueva, Merlinda Villanueva, Morbina Villanueva, Florita Villanueva, Dionisio
Villanueva, and Edita Villanueva

G.R. No. 108921

April 12, 2000

FACTS:

Petitioners Josefina Villanueva-Mjiares, Waldetrudes Villanueva-Nolasco, Godofredo Villanueva,

Eduardo Villanueva, Germelina Villanueva-Fulgencio, and Milagros Villanueva-Arquisola are the
legitimate children of the late Leon Villanueva. Petitioner Concepcion Macahilas vda. de
Villanueva is his widow. Leon was one of eight children of Felipe Villanueva, predecessor-in-
interest of the parties in the present case.

During his lifetime, Felipe owned a parcel of land situated at Estancia, Kalibo, Capiz. Upon
Felipes death, ownership of the land was passed on to his children. Pedro, one of Felipes children,
got his share. The remaining undivided portion of the land was held in trust by Leon. His co-heirs
made several seasonable and lawful demands upon him to subdivide the partition of the property,
but no subdivision took place.

After the death of Leon, private respondents discovered that the shares of four of the heirs of
Felipe, namely, Simplicio, Nicolasa, Fausta and Maria Baltazar, spouse of Benito, was purchased
by Leon as evidenced by a Deed of Sale. It also came to light that Leon had executed a sale and
partition of the property in favor of his own children. Private respondents thus filed a case for
partition with annulment of documents and/or reconveyance and damages with the Regional Trial
Court of Kalibo, Aklan. The RTC declared the petitioners the legal owners of the property. The
Court of Appeals reversed the trial courts decision.

ISSUE:

Did the appellate court err in declaring the Deed of Sale unenforceable against the private
respondents for being an unauthorized contract?

HELD:

No. The court has ruled that the nullity of the unenforceable contract is of a permanent nature and
it will exist as long the unenforceable contract is not duly ratified. The mere lapse of time cannot

Page 774 of 845

give efficacy to such a contract. The defect is such that it cannot be cured except by the subsequent
ratification of the unenforceable contract by the person in whose name the contract was executed.
In the instant case, there is no showing of any express or implied ratification of the assailed Deed
of Sale by the private respondents Procerfina, Ramon, Prosperidad, and Rosa. Thus, the said Deed
of Sale must remain unenforceable as to them.

Page 775 of 845

VILLANUEVA-MIJARES V. COURT OF APPEALS

G.R. No. 108921

April 12, 2000

Facts

Felipe begot the following legitimate children: Simplicio, Benito, Leon, Nicolasa,
Eustaqio, Camila, Fausta, and Pedro. Upon Felipes death, ownership of the land was passed on to
his children. In 1952, Pedro, one of the children of Felipe got his share equivalent to one-sixth
(1/6) of the property with an area of one thousand nine hundred five (1,905) square meters and had
it declared under his name. The undivided portion was held in trust by Leon for his co-heirs. After
the death of Leon, private respondents discovered that the shares of four of the heirs of Felipe,
namely, Simplicio, Nicolasa, Fausta and Maria Baltazar, spouse of Benito, was purchased by Leon.
It also came to light that Leon had, sometime in July 1970, executed a sale and partition of the
property in favor of his own children, herein petitioners. Private respondents then filed a case for
partition with annulment of documents and/or reconveyance and damages.

RTC declared the defendants the legal owners of the property in question in accordance
with the individual titles Issued to them." CA reversed the RTCs decision. It also ruled that under
the Old Civil Code and applicable jurisprudence, Maria Baltazar had no authority to sell the portion
of her late husbands share inherited by her then minor children since she had not been appointed
their guardian. Respondent court likewise declared that as far as private respondents Procerfina,
Prosperidad, Ramon and Rosa, were concerned, the Deed of Sale of August 25, 1946 was
"unenforceable."

Issue

Whether or not the CA erred in declaring the Deed of Sale unenforceable

Ruling

While it is true that the Court of Appeals upheld the validity of the Deed of Sale, it
nevertheless correctly ruled that the sale by Maria Baltazar of her childrens share was invalid.
From its execution up to the time that an action for reconveyance was instituted below by the
private respondents and to the present, the Deed of Sale of August 26, 1948, remained
unenforceable as to private respondents Procerfina, Ramon, Prosperidad, and Rosa. Article 1529
of the old Civil Code, which was the prevailing law in 1948 and thus governed the questioned
Deed of Sale, clearly provided that a contract is unenforceable when there is an absence of
authority on the part of one of the contracting parties. Interpreting Article 1529 of the old Civil
Code, the Court has ruled that the nullity of the unenforceable contract is of a permanent nature
Page 776 of 845
and it will exist as long the unenforceable contract is not duly ratified. The mere lapse of time
cannot give efficacy to such a contract. The defect is such that it cannot be cured except by the
subsequent ratification of the unenforceable contract by the person in whose name the contract
was executed. In the instant case, there is no showing of any express or implied ratification of the
assailed Deed of Sale by the private respondents Procerfina, Ramon, Prosperidad, and Rosa. Thus,
the said Deed of Sale must remain unenforceable as to them.

ROSENCOR DEVELOPMENT CORPORATION V. PATERNO INQUING, ET. AL

G.R. No. 140479

March 8, 2001

Facts

Plaintiffs and plaintiffs-intervenors averred that they are the lessees since 1971 of a two-
story residential apartment owned by spouses Faustino and Cresencia Tiangco. The lease was not
covered by any contract. The lessees were renting the premises then for P150.00 a month and were
allegedly verbally granted by the lessors the pre-emptive right to purchase the property if ever they
decide to sell the same. Upon the death of the spouses Tiangcos in 1975, the management of the
property was adjudicated to their heirs who were represented by Eufrocina de Leon. The lessees
were allegedly promised the same pre-emptive right by the heirs of Tiangcos. In June 1990, the
lessees received a letter from Atty. Erlinda Aguila demanding that they vacate the premises so that
the demolition of the building be undertaken. They refused to leave the premises. In that same
month, de Leon refused to accept the lessees rental payment. Thereafter, they received a letter
from Eufrocina de Leon offering to sell to them the property. However, in November 1990, Rene
Joaquin came to the leased premises introducing himself as its new owner.

The lessees offered to reimburse de Leon the selling price of P726,000.00 plus an
additional P274,000.00 to complete their P1,000.000.00 earlier offer. When their offer was
refused, they filed the present action praying for the following: a) rescission of the Deed of
Absolute Sale between de Leon and Rosencor dated September 4, 1990; b) the defendants
Rosencor/Rene Joaquin be ordered to reconvey the property to de Leon; and c) de Leon be ordered
to reimburse the plaintiffs for the repairs of the property, or apply the said amount as part of the
price for the purchase of the property in the sum of P100,000.00." RTC dismissed the complaint
which was reversed by the CA, ordering the rescission of the absolute deed of sale and the
reconveyance of the subject premises to Eufrosina de Leon.

Issue

Page 777 of 845

 Whether or not the CA erred in ordering the rescission of the absolute deed of sale

Ruling

Under Article 1381 of the New Civil Code, paragraph 3, a contract validly agreed upon
may be rescinded if it is "undertaken in fraud of creditors when the latter cannot in any manner
collect the claim due them." Moreover, under Article 1385, rescission shall not take place "when
the things which are the object of the contract are legally in the possession of third persons who
did not act in bad faith."

Considering that there is no showing of bad faith on the part of the petitioners, the Court
of Appeals thus erred in ordering the rescission of the Deed of Absolute Sale dated September 4,
1990 between petitioner Rosencor and the heirs of the spouses Tiangco. The acquisition by
Rosencor of the property subject of the right of first refusal is an obstacle to the action for its
rescission where, as in this case, it was shown that Rosencor is in lawful possession of the subject
of the contract and that it did not act in bad faith.

This does not mean however that respondents are left without any remedy for the
unjustified violation of their right of first refusal. Their remedy however is not an action for the
rescission of the Deed of Absolute Sale but an action for damages against the heirs of the spouses
Tiangco for the unjustified disregard of their right of first refusal.

SPS. CONSTANTE FIRME AND AZUCENA FIRME V. BUKAL INTERPRISES AND

DEVELOPMENT CORPORATION

G.R. No. 146608

October 23, 2003

Facts

Petitioner Spouses Constante and Azucena Firme (Spouses Firme) are the registered
owners of a parcel of land[3] (Property) located on Dahlia Avenue, Fairview Park, Quezon City.
Renato de Castro (De Castro), the vice president of Bukal Enterprises and Development
Corporation (Bukal Enterprises) authorized his friend, Teodoro Aviles (Aviles), a broker, to
negotiate with the Spouses Firme for the purchase of the Property.

On 28 March 1995, Bukal Enterprises filed a complaint for specific performance and
damages with the trial court, alleging that the Spouses Firme reneged on their agreement to sell
the Property. The complaint asked the trial court to order the Spouses Firme to execute the deed

Page 778 of 845

of sale and to deliver the title to the Property to Bukal Enterprises upon payment of the agreed
purchase price.

The trial court held there was no perfected contract of sale. However, the CA reversed the
decision.

Issue

Whether or not there was a perfected contract of sale

Ruling

Bukal Enterprises is obviously a builder in bad faith. No deed of sale has been executed in
this case. Despite the refusal of the Spouses Firme to sell the Property, Bukal Enterprises still
proceeded to introduce improvements on the Property. Bukal Enterprises introduced
improvements on the Property without the knowledge and consent of the Spouses Firme. When
the Spouses Firme learned about the unauthorized constructions made by Bukal Enterprises on the
Property, they advised the latter to desist from further acts of trespass on their Property.

The Civil Code provides:

Art. 449. He who builds, plants or sows in bad faith on the land of another, loses what is
built, planted or sown without right of indemnity.

Art. 450. The owner of the land on which anything has been built, planted or sown in bad
faith may demand the demolition of the work, or that the planting or sowing be removed, in order
to replace things in their former condition at the expense of the person who built, planted or sowed;
or he may compel the builder or planter to pay the price of the land, and the owner the proper rent.

Under these provisions the Spouses Firme have the following options: (1) to appropriate
what Bukal Enterprises has built without any obligation to pay indemnity; (2) to ask Bukal
Enterprises to remove what it has built; or (3) to compel Bukal Enterprises to pay the value of the
land. Since the Spouses Firme are undoubtedly not selling the Property to Bukal Enterprises, they
may exercise any of the first two options. They may appropriate what has been built without paying
indemnity or they may ask Bukal Enterprises to remove what it has built at Bukal Enterprises own
expense.

LEO QUERUBIN V. COMMISSION ON ELECTIONS

GR No. 218787

Page 779 of 845

December 8, 2015

Facts

On October 27, 2014, the COMELEC en banc, through its Resolution No. 14-0715,
released the bidding documents for the "Two-Stage Competitive Bidding for the Lease of Election
Management System (EMS) and Precinct-Based Optical Mark Reader (OMR) or Optical Scan
(OP-SCAN) System to be used in the 2016 National and Local Elections. The COMELEC Bids
and Awards Committee (BAC) set the deadline for the submission by interested parties of their
eligibility requirements and initial technical proposal on December 4, 2014.
The joint venture of Smartmatic-TIM Corporation (SMTC), Smartmatic International
Holding B.V., and Jarltech International Corporation (collectively referred to as "Smartmatic JV")
responded to the call and submitted bid for the project on the scheduled date. Indra Sistemas, S.A.
(Indra) and MIRU Systems Co. Ltd. likewise signified their interest in the project, but only Indra,
aside from Smartmatic JV, submitted its bid.
During the opening of the bids, Smartmatic JV, in a sworn certification, informed the BAC
that one of its partner corporations, SMTC, has a pending application with the Securities and
Exchange Commission (SEC) to amend its Articles of Incorporation (AOI), attaching therein all
pending documents. The amendments adopted as early as November 12, 2014 were approved by
the SEC on December 10, 2014. On even date, Smartmatic JV and Indra participated in the end-
to-end testing of their initial technical proposals for the procurement project before the BAC.
Finding that the joint venture satisfied the requirements in the published Invitation to Bid,
Smartmatic JV, on March 26, 2015, was declared to have tendered a complete and responsive
Overall Summary of the Financial Proposal. Meanwhile, Indra was disqualified for submitting a
non-responsive bid. Subsequently, for purposes of post-qualification evaluation, the BAC required
Smartmatic JV to submit additional documents and a prototype sample of its OMR. The prototype
was subjected to testing to gauge its compliance with the requirements outlined in the project's
Terms of Reference (TOR).
After the conduct of post-qualification, the BAC, through Resolution No. 9 dated May 5,
2015, disqualified Smartmatic JV on two grounds for failure to submit valid AOI; and the failure
of the demo unit to meet the technical requirement that the system shall be capable of writing all
data/files, auditlog, statistics and ballot images simultaneously in at least two (2) data storages.
Aggrieved, Smartmatic JV filed a Protest to the COMELEC seeking permission to conduct
another technical demonstration. Accordingly, on June 19, 2015, Smartmatic JV was allowed to
prove compliance with the technical specifications for the second time, but this time before the
electoral tribunal's Technical Evaluation Committee (TEC). This was followed, on June 23, 2015,
by another technical demonstration before the Commission en banc at the Advanced Science and
Technology Institute (ASTI) at the University of the Philippines, Diliman, Quezon City.

Page 780 of 845

 COMELEC en banc then ruled that the instant Protest is hereby GRANTED and to RETURN
to prospective bidders their respective payments made for the purchase of Bidding Documents
pertaining to the Second Round of Bidding.
Petitioners contend that SMTC misrepresented itself by leading the BAC to believe that it may
carry out the project despite its limited corporate purpose, and by claiming that it is a Philippine
corporation when it is, allegedly, 100% foreign owned. They add that misrepresentation is a ground
for the procuring agency to consider a bidder ineligible and disqualify it from obtaining an award
or contract. They further contend that SMTC is the biggest shareholder in the bidding joint venture
at 46.5%, making the joint venture less than 60% Filipino-owned.

Issue

Whether SMTCs participation in the bidding is an ultra vires act

Ruling

SMTC 's participation in the bidding is not an ultra vires act but one that is incidental to
its corporate purpose.

To elucidate, an ultra vires act is defined under BP 68 in the following:

Section 45. Ultra vires acts of corporations. - No corporation under this Code shall possess
or exercise any corporate powers except those conferred by this Code or by its articles of
incorporation and except such as are necessary or incidental to the exercise of the powers so
conferred.
The language of the Code appears to confine the term ultra vires to an act outside or beyond
express, implied and incidental corporate powers. Nevertheless, the concept can also include those
acts that may ostensibly be within such powers but are, by general or special laws, either proscribed
or declared illegal. Ultra vires acts or acts which are clearly beyond the scope of one's authority
are null and void and cannot be given any effect. In determining whether or not a corporation may
perform an act, one considers the logical and necessary relation between the act assailed and the
corporate purpose expressed by the law or in the charter, for if the act were one which is lawful in
itself or not otherwise prohibited and done for the purpose of serving corporate ends or reasonably
contributes to the promotion of those ends in a substantial and not merely in a remote and fanciful
sense, it may be fairly considered within corporate powers. The test to be applied is whether the
ad in question is in direct and immediate furtherance of the corporation's business, fairly incident
to the express
In the case at bar, notwithstanding the specific mention of the 2010 National and Local
Elections in SMTC's primary purpose, it is not, as earlier discussed, precluded from entering into
contracts over succeeding ones. Here, SMTC cannot be deemed to be overstepping its limits by
participating in the bidding for the 23,000 new optical mark readers for the 2016 polls since
upgrading the machines that the company supplied the COMELEC for the automation of the 2010
elections and offering them for subsequent elections is but a logical consequence of SMTC's course
Page 781 of 845
of business, and should, therefore, be considered included in, if not incidental to, its corporate
purpose.

GOLDEN APPLE REALTY AND DEVELOPMENT CORPORATION V. SIERRA

GRANDE REALTY CORPORATION, ET. AL

G.R. No. 119857

July 28, 2010

Facts

Hayari Trading Corporation, through a Loan Agreement, borrowed from Manphil

Investment Corporation the amount of Two Million Five Hundred Thousand Pesos for the benefit
of Filipinas Textile Mills, Inc. On the same date, Hayari President Yu Han Yat, Jr., his wife Terry
Villanueva Yu and the latter's uncle, Bernardino Villanueva, executed an Assumption of Joint and
Solidary Liability for and in consideration of the loan granted to Hayari, assuming joint and
solidary liability with Hayari. In connection therewith, Valiant Realty and Development
Corporation, represented by its General Manager Bernardino Villanueva, and Sierra Grande Realty
Corporation represented by Terry Villanueva Yu, executed a Third Party Real Estate Mortgage in
favor of Manphil over a parcel of land, otherwise known as the Roberts property.

Bernardino Villanueva executed a Contract to Sell the Roberts property with Golden Apple
Realty and Development, Inc. On July 26, 1985, Sierra Grande, through Bernardino Villanueva,
finally executed a Deed of Sale, to Golden Apple. Meanwhile, Sierra Grande's Board, passed a
resolution revoking the authority of Bernardo Villanueva to sell the Roberts property.

Terry Villanueva Yu, the President of Sierra Grande at that time, informed Manphil that
Bernardino Villanueva and Elmer Tan had attempted to pre-terminate Hayari's loan in order to
obtain the duplicate original title of the subject lot. It was also mentioned in the letter that Hayari
may opt to pre-terminate the loan itself and be subrogated in the right of action against Bernardino
Villanueva. However, Manphil allowed Elmer Tan to pre-terminate Hayari's obligation after
making total payments to Manphil in the amount of P3, 134,921.00. Hence, Golden Apple and
Rosvibon, on November 28, 1988, filed with the Regional Trial Court of Pasay City, a Complaint
against Sierra Grande and Manphil for specific performance and damages.

The trial court rendered judgment for the plaintiffs and against the defendants, which was
reversed by the Court of Appeals.

Page 782 of 845

Issue

Whether or not the CA erred in invalidating the Deeds of Absolute Sale between Golden
Apple and Rosvibon, as vendees, and Sierra Grande, as vendor

Ruling

According to the CA, because of Rosbivon's lack of personality at the time of the execution
of the Contract to Sell, its presence as a party to the same transaction is taken as another indication
that fraud was indeed attendant. This is one of the situations included, and comprising the phrase
badges of fraud.
Anent the contention of petitioners that inadequacy of price does not invalidate a contract,
the said rule is not without an exception. As provided in the Civil Code:
Art. 1355. Except in cases specified by law, lesion or inadequacy of cause
shall not invalidate a contract, unless there has been fraud, mistake or undue
influence.

The CA was clear as to its main reason for invalidating the contracts in question there was
fraud. The inadequacy of price was merely one of the circumstances upon which the CA was able
to find the existence of fraud and not the main cause for the invalidation of the subject contracts.

THE HEIRS OF MARCELINO DORONIO V. HEIRS OF FORTUNATO DORONIO

G.R. No. 169454

December 27, 2007

Facts

Spouses Simeon Doronio and Cornelia Gante, now both deceased, were the registered
owners of a parcel of a land. The spouses had children. It is clear, however, that Marcelino Doronio
and Fortunato Doronio, now both deceased, were among them and that the parties in this case are
their heirs
On April 24, 1919, a private deed of donation propter nuptias was executed by spouses
Simeon Doronio and Cornelia Gante in favor of Marcelino Doronio and the latters wife, Veronica
Pico. It appears that the property described in the deed of donation is the one covered by OCT No.
352. However, there is a significant discrepancy with respect to the identity of the owner of
adjacent property at the eastern side. Both parties have been occupying the subject land for several

Page 783 of 845

decades although they have different theories regarding its present ownership. According to
petitioners, they are now the owners of the entire property in view of the private deed of donation
propter nuptias in favor of their predecessors, Marcelino Doronio and Veronica Pico.

Eager to obtain the entire property, the heirs of Marcelino Doronio and Veronica Pico filed
before the RTC a petition For the Registration of a Private Deed of Donation. After the RTC
ordered a general default, the petition was eventually granted. This led to the registration of the
deed of donation, cancellation of OCT No. 352 and issuance of a new Transfer Certificate of Title
in the names of Marcelino Doronio and Veronica Pico.
The heirs of Fortunato Doronio filed a pleading before the RTC. It was prayed in the
petition that an order be Issued declaring null and void the registration of the private deed of
donation and that TCT No. 44481 be cancelled. Determined to remain in their possessed property,
respondent heirs of Fortunato Doronio also filed an action for reconveyance and damages with
prayer for preliminary injunction against petitioner heirs of Marcelino Doronio. RTC ruled in
favor of petitioner heirs of Marcelino Doronio. However, the CA reversed the said decision.
Issue
Whether or not the deed of donation executed is void

Ruling
We cannot agree with petitioners contention that respondents may no longer question the
validity of the deed of donation on the ground that they already impliedly admitted it. Under the
provisions of the Civil Code, a void contract is inexistent from the beginning. The right to set up
the defense of its illegality cannot be waived. The right to set up the nullity of a void or non-
existent contract is not limited to the parties as in the case of annullable or voidable contracts; it is
extended to third persons who are directly affected by the contract.
Consequently, although respondents are not parties in the deed of donation, they can set up
its nullity because they are directly affected by the same. The subject of the deed being the land
they are occupying, its enforcement will definitely affect them.

SPOUSES PATRICIO AND MYRNA BERNALES V. HEIRS OF JULIAN SAMBAAN

G.R. No. 163271
January 15, 2010
Facts
Julian Sambaan, married to Guillerma Saarenas-Sambaan, was the registered owner of a
property. The respondents herein and the petitioner Myrna Bernales (Myrna) are the children of
Julian and Guillerma. Myrna, who is the eldest of the siblings, is the present owner and possessor

Page 784 of 845

of the property in question. Sometime in 1975, Julian was ambushed at Merayon, Talakad,
Bukidnon, and was hospitalized due to a gunshot wound. Julian allegedly requested his children
to gather so that he could make his last two wishes. Julians first wish was for the children to redeem
the subject property which was mortgaged to Myrna and her husband Patricio Bernales. Thus,
respondent Absalon Sambaan, one of Julians children, offered to redeem the property but the
petitioners refused because they were allegedly using the property as tethering place for their cattle.
In January 1991, respondents received information that the property was already
transferred to petitioners name. Whereupon, they secured a copy of the Deed of Absolute Sale
which bore the signatures of their parents and had it examined by the National Bureau of
Investigation (NBI). The result of the examination revealed that the signatures of their parents,
Julian and Guillerma, were forged. Respondents, together with their mother Guillerma, filed a
Complaint for Annulment of Deed of Absolute Sale and Cancellation of Transfer Certificate of
Title.
RTC declared Transfer Certificate of Title No. T-14204 null and void. CA affirmed the
decision.
Issue
Whether or not the CA erred in affirming the cancellation of the transfer certificate of title
Ruling
In Sps. Solivel v. Judge Francisco,we held that:
x x x in order that the holder of a certificate for value Issued by virtue of the registration
of a voluntary instrument may be considered a holder in good faith for value, the instrument
registered should not be forged. When the instrument presented is forged, even if accompanied by
the owners duplicate certificate of title, the registered owner does not thereby lose his title, and
neither does the assignee in the forged deed acquire any right or title to the property.
x x x The innocent purchaser for value protected by law is one who purchases a titled land
by virtue of a deed executed by the registered owner himself, not by a forged deed, as the law
expressly states. x x x
The supposed vendor's signature having been proved to be a forgery, the instrument is
totally void or inexistent as "absolutely simulated or fictitious" under Article 1409 of the Civil
Code.[51] According to Article 1410, "the action or defense for the declaration of the inexistence
of a contract does not prescribe. The inexistence of a contract is permanent and incurable which
cannot be cured either by ratification or by prescription.
Thus, the petition is denied.

HEIRS OF SPOUSES ANGEL LIWAGON AND FRANCISCA DUMALAGAN V. HEIRS

OF SPOUSES DEMETRIO LIWAGON AND REGINA LIWAGON

Page 785 of 845

G.R. No. 193117
November 26, 2014

Facts

Petitioners and respondents in the case at bar are all children and grandchildren of the late
spouses Angel and Francisca Liwagon. Angel was provisionally awarded the following parcel of
land through the Board of Liquidators of the Y. Furukawa Plantation.

One of Angels sons named Demetrio, together with his wife Regina, stayed with the
former and administered the property in litigation. The defendants who are all Demetrios
children helped with the cultivation and took care of the familys copra-making business.
Eventually, Angel applied to the Y. Furukawa Tarragona Plantation for final acquisition of the
land by sale. A deed of conveyance was thus executed in Angels favor. As he grew older, Angel
stayed with his children, one after the other. He became sickly in 1976, while staying with one of
his daughters, until the time of his death in 1978. Upon their fathers demise, the [petitioners]
demanded of their brother Demetrio for the partition of the subject landholding. Demetrio pleaded
to defer the partition for economic reasons, to which the [petitioners] acquiesced by permitting the
spouses Demetrio and Regina, and their children, to continuously occupy the land in litigation.
When Demetrio died, followed shortly by Regina, [petitioner] Josefina signified her demand for
partition to one of Demetrios sons named Rodrigo. Rodrigo ignored the demand, however,
contending that they now owned the property as inheritance from their parents, who had earlier
lawfully acquired the land by purchase from their grandfather, as evidenced by a Deed of Sale
dated 24 July 1972. As heirs of Angel and Francisca, the [petitioners] presently brought the instant
case for annulment of the sale, partition, accounting and damages against the defendants-heirs of
Spouses Demetrio and Regina.

Petitioners presented the testimony of Josefina Liwagon-Escauso (Josefina) before the

court a quo. Josefina further claimed that the signature appearing on the assailed Deed of Sale is
not the signature of her father, and that his fathers true signature is the one found on the
Application for the sales patent.

The trial court dismissed the complaint which was affirmed by CA.

Issue

Whether the alleged deed of sale executed by Angel Liwagon in favor of Regina Liwagon
in 1972 is valid

Ruling

Page 786 of 845

 We deny the petition. Petitioners failed to overcome this presumption. In the case at bar, a
single fact fatal to the cause of petitioners is clear: that aside from the sole testimony of petitioner
Josefina that the signature appearing in the assailed Deed of Sale is not that of her father, no clear,
positive and convincing evidence was shown to corroborate such claim. The trial court correctly
appreciated the testimony of Josefina in its Ruling on the Issue, viz.:
The plaintiffs in this case failed to overcome the presumption of regularity. Josefina
testified that the signature affixed on top of the typewritten name of Angel Liwagon is not the real
and true signature of her father Angel. The presentation of a copy of a sales application is not
enough to substantiate her claim that the signature found on said application is the real and true
signature of her father Angel Liwagon. Plaintiff did not present the notary public who notarized
the Deed of Sale or any witness to prove that the signature of Angel appearing on the deed is not
the true signature of her father.

Lastly, as to petitioners making an Issue of the circumstance that their brother Demetrio
never disclosed to them the existence of the purported Deed of Sale, such unexplained delay in
disclosing the alleged deed of sale is not sufficient basis to declare that the sale was fictitious and
hence not valid. While petitioners may consider it as concealment and as a sign of guilt that the
purported deed is fictitious, this Court needs relevant, convincing and clear evidence and not
mere unsubstantiated conjectures especially in this case where petitioners failed to discharge
their burden to prove on all points that the assailed Deed of Sale was not valid.

JESUS CAMPOS AND ROSEMARIE CAMPOS-BAUTISTA V. NENITA BUENVENIDA

PASTRANA
G.R. No. 175994
December 8, 2009

Facts
The first case arose from the refusal of Carlito Campos, the father of herein petitioners, to surrender
the possession of a fishpond he leased from respondents mother, Salvacion Buenvenida, despite the
expiration of their contract of lease. Alleging that he was an agricultural lessee, Carlito filed an agrarian
case. After trial, RTC found that Carlito was not an agricultural tenant. He then appealed to the CA and
subsequently to this Court, but was unsuccessful. While the appeal in the Agrarian Case was pending before
the CA, herein respondents filed the second case for Recovery of Possession and Damages with Preliminary
Mandatory Injunction (Possession Case) involving the same fishpond .
RTC rendered a Decision finding Carlito to have retained possession of the fishpond
notwithstanding the expiration of the contract of lease and ordering him to pay rentals, the value
of the produce and damages to the herein respondents. The Decision became final and executory

Page 787 of 845

and a Writ of Execution was Issued. Carlito was the registered owner of two lots. When the respondents
were about to levy these properties to satisfy the judgment in the Possession Case, they discovered that
spouses Carlito and Margarita Campos transferred these lots to their children Rosemarie and Jesus Campos,
herein petitioners, by virtue of Deeds of Absolute Sale.
Respondents instituted the third case seeking to declare as null the aforesaid deeds of sale and the
transfer certificates of title. RTC dismissed the complaint. CA ruled that the assailed contracts of sale were
indeed absolutely simulated transactions and declared the same to be void ab initio.
Issue
Whether or not the CA erred in declaring the contracts of sale void
Ruling
The petition lacks merit.
The CA correctly held that the assailed Deeds of Absolute Sale were executed when the Possession
Case was already pending, evidently to avoid the properties subject thereof from being attached or levied
upon by the respondents. While the sales in question transpired onOctober 18, 1985 and November 2,
1988, as reflected on the Deeds of Absolute Sale, the same were registered with the Registry of Deeds only
on October 25, 1990 and September 25, 1990. Second, there was a wide disparity in the alleged
consideration specified in the Deeds of Absolute Sale and the actual zonal valuation of the subject properties
as per the BIR Certification. The fact that petitioners were able to secure titles in their names did not operate
to vest upon them ownership over the subject properties. That act has never been recognized as a mode of
acquiring ownership. The Torrens system does not create or vest title. It only confirms and records title
already existing and vested. It does not protect a usurper from the true owner. It cannot be a shield for the
commission of fraud. Finally, petitioners argument that the applicable law in this case is Article 1381(3)
of the Civil Code on rescissible contracts and not Article 1409 on void contracts is not a question of first
impression. This Issue had already been settled several decades ago when we held that an action to rescind
is founded upon and presupposes the existence of a contract. A contract which is null and void is no contract
at all and hence could not be the subject of rescission.
In the instant case, we have declared the Deeds of Absolute Sale to be fictitious and inexistent for
being absolutely simulated contracts. It is true that the CA cited instances that may constitute badges of
fraud under Article 1387 of the Civil Code on rescissible contracts. But there is nothing else in the appealed
decision to indicate that rescission was contemplated under the said provision of the Civil Code. The
aforementioned badges must have been considered merely as grounds for holding that the sale is fictitious.
Consequently, we find that the CA properly applied the governing law over the matter under consideration
which is Article 1409 of the Civil Code on void or inexistent contracts.

NATIVIDAD ARIAGA VDA. DE GURREA, ET. AL V. ENRIQUE SUPLICO

G.R. No. 144320
April 26, 2006

Page 788 of 845

Facts
The lot in question was originally owned by one of herein plaintiffs Attorney-in-Fact, Rosalina
Gurrea. That sometime in 1958, Rosalina Gurrea transferred the ownership of said lot to Adelina Gurrea.
Adelina Gurrea continued to be the owner of the lot until her death. Thereafter, Special Proceedings No.
7185 was instituted to have the will she executed during her lifetime probated and to settle her estate. Under
the said will, the San Juan lot was bequeathed to Pilar and Luis Gurrea, while 700,000 pesetas, of the lot in
Baguio City and a one-hectare piece of land in Pontevedra, Negros Occidental were given to Ricardo
Gurrea.
Ricardo Gurrea filed an Opposition. In consideration of said representation, Ricardo Gurrea agreed
to pay Atty. Suplico a contingent fee of twenty (20%) of whatever is due me, either real or personal
property. Ricardo Gurrea further instructed Atty. Suplico not to enter into any settlement with the heirs
unless the piso (apartment building) is transferred to his daughter. Finally, the transfer of the piso worth
P64, 000.00 was executed and the heirs arrived at an amicable settlement regarding the estate of Adelina
Gurrea. Hence, Ricardo Gurrea withdrew his Opposition and the heirs then drew up a project of partition
which was eventually approved by the probate court.
As payment of his attorneys fees, Ricardo Gurrea offered the San Juan lot to Atty. Suplico. The
latter agreed to Ricardo Guerreas proposal with the further understanding that he will receive an additional
commission of 5% if he sells the Baguio property. Thereafter, the deed of Transfer of Rights and Interest
was drafted. Atty. Suplico registered the deed and obtained a title/TCT to the San Juan property under his
name. Ricardo Gurrea died on October 22, 1980. After his death, his heirs instituted the settlement of
Ricardo Gurreas estate. In the said proceedings, Atty. Suplico filed several claims for unpaid attorneys
fees; however, all were dismissed with finality.
The petitioners filed a complaint for annulment of title with prayer for preliminary injunction.
However the RTC dismissed the case which was affirmed by the CA.
Issue
Whether or not, assuming without admitting, that the transfer of rights and interests was
duly executed by Ricardo Gurrea, the same violates article 1491 of the new civil code and,
therefore, null and void.
Ruling
The Court finds the petition meritorious.
Anent the first issue, it is necessary to resolve whether the subject property was still the
object of litigation at the time the deed of Transfer of Rights and Interest in favor of respondent
was executed; and if so, whether the same should be considered null and void for being violative
of the provisions of Article 1491 of the Civil Code.

Article 1491(5) of the Civil Code provides:

Page 789 of 845

 1491. The following persons cannot acquire by purchase, even at a public
or judicial auction, either in person or through the mediation of another:
(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior
courts, and other officers and employees connected with the administration of
justice, the property and rights in litigation or levied upon an execution before the
court within whose jurisdiction or territory they exercise their respective
functions; this prohibition includes the act of acquiring by assignment and shall
apply to lawyers, with respect to the property and rights which may be the object
of any litigation in which they may take part by virtue of their profession.

Having been established that the subject property was still the object of litigation at the time the
subject deed of Transfer of Rights and Interest was executed, the assignment of rights and interest over the
subject property in favor of respondent is null and void for being violative of the provisions of Article 1491
of the Civil Code which expressly prohibits lawyers from acquiring property or rights which may be the
object of any litigation in which they may take part by virtue of their profession.

ALFRED FRITZ FRENZEL V. EDERLINA P. CATITO

G.R. No. 143958
July 11, 2003

Facts
Petitioner Alfred Fritz Frenzel is an Australian citizen of German descent who married
Teresita Santos, a Filipino citizen. In 1981, Alfred and Teresita separated from bed and board
without obtaining a divorce. Alfred met Ederlina Catito, a Filipina who was married to Klaus
Muller. Alfred helped Ederlina in putting up a parlor in the Philippines. Alfred paid Atty. Hidalgo
P20,000.00 for his right over the property and gave P300,000.00 to Ederlina for the purchase of
equipment and furniture for the parlor. He also purchased a house and lot. Since Alfred knew that
as an alien he was disqualified from owning lands in the Philippines, he agreed that only Ederlina's
name would appear in the deed of sale as the buyer of the property, as well as in the title covering
the same. Alfred decided to purchase another three parcels of land in the name of Erlinda. After
all, he was planning to marry Ederlina and he believed that after their marriage, the two of them
would jointly own the property. In the meantime, Ederlina's petition for divorce was denied
because Klaus opposed the same. A second petition filed by her met the same fate. Klaus wanted
half of all the properties owned by Ederlina in the Philippines before he would agree to a divorce.
Worse, Klaus threatened to file a bigamy case against Ederlina. Alfred and Ederlina's relationship
deteriorated. Alfred filed a Complaint for recovery of real and personal properties located in
Quezon City and Manila.

Page 790 of 845

 The RTC in Davao was in favor of Erlinda. The CA rendered a decision affirming in
toto the decision of the RTC. The appellate court ruled that the petitioner knowingly violated the
Constitution.
Issue
Whether or not CA erred in affirming the RTCs decision
Ruling

The petitioner cannot find solace in Article 1416 of the New Civil Code which reads:

Art. 1416. When the agreement is not illegal per se but is merely prohibited, and the
prohibition by the law is designed for the protection of the plaintiff, he may, if public policy
is thereby enhanced, recover what he has paid or delivered. 64

The provision applies only to those contracts which are merely prohibited, in order to
benefit private interests. It does not apply to contracts void ab initio. The sales of three parcels of
land in favor of the petitioner who is a foreigner is illegal per se. The transactions are void ab
initio because they were entered into in violation of the Constitution. Thus, to allow the petitioner
to recover the properties or the money used in the purchase of the parcels of land would be
subversive of public policy.

Thus, the petition is dismissed.

LA BUGAL-B'LAAN TRIBAL ASSOCIATION, INC. V. VICTOR O. RAMOS, ET. AL

G.R. No. 127882

December 1, 2004

Facts

The Petition for Prohibition and Mandamus before the Court challenges the
constitutionality of (1) Republic Act No. [RA] 7942 (The Philippine Mining Act of 1995); (2) its
Implementing Rules and Regulations (DENR Administrative Order No. [DAO] 96-40); and (3)
the FTAA dated March 30, 1995, executed by the government with Western Mining Corporation
(Philippines), Inc. (WMCP).

On January 27, 2004, the Court en banc promulgated its Decision granting the Petition and
declaring the unconstitutionality of certain provisions of RA 7942, DAO 96-40, as well as of the

Page 791 of 845

entire FTAA executed between the government and WMCP, mainly on the finding that FTAAs
are service contracts prohibited by the 1987 Constitution.

The Decision struck down the subject FTAA for being similar to service contracts, which,
though permitted under the 1973 Constitution, were subsequently denounced for being antithetical
to the principle of sovereignty over our natural resources, because they allowed foreign control
over the exploitation of our natural resources, to the prejudice of the Filipino nation.

The Decision quoted several legal scholars and authors who had criticized service contracts
for, inter alia, vesting in the foreign contractor exclusive management and control of the enterprise,
including operation of the field in the event petroleum was discovered; control of production,
expansion and development; nearly unfettered control over the disposition and sale of the products
discovered/extracted; effective ownership of the natural resource at the point of extraction; and
beneficial ownership of our economic resources. According to the Decision, the 1987 Constitution
(Section 2 of Article XII) effectively banned such service contracts.

Issue
Whether or not the FTAAs are void
Ruling

To bolster further their claim that the case is not moot, petitioners insist that the FTAA is
void and, hence cannot be transferred; and that its transfer does not operate to cure the
constitutional infirmity that is inherent in it; neither will a change in the circumstances of one of
the parties serve to ratify the void contract.

Petitioners are confusing themselves. The present Petition has been filed, precisely because
the grantee of the FTAA was a wholly owned subsidiary of a foreign corporation. It cannot be
gainsaid that anyone would have asserted that the same FTAA was void if it had at the outset been
issued to a Filipino corporation. The FTAA, therefore, is not per se defective or unconstitutional.
It was questioned only because it had been issued to an allegedly non-qualified, foreign-owned
corporation. We believe that this case is clearly analogous to Halili, in which the land acquired by
a non-Filipino was re-conveyed to a qualified vendee and the original transaction was thereby
cured. Paraphrasing Halili, the same rationale applies to the instant case: assuming arguendo the
invalidity of its prior grant to a foreign corporation, the disputed FTAA -- being now held by a
Filipino corporation -- can no longer be assailed; the objective of the constitutional provision -- to
keep the exploration, development and utilization of our natural resources in Filipino hands -- has
been served.

More accurately speaking, the present situation is one degree better than that obtaining
in Halili, in which the original sale to a non-Filipino was clearly and indisputably violative of the
constitutional prohibition and thus voidab initio. In the present case, the issuance/grant of the
subject FTAA to the then foreign-owned WMCP was notillegal, void or unconstitutional at the

Page 792 of 845

time. The matter had to be brought to court, precisely for adjudication as to whether the FTAA and
the Mining Law had indeed violated the Constitution. Since, up to this point, the decision of this
Court declaring the FTAA void has yet to become final, to all intents and purposes, the FTAA
must be deemed valid and constitutional.

DEMOSTHENES P. AGAN, JR., ET AL., VS. PHILIPPINE INTERNATIONAL AIR

TERMINALS CO., INC., MANILA INTERNATIONAL AIRPORT AUTHORITY,
DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS AND
SECRETARY LEANDRO M. MENDOZA
G.R. No. 155001
January 21, 2004

Facts
On October 5, 1994, Asias Emerging Dragon Corp. (AEDC) submitted an unsolicited
proposal to the Philippine Government through the Department of Transportation and
Communication (DOTC) and Manila International Airport Authority (MIAA) for the construction
and development of the NAIA IPT III under a build-operate-and-transfer arrangement pursuant to
R.A. No. 6957, as amended by R.A. No. 7718 (BOT Law). In accordance with the BOT Law and
its Implementing Rules and Regulations (Implementing Rules), the DOTC/MIAA invited the
public for submission of competitive and comparative proposals to the unsolicited proposal of
AEDC.
On September 20, 1996 a consortium composed of the Peoples Air Cargo and
Warehousing Co., Inc. (Paircargo), Phil. Air and Grounds Services, Inc. (PAGS) and Security
Bank Corp. (Security Bank) (collectively, Paircargo Consortium), submitted their competitive
proposal to the Prequalification Bids and Awards Committee (PBAC).After finding that the
Paircargo Consortium submitted a bid superior to the unsolicited proposal of AEDC and after
failure by AEDC to match the said bid, the DOTC Issued the notice of award for the NAIA IPT
III project to the Paircargo Consortium, which later organized into herein respondent PIATCO.
Hence, on July 12, 1997, the Government, through then DOTC Secretary Arturo T. Enrile, and
PIATCO, through its President, Henry T. Go, signed the Concession Agreement for the Build-
Operate-and-Transfer Arrangement of the Ninoy Aquino International Airport Passenger Terminal
III (1997 Concession Agreement).
On November 26, 1998, the 1997 Concession Agreement was superseded by the Amended
and Restated Concession Agreement (ARCA) containing certain revisions and modifications from
the original contract. A series of supplemental agreements was also entered into by the
Government and PIATCO. The First Supplement was signed on August 27, 1999, the Second
Supplement on September 4, 2000, and the Third Supplement on June 22, 2001 (collectively,
Supplements) (the 1997 Concession Agreement, ARCA and the Supplements collectively referred

Page 793 of 845

to as the PIATCO Contracts).On September 17, 2002, various petitions were filed before this Court
to annul the 1997 Concession Agreement, the ARCA and the Supplements and to prohibit the
public respondents DOTC and MIAA from implementing them.
In a decision dated May 5, 2003, this Court granted the said petitions and declared the 1997
Concession Agreement, the ARCA and the Supplements null and void. Respondent PIATCO,
respondent-Congressmen and respondents-intervenors now seek the reversal of the decision.
Issue
Whether or not the Concession Agreement, the ARCA and the Supplements null and void
Ruling
Public bidding is a standard practice for procuring government contracts for public service
and for furnishing supplies and other materials. It aims to secure for the government the lowest
possible price under the most favorable terms and conditions, to curtail favoritism in the award of
government contracts and avoid suspicion of anomalies and it places all bidders in equal footing.
Any government action which permits any substantial variance between the conditions under
which the bids are invited and the contract executed after the award thereof is a grave abuse of
discretion amounting to lack or excess of jurisdiction which warrants proper judicial action.
In view of the above discussion, the fact that the foregoing substantial amendments were made
on the 1997 Concession Agreement renders the same null and void for being contrary to public
policy. These amendments convert the 1997 Concession Agreement to an entirely different
agreement from the contract bidded out or the draft Concession Agreement. It is not difficult to
see that the amendments on (1) the types of fees or charges that are subject to MIAA regulation or
control and the extent thereof and (2) the assumption by the Government, under certain conditions,
of the liabilities of PIATCO directly translates concrete financial advantages to PIATCO that were
previously not available during the bidding process. These amendments cannot be taken as merely
supplements to or implementing provisions of those already existing in the draft Concession
Agreement. The amendments discussed above present new terms and conditions which provide
financial benefit to PIATCO which may have altered the technical and financial parameters of
other bidders had they known that such terms were available.

SENATOR ROBERT S. JAWORSKI, VS. PHILIPPINE AMUSEMENT AND GAMING

CORPORATION AND SPORTS AND GAMES ENTERTAINMENT CORPORATION
January 14, 2004
G.R. No. 144463

Facts

Page 794 of 845

 On March 31, 1998, PAGCORs board of directors approved an instrument denominated
as Grant of Authority and Agreement for the Operation of Sports Betting and Internet Gaming,
which granted SAGE the authority to operate and maintain Sports Betting station in PAGCORs
casino locations, and Internet Gaming facilities to service local and international bettors, provided
that to the satisfaction of PAGCOR, appropriate safeguards and procedures are established to
ensure the integrity and fairness of the games.

Petitioner filed the instant petition, praying that the grant of authority by PAGCOR in favor
of SAGE be nullified. He maintains that PAGCOR committed grave abuse of discretion
amounting to lack or excess of jurisdiction when it authorized SAGE to operate gambling on the
internet. He contends that PAGCOR is not authorized under its legislative franchise, P.D. 1869,
to operate gambling on the internet for the simple reason that the said decree could not have
possibly contemplated internet gambling since at the time of its enactment on July 11, 1983 the
internet was yet inexistent and gambling activities were confined exclusively to real-space.
Further, he argues that the internet, being an international network of computers, necessarily
transcends the territorial jurisdiction of the Philippines, and the grant to SAGE of authority to
operate internet gambling contravenes the limitation in PAGCORs franchise, under Section 14 of
P.D. No. 1869

Issue
Whether or not the agreement granting the authority to PAGCOR to operate internet
gambling should be declared void

Ruling
In the case at bar, PAGCOR executed an agreement with SAGE whereby the former grants
the latter the authority to operate and maintain sports betting stations and Internet gaming
operations. In essence, the grant of authority gives SAGE the privilege to actively participate,
partake and share PAGCORs franchise to operate a gambling activity. The grant of franchise is a
special privilege that constitutes a right and a duty to be performed by the grantee. The grantee
must not perform its activities arbitrarily and whimsically but must abide by the limits set by its
franchise and strictly adhere to its terms and conditionalities. A corporation as a creature of the
State is presumed to exist for the common good. Hence, the special privileges and franchises it
receives are subject to the laws of the State and the limitations of its charter. There is therefore a
reserved right of the State to inquire how these privileges had been employed, and whether they
have been abused.
While PAGCOR is allowed under its charter to enter into operators and/or management
contracts, it is not allowed under the same charter to relinquish or share its franchise, much less
grant a veritable franchise to another entity such as SAGE. PAGCOR cannot delegate its power in
view of the legal principle of delegata potestas delegare non potest, inasmuch as there is nothing

Page 795 of 845

in the charter to show that it has been expressly authorized to do so. In Lim v. Pacquing, the Court
clarified that since ADC has no franchise from Congress to operate the jai-alai, it may not so
operate even if it has a license or permit from the City Mayor to operate the jai-alai in the City of
Manila. By the same token, SAGE has to obtain a separate legislative franchise and not ride on
PAGCORs franchise if it were to legally operate on-line Internet gambling.
WHEREFORE, in view of all the foregoing, the instant petition is GRANTED. The Grant
of Authority and Agreement to Operate Sports Betting and Internet Gaming executed by PAGCOR
in favor of SAGE is declared NULL and VOID.

HEIRS OF THE LATE SPOUSES AURELIO AND ESPERANZA BALITE VS. RODRIGO
N. LIM,
G.R. No. 152168
December 10, 2004

Facts
Spouses Aurelio and Esperanza Balite were the owners of a parcel of land with an area of
17,551 square meters. When Aurelio died intestate in 1985, his wife, Esperanza Balite, and their
children, petitioner Antonio Balite, Flor Balite-Zamar, Visitacion Balite-Difuntorum, Pedro Balite,
Pablo Balite, Gaspar Balite, Cristeta Balite and Aurelio Balite, Jr., inherited the subject property
and became co-owners thereof, with Esperanza inheriting an undivided share of 9,751 square
meters.
Esperanza became ill and was in dire need of money for her hospital expenses. She,
through her daughter, Cristeta, offered to sell to Rodrigo Lim, her undivided share. Esperanza and
Rodrigo agreed that, under the Deed of Absolute Sale, to be executed by Esperanza over the
property, it will be made to appear that the purchase price of the property would be P150,000.00,
although the actual price agreed upon by them for the property was P1,000,000.00.
Gaspar, Visitacion, Flor, Pedro and Aurelio, Jr. learned of the sale, they wrote a letter to
the Register of Deeds [RD] of Northern Samar, saying that they were not informed of the sale of
a portion of the said property by their mother nor did they give their consent thereto. On June 27,
1997, petitioners filed a complaint against Rodrigo with the Regional Trial Court of Northern
Samar for Annulment of Sale, Quieting of Title, Injunction and Damages.
The trial court dismissed the Complaint. The Court of Appeals held that the sale was valid
and binding insofar as Ezperanza Balites undivided share of the property was concerned.

Issue

Page 796 of 845

 Whether or not the Deed of Absolute Sale is void

Ruling

Article 1345 of the Civil Code provides that the simulation of a contract may either be
absolute or relative. In absolute simulation, there is a colorable contract but without any substance,
because the parties have no intention to be bound by it. An absolutely simulated contract is void,
and the parties may recover from each other what they may have given under the contract. On
the other hand, if the parties state a false cause in the contract to conceal their real agreement, such
a contract is relatively simulated. Here, the parties real agreement binds them.
In the present case, the parties intended to be bound by the Contract, even if it did not
reflect the actual purchase price of the property. That the parties intended the agreement to produce
legal effect is revealed by the letter of Esperanza Balite to respondent dated October 23, 1996 and
petitioners admission that there was a partial payment of P320,000 made on the basis of the Deed
of Absolute Sale. There was an intention to transfer the ownership of over 10,000 square meters
of the property. The Deed of Absolute Sale was merely relatively simulated, it remains valid and
enforceable between the parties and their successors in interest since all the essential requisites
prescribed by law for the validity and perfection of contracts are present.

ALEJANDRIA PINEDA, ET. AL VS. COURT OF APPEALS, ET.AL

February 6, 2002
376 SCRA 222

Facts
The appellees and the petitioner, Pineda, executed an Agreement to Exchange Real
Properties. The appellees exchanging their property at White Plains with that of the Pinedas
located in California. At the time of the execution of the agreement, the White Plains property was
mortgaged with the GSIS, while the California property also had a mortgaged obligation. As stated
in the exchange agreement, Pineda paid the appellees the total amount of $12, 000. Pineda and the
spouses Duque executed an agreement to sell over the White Plains property, whereby Pineda sold
the property in the amount of P1.6M. Pineda paid the mortgage of the White Plains property and
requested the appellees for a written authority for the release of the title from GSIS. The appellees
gave Pineda the authority with the understanding that Pineda will deliver the title to the appellees.
Upon their return to the Philippines, the appellees discovered that the spouses Duque were
occupying the White Plains property and a fictitious deed of sale in the name of Pineda.

Page 797 of 845

 In a civil case filed by the appellees, the trial court declared them as the absolute owners
of the property located in White Plains.

Issue
Whether or not the Deed of Sale is void

Ruling
The Court denies the petition. It appears that the Baez spouses were the original owners
of the parcel of land and improvements located at White Plains, Quezon City. On January 11,
1983, the Baez spouses and petitioner Pineda executed an agreement to exchange real properties.
However, the exchange did not materialize. Petitioner Pinedas "sale" of the property to petitioners
Duque was not authorized by the real owners of the land, respondent Baez. The Civil Code
provides that in a sale of a parcel of land or any interest therein made through an agent, a special
power of attorney is essential. This authority must be in writing; otherwise the sale shall be void.
In his testimony, petitioner Adeodato Duque confirmed that at the time he "purchased"
respondents property from Pineda, the latter had no Special Power of Authority to sell the
property. A special power of attorney is necessary to enter into any contract by which the
ownership of an immovable is transmitted or acquired for a valuable consideration. Without an
authority in writing, petitioner Pineda could not validly sell the subject property to petitioners
Duque. Hence, any "sale" in favor of petitioners Duque is void.

EDILBERTO CRUZ AND SIMPLICIO CRUZ VS. BANCOM FINANCE CORPORATION

(NOW UNION BANK OF THE PHILIPPINES)
G.R. No. 147788
March 19, 2002
Facts

Plaintiffs Rev. Fr. Edilberto Cruz and his brother Simplicio Cruz, were the registered
owners of a parcel of agricultural land together with improvements.
Defendant Norma Sulit, after being introduced by Candelaria Sanchez to Fr. Cruz, offered
to purchase the land. Plaintiffs asking price for the land was P700,000.00, but Norma only had
P25,000.00 which Fr. Cruz accepted as earnest money with the agreement that titles would be
transferred to Norma upon payment of the balance of P675,000.00. Norma succeeded in having
the plaintiffs execute a document of sale of the land in favor of Candelaria who planned to obtain
a bank loan in her name using the plaintiffs land as collateral.

Page 798 of 845

 On account of Normas failure to pay the amount stipulated in the Special Agreement and
her subsequent disappearance from her usual address, plaintiffs were prompted to file a complaint
to recover the property.
ISSUE

Whether or not the Contracts of Sale and Mortgage are void

Ruling

Clearly, the Deeds of Sale were executed merely to facilitate the use of the property as
collateral to secure a loan from a bank. Being merely a subterfuge, these agreements could not
have been the source of any consideration for the supposed sales. Indeed, the execution of the two
documents on the same day sustains the position of petitioners that the Contracts of Sale were
absolutely simulated, and that they received no consideration therefor.
The failure of Sulit to take possession of the property purportedly sold to her was a clear
badge of simulation that rendered the whole transaction void and without force and effect, pursuant
to the Civil Code. The fact that she was able to secure a Certificate of Title to the subject property
in her name did not vest her with ownership over it. A simulated deed of sale has no legal effect;
consequently any transfer certificate of title Issued in consequence thereof should be cancelled. A
simulated contract is not a recognized mode of acquiring ownership.

MANSUETO CUATON VS. REBECCA SALUD AND COURT OF APPEALS (SPECIAL

FOURTEENTH DIVISION)
G.R. No. 158382
January 27, 2004

Facts
Respondent Rebecca Salud, joined by her husband Rolando Salud, instituted a suit for
foreclosure of real estate mortgage with damages against petitioner Mansueto Cuaton and his
mother, Conchita Cuaton, with the trial court. The trial court rendered a decision declaring the
mortgage void, because it was executed by Mansueto Cuaton in favor of Rebecca Salud without
expressly stating that he was merely acting as a representative of Conchita Cuaton, in whose name
the mortgaged lot was titled. The court ordered petitioner to pay Rebecca Salud, inter alia, the
loan secured by the mortgage in the amount of P1,000,000 plus a total P610,000.00 representing
interests of 10% and 8% per month for the period February 1992 to August 1992.
Both parties filed their respective notices of appeal.

Page 799 of 845

 The Court of Appeals affirmed the judgment of the trial court. Petitioner filed a motion
for partial reconsideration of the trial courts decision with respect to the award of interest in the
amount of P610,000.00, arguing that the same was iniquitous and exorbitant. This was denied by
the Court of Appeals.

Issue
Whether or not the stipulation of excessive interest rates shall render the contract void

Ruling
In the present case, the 10% and 8% interest rates per month on the one-million-peso loan of
petitioner are even higher than those previously invalidated by the Court in the above
cases. Accordingly, the reduction of said rates to 12% per annum is fair and reasonable.
Stipulations authorizing iniquitous or unconscionable interests are contrary to morals (contra
bonos mores), if not against the law. Under Article 1409 of the Civil Code, these contracts are
inexistent and void from the beginning. They cannot be ratified nor the right to set up their illegality
as a defense be waived.
Moreover, the contention regarding the excessive interest rates cannot be considered as an
Issue presented for the first time on appeal. The records show that petitioner raised the validity of
the 10% monthly interest in his answer filed with the trial court. To deprive him of his right to
assail the imposition of excessive interests would be to sacrifice justice to
technicality. Furthermore, an appellate court is clothed with ample authority to review Rulings
even if they are not assigned as errors. This is especially so if the court finds that their consideration
is necessary in arriving at a just decision of the case before it. We have consistently held that an
unassigned error closely related to an error properly assigned, or upon which a determination of
the question raised by the error properly assigned is dependent, will be considered by the appellate
court notwithstanding the failure to assign it as an error. Since respondents pointed out the matter
of interest in their Appellants Brief before the Court of Appeals, the fairness of the imposition
thereof was opened to further evaluation. The Court therefore is empowered to review the same.
Wherefore, petition is granted.

HADJA FATIMA GAGUIL MAGOYAG joined by her husband, HADJI HASAN

MADLAWI MAGOYAG vs. HADJI ABUBACAR MARUHOM
G.R. No. 179743
August 2, 2010

Facts

Page 800 of 845

 Respondent Hadji Abubacar Maruhom was awarded a market stall at the Reclamation Area
by the Islamic City of Marawi. On December 1, 1985, respondent orally sold his stall to petitioner
for P20,000.00. Later, respondent executed a Deed of Assignment, confirming the oral sale;
assigning, selling, transferring, and conveying his market stall to petitioners for a consideration
of P20,000.00. In the same Deed of Assignment, petitioners leased the subject stall to respondent
for a monthly rental of P250.00, beginning December 1, 1985, renewable every year at the option
of petitioners.
Respondent religiously paid the monthly rentals. However, on June 1, 1993, respondent
simply stopped paying the rentals. Respondent promised to settle his unpaid account, but he failed
to make good his promise. Petitioner then demanded that respondent vacate the property, but the
demand just fell on deaf ears.
Accordingly, on August 22, 1994, petitioners filed a complaint for recovery of possession
and damages, with prayer for issuance of a temporary restraining order (TRO), with the Regional
Trial Court.
Respondent averred that he signed the Deed of Assignment on petitioners assurance that
the conditions they earlier agreed upon were contained in the deed. Being illiterate, he just relied
on petitioners assurances. Respondent denied that he refused to pay the agreed monthly rentals;
alleging that petitioners were the ones who refused to receive the rental payments and instead
demanded payment of P150,000.00. The Deed of Assignment, he added, failed to express the true
intent and agreement of the parties; and his signature thereon was procured by fraud, deceit, and
misrepresentation; hence, void ab initio.
The respondent appealed to the CA urging it to apply the civil law rule on pari delicto after
the RTC rendered a decision in favor of the petitioner.
Issue
Whether or not the rule on pari delicto is applicable in the case
Ruling
We sustain the CA in declaring the Deed of Assignment null and void, but we cannot abide
by the CAs final disposition.
A void contract is equivalent to nothing; it produces no civil effect. It does not create,
modify, or extinguish a juridical relation.Parties to a void agreement cannot expect the aid of the
law; the courts leave them as they are, because they are deemed in pari delicto or in equal fault.
To this rule, however, there are exceptions that permit the return of that which may have been
given under a void contract. One of the exceptions is found in Article 1412 of the Civil Code,
which states:
Art. 1412. If the act in which the unlawful or forbidden cause consists does not
constitute a criminal offense, the following rules shall be observed:

Page 801 of 845

 (1) When the fault is on the part of both contracting parties, neither may recover
what he has given by virtue of the contract, or demand the performance of
the other's undertaking;
(2) When only one of the contracting parties is at fault, he cannot recover
what he has given by reason of the contract, or ask for the fulfillment of
what has been promised him. The other, who is not at fault, may demand
the return of what he has given without any obligation to comply with his
promise.
Respondent was well aware that as mere grantee of the subject stall, he cannot sell it
without the consent of the City Government of Marawi. Yet, he sold the same to petitioners. The
records, however, are bereft of any allegation and proof that petitioners had actual knowledge of
the status of respondents ownership of the subject stall. Petitioners can, therefore, recover the
amount they had given under the contract.

INFORMATION TECHNOLOGY FOUNDATION OF THE PHILIPPINES VS.

COMMISSION ON ELECTIONS
G.R. No. 159139
January 13, 2004

Facts
Congress passed Republic Act 8046, which authorized COMELEC to conduct a
nationwide demonstration of a computerized election system. On December 22, 1997, Congress
enacted Republic Act 8436 authorizing COMELEC to use an automated election system (AES)
for the process of voting, counting votes and canvassing/consolidating the results of the national
and local elections.
Initially intending to implement the automation during the May 11, 1998 presidential
elections, COMELEC eventually decided against full national implementation and limited the
automation to the Autonomous Region in Muslim Mindanao (ARMM). However, due to the
failure of the machines to read correctly some automated ballots in one town, the poll body later
ordered their manual count for the entire Province of Sulu.
On January 28, 2003, the Commission Issued an Invitation to Apply for Eligibility and to
Bid.
Out of the 57 bidders, the BAC found MPC and the Total Information Management
Corporation (TIMC) eligible. For technical evaluation, they were referred to the BACs Technical
Working Group (TWG) and the Department of Science and Technology (DOST).

Page 802 of 845

 In its Report on the Evaluation of the Technical Proposals on Phase II, DOST said that both
MPC and TIMC had obtained a number of failed marks in the technical evaluation.
Notwithstanding these failures, COMELEC en banc, promulgated Resolution No. 6074 awarding
the project to MPC.
On May 29, 2003, five individuals and entities (including the herein Petitioners
Information Technology Foundation of the Philippines, represented by its president, Alfredo M.
Torres; and Ma. Corazon Akol) wrote a letter to COMELEC Chairman Benjamin Abalos Sr. They
protested the award of the Contract to Respondent MPC due to glaring irregularities in the manner
in which the bidding process had been conducted. Citing therein the noncompliance with
eligibility as well as technical and procedural requirements, they sought a re-bidding. However,
the COMELEC chairman -- speaking through Atty. Jaime Paz, his head executive assistant --
rejected the protest and declared that the award would stand up to the strictest scrutiny.

Issue
Whether or not the COMELEC can recover or demand the performance of the other

Ruling
For the automation of the counting and canvassing of the ballots in the 2004 elections,
COMELEC awarded the Contract to Mega Pacific Consortium an entity that had not participated
in the bidding. Despite this grant, the poll body signed the actual automation Contract with Mega
Pacific eSolutions, Inc., a company that joined the bidding but had not met the eligibility
requirements.
Because of the foregoing violations of law and the glaring grave abuse of discretion
committed by COMELEC, the Court declared null and void the assailed Resolution and the subject
Contract. The illegal, imprudent and hasty actions of the Commission have not only desecrated
legal and jurisprudential norms, but have also cast serious doubts upon the poll bodys ability and
capacity to conduct automated elections. Truly, the pith and soul of democracy -- credible,
orderly, and peaceful elections -- has been put in jeopardy by the illegal and gravely abusive acts
of COMELEC.
As a necessary consequence of such nullity and illegality, the purchase of the machines and
all appurtenances thereto including the still-to-be-produced (or in COMELEC words, to be
reprogrammed) software, as well as all the payments made therefor, have no basis whatsoever in
law. The public funds expended pursuant to the void Resolution and Contract must therefore be
recovered from the payees and/or from the persons who made possible the illegal disbursements,
without prejudice to possible criminal prosecutions against them.
WHEREFORE, the Petition is GRANTED

Page 803 of 845

TEDDY G. PABUGAIS V. DAVE P. SAHIJWANI
G.R. No. 156846
February 23, 2004

Facts
Pursuant to an Agreement And Undertaking, petitioner Teddy G. Pabugais, agreed to sell
to respondent Dave P. Sahijwani a lot containing 1,239 square meters. Respondent paid petitioner
the amount of P600,000.00 as option/reservation fee and the balance of P14,887,500.00 to be paid
within 60 days from the execution of the contract, simultaneous with delivery of the owners
duplicate Transfer Certificate of Title in respondents name the Deed of Absolute Sale; the
Certificate of Non-Tax Delinquency on real estate taxes and Clearance on Payment of Association
Dues. The parties further agreed that failure on the part of respondent to pay the balance of the
purchase price entitles petitioner to forfeit the P600, 000.00 option/reservation fees; while non-
delivery by the latter of the necessary documents obliges him to return to respondent the said
option/reservation fee with interest at 18% per annum. Petitioner failed to deliver the required
documents. In compliance with their agreement, he returned to respondent the latters P600,
000.00 option/reservation fee by way of Far East Bank & Trust Company Check, which was,
however, dishonored.
Petitioner claimed that he twice tendered to respondent, through his counsel, the amount
of P672,900.00, but said counsel refused to accept the same. On August 15, 1994, petitioner filed
a complaint for consignation.
Respondents counsel, on the other hand, admitted that his office received petitioners letter
dated August 5, 1994, but claimed that no check was appended thereto. He averred that there was
no valid tender of payment because no check was tendered and the computation of the amount to
be tendered was insufficient.
On November 29, 1996, the trial court rendered a decision declaring the consignation
invalid for failure to prove that petitioner tendered payment to respondent and that the latter refused
to receive the same. Petitioner appealed the decision to the Court of Appeals but was denied.
On a motion for reconsideration, the Court of Appeals declared the consignation as valid.
It held that the validity of the consignation had the effect of extinguishing petitioners obligation
to return the option/reservation fee to respondent. Hence, petitioner can no longer withdraw the
same.

Issue
Whether or not assigning the amount of P672, 900.00 to Atty. De Guzman is prohibited.

Page 804 of 845

Ruling
The amount consigned with the trial court can no longer be withdrawn by petitioner
because respondents prayer in his answer that the amount consigned be awarded to him is
equivalent to an acceptance of the consignation, which has the effect of extinguishing petitioners
obligation.
Petitioner also failed to manifest his intention to comply with the Agreement and
Undertaking by delivering the necessary documents and the lot subject of the sale to respondent
in exchange for the amount deposited. Withdrawal of the money consigned would enrich
petitioner and unjustly prejudice respondent.
The withdrawal of the amount deposited in order to pay attorneys fees to petitioners
counsel, Atty. De Guzman, Jr., violates Article 1491 of the Civil Code which forbids lawyers from
acquiring by assignment, property and rights which are the object of any litigation in which they
may take part by virtue of their profession. Furthermore, Rule 10 of the Canons of Professional
Ethics provides that the lawyer should not purchase any interest in the subject matter of the
litigation which he is conducting. The assailed transaction falls within the prohibition because
the Deed assigning the amount of P672, 900.00 to Atty. De Guzman, Jr., as part of his attorneys
fees was executed during the pendency of this case with the Court of Appeals. In his Motion to
Intervene, Atty. De Guzman, Jr., not only asserted ownership over said amount, but likewise
prayed that the same be released to him. That petitioner knowingly and voluntarily assigned the
subject amount to his counsel did not remove their agreement within the ambit of the prohibitory
provisions. To grant the withdrawal would be to sanction a void contract. Thus, the petition is
denied.

CONCHITA LIGUEZ VS. COURT OF APPEALS, MARIA NGO VDA. DE LOPEZ, ET

AL
G.R. No. L-11240
December 18, 1957

Facts

The case began upon complaint filed by petitioner-appellant against the widow and heirs of the
late Salvador P. Lopez to recover a parcel of 51.84 hectares of land. Plaintiff averred to be its legal
owner, pursuant to a deed of donation of said land, executed in her favor by the late owner,
Salvador P. Lopez, on 18 May 1943. The defense interposed was that the donation was null and
void for having an illicit causa or consideration, which was the plaintiff's entering into marital
relations with Salvador P. Lopez, a married man; and that the property had been adjudicated to the
appellees as heirs of Lopez by the court of First Instance, since 1949.

Page 805 of 845

The Court of Appeals found that the deed of donation was prepared by the Justice of the Peace of
Mati, Davao, before whom it was signed and ratified on the date aforesaid. At the time, the
appellant Liguez was a minor, only 16 years of age.
The Court of Appeals found that when the donation was made, Lopez had been living with
the parents of appellant for barely a month; that the donation was made in view of the desire of
Salvador P. Lopez, a man of mature years, to have sexual relations with appellant Conchita Liguez;
that Lopez had confessed to his love for appellant to the instrumental witnesses, with the remark
that her parents would not allow Lopez to live with her unless he first donated the land in question;
that after the donation, Conchita Liguez and Salvador P. Lopez lived together in the house that
was built upon the latter's orders, until Lopez was killed on July 1st, 1943, by some guerrillas who
believed him to be pro-Japanese.

It was also ascertained by the Court of Appeals that the donated land originally belonged
to the conjugal partnership of Salvador P. Lopez and his wife, Maria Ngo; that the latter had met
and berated Conchita for living maritally with her husband, sometime during June of 1943; that
the widow and children of Lopez were in possession of the land and made improvements thereon;
that the land was assessed in the tax rolls first in the name of Lopez and later in that of his widow.;
and that the deed of donation was never recorded.

Upon these facts, the Court of Appeals held that the deed of donation was inoperative, and
null and void (1) because the husband, Lopez, had no right to donate conjugal property to the
plaintiff appellant; and (2) because the donation was tainted with illegal cause or consideration, of
which donor and donee were participants.

Issue
Whether or not the Deed of Donation is void for having illicit cause or consideration
Ruling
Under Article 1279 of the Civil Code of 1989, which was the governing law during the
execution of the Deed of Donation, the liberality of the donor is deemed cover only in those
contracts that are pure beneficence. In these contracts, the idea of self interest is totally absent in
the part of the transferee. Here, the facts as found demonstrated that in making the donation,
Salvador Lopez was not moved exclusively by the desire to benefit the petitioner but also to secure
her cohabiting with him. Petitioner seeks to differentiate between the liberality of Lopez as cause
and his desire as a motive. However, motive may be regarded as cause when it predetermined the
purpose of the contract. The Court of Appeals rejected the claim of petitioner on the ground on
the rule on pari delicto embodied in Article 1912 of the Civil Code. However, this rule cannot be
applied in the case because it cannot be said that both parties had equal guilt where petitioner was
a mere minor when the donation was made and that it was not shown that she was fully aware of
the terms of the said donation.

Page 806 of 845

PHILIPPINE BANKING CORPORATION, representing the estate of JUSTINA SANTOS
Y CANON FAUSTINO vs. LUI SHE in her own behalf and as administratrix
G.R. No. L-17587
September 12, 1967

Facts

Justina Santos y Canon Faustino and her sister Lorenzo were the owners in common of a
piece of land in Manila. In it are two residential houses with entrance on Florentino Torres street
and the Hen Wah Restaurant with entrance on Rizal Avenue. The sisters lived in one of the houses,
while Wong Heng, a Chinese, lived with his family in the restaurant. Wong had been a long-time
lessee of a portion of the property, paying a monthly rental of P2,620.

On September 22, 1957 Justina Santos became the owner of the entire property as her sister
died with no other heir. Then already well advanced in years, being at the time 90 years old, blind,
crippled and an invalid, she was left with no other relative to live with. Her otherwise dreary
existence was brightened now and then by the visits of Wong's four children who had become the
joy of her life. Wong himself was the trusted man to whom she delivered various amounts for
safekeeping, including rentals. Wong also took care of the payment; in her behalf, of taxes,
lawyers' fees, funeral expenses, masses, salaries of maids and security guard, and her household
expenses.

Subsequently, she executed a contract of lease in favor of Weng for a period of 50 years.
However, the lessee was given the right to withdraw at any time from the agreement.
Subsequently, she again executed another contract giving Weng the option to buy the premises.
The option was conditioned on Wengs obtaining a Filipino citizenship, which however, Weng
failed to obtain. After which, Justinia again executed two other contracts, extending the term of
the lease to 99 years and another fixing the term of the option to 50 years. However, a year later,
she filed a complaint before the trial court alleging that the various contracts were executed by her
because of machination, and inducement practiced by Weng, thereby she directed her executor to
secure the annulment of the contract.

Issue
Whether or not the various contracts were void.

Ruling

Page 807 of 845

 Article 1308 of the Civil Code creates no impediment to the insertion in a contract of a
resolutory condition permitting the cancellation of the contract by one of the parties. Such a
stipulation does not make either the validity or the fulfillment of the contract dependent upon the
will of the party to whom it conceded the privilege of the cancellation.
In the case, the lease for an alien for a reasonable period is valid. So is the option giving
the alien the right to buy the real property subject to the condition that he must obtain Filipino
citizenship. Since aliens residence in the Philippines is temporary, they may be granted temporary
rights such as a lease contract which is not forbidden. However, if the alien is given not only the
lease of, but also the option to buy a piece of land by virtue of which the Filipino owner cannot
sell, or otherwise dispose of his property, this to last for 50 years, then it becomes clear that the
arrangement is a virtual transfer of ownership. As such, the constitutional ban against alien
landholding is in grave peril.
However, it does not follow that because the parties are in pari delicto, they will be left
where they are without relief. Article 1416 of the Civil Code provides an exception when the
agreement is not illegal per se but is merely prohibited, and the prohibition by law is designed for
the protection of the plaintiff, he may, if public policy is thereby enhanced, recover what he had
paid on delivery.
ACCORDINGLY, the contracts in question are annulled and set aside.

GREGORIO R. VIGILAR, et. al vs. ARNULFO D. AQUINO

G.R. No. 180388
January 18, 2011

Facts

On 19 June 1992, petitioner Angelito M. Twao, then Officer-in-Charge-District Engineer

of the Department of Public Works and Highways 2nd Engineering District of Pampanga sent an
Invitation to Bid to respondent Arnulfo D. Aquino, the owner of A.D. Aquino Construction and
Supplies. The bidding was for the construction of a dike by bulldozing a part of the Porac River at
Pampanga.

Subsequently, the project was awarded to respondent, and a "Contract of Agreement" was
thereafter executed between him and concerned petitioners for the amount of PhP1,873,790.69, to
cover the project cost.

By 9 July 1992, the project was duly completed by respondent, who was then Issued a
Certificate of Project Completion dated 16 July 1992. The certificate was signed by Romeo M.

Page 808 of 845

Yumul, the Project Engineer; as well as petitioner Romeo N. Supan, Chief of the Construction
Section, and by petitioner Twao.

Respondent Aquino, however, claimed that PhP1,262,696.20 was still due him, but
petitioners refused to pay the amount. He thus filed a Complaint for the collection of sum of money
with damages before the Regional Trial Court.

Petitioners, for their part, set up the defense that the Complaint was a suit against the state;
that respondent failed to exhaust administrative remedies; and that the "Contract of Agreement"
covering the project was void for violating Presidential Decree No. 1445, absent the proper
appropriation and the Certificate of Availability of Funds.

The lower court ruled in favor of respondent. On appeal, the Court of Appeals reversed and
set aside the Decision of the lower court ordering the Commission on Audit to determine and
ascertain with dispatch, on a quantum meruit basis, the total obligation due to the plaintiff-appellee
for his undertaking.

Issue

Whether or not Aquino is entitled to the unpaid amount

Ruling

The government project contracted out to respondent was completed almost two decades
ago. To delay the proceedings by remanding the case to the relevant government office or agency
will definitely prejudice respondent. More importantly, the Issues in the present case involve the
validity and the enforceability of the "Contract of Agreement" entered into by the parties.

Neither can petitioners escape the obligation to compensate respondent for services
rendered and work done by invoking the states immunity from suit. This Court has long
established in Ministerio v. CFI of Cebu, and recently reiterated in Heirs of Pidacan v. ATO, that
the doctrine of governmental immunity from suit cannot serve as an instrument for perpetrating an
injustice to a citizen.

To be sure, this Court as the staunch guardian of the citizens' rights and welfare
cannot sanction an injustice so patent on its face, and allow itself to be an instrument in the
perpetration thereof. Justice and equity sternly demand that the State's cloak of invincibility against
suit be shred in this particular instance, and that petitioners-contractors be duly compensated
on the basis of quantum meruit for construction done on the public works housing project.

WHEREFORE, in view of the foregoing, the Petition is DENIED for lack of merit.

Page 809 of 845

EPG CONSTRUCTION CO. VS. HON. GREGORIO R. VIGILAR
G.R. No. 131544
March 16, 2001
Facts
The Ministry of Human Settlement through the BLISS Development Corporation, initiated
a housing project on a government property. For this purpose, the MHS entered into a
Memorandum of Agreement (MOA) with the Ministry of Public Works (MPWH) and Highway
where the latter undertook to develop the housing site and construct therein 145 housing units. By
virtue of the MOA, the MPWH forged individual contracts with petitioners for the construction of
the housing units. Under the contracts, the scope of construction covered only 2/3 of each housing
unit. After complying, the MPWH undersecretary made a verbal request for the additional
construction, for the completion of the housing units, which the petitioner agreed.
Petitioners then received payment for the construction work duly covered by the individual
written contracts, thereby leaving an unpaid balance of P5, 918,315.63, which amount represents
the expenses for the additional constructions for the completion of the existing housing units. On
14 November 1988, petitioners sent a demand letter to the DPWH Secretary and submitted that
their claim for payment was favorably recommended by DPWH Assistant Secretary for Legal
Services Dominador Madamba, who recognized the existence of implied contracts covering the
additional constructions. Notwithstanding, DPWH Assistant Secretary Madamba opined that
payment of petitioners money claims should be based on quantum meruit and should be forwarded
to the Commission on Audit (COA) for its due consideration and approval. The money claims
were then referred to COA which returned the same to the DPWH Auditor for auditorial action.
On the basis of the Inspection Report of the Auditors Technical Staff, the DPWH Auditor
interposed no objection to the payment of the money claims subject to whatever action the COA
may adopt.
In a Letter of the Undersecretary of Budget and Management dated 20 December 1994, the
amount of P5,819,316.00 was then released for the payment of petitioners money claims.
However, respondent DPWH Secretary Gregorio Vigilar denied the subject money claims
prompting herein petitioners to file before the Regional Trial Court, which was however dismissed.

Issue
Whether or not the petitioner has the right to be compensated for the public works housing
project by virtue of the implied contract which was verbally executed

Ruling

Page 810 of 845

 YES, the petitioner has the right to be compensated for the additional construction applying
the principle of quantum meruit. Notably, the peculiar circumstances present in the instant case
buttress petitioners claim for compensation for the additional construction, despite the illegality
and void nature of the implied contracts forged between the MPWH and petitioners. In this
matter, it is bear stressing that, the illegality of the subject contracts proceeds from the express
declaration or prohibition of the law, and not for any intrinsic illegality. Stated differently, the
subject contracts are not illegal per se.
The Court cannot sanction an injustice so patent on its face and allow itself to be an
instrument in the perpetration thereof. Justice and equity demands that the States cloak of
invincibility against suit be shred in this particular case and that the petitioners-contractors be duly
compensated, on the basis of quantum meruit, for the construction done on the public housing
project.
Thus, the petition is granted.

VIRGINIA O. GOCHAN, et. al vs. RICHARD G. YOUNG, et. al

G.R. No. 131889
March 12, 2001

Facts

Gochan Realty was registered with the Security and Exchange Commission with Felix
Gochan Sr., Maria Tiong, Pedro Gochan, Tomasa Gochan, Esteban Gochan and Crispo Gochan as
its incorporators. Later, Felix Gochan Sr.s daughter, Alice, mother of herein respondents,
inherited 50 shares of stocks in Gochan Realty from the former. Alice subsequently died leaving
the 50 shares to her husband, John Young Sr. Sometime in 1962, the RTC adjudicated 6/14 of
these shares to her children. When her children, herein respondents, reached the age of majority,
their father requested Gochan Realty to partition the shares of his late wife by canceling the stock
certificate in his name and issuing, in lieu thereof, a new stock certificate in favor of his children.
The Realty however, refused.
Meanwhile, fifteen years later, Cecilia Uy and Miguel Uy filed a complaint with the SEC
for issuance of shares of stocks to the rightful owners, nullification of shares of stock,
reconveyance of the property impressed with trust and damages. The petitioners moved to dismiss
the complaint. The SEC thereafter held that the Youngs were not shown to have been stockholders
stockholders of Gochan Realty to confer them with the legal capacity to bring and maintain their
action. That is why the case cannot be considered as an intra-corporate controversy within the
jurisdiction of the Commission. The Court of Appeals, on appeal, held that the SEC had no

Page 811 of 845

jurisdiction over the case as far as the heirs of Alice Gochan were concerned; however, it upheld
the capacity of Cecilia Gochan Uy and her spouse, Miguel Uy.

Issue
Whether or not the Spouses Uy have the personality to file an action before the SEC against
Gochan Realty Corporation

Ruling
Petitioners contend that the statute of limitations already bars the Uy spouses action, be it
one for annulment of a voidable contract or one based upon a written contract. The Complaint,
however, contains respondents allegation that the sale of the shares of stock was not merely
voidable, but was void ab initio. Below we quote its relevant portion:
That on November 21, 1979, respondent Felix Gochan & Sons Realty Corporation did not
have unrestricted retained earnings in its books to cover the purchase price of the 208 shares of
stock it was then buying from complainant Cecilia Gochan Uy, thereby rendering said purchase
null and void ab initio for being violative of the trust fund doctrine and contrary to law, morals
good customs, public order and public policy;
Necessarily, petitioners contention that the action has prescribed cannot be
sustained. Prescription cannot be invoked as a ground if the contract is alleged to be void ab
initio. It is axiomatic that the action or defense for the declaration of nullity of a contract does not
prescribe.
WHEREFORE, the Petition is hereby DENIED and the assailed Decision AFFIRMED.

JULIAN FRANCISCO vs. PASTOR HERRERA

G.R. No. 139982
November 21, 2002

Facts

Eligio Herrera, Sr., the father of respondent, was the owner of two parcels of land. On
January 3, 1991, petitioner bought from said landowner the first parcel for the price of P1,000,000,
paid in installments from November 30, 1990 to August 10, 1991. On March 12, 1991, petitioner
bought the second parcel for P750,000.

Page 812 of 845

 Contending that the contract price for the two parcels of land was grossly inadequate, the
children of Eligio, Sr., namely, Josefina Cavestany, Eligio Herrera, Jr., and respondent Pastor
Herrera, tried to negotiate with petitioner to increase the purchase price. When petitioner refused,
herein respondent then filed a complaint for annulment of sale, with the RTC of Antipolo City. In
his complaint, respondent claimed ownership over the second parcel, allegedly by virtue of a sale
in his favor since 1973. He likewise claimed that the first parcel was subject to the co-ownership
of the surviving heirs of Francisca A. Herrera, the wife of Eligio, Sr., considering that she died
intestate on April 2, 1990, before the alleged sale to petitioner. Finally, respondent also alleged
that the sale of the two lots was null and void on the ground that at the time of sale, Eligio, Sr. was
already incapacitated to give consent to a contract because he was already afflicted with senile
dementia, characterized by deteriorating mental and physical condition including loss of memory.

In his answer, petitioner as defendant below alleged that respondent was estopped from
assailing the sale of the lots. Petitioner contended that respondent had effectively ratified both
contracts of sales, by receiving the consideration offered in each transaction.

The trial court declared the Deeds of Sale null and void. Francisco was ordered to return
the lots in question including all improvements. Concomitantly, Herrera was ordered to return the
purchase price of the lots sold. This was affirmed by the Court of Appeals.

Issue
Whether or not the assailed contracts of sale are void or merely voidable and hence capable
of being ratified

RULING

In the present case, it was established that the vendor Eligio, Sr. entered into an agreement
with petitioner, but that the formers capacity to consent was vitiated by senile dementia. Hence,
we must rule that the assailed contracts are not void or inexistent per se; rather, these are contracts
that are valid and binding unless annulled through a proper action filed in court seasonably.

An annullable contract may be rendered perfectly valid by ratification, which can be

express or implied. Implied ratification may take the form of accepting and retaining the benefits
of a contract. This is what happened in this case. Respondents contention that he merely received
payments on behalf of his father merely to avoid their misuse and that he did not intend to concur
with the contracts is unconvincing. If he was not agreeable with the contracts, he could have
prevented petitioner from delivering the payments, or if this was impossible, he could have
immediately instituted the action for reconveyance and have the payments consigned with the
court. None of these happened. As found by the trial court and the Court of Appeals, upon learning

Page 813 of 845

of the sale, respondent negotiated for the increase of the purchase price while receiving the
installment payments. It was only when respondent failed to convince petitioner to increase the
price that the former instituted the complaint for reconveyance of the properties. Clearly,
respondent was agreeable to the contracts, only he wanted to get more. Further, there is no showing
that respondent returned the payments or made an offer to do so. This bolsters the view that indeed
there was ratification. One cannot negotiate for an increase in the price in one breath and in the
same breath contend that the contract of sale is void.

Nor can we find for respondents argument that the contracts were void as Eligio, Sr., could
not sell the lots in question as one of the properties had already been sold to him, while the other
was the subject of a co-ownership among the heirs of the deceased wife of Eligio, Sr. Note that it
was found by both the trial court and the Court of Appeals that Eligio, Sr., was the "declared
owner" of said lots. This finding is conclusive on us. As declared owner of said parcels of land, it
follows that Eligio, Sr., had the right to transfer the ownership thereof under the principle of jus
disponendi.

In sum, the appellate court erred in sustaining the judgment of the trial court that the deeds
of sale of the two lots in question were null and void.

MARIO J. MENDEZONA, et.al vs. JULIO H. OZAMIZ, et. al

G.R. No. 143370
February 6, 2002

Facts
A civil case for quieting of title was instituted by petitioner spouses Mendezona as
plaintiffs. In their complaint, the petitioners, as plaintiffs therein, alleged that petitioner spouses
own a parcel of land each with almost similar areas covered and described in Transfer Certificates
of Title. The petitioners ultimately traced their titles of ownership over their respective properties
from a notarized Deed of Absolute Sale dated April 28, 1989 executed in their favor by Carmen
Ozamiz for and in consideration of the sum of One Million Forty Thousand Pesos (P1,040,000.00).
The petitioners initiated the suit to remove a cloud on their said respective titles caused by
the inscription thereon of a notice of lis pendens, which came about as a result of an incident in a
Special Proceeding of the RTC. This Special Proceeding is a proceeding for guardianship over
the person and properties of Carmen Ozamiz.
In the course of the guardianship proceeding, the petitioners and the oppositors thereto
agreed that Carmen Ozamiz needed a guardian over her person and her properties, and thus
respondent Montalvan was designated as guardian over the person of Carmen Ozamiz while

Page 814 of 845

petitioner Mendezona, respondents Roberto J. Montalvan and Julio H. Ozamiz were designated as
joint guardians over the properties of the said ward.
The respondents opposed the petitioners claim of ownership of the Lahug property and
alleged that the titles issued in the petitioners names are defective and illegal, and the ownership
of the said property was acquired in bad faith and without value inasmuch as the consideration for
the sale is grossly inadequate and unconscionable. Respondents further alleged that at the time of
the sale on April 28, 1989 Carmen Ozamiz was already ailing and not in full possession of her
mental faculties; and that her properties having been placed in administration, she was in effect
incapacitated to contract with petitioners.
The lower court ruled in favor of petitioners. The appellate court reversed the factual
findings of the trial court and ruled that the Deed of Absolute Sale dated April 28, 1989 was a
simulated contract since the petitioners failed to prove that the consideration was actually paid,
and, furthermore, that at the time of the execution of the contract the mental faculties of Carmen
Ozamiz were already seriously impaired. Thus, the appellate court declared that the Deed of
Absolute Sale of April 28, 1989 is null and void.

Issue
Whether or not the Deed of Absolute Sale was a Simulated Contract

Ruling
Simulation is defined as "the declaration of a fictitious will, deliberately made by
agreement of the parties, in order to produce, for the purposes of deception, the appearances of a
juridical act which does not exist or is different from what that which was really executed." The
requisites of simulation are: (a) an outward declaration of will different from the will of the parties;
(b) the false appearance must have been intended by mutual agreement; and (c) the purpose is to
deceive third persons. None of these were clearly shown to exist in the case at bar.
It has been held that a person is not incapacitated to contract merely because of advanced
years or by reason of physical infirmities. Only when such age or infirmities impair her mental
faculties to such extent as to prevent her from properly, intelligently, and fairly protecting her
property rights, is she considered incapacitated. The respondents utterly failed to show adequate
proof that at the time of the sale on April 28, 1989 Carmen Ozamiz had allegedly lost control of
her mental faculties.

A person is presumed to be of sound mind at any particular time and the condition is
presumed to continue to exist, in the absence of proof to the contrary. Competency and freedom
from undue influence, shown to have existed in the other acts done or contracts executed, are
presumed to continue until the contrary is shown.

Page 815 of 845

 WHEREFORE, the instant petition is hereby GRANTED.

SPOUSES CELEDONIO MANZANILLA and DOLORES FUERTE, and INES CARPIO

vs. HON. COURT OF APPEALS and JUSTINA CAMPO

G.R. No. L-75342

March 15, 1990

Facts

In 1963, spouses Celedonio and Dolores Manzanilla (spouses Manzanilla) sold on

installment an undivided one-half portion of their residential house and lot. At the time of the sale,
the said property was mortgaged to the Government Service Insurance System (GSIS), which fact
was known to the vendees, spouses Magdaleno and Justina Campo. The Campo spouses took
possession of the premises upon payment of the first installment on April 17, 1963 and up to the
present. Some payments were made to petitioners while some were made directly to GSIS.

On May 17, 1965, the GSIS filed its application to foreclose the mortgage on the property
for failure of the Manzanilla spouses to pay their monthly amortizations. The property was sold at
public auction where GSIS was the highest bidder.

Two months before the expiration of the period to redeem or on August 31, 1966, the
Manzanilla spouses executed a Deed of Absolute Sale of the undivided one half portion of their
property in favor of the Campo spouses. Upon the expiration of the period to redeem without the
Manzanilla spouses exercising their right of redemption, title to the property was consolidated in
favor of the GSIS and a new title Issued in its name.

The Manzanilla spouses made representations and succeeded in re-acquiring the property
from the GSIS then they mortgaged the property to the Bian Rural Bank. Petitioner Ines Carpio
purchased the property from the Manzanilla spouses and agreed to assume the mortgage in favor
of Bian Rural Bank.

On November 12, 1973, private respondent Justina Campo registered her adverse claim
over the said lot.On October 3, 1977, petitioner Carpio filed an ejectment case against private
respondent Justina Campo. On July 31, 1979, private respondent Justina Campo (already a
widow) filed a complaint for quieting of title against the Manzanilla spouses and Ines Carpio
Page 816 of 845
 praying among others, for the issuance to her of a certificate of title over the undivided one-
half portion of the property.
The trial court rendered its decision in favor of Campo. The decision was appealed by
petitioners to the Court of Appeals; however it only affirmed the decision of the trial court.
Petitioners Motion for reconsideration was denied.

Issue
Whether or not petitioners are under any legal duty to reconvey the undivided one-half
portion of the property to private respondent Justina Campo

Ruling

In view of the failure of either the Manzanilla spouses or the Campo spouses to redeem the
property from GSIS, title to the property was consolidated in the name of GSIS. The new title
cancelled the old title in the name of the Manzanilla spouses. GSIS at this point had a clean title
free from any lien in favor of any person including that of the Campo spouses.

If it were true that petitioners deliberately allowed the loan to lapse and the mortgage to be
foreclosed, we do not see how these circumstances can be utilized by them to their advantage.
There was no guarantee that petitioners would be able to redeem the property in the event the
mortgage thereon was foreclosed as in fact they failed to redeem because they had no money. On
the other hand, had they opted to eventually exercise their right of redemption after foreclosure,
they would be under a legal duty to convey one-half portion thereof sold to the Campo spouses
because by then, title to the property would still be in their name. Either way, petitioners were
bound to lose either the entire property in case of failure to redeem or the one-half portion thereof
sold to private respondent in the case of redemption. Further, should not petitioners let the period
of redemption lapse without exercising the right of redemption, as what happened in this case,
there was no guarantee that the same could be re-acquired by them from GSIS nor would GSIS be
under any legal duty to resell the property to them.

There may be a moral duty on the part of petitioners to convey the one-half portion of the
property previously sold to private respondents. However, they are under no legal obligation to do
so. Hence, the action to quiet title filed by private respondent must fail.

RURAL BANK OF PARAAQUE, INC. vs. ISIDRA REMOLADO and COURT OF

APPEALS

Page 817 of 845

G.R. No. L-62051

March 18, 1985

Facts
This case is about the repurchase of mortgaged property after the period of redemption had
expired. Isidra Remolado, 64, a widow, and resident of Makati, Rizal, owned a lot with an area of
308 square meters, with a bungalow thereon, which was leased to Beatriz Cabagnot. In 1966 she
mortgaged it to the Rural Bank of Paraaque, Inc. as security for a loan of P15,000. She paid the
loan. On April 17, 1971 she mortgaged it again to the bank. She eventually secured loans totalling
P18,000. The loans become overdue. The bank foreclosed the mortgage on July 21, 1972 and
bought the property at the foreclosure sale for P22,192.70. The one-year, period of redemption
was to expire on August 21, 1973. On August 8, 1973 the bank advised Remolado that she had
until August 23 to redeem the property. On August 9, 1973 or 14 days before the expiration of the
one-year redemption period, the bank gave her a statement showing that she should pay P25,491.96
for the redemption of the property on August 23. No redemption was made on that date. On
September 3, 1973 the bank consolidated its ownership over the property. Remolado's title was
cancelled. A new title, TCT No. 418737, was Issued to the bank on September 5. On September
24, 1973, the bank gave Remolado up to ten o'clock in the morning of October 31, 1973, or 37
days, within which to repurchase (not redeem since the period of redemption had expired) the
property. The bank did not specify the price.
On October 26, 1973 Remolado and her daughter, Patrocinio Gomez, promised to pay the
bank P33,000 on October 31 for the repurchase of the property. Contrary to her promise,
Remolado did not repurchase the property on October 31. Five days later, or on November 5,
Remolado and her daughter delivered P33,000 cash to the bank's assistant manager as repurchase
price. The amount was returned to them the next day, November 6, 1973. At that time, the bank
was no longer willing to allow the repurchase. Remolado filed an action to compel the bank to
reconvey the property to her for P25,491.96 plus interest and other charges and to pay P35,000 as
damages. The repurchase price was not consigned. A notice of lis pendens was registered. On
November 15, the bank sold the property to Pilar Aysip for P50,000. A new title was Issued to
Aysip with an annotation of lis pendens
The trial court ordered the bank to return the property to Remolado upon payment of the
redemption price of P25,491.96 plus interest and other bank charges and to pay her P15,000 as
damages. The Appellate Court affirmed the judgment.
Issue
Whether or not the appellate court erred in reconveying the disputed property to Remolado

Ruling

Page 818 of 845

 Yes. We hold that the trial court and the Appellate Court erred in ordering the
reconveyance of the property. There was no binding agreement for its repurchase. Even on the
assumption that the bank should be bound by its commitment to allow repurchase on or before
October 31, 1973, still Remolado had no cause of action because she did not repurchase the
property on that date.
Justice is done according to law. As a rule, equity follows the law. There may be a moral
obligation, often regarded as an equitable consideration (meaning compassion), but if there is no
enforceable legal duty, the action must fail although the disadvantaged party deserves
commiseration or sympathy. The choice between what is legally just and what is morally just,
when these two options do not coincide, is explained by Justice Moreland in Vales vs. Villa, 35
Phil. 769, 788 where he said: "Courts operate not because one person has been defeated or
overcome by another, but because he has been defeated or overcome illegally. Men may do foolish
things, make ridiculous contracts, use miserable judgment, and lose money by them - indeed, all
they have in the world; but not for that alone can the law intervene and restore. There must be, in
addition, a violation of law, the commission of what the law knows as an actionable wrong before
the courts are authorized to lay hold of the situation and remedy it."
In the instant case, the bank acted within its legal rights when it refused to give Remolado
any extension to repurchase after October 31, 1973. It had given her about two years to liquidate
her obligation. She failed to do so. Thus, the Appellate Court's judgment is reversed and set aside.

REPUBLIC OF THE PHILIPPINES vs. SANDIGANBAYAN, JR., et. al

G.R. No. 166859, G.R. No. 169203, G.R. No. 180702
April 12, 2011

Facts
For over two decades, the Issue of whether the sequestered sizable block of shares
representing 20% of the outstanding capital stock of San Miguel Corporation (SMC) at the time
of acquisition belonged to their registered owners or to the coconut farmers has remained
unresolved.
The Republic commenced Civil Case No. 0033 in the Sandiganbayan by complaint,
impleading as defendants respondent Eduardo M. Cojuangco, Jr. (Cojuangco) and 59 individual
defendants.
Cojuangco allegedly purchased a block of 33,000,000 shares of SMC stock through the 14
holding companies owned by the CIIF Oil Mills. For this reason, the block of 33,133,266 shares
of SMC stock shall be referred to as the CIIF block of shares.
The Sandiganbayan ruled that the amended Complaint in Civil Case No. 0033-F was
dismissed for failure of plaintiff to prove by preponderance of evidence its causes of action against
defendants with respect to the twenty percent (20%) outstanding shares of stock of San Miguel
Corporation registered in defendants names. Republic of the Philippines appealed the case to the

Page 819 of 845

Supreme Court invoking that coconut levy funds are public funds. The SMC shares, which were
acquired by respondents Cojuangco, Jr. and the Cojuangco companies with the use of coconut levy
funds in violation of respondent Cojuangco, Jr.s fiduciary obligation are, necessarily, public
in character and should be reconveyed to the government

Issue
Whether Respondent Cojuangco Jr. used the coconut levy funds to acquire SMC shares in
violation of his fiduciary obligation as a public officer

Ruling
It does not suffice, as in this case, that the respondent is or was a government official or
employee during the administration of former Pres. Marcos. There must be a prima facie showing
that the respondent unlawfully accumulated wealth by virtue of his close association or relation
with former Pres. Marcos and/or his wife.
Republics burden to establish by preponderance of evidence that respondents SMC shares
had been illegally acquired with coconut-levy funds was not discharged.
The conditions for the application of Articles 1455 and 1456 of the Civil Code (like the
trustee using trust funds to purchase, or a person acquiring property through mistake or fraud), and
Section 31 of the Corporation Code (like a director or trustee willfully and knowingly voting for
or assenting to patently unlawful acts of the corporation, among others) require factual foundations
to be first laid out in appropriate judicial proceedings. Hence, concluding that Cojuangco breached
fiduciary duties as an officer and member of the Board of Directors of the UCPB without
competent evidence thereon would be unwarranted and unreasonable.
Thus, the Sandiganbayan could not fairly find that Cojuangco had committed breach of
any fiduciary duties as an officer and member of the Board of Directors of the UCPB. For one, the
Amended Complaint contained no clear factual allegation on which to predicate the application of
Articles 1455 and 1456 of the Civil Code, and Section 31 of the Corporation Code. Although the
trust relationship supposedly arose from Cojuangcos being an officer and member of the Board
of Directors of the UCPB, the link between this alleged fact and the borrowings or advances was
not established. Nor was there evidence on the loans or borrowings, their amounts, the approving
authority, etc. As trial court, the Sandiganbayan could not presume his breach of fiduciary duties
without evidence showing so, for fraud or breach of trust is never presumed, but must be alleged
and proved.
The thrust of the Republic that the funds were borrowed or lent might even preclude any
consequent trust implication but is more inclined to be a contract of loan. To say that a relationship
is fiduciary when existing laws do not provide for such requires evidence that confidence is
reposed by one party in another who exercises dominion and influence. Absent any special Facts
and circumstances proving a higher degree of responsibility, any dealings between a lender and
borrower are not fiduciary in nature.
Thus, the petition is denied.

Page 820 of 845

PROSPERO RINGOR, et. al. vs. CONCORDIA RINGOR, et. al.
G.R. No. 147863
August 13, 2004

Facts
The controversy involves lands in San Fabian, Pangasinan, owned by the late Jacobo
Ringor. By his first wife, Gavina Laranang, he had two children, Juan and Catalina. He did not
have offsprings by his second and third wives. Catalina predeceased her father Jacobo who died
sometime in 1935, leaving Juan his lone heir of 3 lots owned by Jacobo. Juan married Gavina and
had 7 children with her. One of the children was Jose (the father and predecessors-in-interest of
herein petitioners). Jacobo applied for the registration of his lands under the Torrens system. He
filed three land registration cases alone, with his son Juan, or his grandson Jose, applying jointly
with him. Subsequently, in a Compraventa dated November 3, 1928, Jacobo allegedly sold and
transferred to Jose his one-half undivided interest in Parcel 1 covered by OCT No. 25885. Jacobo's
thumbmark appeared on the Compraventa.
During trial, witnesses attested that even after the decisions in the three land registration
cases and the Compraventas, Jacobo remained in possession of the lands and continued
administering them as he did prior to their registration. According to witness Julio Monsis, Jacobo
did not partition the lands since the latter said that he still needed them. When Jacobo died on June
7, 1935, the lands under the three land registration applications, including those which petitioners
sought to partition in their counterclaim before the trial court, remained undivided. Jose continued
to function as administrator over said land and promised to divide it equally/ When he died
sometime on 1971, Respondents demanded from Jose's children, herein petitioners, the partition
and delivery of their share in the estate left by Jacobo and under Jose's administration. The
petitioners refused and attempts at amicable settlement failed. On March 27, 1973, respondents
filed a Complaint for partition and reconveyance.
RTC decided in favor of respondents, concluding that Jacobo created an express trust over
his entire property in favor of his grandchildren. CA affirmed the lower courts decision.
Issue
Whether or not Jacobo only created an express trust
Ruling
Express trusts, sometimes referred to as direct trusts, are intentionally created by the direct and
positive acts of the settlor or the trustor by some writing, deed, or will, or oral declaration.
Contrary to the claim of petitioners, oral testimony is allowed to prove that a trust exists. It is not
error for the court to rely on parol evidence, - - i.e., the oral testimonies of witnesses Emeteria
Ringor, Julio Monsis and Teofilo Abalos - - which the appellate court also relied on to arrive at
the conclusion that an express trust exists.

Page 821 of 845

 Contrary to the claim of petitioners, oral testimony is allowed to prove that a trust exists.
It is not error for the court to rely on parol evidence, - - i.e., the oral testimonies of witnesses
Emeteria Ringor, Julio Monsis and Teofilo Abalos - - which the appellate court also relied on to
arrive at the conclusion that an express trust exists.
A trustee who obtains a Torrens title over a property held in trust for him by another cannot
repudiate the trust by relying on the registration. A Torrens Certificate of Title in Jose's name did
not vest ownership of the land upon him. The Torrens system does not create or vest title. It only
confirms and records title already existing and vested. The SC upheld the decision of the lower
courts in favoring the respondents claims.

REMEDIOS G. SALVADOR and GRACIA G. SALVADOR vs. COURT OF APPEALS,

ALBERTO and ELPIA YABO, FRANCISCA YABO, et al.
G.R. No. 109910
April 5, 1995

Facts

Alipio Yabo was the owner of Lot No. 6080 and Lot No. 6180 containing an area of
1,267 and 3,816 square meters, respectively. Title thereto devolved upon his nine children,
namely, Victoriano, Procopio, Lope, Jose, Pelagia, Baseliza, Francisca, Maria, and Gaudencia,
upon his death sometime before or during the second world war.

Pastor Makibalo, who is the husband of Maria Yabo, one of Alipio's children, filed with
the then Court of First Instance a complaint against the spouses Alberto and Elpia Yabo for
"Quieting of Title, Annulment of Documents, and Damages." In the complaint, he alleged that he
owned a total of eight shares of the subject lots, having purchased the shares of seven of Alipio's
children and inherited the share of his wife, Maria, and that except for the portion corresponding
to Gaudencia's share which he did not buy, he occupied, cultivated, and possessed continuously,
openly, peacefully, and exclusively the two parcels of land. He then prayed that he be declared
the absolute owner of 8/9 of the lots in question.

On 8 October 1976, the grandchildren and great-grandchildren of the late Alipio Yabo
lodged with the same court a complaint for partition and quieting of title with damages against
Pastor Makibalo, Enecia Cristal, and the spouses Eulogio and Remedies Salvador. They alleged
that Lot No. 6080 and Lot No. 6180 are the common property of the heirs of Alipio Yabo; that
after Alipio's death, the spouses Pastor and Maria Makibalo, Enecia Cristal and Jose Yabo
became the de facto administrators of the said properties; and that much to their surprise, they

Page 822 of 845

discovered that the Salvador spouses, who were strangers to the family, have been harvesting
coconuts from the lots, which act as a cloud on the plaintiffs' title over the lots.

Issue
Whether or not Pastor Makibalo has acquired by prescription the shares of his other co-heirs or
co-owners
Ruling

This Court has held that the possession of a co-owner is like that of a trustee and shall not
be regarded as adverse to the other co-owners but in fact as beneficial to all of them. Acts which
may be considered adverse to strangers may not be considered adverse insofar as co-owners are
concerned. A mere silent possession by a co-owner, his receipt of rents, fruits or profits from the
property, the erection of buildings and fences and the planting of trees thereon, and the payment
of land taxes, cannot serve as proof of exclusive ownership, if it is not borne out by clear and
convincing evidence that he exercised acts of possession which unequivocably constituted an
ouster or deprivation of the rights of the other co-owners.

Thus, in order that a co-owner's possession may be deemed adverse to the cestui que trust
or the other co-owners, the following elements must concur: (1) that he has performed
unequivocal acts of repudiation amounting to an ouster of the cestui que trust or the other co-
owners; (2) that such positive acts of repudiation have been made known to the cestui que trust
or the other co-owners; and (3) that the evidence thereon must be clear and convincing.

In Pangan vs. Court of Appeals, this Court had occasion to lay down specific acts which are
considered as acts of repudiation:

There is clear repudiation of a trust when one who is an apparent administrator of

property causes the cancellation of the title thereto in the name of the apparent
beneficiaries and gets a new certificate of title in his own name.

It is only when the defendants, alleged co-owners of the property in question,

executed a deed of partition and on the strength thereof obtained the cancellation
of the title in the name of their predecessor and the issuance of a new one wherein
they appear as the new owners of a definite area each, thereby in effect denying or
repudiating the ownership of one of the plaintiffs over his alleged share in the
entire lot, that the statute of limitations started to run for the purposes of the action
instituted by the latter seeking a declaration of the existence of the co-ownership
and of their rights thereunder.

Page 823 of 845

 The records do not show that Pastor Makibalo adjudicated to himself the whole estate of
his wife by means of an affidavit filed with the Office of the Register of Deeds as allowed under
Section 1 Rule 74 of the Rules of Court, or that he caused the issuance of a certificate of title in
his name or the cancellation of the tax declaration in Alipio's name and the issuance of a new one
in his own name.

SPS. RICARDO AND MILAGROS HUANG VS. COURT OF APPEALS, et. al

G.R. No. 108525
September 13, 1994

Facts
Private respondents Dolores and Aniceto Sandoval wanted to buy two lots in Makati but
were allowed to buy only one lot per policy of the subdivision owner. Private respondents bought
Lot 21 and registered it in their name. Respondents also bought Lot 20 but the deed of sale was in
the name of petitioner Ricardo Huang and registered in his name. Respondents constructed a house
on Lot 21 while petitioners were allowed by respondents to build a house on Lot 20. Petitioners
were also allowed to mortgage the Lot 20 to the SSS to secure a loan. Respondents actually
financed the construction of the house, the swimming pool, and the fence surrounding the
properties on the understanding that the petitioners would merely hold title in trust for the
respondents beneficial interest.

Petitioner Huangs leased the property to Deltron Corporation for its official quarters
without the permission of the respondents. But later, the lessees prohibited the use of the
swimming pool by the respondents, and the Huangs began challenging the respondents ownership
of the property. Thus, respondents filed a complaint before the trial court for the nullification of
the deed of sale to the petitioners and the quieting of title of Lot 20.
The trial court found that the respondents were the real owners of the Lot 20 and therefore
ordered the petitioners to vacate the property and to remit to the respondents the rentals earned
from Lot 20. The Court of Appeals affirmed the lower courts decision. Hence, this petition.

Issue
Whether or not petitioners can claim ownership of the property registered in their name but
for which was paid by the respondents.

Ruling

Page 824 of 845

 Respondent Sandoval provided the money for the purchase of Lot 20 but the corresponding
deed of sale and transfer certificate of title were placed in the name of petitioner Huang. Through
this transaction, a resulting trust was created. Petitioner became the trustee of Lot 20 and its
improvements for the benefit of respondent as owner. Article 1448 of the New Civil Code provides
that there is an implied trust when property is sold and the legal estate is granted to one party but
the price is paid by another for the purpose of having the beneficial interest for the property. A
resulting trust arises because of the presumption the he who pays for a thing intends a beneficial
therein for himself.
Given these provisions of law, petitioner was only a trustee of the property in question for
the benefit of the respondent who is the real owner. Therefore, petitioner cannot claim ownership
of the property even when it was registered in his name. Thus, petition is denied.

CATALINA BUAN VDA. DE ESCONDE, CONSTANCIA ESCONDE VDA. DE

PERALTA, ELENITA ESCONDE and BENJAMIN ESCONDE VS. HONORABLE
COURT OF APPEALS and PEDRO ESCONDE
G.R. No. 103635
February 01, 1996
Facts
Petitioners Constancia, Benjamin and Elenita, and private respondent Pedro, are the
children of the late Eulogio Esconde and petitioner Catalina Buan. Eulogio Esconde was one of
the children and heirs of Andres Esconde. Andres is the brother of Estanislao Esconde, the original
owner of the disputed lot who died without Issue on April 1942. Survived by his only brother,
Andres, Estanislao left an estate consisting of four (4) parcels of land in Samal, Bataan.

Eulogio died in April, 1944 survived by petitioners and private respondent. At that time,
Lazara and Ciriaca, Eulogio's sisters, had already died without having partitioned the estate of the
late Estanislao Esconde.
On December 5, 1946, the heirs of Lazara, Ciriaca and Eulogio executed a deed of
extrajudicial partition, with the heirs of Lazara identified therein as the Party of the First Part, that
of Ciriaca, the Party of the Second Part and that of Eulogio, the Party of the Third Part. Pursuant
to the same deed, transfer certificates of title were Issued to the new owners of the properties.
Meanwhile, Benjamin constructed the family home on Lot No. 1698-B which is adjacent
to Lot No. 1700. A portion of the house occupied an area of twenty (20) square meters, more or
less, of Lot No. 1700. Benjamin also built a concrete fence and a common gate enclosing the two
(2) lots, as well as an artesian well within Lot No. 1700. Sometime in December, 1982, Benjamin
discovered that Lot No. 1700 was registered in the name of his brother, private respondent.
Believing that the lot was co-owned by all the children of Eulogio Esconde, Benjamin demanded

Page 825 of 845

his share of the lot from private respondent. However, private respondent asserted exclusive
ownership thereof pursuant to the deed of extrajudicial partition and, in 1985 constructed a "buho"
fence to segregate Lot No. 1700 from Lot No. 1698-B.
Petitioners herein filed a complaint before the Regional Trial Court of Bataan against
private respondent for the annulment of TCT No. 394. In its decision of July 31, 1989, the
lower court dismissed the complaint and the counterclaims. Petitioners elevated the case to the
Court of Appeals which affirmed the lower court's decision.

Issue
Whether or not the action was already barred with laches and prescription.

Ruling
Trust is the legal relationship between one person having an equitable ownership in
property and another person owning the legal title to such property, the equitable ownership of the
former entitling him to the performance of certain duties and the exercise of certain powers by the
latter. Trusts are either express or implied. An express trust is created by the direct and positive
acts of the parties, by some writing or deed or will or by words evidencing an intention to create a
trust. No particular words are required for the creation of an express trust, it being sufficient that
a trust is clearly intended. On the other hand, implied trusts are those which, without being
expressed, are deducible from the nature of the transaction as matters of intent or which are
superinduced on the transaction by operation of law as matters of equity, independently of the
particular intention of the parties. In turn, implied trusts are either resulting or constructive trusts.
These two are differentiated from each other as follows:
Resulting trusts are based on the equitable doctrine that valuable consideration and not
legal title determines the equitable title or interest and are presumed always to have been
contemplated by the parties. They arise from the nature or circumstances of the consideration
involved in a transaction whereby one person thereby becomes invested with legal title but is
obligated in equity to hold his legal title for the benefit of another. On the other hand, constructive
trusts are created by the construction of equity in order to satisfy the demands of justice and prevent
unjust enrichment. They arise contrary to intention against one who, by fraud, duress or abuse of
confidence, obtains or holds the legal right to property which he ought not, in equity and good
conscience, to hold.
The rule that a trustee cannot acquire by prescription ownership over property entrusted to
him until and unless he repudiates the trust, applies to express trusts and resulting implied trusts.
However, in constructive implied trusts, prescription may supervene even if the trustee does not
repudiate the relationship. Necessarily, repudiation of the said trust is not a condition precedent to
the running of the prescriptive period.

Page 826 of 845

 Since the action for the annulment of private respondent's title to Lot No. 1700 accrued
during the effectivity of Act No. 190, Section 40 of Chapter III thereof applies. It provides: Sec.
40. Period of prescription as to real estate. An action for recovery of title to, or possession of,
real property, or an interest therein, can only be brought within ten years after the cause of such
action accrues.
It is tragic that a land dispute has once again driven a wedge between brothers. However,
credit must be given to petitioner Benjamin Esconde for resorting to all means possible in arriving
at a settlement between him and his. Unfortunately, his efforts drove fruitless. Even the action he
brought before the court was filed too late. On the other hand, private respondent should not be
unjustly enriched by the improvements introduced by his brother on Lot No. 1700 which he himself
had tolerated. He is obliged by law to indemnify his brother, petitioner Benjamin Esconde, for
whatever expenses the latter had incurred.

TALA REALTY SERVICES CORPORATION VS. BANCO FILIPINO SAVINGS AND

MORTGAGE BANK
2004 Jan 29
G.R. No. 143263

Facts
In 1979, Banco Filipino, respondent, had to unload some of its branch sites since it has
reached its allowable limit under Section 25(a) and 34 of Republic Act 337, as amended, otherwise
known as the General Banking Act.
The major stockholders of Banco Filipino formed a corporation known as TALA Realty
Services Corporation, herein petitioner. On August 25, 1981, respondent bank executed in favor
of petitioner TALA eleven deeds of sale transferring to the latter its branch sites. In turn, petitioner
leased these branch sites to respondent through separate contracts of lease for a period of twenty
years, renewable for another twenty years, at the option of respondent, with a monthly rental of
P12,000.00 and require respondent bank to pay petitioner P602,500.00 as advance rentals.
That day, another lease contract was executed by the parties covering each branch site
providing for a period of eleven years, renewable for another nine years at the option of respondent.
And respondent bank was required to pay P602,500.00 as security deposit for the performance of
the terms and conditions of the contract. In August 1992, petitioner wrote respondent informing it
of the expiration of the 11-year lease contract. They failed to reach an agreement. Thus, on April
14, 1994, petitioner notified respondent that the lease shall no longer be renewed and demanded
that it vacate the premises and pay the rents in arrears amounting to P2,057,600.00. Respondent
did not heed such demand, prompting petitioner to file civil case for illegal detainer.

Page 827 of 845

 RTC rendered its Decision dismissing petitioners complaint for ejectment for lack of
merit. The Court of Appeals had dismissed the petition and upholding the 20-year lease contract
between the parties.
Issue
Whether respondent may be ejected from the leased premises for non-payment of rent
Ruling
No, the Supreme Court ruled that the parties deliberately circumvented the real estate
investment limit under Sections 25(a) and 34 of the General Banking Act. Being in pari delicto,
they should suffer the consequences of their deception by denying them any affirmative relief.
Equity dictates that Tala should not be allowed to collect rent from the Bank. Both the Bank and
Tala participated in the deceptive creation of a trust to circumvent the real estate investment limit
under Sections 25(a) and 34 of the General Banking Act. Upholding Talas right to collect rent
from the period during which the Bank was arbitrarily closed would allow Tala to benefit from the
illegal warehousing agreement. This would result in the application of the Banks advance
rentals covering the eleventh to the twentieth years of the lease, to the rentals due for the period
during which the Bank was arbitrarily closed. With the advance rentals already used up, and the
Bank having stopped payment of the rent on the thirteenth year of the lease or in April 1994, rentals
would be due Tala from the time the Bank stopped paying rent in April 1994 up to the expiration
of the lease period. The Bank should not be allowed to dispute the sale of its lands to Tala nor
should Tala be allowed to further collect rent from the Bank. The clean hands doctrine will not
allow the creation or the use of a juridical relation such as a trust to subvert, directly or indirectly,
the law. Neither the Bank nor Tala came to court with clean hands; neither will obtain relief from
the court as one who seeks equity and justice must come to court with clean hands. Thus, the
petition is DENIED.
THE HEIRS OF PEDRO MEDINA vs. THE HON. COURT OF APPEALS

G.R. No. L-26107

November 27, 1981

Facts

The late Francisco Medina had eight children, all of whom are deceased. Petitioner
Margarita Medina, who filed the complaint on behalf of the heirs of Pedro Medina in the Court
of First Instance of Masbate, is the daughter of Pedro Medina who predeceased his father
Francisco Medina. Restituta Zurbito Vda. de Medina, herein private respondent, and defendant in
the trial court, is the widow of Sotero Medina (brother of Pedro Medina); and Andres Navarro,
Jr., her herein co-respondent and co-defendant in the trial court, is her grandson.

Page 828 of 845

 On March 6, 1957, herein petitioners filed the complaint in the trial court seeking to
recover from herein respondents a parcel of land situated in the sitio of Oac, municipality of
Milagros, province of Masbate, containing an area of 321.1156 hectares and praying that
respondents be ordered to deliver to them possession and ownership thereof with accounting,
damages and costs and litigation expenses.

Among others, the complaint alleged that petitioner Margarita Medina as plaintiff
inherited with her sister Ana Medina the said parcel of land from their father Pedro Medina; that
upon their father's death, she and her sister Ana Medina being then minors were placed under the
care and custody of the spouses Sotero Medina and Restituta Zurbito, as guardians of their
persons and property; that the land in dispute was placed under the management of Sotero
Medina as administrator thereof, and upon Sotero's death under the management of his widow,
Restituta Zurbito; that she later discovered that the land in question was surreptitiously declared
for taxation purposes in the name of Andres Navarro, Jr., grandson of Restituta Zurbito; that said
respondents as defendants had without color of title denied petitioners' ownership and instead
had claimed ownership thereof since the year 1948 and exercised acts of possession and
ownership thereon to the exclusion of petitioners; that petitioners had demanded that respondents
vacate the premises and deliver possession and ownership thereof, but the latter failed and
refused to do so; that respondent Andres Navarro, Jr. had excavated soil from the land in
question and sold the same to the Provincial Government of Masbate without the knowledge and
consent of petitioners and appropriated the proceeds thereof to his personal benefit to the damage
and prejudice of the plaintiff; and that respondent Restituta Zurbito Vda. de Medina never
rendered an accounting of the income of the property in question in spite of their repeated
demands and instead appropriated all the income therefrom to her personal use and benefit.

After trial, judgment was rendered declaring petitioner Margarita Medina with her co-
heirs as the lawful owners of the land in question. Upon appeal, respondent Court of Appeals
reversed the trial court's decision and sustaining respondents' defenses of prescription of action
and acquisitive prescription, ordered the dismissal of the complaint.

Issue
Whether or not express trust was created in the case

Ruling

The appellate court correctly held that the Facts and evidence of record do not support
petitioners' claim of the creation of an express trust and imprescriptibility of their claim, Ruling
squarely that "the Facts do not warrant the conclusion that an express trust was created over the
land in dispute. Although no particular words are required for the creation of an express trust, a
clear intention to create a trust must be shown (Article 1444, Civil Code of the Philippines); and

Page 829 of 845

the proof of fiduciary relationship must be clear and convincing g (Quiogue vs. Arambulo, 45 O.
G. 305; Espinosa vs. Tumulak, CA-G. R. No. 30075-R, June 26, 1964). Express trusts are those
intentionally created by the direct and positive act of the trustor, by some writing, deed or win, or
oral declaration (54 Am. Jur. 33-34). The creation of an express trust must be manifested with
reasonable certainty and cannot be inferred from loose and vague declarations or from
ambiguous circumstances susceptible of other interpretations (54 Am. Jur. 48-49). Nowhere in
the record is there any evidence, and the plaintiffs do not even raise the pretention, that the
original owner of the property Pedro Medina, father of plaintiff Margarita Medina, appointed,
designated or constituted Sotero Medina (the husband of defendant Restituta Zurbito Medina) as
the trustee of the land in dispute. Plaintiffs' contention that there was an express trust must,
therefore, fail."

Concretely, petitioners anchor their claim of an express trust on the following

circumstances: (1) respondents' possession of the titulo real covering the land; (2) the deed of
partition of the estate of the common predecessor Francisco Medina dated February 3, 1924,
adjudicating the land solely to his son Narciso Medina; (3) the deed of sale of the land dated June
29, 1924, executed by Narciso Medina in favor of his brother Sotero Medina; and (4) the
testimony of respondent Restituta Zurbito Vda. de Medina (Sotero's wife) to the effect that her
husband used to "administer" and then later on, she herself "administered" the land.

These circumstances do not make out the creation of an express trust. Respondents'
possession of the Spanish title issued in the late Pedro Medina's name may just be the
consequence of the sale of the land by Narciso (to whom it had been adjudicated in the partition)
to the spouses Sotero Medina and Restituta Zurbito on June 29, 1924 and is by no means an
evidence of an express trust created for the benefit of petitioners. Spanish titles are defeasible,
and "although evidences of ownership . ... may be lost through prescription." Neither is the deed
of partition (which apparently excluded Pedro Medina) entered into earlier any indication of an
express creation of a trust. In fact, these documents are adverse to petitioners' cause, and are
evidences of transfer of ownership of the land from one owner/owners to another or others and
they in fact negate the creation or existence of an express trust.

FILIPINAS PORT SERVICES, INC., et. al. vs. VICTORIANO S. GO, et. al.

G.R. No. 161886

March 16, 2007

Page 830 of 845

Facts

On 4 September 1992, petitioner Eliodoro C. Cruz, Filports president from 1968 until he
lost his bid for reelection as Filports president during the general stockholders meeting in 1991,
wrote a letter to the corporations Board of Directors questioning the boards creation of the
following positions with a monthly remuneration of P13, 050.00 each, and the election thereto of
certain members of the board. In his aforesaid letter, Cruz requested the board to take necessary
action/actions to recover from those elected to the aforementioned positions the salaries they
have received. The board met and took up Cruzs letter. The records do not show what specific
action/actions the board had taken on the letter. Evidently, whatever action/actions the board
took did not sit well with Cruz.

On 14 June 1993, Cruz, purportedly in representation of Filport and its stockholders,

among which is herein co-petitioner Mindanao Terminal and Brokerage Services, Inc.
(Minterbro), filed with the SEC a petition which he describes as a derivative suit against the
herein respondents who were then the incumbent members of Filports Board of Directors, for
alleged acts of mismanagement detrimental to the interest of the corporation and its shareholders
at large. In the same petition, Cruz alleged that despite demands made upon the respondent
members of the board of directors to desist from creating the positions in question and to account
for the amounts incurred in creating the same, the demands were unheeded. Cruz thus prayed
that the respondent members of the board of directors be made to pay Filport, jointly and
severally, the sums of money variedly representing the damages incurred as a result of the
creation of the offices/positions complained of and the aggregate amount of the questioned
increased salaries.

The derivative suit hibernated with the SEC for a long period of time. This petition was
filed to set aside the decision of Court of Appeals reversing the RTCs decision dismissing the
derivative suit instituted by petitioner Eliodoro Cruz for and in behalf of the stockholders of co-
petitioner Filipinas Port Services, Inc.

Issue
Whether the CA erred in holding that Filports Board of Directors acted within its powers
in creating the executive committee and the positions of AVPs for Corporate Planning, Operations,
Finance and Administration, and those of the Special Assistants to the President and the Board
Chairman, each with corresponding remuneration, and in increasing the salaries of the positions
of Board Chairman, Vice-President, Treasurer and Assistant General Manager

Ruling

The petition is bereft of merit.

Page 831 of 845

 The governing body of a corporation is its board of directors. Section 23 of the
Corporation Code explicitly provides that unless otherwise provided therein, the corporate
powers of all corporations formed under the Code shall be exercised, all business conducted and
all property of the corporation shall be controlled and held by a board of directors. Thus, with the
exception only of some powers expressly granted by law to stockholders (or members, in case of
non-stock corporations), the board of directors (or trustees, in case of non-stock corporations)
has the sole authority to determine policies, enter into contracts, and conduct the ordinary
business of the corporation within the scope of its charter, i.e., its articles of incorporation, by-
laws and relevant provisions of law. Verily, the authority of the board of directors is restricted to
the management of the regular business affairs of the corporation, unless more extensive power
is expressly conferred.

In the present case, the boards creation of the positions of Assistant Vice Presidents for
Corporate Planning, Operations, Finance and Administration, and those of the Special Assistants
to the President and the Board Chairman, was in accordance with the regular business operations
of Filport as it is authorized to do so by the corporations by-laws, pursuant to the Corporation
Code.

The election of officers of a corporation is provided for under Section 25 of the Code
which reads:

Sec. 25. Corporate officers, quorum. Immediately after their election, the directors of a
corporation must formally organize by the election of a president, who shall be a director, a
treasurer who may or may not be a director, a secretary who shall be a resident and citizen of the
Philippines and such other officers as may be provided for in the by-laws.

NESTOR MENDIZABEL vs. FERNANDO APAO and TEOPISTA PARIDELA-APAO

G.R. No. 143185
February 20, 2006

Facts

Fernando Apao purchased from spouses Alejandro and Teofila Magbanua a parcel of land
with an area of 61,616 square meters. Fernando bought the property for P400. The vendors
executed a deed of sale which stated inter alia that they could purchase back the property within
six months for P400, failing which, the sale would become absolute. The vendors failed to
repurchase the property. Fernando thus took possession of the same. The Bureau of Lands
approved the survey resulting in the issuance of Survey Plan covering both lots. Upon receipt of
the approved survey plan, Fernando immediately filed an application with the Bureau of Lands for
a free patent over the entirety.

Page 832 of 845

 A latter survey resulted in a subdivision of the land into two separate and distinct lots
identified as Lot Nos. 407 and 1080. Fernando learned that Ignacio Mendizabel had filed prior to
the Bureau of Lands survey a homestead application over Lot No. 1080. Fernando became the
claimant-protestant in Ignacios application.

On 11 May 1962, the Bureau of Lands Regional Office in Zamboanga City rendered a
decision awarding Lot No. 1080 to Ignacio.
Fernando and his wife Teopista Paridela-Apao filed before the trial court a complaint for
Annulment of Titles, Reconveyance and Damages against petitioner.
The RTC rendered a decision in favor of the spouses Apao which was affirmed by the CA.
Issue
Whether implied trust exists in this case
Ruling
Petitioners claim that while respondents complaint alleged fraud or mistake, it did not
state with particularity the circumstances constituting fraud or mistake, pursuant to Section 5,
Rule 8 of the Rules of Court. Petitioners claim that on this score alone, both the trial court and
the Court of Appeals should have decided the case in their favor.

Petitioners argument is untenable.

In an action for reconveyance, all that must be alleged in the complaint are two Facts
which, admitting them to be true, would entitle the plaintiff to recover title to the disputed land,
namely, (1) that the plaintiff was the owner of the land or possessed the land in the concept of
owner, and (2) that the defendant had illegally dispossessed him of the land.

In their complaint, respondents clearly asserted that: (1) they were the true and actual
possessors of the property; (2) they purchased the property from spouses Alejandro and Teofila
Magbanua on 21 March 1955 as evidenced by a deed of sale pacto de retro which spouses
Magbanua executed in their favor; (3) their ownership of the property became absolute when the
vendors failed to repurchase it within the period stipulated in their contract; and (4) they were
fraudulently deprived of ownership of the property when petitioners obtained homestead patents
and certificates of title in their names. These allegations certainly measure up to the requisite
statement of Facts to constitute an action for reconveyance based on an implied trust.

Indubitably, the act of petitioners in misrepresenting that they were in actual possession
and occupation of the property, obtaining patents and original certificates of title in their names,
created an implied trust in favor of the actual possessors of the property. The Civil Code
provides:
ART. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by
force of law, considered a trustee of an implied trust for the benefit of the person from whom the
property comes.

Page 833 of 845

 In other words, if the registration of the land is fraudulent, the person in whose name the
land is registered holds it as a mere trustee, and the real owner is entitled to file an action for
reconveyance of the property.

CONSUELO N. VDA. DE GUALBERTO vs. FRANCISCO H. GO

G.R. No. 139843
July 21, 2005

Facts
Petitioners are the heirs of the late Generoso Gualberto, former registered owner of a parcel
of land containing an area of 169.59 square meters, more or less, and declared for taxation purpose.
Sometime in 1965, the subject parcel of land was sold by Generoso Gualberto and his wife,
herein petitioner Consuelo Natividad Vda. De Gualberto, to respondents father Go S. Kiang for
P9, 000.00, as evidenced by a deed entitled Kasulatan ng Bilihang Tuluyan dated January 15,
1965 (Kasulatan, for brevity), which deed appears to have been duly notarized by then Municipal
Judge Pascual L. Serrano of the Municipal Court of Siniloan, Laguna and recorded in his registry
as Doc. No. 9, Page No. 12, Book No.12, Series of 1965. On April 1, 1973, petitioner Consuelo
executed an Affidavit attesting to the fact that the aforementioned parcel of land had truly been
sold by her and her husband Generoso to the spouses Go S. Kiang and Rosa Javier Go, as borne
by the said Kasulatan. Evidently, the affidavit was executed for purposes of securing a new tax
declaration in the name of the spouses Go.
In December, 1973, in a case for Unlawful Detainer filed by a certain Demetria Garcia
against herein petitioners, the latter alleged that therein plaintiff Garcia is not a real party in
interest and therefore has no legal capacity and cause of action to sue the defendants; that the real
parties in interest of the parcel of commercial land and the residential apartment in question are
Generoso Gualberto and Go S. Kiang respectively as shown by TCT No. 9203 Issued by the
Register of Deeds of Laguna. In a Forcible Entry case filed by respondents against petitioners
before the Municipal Circuit Trial Court of Siniloan-Famy, Siniloan, Laguna docketed as Civil
Case No. 336, a decision was rendered in favor of respondents, which decision was affirmed in
toto by the RTC of Siniloan, Laguna. When elevated to the Court of Appeals, that same decision
was affirmed by the latter court, saying that the Court finds that the judgment of the court a quo
affirming the previous judgment of the municipal court is supported by sufficient and satisfactory
evidence and there is no reason for the Court to hold otherwise.

Issue
Whether an action for reconveyance of property based on nullity of title prescribes
Held

Page 834 of 845

 Petitioners insist that their action for reconveyance is imprescriptible.
An action for reconveyance of real property based on implied or constructive trust is not
barred by the aforementioned 10-year prescriptive period only if the plaintiff is in actual,
continuous and peaceful possession of the property involved. Generally, an action for
reconveyance based on an implied or constructive trust, such as the instant case, prescribes in 10
years from the date of issuance of decree of registration. However, this rule does not apply when
the plaintiff is in actual possession of the land. Thus, it has been held:
An action for reconveyance of a parcel of land based on implied or constructive trust
prescribes in ten years, the point of reference being the date of registration of the deed or the date
of the issuance of the certificate of title over the property, but this rule applies only when the
plaintiff or the person enforcing the trust is not in possession of the property, since if a person
claiming to be the owner thereof is in actual possession of the property, as the defendants are in
the instant case, the right to seek reconveyance, which in effect seeks to quiet title to the property,
does not prescribe. The reason for this is that one who is in actual possession of a piece of land
claiming to be the owner thereof may wait until his possession is disturbed or his title is attacked
before taking steps to vindicate his right, the reason for the rule being, that his undisturbed
possession gives him a continuing right to seek the aid of a court of equity to ascertain and
determine the nature of the adverse claim of a third party and its effect on his own title, which right
can be claimed only by one who is in possession.
Here, it was never established that petitioners remained in actual possession of the property
after their fathers sale thereof to Go S. Kiang in 1965 and up to the filing of their complaint in
this case on August 10, 1995. On the contrary, the trial courts factual conclusion is that
respondents had actual possession of the subject property ever since. The action for reconveyance
in the instant case is, therefore, not in the nature of an action for quieting of title, and is not
imprescriptible.

HEIRS OF LORENZO YAP vs. THE HONORABLE COURT OF APPEALS

G.R.No. 133047
August 17, 1999

Facts
Ramon Yap purchased a parcel of land from the spouses Carlos and Josefina Nery. The
lot was thereupon registered in the name of Ramon Yap under Transfer Certificate of Title No.
102132; forthwith, he also declared the property in his name for tax purposes and paid the real
estate taxes due thereon from 1966 to 1992. In 1967, Ramon Yap constructed a two storey 3-door
apartment building for the use of the Yap family. One-fifth (1/5) of the cost of the construction
was defrayed by Ramon Yap while the rest was shouldered by Chua Mia, the mother of Lorenzo,

Page 835 of 845

Benjamin and Ramon. Upon its completion, the improvement was declared for real estate tax
purposes in the name of Lorenzo Yap in deference to the wishes of the old woman.
The controversy started when herein petitioners, by a letter of 08 June 1992, advised
respondents of the formers claim of ownership over the property and demanded that respondents
execute the proper deed necessary to transfer the title to them. At about the same time, petitioners
filed a case for ejectment against one of the bonafide tenants of the property.

Issue
Whether or not there was implied trust in the instant case

Ruling
The court found there was none. The Court of Appeals, sustaining the court a quo, has
found the evidence submitted by petitioners to be utterly wanting, consisting mainly of the self-
serving testimony of Sally Yap. She herself admitted that the business establishment of her
husband Lorenzo was razed by fire in 1964 that would somehow place to doubt the claim that he
indeed had the means to purchase the subject land about two years later from the Nery spouses.
Upon the other hand, Ramon Yap was by then an accountant with apparent means to buy the
property himself. At all events, findings of fact by the Court of Appeals, particularly when
consistent with those made by the trial court, should deserve utmost regard when not devoid of
evidentiary support. No cogent reason had been shown by petitioners for the Court to now hold
otherwise.

One basic distinction between an implied trust and an express trust is that while the former
may be established by parol evidence, the latter cannot. Even then, in order to establish an implied
trust in real property by parol evidence, the proof should be as fully convincing as if the acts giving
rise to the trust obligation are proven by an authentic document. An implied trust, in fine, cannot
be established upon vague and inconclusive proof.

HEIRS OF AMBROCIO KIONISALA, namely, ANA, ISABEL, GRACE, JOVEN and

CARMELO, all surnamed KIONISALA vs. HEIRS OF HONORIO DACUT
G.R. No. 147379
February 27, 2002
Facts
On 19 December 1995 private respondents filed a complaint for declaration of nullity of
titles, reconveyance and damages against petitioners in the Regional Trial Court. This complaint

Page 836 of 845

involved 2 parcels of land known as Lot No. 1017 and Lot No. 1015. Lot No. 1017 was granted a
free patent to petitioners Heirs of Ambrocio Kionisala and Lot 1015 was bestowed upon Isabel
Kionisala, one of the impleaded heirs of Ambrocio Kionisala. Thereafter, Lot 1017 was registered
under the Torrens system and was Issued Original Certificate of Title in petitioners name, while
Lot No. 1015 was registered in the name of Isabel Kionisala under Original Certificate of Title
No. P-20229.
In support of their causes of action for declaration of nullity of titles and reconveyance,
private respondents claimed absolute ownership of Lot 1015 and 1017 even prior to the issuance
of the corresponding free patents and certificates of title.
The trial court dismissed the complaint on the ground that the cause of action of private
respondents was truly for reversion so that only the Director of Lands could have filed the
complaint. The private respondents moved for reconsideration of the order of dismissal but the
motion was denied. The appellate court promulgated its assailed Decision reversing the order of
dismissal.

Issue
Whether or not the action for nullity of free patents and certificates of title of Lot 1015 and
Lot 1017 or the action for reconveyance based on implied trust of the same lots has prescribed.

Ruling
The Supreme Court ruled that neither the action for declaration of nullity of free patents
and certificates of title of Lot 1015 and Lot 1017 nor the action for reconveyance based on an
implied trust of the same lots has prescribed. It ruled that a free patent Issued over private land is
null and void, and produces no legal effects whatsoever. Moreover, private respondents claim of
open, public, peaceful, continuous and adverse possession of the 2 parcels of land and its illegal
inclusion in the free patents of petitioners and in their original certificates of title also amounts to
an action for quieting of title which is imprescriptible.
The action for reconveyance based on implied trust, on the other hand, prescribes only after
10 years from 1990 and 1991 when the free patents and the certificates of title over Lot 1017 and
Lot 1015, respectively, were registered.
Obviously the action had not prescribed when private respondents filed their complaint
against petitioners on 19 December 1995. At any rate, the action for reconveyance in the case at
bar is also significantly deemed to be an action to quiet title for purposes of determining the
prescriptive period on account of private respondents allegations of actual possession of the
disputed lots. In such a case, the cause of action is truly imprescriptible.
Wherefore, the instant petition for review is denied.

Page 837 of 845

EMILIANO B. RAMOS, ET AL. vs. GREGORIA T. RAMOS, ET AL.

G.R. No. L-19872

December 3, 1974

Facts
Spouses Martin Ramos and Candida Tanate died on October 4, 1906 and October 26, 1880,
respectively. They were survived by their 3 children. Moreover, Martin was survived by his 7
natural children. In December 1906, a special proceeding for the settlement of the intestate estate
of said spouses was conducted. Rafael Ramos, a brother of Martin, administered the estate for
more than 6 years. Eventually, a partition project was submitted which was signed by the 3
legitimate children and 2 of the 7 natural children. A certain Timoteo Zayco signed in
representation of the other 5 natural children who were minors. The partition was sworn to before
a justice of peace.
The conjugal hereditary estate was appraised at P74,984.93, consisting of 18 parcels of
land, some head of cattle and the advances to the legitimate children. thereof represented the
estate of Martin. 1/3 thereof was the free portion or P12,497.98. The shares of the 7 natural
children were to be taken from that 1/3 free portion. Indeed, the partition was made in accordance
with the Old Civil code. Thereafter, Judge Richard Campbell approved the partition project. The
court declared that the proceeding will be considered closed and the record should be archived as
soon as proof was submitted that each heir had received the portion adjudicated to him.
On February 3, 1914, Judge Nepumoceno asked the administrator to submit a report
showing that the shares of the heirs had been delivered to them as required by the previous
decision. Nevertheless, the manifestation was not in strict conformity with the terms of the judges
order and with the partition project itself. 8 lots of the Himamaylan Cadastre were registered in
equal shares in the names of Gregoria (widow of Jose Ramos) and her daughter, when in fact the
administrator was supposed to pay the cash adjudications to each of them as enshrined in the
partition project. Plaintiffs were then constrained to bring the suit before the court seeking for the
reconveyance in their favor their corresponding participations in said parcels of land in accordance
with Article 840 of the old Civil Code. Note that 1/6 of the subject lots represents the 1/3 free
portion of martins shares which will eventually redound to the shares of his 7 legally
acknowledged natural children. The petitioners action was predicated on the theory that their
shares were merely held in trust by defendants. Nonetheless, no Deed of Trust was alleged and
proven. Ultimately, the lower court dismissed the complaint on the grounds of res judicata,
prescription and laches.

Issue
Whether or not the plaintiffs action was barred by prescription, laches and res judicata to
the effect that they were denied of their right to share in their fathers estate
Page 838 of 845
Ruling
There is a rule that a trustee cannot acquire by prescription the ownership of property
entrusted to him, or that an action to compel a trustee to convey property registered in his name in
trust for the benefit of the cestui qui trust does not prescribed or that the defense of prescription
cannot be set up in an action to recover property held by a person in trust for the benefit of anothe,
or that property held in trust can be recovered by the beneficiary regardless of the lapse of time.
That rule applies squarely to express trusts. The basis of the rule is that the possession of a
trustee is not adverse. Not being adverse, he does not acquire by prescription the property held in
trust. Thus, section 38 of Act 190 provides that the law of prescription does not apply in the case
of a continuing and subsisting trust.

THE INTESTATE ESTATE OF ALEXANDER T. TY, represented by the Administratrix,

SYLVIA S. TE,
VS. COURT OF APPEALS, HON. ILDEFONSO E. GASCON, and ALEJANDRO B. TY
G.R. No. 112872
April 19, 2001

Facts
Petitioner Sylvia S. Ty was married to Alexander T. Ty, son of private respondent
Alejandro B. Ty. Alexander died of leukemia on May 19, 1988 and was survived by his wife,
petitioner Silvia, and only child, Krizia Katrina. In the settlement of his estate, petitioner was
appointed administratrix of her late husbands intestate estate.
On November 4, 1992, petitioner filed a motion for leave to sell or mortgage estate property
in order to generate funds for the payment of deficiency estate taxes in the sum of P4,714,560.00.
Privite respondent Alejandro Ty then filed two complaints for the recovery of the above-
mentioned property, praying for the declaration of nullity of the deed of absolute sale of the shares
of stock executed by private respondent in favor of the deceased Alexander, praying for the
recovery of the pieces of property that were placed in the name of deceased Alexander, they were
acquired through private-respondents money, without any cause or consideration from deceased
Alexander.
The motions to dismiss were denied. Petitioner then filed petitions for certiorari in the
Courts of Appeals, which were also dismissed for lack of merit. Thus, the present petitions now
before the Court.

Page 839 of 845

Issue
Whether or not an express trust was created by private respondent when he transferred the
property to his son

Ruling
Private respondent contends that the pieces of property were transferred in the name of the
deceased Alexander for the purpose of taking care of the property for him and his siblings. Such
transfer having been effected without cause of consideration, a resulting trust was created.
Petitioner is in error when she contends that an express trust was created by private
respondent when he transferred the property to his son. Express trust is those that are created by
the direct and positive acts of the parties, by some writing or deed or will or by words evidencing
an intention to create a trust. On the other hand, implied trusts are those which, without being
expressed, are deducible from the nature of the transaction by operation of law as matters of equity,
independently of the particular intention of the parties. Thus, if the intention to establish a trust is
clear, the trust is express; if the intent to establish a trust is to be taken from circumstances or other
matters indicative of such intent, then the trust is implied.
In the cases at hand, private respondent contends that the pieces of property were
transferred in the name of the deceased Alexander for the purpose of taking care of the property
for him and his siblings. Such transfer having been effected without cause of consideration, a
resulting trust was created. A resulting trust arises in favor of one who pays the purchase money
of an estate and places the title in the name of another, because of the presumption that he who
pays for a thing intends a beneficial interest therein for himself. The trust is said to result in law
from the acts of the parties. Such a trust is implied in fact. Petitioners assertion that private
respondents action is barred by the statute of limitations is erroneous. The statute of limitations
cannot apply in this case. Resulting trusts generally do not prescribe except when the trustee
repudiates the trust.

CATALINA VDA. DE RETUERTO, et. al vs. ANGELO P. BARZ

G.R. No. 148180.
DECEMBER 19, 2001

Facts
Petitioners are the heirs of Panfilo Retuerto, while respondents are the heirs of Pedro Barz
who is the sole heir of Juana Perez Barz. Juana Perez Barz was the original owner of Lot No. 896
having an area of 13,160 square meters. Before her death, Juana Perez executed a Deed of
Absolute Sale in favor of Panfilo Retuerto over a parcel of land, identified as Lot No. 896-A, a
subdivision of Lot No. 896, with an approximate area of 2,505 square meters. On July 22, 1940,
the Court Issued an Order directing the Land Registration Commission for the issuance of the

Page 840 of 845

appropriate Decree in favor of Panfilo Retuerto over the said parcel of land. However, no such
Decree was Issued as directed by the Court because, by December 8, 1941, the Second World War
ensued in the Pacific. However, Panfilo failed to secure the appropriate decree after the war.
Sometime in 1966, Pedro Barz, as the sole heir of Juana Perez, filed and application, with
the then CFI of Cebu for the confirmation of his title over Lot 896 which included the Lot sold to
Panfilo Retuerto. The Court ruled in his favor declaring him the lawful owner of the said property,
and thus Original Certificate of Title No. 521 was Issued. Lot No. 896-A however was
continuously occupied by the petitioners. Thus, a confrontation arose and as a result respondents
filed an action on September 5, 1989 for Quieting of Title, Damages and Attorneys Fees. In
their answer, petitioners claimed that they were the owners of a portion of the lot which was
registered under the name of Pedro Barz and therefore the issuance of the Original Certificate of
Title in Pedro Barzs name did not vest ownership but rather it merely constituted him as a trustee
under a constructive trust. Petitioners further contend that Pedro Barz misrepresented with the
land registration court that he inherited the whole lot thereby constituting fraud on his part.

Issue
Whether or not petitioners are the rightful owner of the lot

Ruling
The contention is bereft of merit. Constructive trusts are created in equity to prevent unjust
enrichment, arising against one who, by fraud, duress or abuse of confidence, obtains or holds the
legal right to property which he ought not, in equity and good conscience, to hold. Petitioners
failed to substantiate their allegation that their predecessor-in-interest had acquired any legal right
to the property subject of the present controversy. Nor had they adduced evidence to show that
the certificate of title of Pedro Barz was obtained through fraud.
Even assuming arguendo that Pedro Barz acquired title to the property through mistake or
fraud, petitioners are nonetheless barred from filing their claim of ownership. An action for
reconveyance based on an implied or constructive trust prescribes within ten years from the time
of its creation or upon the alleged fraudulent registration of the property. Since registration of real
property is considered a constructive notice to all persons, then the ten-year prescriptive period is
reckoned from the time of such registering, filing or entering. Thus, petitioners should have filed
an action for reconveyance within ten years from the issuance of OCT No. 521 in November 16,
1968. This, they failed to do so.

CHIAO LIONG TAN VS. COURT OF APPEALS

G.R. No. 106251
November 11, 1993

Page 841 of 845

Facts
Petitioner Chiao Liong Tan claims to be the owner of a motor vehicle, particularly
described as Isuzu Elf van, 1976 Model that he purchased. As owner thereof, petitioner says he
has been in possession, enjoyment and utilization of the said motor vehicle until his older brother,
Tan Ban Yong, the private respondent, took it from him.
Petitioner relies principally on the fact that the van is registered in his name under
Certificate of Registration. He claims in his testimony before the trial court that the said motor
vehicle was purchased from Balintawak Isuzu Motor Center for a price of over P100, 000. 00; that
he sent his brother to pay for the van and the receipt for payment was placed in his name because
it was his money that was used to pay for the vehicle; that he allowed his brother to use the van
because the latter was working for his company, the CLT Industries; and that his brother later
refused to return the van to him and appropriated the same for himself.
On the other hand, private respondent testified that CLT Industries is a family business that
was placed in petitioners name because at that time he was then leaving for the United Stated and
petitioner remaining Filipino in the family residing in the Philippines. When the family business
needed a vehicle in 1987 for use in the delivery of machinery to its customers, he asked petitioner
to look for a vehicle and gave him the amount of P5, 000.00 to be deposited as down payment for
the van, which would be available in about a month. After a month, he himself paid the whole
price out of a loan of P140, 000.00 from his friend Tan Pit Sin. Nevertheless, respondent allowed
the registration of the vehicle in petitioners name. It was also their understanding that he would
keep the van for himself because CLT Industries was not in a position to pay him. Hence, from
the time of the purchase, he had been in possession of the vehicle including the original registration
papers thereof, but allowing petitioner from time to time to use the van for deliveries of machinery.
After hearing, the trial court ruled in favor of the private respondent. Finding no merit in
the appeal, the Court of Appeals affirmed the decision of the trail court.

Issue
Whether or not the petitioner-appellant established proof of ownership over the subject
motor vehicle.

Ruling
Petitioner did not have in his possession the Certificate of Registration of the motor vehicle
and the official receipt of payment for the same, thereby lending credence to the claim of private
respondent who has possession thereof, that he owns the subject motor vehicle. A certificate of
registration of a motor vehicle in ones name indeed creates a strong presumption of ownership.
For all practical purposes, the person in whose favor it has been Issued is virtually the owner

Page 842 of 845

thereof unless proved otherwise. In other words, such presumption is rebuttable by competent
proof.

The New Civil Code recognizes cases of implied trusts other than those enumerated
therein. Thus, although no specific provision could be cited to apply to the parties herein, it is
undeniable that an implied trust was created when the certificate of registration of the motor
vehicle was placed in the name of the petitioner although the price thereof was not paid by him
but by private respondent. The principle that a trustee who puts a certificate of registration in his
name cannot repudiate the trust relying on the registration is one of the well-known limitations
upon a title. A trust, which derives its strength from the confidence one reposes on another
especially between brothers, does not lose that character simply because of what appears in a legal
document.

WHEREFORE, the instant petition for review is hereby DENIED for lack of merit.

EILIA OLACO V. CO CHO CHIT

G.R. No. 58010
March 31, 1993

Facts
This Case involves half-sisters each claiming ownership over a parcel of land. While
petitioner Emilia O'Laco asserts that she merely left the certificate of title covering the property
with private respondent O Lay Kia for safekeeping, the latter who is the former's older sister insists
that the title was in her possession because she and her husband bought the property from their
conjugal funds.
The trial court declared that there was no trust relation of any sort between the sisters. The
Court of Appeals ruled otherwise. Hence, the instant petition for review on certiorari of the
decision of the appellate court together with its resolution denying reconsideration.

Issue
Whether a resulting trust was intended by them in the acquisition of the property; Whether
Prescription has set in.

Held

Page 843 of 845

 Trust relations between parties may either be express or implied. Express trusts are those
which are created by the direct and positive acts of the parties, by some writing or deed, or will,
or by words evincing an intention to create a trust. Implied trusts are those which, without being
express, are deducible from the nature of the transaction as matters of intent, or which are
superinduced on the transaction by operation of law as matters of equity, independently of the
particular intention of the parties. Implied trusts may either be resulting or constructive trusts,
both coming into being by operation of law.

A resulting trust was indeed intended by the parties under Art. 1448 of the New Civil Code
which states ---- "Art. 1448. There is an implied trust when property is sold, and the legal estate
is granted to one party but the price is paid by another for the purpose of having the beneficial
interest of the property. The former is the trustee, while the latter is the beneficiary . . ."
As differentiated from constructive trusts, where the settled rule is that prescription may
supervene, in resulting trust, the rule of imprescriptibility may apply for as long as the trustee has
not repudiated the trust. Once the resulting trust is repudiated, however, it is converted into a
constructive trust and is subject to prescription. A resulting trust is repudiated if the following
requisites concur: (a) the trustee has performed unequivocal acts of repudiation amounting to an
ouster of the cestui qui trust; (b) such positive acts of repudiation have been made known to the
cestui qui trust; and, (c) the evidence thereon is clear and convincing.
In Tale v. Court of Appeals, the Court categorically ruled that an action for reconveyance
based on an implied or constructive trust must perforce prescribe in ten (10) years, and not
otherwise, thereby modifying previous decisions holding that the prescriptive period was four (4)
years.
Neither the registration of the Oroquieta property in the name of petitioner Emilia O'Laco
nor the issuance of a new Torrens title in 1944 in her name in lieu of the alleged loss of the original
may be made the basis for the commencement of the prescriptive period. For, the issuance of the
Torrens title in the name of Emilia O'Laco could not be considered adverse, much less fraudulent.
Precisely, although the property was bought by respondent-spouses, the legal title was placed in
the name of Emilia O'Laco. The transfer of the Torrens title in her name was only in consonance
with the deed of sale in her favor. Consequently, there was no cause for any alarm on the part of
respondent-spouses. As late as 1959, or just before she got married, Emilia continued to recognize
the ownership of respondent-spouses over the Oroquieta property.
Thus, until that point, respondent-spouses were not aware of any act of Emilia which would
convey to them the idea that she was repudiating the resulting trust. The second requisite is
therefore absent. Hence, prescription did not begin to run until the sale of the Oroquieta property,
which was clearly an act of repudiation. But immediately after Emilia sold the Oroquieta property
which is obviously a disavowal of the resulting trust, respondent-spouses instituted the present suit
for breach of trust. Correspondingly, laches cannot lie against them.
After all, so long as the trustee recognizes the trust, the beneficiary may rely upon the
recognition, and ordinarily will not be in fault for omitting to bring an action to enforce his rights.

Page 844 of 845

There is no running of the prescriptive period if the trustee expressly recognizes the resulting trust.
Since the complaint for breach of trust was filed by respondent-spouses two (2) months after
acquiring knowledge of the sale, the action therefore has not yet prescribed.
WHEREFORE, the Petition for Review on Certiorari is DENIED.

--End of Casebook--

Page 845 of 845