Sample - 26 Escol, Hanzel Grace

Sunday Civil Law Review 2
(1:00 – 5:00 pm)
Submitted by: ESCOL, HANZEL GRACE C.N.

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TABLE OF CONTENTS
TABLE OF CONTENTS..............................................................................................................................................................2
I. OBLIGATIONS.........................................................................................................................................................................5
A. IN GENERAL...........................................................................................................................................................................5
3. PRESCRIPTION OF ACTIONS...................................................................................................................................................................... 5
1. FLORO MERCENE vs. GOVERNMENT SERVICE INSURANCE SYSTEM, G.R. No. 192971, January 10,
2018 (THIRD DIVISION)........................................................................................................................................................................ 5
2. HEIRS OF GILBERTO ROLDAN, v. HEIRS OF SILVELA ROLDAN, AND HEIRS OF LEOPOLDO MAGTULIS,
G.R. No. 202578, September 27, 2017 (FIRST DIVISION)......................................................................................................... 7
B. SOURCES OF CIVIL OBLIGATIONS...................................................................................................................................8
2. CONTRACTS............................................................................................................................................................................................. 8
3. FEDERAL EXPRESS CORPORATION v. LUWALHATI R. ANTONINO AND ELIZA BETTINA RICASA
ANTONINO, G.R. No. 199455, June 27, 2018 (THIRD DIVISION)........................................................................................... 8
4. ACTS OR OMISSIONS PUNISHED BY LAW.............................................................................................................................................10
4. SWIRE REALTY DEVELOPMENT CORPORATION, V. SPECIALTY CONTRACTS GENERAL AND
CONSTRUCTION SERVICES, INC. AND JOSE JAVELLANA, G.R. No. 188027, August 09, 2017 (THIRD
DIVISION)................................................................................................................................................................................................... 10
C. COMPLIANCE WITH OBLIGATIONS..............................................................................................................................12
ANTONINO, G.R. No. 199455, June 27, 2018 (THIRD DIVISION)........................................................................................12
D. KINDS OF CIVIL OBLIGATIONS.....................................................................................................................................14
3. AS TO RIGHTS AND OBLIGATIONS OF MULTIPLE PARTIES............................................................................................14
B. SOLIDARY............................................................................................................................................................................................... 14
6. CITYSTATE SAVINGS BANK v. TERESITA TOBIAS AND SHELLIDIE VALDEZ, G.R. No. 227990, March 07,
2018, (SECOND DIVISION).................................................................................................................................................................. 14
E. BREACH OF OBLIGATIONS..............................................................................................................................................16
MANNER OF BREACH................................................................................................................................................................................... 16
FRAUD............................................................................................................................................................................................................ 16
7. PARADIGM DEVELOPMENT CORPORATION OF THE PHILIPPINES, vs. ,BANK OF THE PHILIPPINE
ISLANDS, G.R. No. 191174, June 7, 2017 (THIRD DIVISION)................................................................................................ 16
2. NEGLIGENCE............................................................................................................................................................................................ 18
8. AL DELA CRUZ vs. CAPT. RENATO OCTA VIANO and WILMA OCTA VIANO, G.R. No. 219649, July 26,
2017 (SECOND DIVISION)................................................................................................................................................................... 18
3. DELAY........................................................................................................................................................................................................ 20
9. SPOUSES FRANCISCO ONG AND BETTY LIM ONG, AND SPOUSES JOSEPH ONG CHUAN AND
ESPERANZA ONG CHUAN vs. BPI FAMILY SAVINGS BANK, INC., G.R. No. 208638, January 24, 2018 (SECOND
DIVISION)................................................................................................................................................................................................... 20
4. ANY OTHER MANNER OF CONTRAVENTION.........................................................................................................................................22
10. SWIRE REALTY DEVELOPMENT CORPORATION V. SPECIALTY CONTRACTS GENERAL AND
DIVISION)................................................................................................................................................................................................... 22
F. REMEDIES FOR BREACH OF OBLIGATIONS...............................................................................................................24
2. JUDICIAL REMEDIES......................................................................................................................................................................... 24
11. SWIRE REALTY DEVELOPMENT CORPORATION V. SPECIALTY CONTRACTS GENERAL AND
DIVISION)................................................................................................................................................................................................... 24
G. MODES OF EXTINGUISHMENT OF OBLIGATIONS...................................................................................................26
6. NOVATION................................................................................................................................................................................................. 26
12. PARADIGM DEVELOPMENT CORPORATION OF THE PHILIPPINES vs. BANK OF THE PHILIPPINE
ISLANDS, G.R. No. 191174, June 7, 2017 (THIRD DIVISION)................................................................................................26
II. CONTRACTS........................................................................................................................................................................28
B. FUNDAMENTAL CHARACTERISTICS/ PRINCIPLES OF CONTRACTS.................................................................28
1. CONSENSUALITY OF CONTRACTS.......................................................................................................................................................... 28
CONTRACT OF ADHESION............................................................................................................................................................................28
13. ENCARNACION CONSTRUCTION & INDUSTRIAL CORPORATION, v. PHOENIX READY MIX
CONCRETE DEVELOPMENT & CONSTRUCTION, INC., G.R. No. 225402, September 04, 2017 (SECOND
DIVISION)................................................................................................................................................................................................... 28
ANTONINO, G.R. No. 199455, June 27, 2018 (THIRD DIVISION)........................................................................................30
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I. OBLIGATIONS
A. IN GENERAL
3. Prescription of Actions
1. FLORO MERCENE VS. GOVERNMENT SERVICE
INSURANCE SYSTEM, G.R. NO. 192971, JANUARY
10, 2018 (THIRD DIVISION)
MARTIRES, J.:
NATURE OF THE ACTION: This petition for review on certiorari seeks to reverse and set aside the
29 April 2010 Decision and 20 July 2010 Resolution of the Court of Appeals (CA) in CA-G.R. CV No.
86615 which reversed the 15 September 2005 Decision of the Regional Trial Court, Branch 220,
Quezon City (RTC).
FACTS: On 19 January 1965, petitioner Floro Mercene (Mercene) obtained a loan from respondent
Government Service Insurance System (GSIS) in the amount of ₱29,500.00. As security, a real estate
mortgage was executed over Mercene's property in Quezon City, registered under Transfer
Certificate of Title No. 90535. The mortgage was registered and annotated on the title on 24 March
1965.
On 14 May 1968, Mercene contracted another loan with GSIS for the amount of ₱14,500.00. The
loan was likewise secured by a real estate mortgage on the same parcel of land. The following day,
the loan was registered and duly annotated on the title.
On 11 June 2004, Mercene opted to file a complaint for Quieting of Title against GSIS. He alleged
that: since 1968 until the time the complaint was filed, GSIS never exercised its rights as a
mortgagee; the real estate mortgage over his property constituted a cloud on the title; GSIS' right to
foreclose had prescribed. In its answer, GSIS assailed that the complaint failed to state a cause of
action and that prescription does not run against it because it is a government entity.
The RTC granted Mercene's complaint and ordered the cancellation of the mortgages annotated on
the title. The CA reversed the RTC decision. The appellate court posited that the trial court erred in
declaring that GSIS' right to foreclose the mortgaged properties had prescribed.
ISSUE: WHETHER THE COURT OF APPEALS ERRED IN RULING THAT THE REAL ESTATE
MORTGAGES HAD YET TO PRESCRIBE.
RULINGS: NO. The Court finds that the CA did not err in ruling that the real estate mortgages had
yet to prescribe.
In University of Mindanao, Inc. v. Bangko Sentral ng Pilipinas, et al., the Court clarified that
prescription runs in mortgage contract from the time the cause of action arose and not from the
time of its execution, to wit:
The prescriptive period neither runs from the date of the execution of a contract nor does the
prescriptive period necessarily run on the date when the loan becomes due and demandable.
Prescriptive period runs from the date of demand, subject to certain exceptions.
In other words, ten (10) years may lapse from the date of the execution of contract, without barring
a cause of action on the mortgage when there is a gap between the period of execution of the
contract and the due date or between the due date and the demand date in cases when demand is
necessary.
The mortgage contracts in this case were executed by Saturnino Petalcorin in 1982. The maturity
dates of FISLAI's loans were repeatedly extended until the loans became due and demandable only
in 1990. Respondent informed petitioner of its decision to foreclose its properties and demanded
payment in 1999.
The running of the prescriptive period of respondent's action on the mortgages did not start when it
executed the mortgage contracts with Saturnino Petalcorin in 1982.
The prescriptive period for filing an action may run either (1) from 1990 when the loan became
due, if the obligation was covered by the exceptions under Article 1169 of the Civil Code; (2) or from
1999 when respondent demanded payment, if the obligation was not covered by the exceptions
under Article 116919 of the Civil Code.
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In Maybank Philippines, Inc. v. Spouses Tarrosa, 20 the Court explained that the right to foreclose
prescribes after ten (10) years from the time a demand for payment is made, or when then loan
becomes due and demandable in cases where demand is unnecessary, viz:
An action to enforce a right arising from a mortgage should be enforced within ten (10) years from
the time the right of action accrues, i.e., when the mortgagor defaults in the payment of his
obligation to the mortgagee; otherwise, it will be barred by prescription and the mortgagee will lose
his rights under the mortgage. However, mere delinquency in payment does not necessarily mean
delay in the legal concept. To be in default is different from mere delay in the grammatical sense,
because it involves the beginning of a special condition or status which has its own peculiar effects
or results.
In order that the debtor may be in default, it is necessary that: (a) the obligation be demandable and
already liquidated; (b) the debtor delays performance; and (c) the creditor requires the
performance judicially or extrajudicially, unless demand is not necessary - i.e., when there is an
express stipulation to that effect; where the law so provides; when the period is the controlling
motive or the principal inducement for the creation of the obligation; and where demand would be
useless. Moreover, it is not sufficient that the law or obligation fixes a date for performance; it must
further state expressly that after the period lapses, default will commence. Thus, it is only when
demand to pay is unnecessary in case of the aforementioned circumstances, or when required, such
demand is made and subsequently refused that the mortgagor can be considered in default and the
mortgagee obtains the right to file an action to collect the debt or foreclose the mortgage.
Thus, applying the pronouncements of the Court regarding prescription on the right to foreclose
mortgages, the Court finds that the CA did not err in concluding that Mercene's complaint failed to
state a cause of action. It is undisputed that his complaint merely stated the dates when the loan
was contracted and when the mortgages were annotated on the title of the lot used as a security.
Conspicuously lacking were allegations concerning: the maturity date of the loan contracted and
whether demand was necessary under the terms and conditions of the loan.
As such, the RTC erred in ruling that GSIS' right to foreclose had prescribed because the allegations
in Mercene's complaint were insufficient to establish prescription against GSIS. The only
information the trial court had were the dates of the execution of the loan, and the annotation of the
mortgages on the title. As elucidated in the above-mentioned decisions, prescription of the right to
foreclose mortgages is not reckoned from the date of execution of the contract. Rather, prescription
commences from the time the cause of action accrues; in other words, from the time the obligation
becomes due and demandable, or upon demand by the creditor/mortgagor, as the case may be.
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2. HEIRS OF GILBERTO ROLDAN, V. HEIRS OF
SILVELA ROLDAN, AND HEIRS OF LEOPOLDO
MAGTULIS, G.R. NO. 202578, SEPTEMBER 27,
2017 (FIRST DIVISION)
SERENO, C.J.:
NATURE OF THE ACTION: A Petition for Review on Certiorari assailing the Court of Appeals (CA)
Decision and Resolution, which affirmed the Decision of the Regional Trial Court (RTC).
FACTS : Natalia Magtulis owned Lot No. 4696, an agricultural land in Kalibo, Aklan, which had an
area of 21,739 square meters, and was covered by Original Certificate of Title No. P-7711.7 Her
heirs included Gilberto Roldan and Silvela Roldan, her two children by her first marriage; and,
allegedly, Leopolda Magtulis her child with another man named Juan Aguirre. After her death in
1961, Natalia left the lot to her children. However, Gilberta and his heirs took possession of the
property to the exclusion of respondents.
On 19 May 2003, respondents filed before the RTC a Complaint for Partition and Damages against
petitioners. The latter refused to yield the property on these grounds: (1) respondent heirs of
Silvela had already sold her share to Gilberto; and (2) respondent heirs of Leopolda had no cause of
action, given that he was not a child of Natalia.
Petitioners additionally contend that respondents lost their rights over the property, since the
action for partition was lodged before the RTC only in 2003, or 42 years since Gilberto occupied the
property in 1961. For the heirs of Gilberto, prescription and laches already preclude the heirs of
Silvela and the heirs of Leopoldo from claiming co-ownership over Lot No. 4696.
ISSUE: WHETHER PRESCRIPTION AND LACHES BAR RESPONDENTS FROM CLAIMING CO-
OWNERSHIP OVER LOT NO. 4696.
RULINGS: No. Prescription cannot be appreciated against the co-owners of a property, absent any
conclusive act of repudiation made clearly known to the other coowners.
Here, petitioners merely allege that the purported co-ownership "was already repudiated by one of
the parties" without supporting evidence. Aside from the mere passage of time, there was failure on
the part of petitioners to substantiate their allegation of laches by proving that respondents slept on
their rights. Nevertheless, had they done so, two grounds deter them from successfully claiming the
existence of prescription and laches.
First, as demanded by the repudiation requisite for prescription to be appreciated, there is a need to
determine the veracity of factual matters such as the date when the period to bring the action
commenced to run. In Macababbad, Jr. v. Masirag, we considered that determination as factual in
nature. The same is true in relation to finding the existence of laches. We held in Crisostomo v.
Garcia, Jr. that matters like estoppel, laches, and fraud require the presentation of evidence and the
determination of facts. Since petitions for review on certiorari under Rule 45 of the Rules of Court,
as in this case, entertain questions of law, petitioners claim of prescription and laches fail.
Second, petitioners have alleged prescription and laches only before this Court. Raising a new
ground for the first time on appeal contravenes due process, as that act deprives the adverse party
of the opportunity to contest the assertion of the claimant. Since respondents were not able to
refute the issue of prescription and laches, this Court denies the newly raised contention of
petitioners.
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B. SOURCES OF CIVIL OBLIGATIONS
2. CONTRACTS
3. FEDERAL EXPRESS CORPORATION V.
LUWALHATI R. ANTONINO AND ELIZA
BETTINA RICASA ANTONINO, G.R. NO.
199455, JUNE 27, 2018 (THIRD DIVISION)
LEONEN, J.:
NATUREOF THE ACTION: This resolves a Petition for Review on Certiorari under Rule 45 of the
1997 Rules of Civil Procedure praying that the assailed Court of Appeals August 31, 2011 Decision
and November 21, 2011 Resolution in CA-G.R. CV No. 91216 be reversed and set aside and that
Luwalhati R. Antonino (Luwalhati) and Eliza Bettina Ricasa Antonino (Eliza) be held liable on
Federal Express Corporation's (FedEx) counterclaim.
FACTS: Eliza was the owner of Unit 22-A (the Unit) in Allegro Condominium, located at 62 West
62nd St., New York, United States.7 In November 2003, monthly common charges on the Unit
became due. These charges were for the period of July 2003 to November 2003, and were for a total
amount of US$9,742.81.
On December 15, 2003, Luwalhati and Eliza were in the Philippines. As the monthly common
charges on the Unit had become due, they decided to send several Citibank checks to Veronica Z.
Sison (Sison), who was based in New York. Citibank checks allegedly amounting to US$17,726.18 for
the payment of monthly charges and US$11,619.35 for the payment of real estate taxes were sent by
Luwalhati through FedEx with Account No. x2546-4948-1 and Tracking No. 8442 4588 4268. The
package was addressed to Sison who was tasked to deliver the checks payable to Maxwell-Kates,
Inc. and to the New York County Department of Finance. Sison allegedly did not receive the package,
resulting in the non-payment of Luwalhati and Eliza's obligations and the foreclosure of the Unit.
Upon learning that the checks were sent on December 15, 2003, Sison contacted FedEx on February
9, 2004 to inquire about the non-delivery. She was informed that the package was delivered to her
neighbor but there was no signed receipt.
On March 14, 2004, Luwalhati and Eliza, through their counsel, sent a demand letter to FedEx for
payment of damages due to the non-delivery of the package, but FedEx refused to heed their
demand. Hence, on April 5, 2004, they filed their Complaint for damages.
FedEx claimed that Luwalhati and Eliza "ha[d] no cause of action against it because [they] failed to
comply with a condition precedent, that of filing a written notice of claim within the 45 calendar
days from the acceptance of the shipment."
ISSUE: WHETHER OR NOT PETITIONER FEDERAL EXPRESS CORPORATION MAY BE HELD LIABLE
FOR DAMAGES ON ACCOUNT OF ITS FAILURE TO DELIVER THE CHECKS SHIPPED BY
RESPONDENTS LUWALHATI R. ANTONINO AND ELIZA BETTINA RICASA ANTONINO TO THE
CONSIGNEE VERONICA SISON.
RULINGS: YES. Federal Express Corporation is liable for damages on account of its failure to deliver
the checks shipped by respondents Luwalhati R. Antonino and Eliza Bettina Ricasa Antonino to the
consignee veronica sison.
A provision in a contract of carriage requiring the filing of a formal claim within a specified period is
a valid stipulation. Jurisprudence maintains that compliance with this provision is a legitimate
condition precedent to an action for damages arising from loss of the shipment:
More particularly, where the contract of shipment contains a reasonable requirement of giving
notice of loss of or injury to the goods, the giving of such notice is a condition precedent to the
action for loss or injury or the right to enforce the carrier's liability. Such requirement is not an
empty formalism. The fundamental reason or purpose of such a stipulation is not to relieve the
carrier from just liability, but reasonably to inform it that the shipment has been damaged and that
it is charged with liability therefor, and to give it an opportunity to examine the nature and extent of
the injury. This protects the carrier by affording it an opportunity to make an investigation of a
claim while the matter is fresh and easily investigated so as to safeguard itself from false and
fraudulent claims.
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Petitioner's Air Waybill stipulates the following on filing of claims:
Claims for Loss, Damage, or Delay. All claims must be made in writing and within strict time limits.
See any applicable tariff, our service guide or our standard conditions for carriage for details.
The right to damages against us shall be extinguished unless an action is brought within two (2)
years from the date of delivery of the shipment or from the date on which the shipment should have
been delivered.
Within forty-five (45) days after notification of the claim, it must be documented by sending to us
[all the] relevant information about it.
For their claim to prosper, respondents must, thus, surpass two (2) hurdles: first, the filing of their
formal claim within 45 days; and second, the subsequent filing of the action within two (2) years.
There is no dispute on respondents' compliance with the second period as their Complaint was filed
on April 5, 2004.
In appraising respondents' compliance with the first condition, this Court is guided by settled
standards in jurisprudence.
In Philippine Airlines, Inc. v. Court of Appeals, Philippine Airlines alleged that shipper Gilda Mejia
(Mejia) failed to file a formal claim within the period stated in the Air Waybill. This Court ruled that
there was substantial compliance with the period because of the zealous efforts demonstrated by
Mejia in following up her claim. These efforts coupled with Philippine Airlines' "tossing around the
claim and leaving it unresolved for an indefinite period of time" led this Court to deem the requisite
period satisfied. This is pursuant to Article 1186 of the New Civil Code which provides that "[t]he
condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment":
Considering the abovementioned incident and private respondent Mejia's own zealous efforts in
following up the claim, it was clearly not her fault that the letter of demand for damages could only
be filed, after months of exasperating follow-up of the claim, on August 13, 1990. If there was any
failure at all to file the formal claim within the prescriptive period contemplated in the air waybill,
this was largely because of PAL's own doing, the consequences of which cannot, in all fairness, be
attributed to private respondent.
Even if the claim for damages was conditioned on the timely filing of a formal claim, 'under Article
1186 of the Civil Code that condition was deemed fulfilled, considering that the collective action of
PAL's personnel in tossing around the claim and leaving it unresolved for an indefinite period of
time was tantamount to "voluntarily preventing its fulfillment." On grounds of equity, the filing of
the baggage freight claim, which sufficiently informed PAL of the damage sustained by private
respondent's cargo, constituted substantial compliance with the requirement in the contract for the
filing of a formal claim.
Here, the Court of Appeals detailed the efforts made by respondent Luwalhati and consignee Sison.
It also noted petitioner's ambiguous and evasive responses, nonchalant handling of respondents'
concerns, and how these bogged down respondents' actions and impaired their compliance with
the required 45-day period:
Anent the issues concerning lack of cause of action and their so-called "run-around" matter, We
uphold the lower court's finding that the herein appellees complied with the requirement for the
immediate filing of a formal claim for damages as required in the Air Waybill or, at least, We find
that there was substantial compliance therewith. Luwalhati testified that the addressee, Veronica Z.
Sison promptly traced the whereabouts of the said package, but to no avail.
To the Court's mind, it is beyond her control why the demand letter for damages was only sent
subsequent to her infuriating follow-ups regarding the whereabouts of the said package. We can
surmise that if there was any omission at all to file the said claim within the prescriptive period
provided for under the Air Waybill it was mostly due to herein appellant's own behavior, the
outcome thereof cannot, by any chance, be imputed to the herein appellees.
Petitioner has been unable to persuasively refute Luwalhati's recollection of the efforts that she and
Sison exerted, and of the responses it gave them. It instead insists that the 45-day period stated in
its Air Waybill is sacrosanct. This Court is unable to bring itself to sustaining petitioner's appeal to a
convenient reprieve. It is one with the Regional Trial Court and the Court of Appeals in stressing
Page 8 of 31
that respondents' inability to expediently file a formal claim can only be attributed to petitioner
hampering its fulfillment. Thus, respondents must be deemed to have substantially complied with
the requisite 45-day period for filing a formal claim.
4. Acts or Omissions punished by Law
4. SWIRE REALTY DEVELOPMENT CORPORATION, V.
SPECIALTY CONTRACTS GENERAL AND
CONSTRUCTION SERVICES, INC. AND JOSE
JAVELLANA, G.R. NO. 188027, AUGUST 09, 2017
(THIRD DIVISION)
REYES, JR., J:
NATURE OF THE ACTION: Petition for review on certiorari under Rule 45 of the Rules of Court
seeking to annul and set aside the Decision dated February 24, 2009 and Resolution dated May 25,
2009 issued by the Court of Appeals (CA) in CA-G.R. CV No. 84706.
The controversy arose from a Complaint for Sum of Money and Damages filed by Swire Realty
Development Corporation (petitioner) against Specialty Contracts General and Construction
Services, Inc., represented by its President and General Manager Jose Javellana, Jr. (the
respondents).
FACTS: The Complaint alleges breach of an Agreement to Undertake Waterproofing Works[4] (the
Agreement) entered into on December 27, 1996 by the petitioner and the respondents. By virtue of
this, the respondents undertook to perform waterproofing works on the petitioner's condominium
project known as the Garden View Tower for the amount of Php 2,000,000.00 over a period of 100
calendar days from the execution of the Agreement or until April 6, 1997. The amount agreed upon
is to be paid to the respondents as follows: 20% as down payment, and the balance of 80% payable
through monthly progress billings based on accomplished work, subject to a 10% retention fee and
1% withholding tax. The Agreement likewise provided that the parties are liable for penalty in case
of delay in the performance of their respective obligations and that retention fee shall be released to
the respondents within 90 days from turnover and acceptance by the petitioner of the completed
work.
After due proceedings, the Regional Trial Court (RTC) of Quezon City, Branch 224, on July 9, 2004,
rendered its Decision,[5] viz.:
WHEREFORE, judgment is hereby rendered ordering [the respondents] to pay [the petitioner] the
following:
1.) P400,000.00 representing actual damages moneys advanced by defendant Specserve without
completion of waterproofing works;
2.) P124,931.40 representing the contract price paid by [the petitioner] to Esicor for the unfinished
works of Specserve;
3.) P100,000.00 as attorney's fees.
SO ORDERED.
The respondents filed a motion for reconsideration of the RTC decision, which the RTC denied in its
Orderdated October 25, 2004.
The matter was elevated to the CA. Finding proof that additional works were performed by the
respondents, the CA in its Decision dated February 24, 2009, reversed and set aside the RTC's
decision, in this wise:
IN VIEW OF THE FOREGOING, the decision appealed from is reversed, and a new one entered
directing the [petitioner] to pay the defendant Specserv the amount of P157,702.06 with legal
interest of six (6) percent per annum form October 10, 1997 until paid.
The petitioner sought a reconsideration of the CA decision, but it was denied by the CA in its
Resolution[10] dated May 25, 2009.
ISSUE: WETHER OR NOT RESPONDENT SPECSERVE ARE LIABLE FOR THE COSTS INCURRED BY
THE PETITIONER IN HIRING THE SERVICES OF ESICOR TO COMPLETE THEIR UNFINISHED WORK.
Page 9 of 31
RULINGS: Yes. The respondents are liable for the costs incurred by the petitioner in hiring the
services of Esicor to complete their unfinished work, amounting to Php 124,931.40, in consonance
with Article 1167 of the New Civil Code, which provides:
Article 1167. If a person obliged to do something fails to do it, the same shall be executed at his cost.
This same rule shall be observed if he does it in contravention of the tenor of the obligation.
Furthermore, it may be decreed that what has been poorly done be undone.
The extent of work accomplished by the respondents is only at 90% and that despite demand they
failed to deploy their workers, until the 100-day period for the works to finish has already expired;
There being a clear breach of contract on the part of the respondents when they failed to fully
comply with their obligation under the contract, within the time agreed upon, and failing to perform
the necessary repairs, they are liable for damages and are bound to refund the excess in payment
made by the petitioner.
Page 10 of 31
C. COMPLIANCE WITH OBLIGATIONS

LEONEN, J.:
62nd St., New York, United States. In November 2003, monthly common charges on the Unit became
due. These charges were for the period of July 2003 to November 2003, and were for a total amount
of US$9,742.81.
Upon learning that the checks were sent on December 15, 2003, Sison contacted FedEx on February
9, 2004 to inquire about the non-delivery. She was informed that the package was delivered to her
neighbor but there was no signed receipt.
FedEx claimed that Luwalhati and Eliza "ha[d] no cause of action against it because [they] failed to
comply with a condition precedent, that of filing a written notice of claim within the 45 calendar
days from the acceptance of the shipment."
ISSUE: WHETHER OR NOT PETITIONER FEDERAL EXPRESS CORPORATION EXERCISED THE

REQUIRED DILIGENCE IN ENSURING DELIVERY OF THE PACKAGE TO ITS DESIGNATED
CONSIGNEE.
RULINGS: No. Federal Express Corporation failed to exercise the required diligence in ensuring
delivery of the package to its designated consignee, which is extraordinary diligence.
The Civil Code mandates common carriers to observe extraordinary diligence in caring for the
goods they are transporting:
Article 1733. Common carriers, from the nature of their business and for reasons of public policy,
are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of
the passengers transported by them, according to all the circumstances of each case.
"Extraordinary diligence is that extreme measure of care and caution which persons of unusual
prudence and circumspection use for securing and preserving their own property or rights."45
Consistent with the mandate of extraordinary diligence, the Civil Code stipulates that in case of loss
Page 11 of 31
or damage to goods, common carriers are presumed to be negligent or at fault,46 except in the
following instances:
(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 or competent public authority.
In all other cases, common carriers must prove that they exercised extraordinary diligence in the
performance of their duties, if they are to be absolved of liability.
The responsibility of common carriers to exercise extraordinary diligence lasts from the time the
goods are unconditionally placed in their possession until they are delivered "to the consignee, or to
the person who has a right to receive them." Thus, part of the extraordinary responsibility of
common carriers is the duty to ensure that shipments are received by none but "the person who has
a right to receive them." Common carriers must ascertain the identity of the recipient. Failing to
deliver shipment to the designated recipient amounts to a failure to deliver. The shipment shall then
be considered lost, and liability for this loss ensues.
Petitioner is unable to prove that it exercised extraordinary diligence in ensuring delivery of the
package to its designated consignee. It claims to have made a delivery but it even admits that it was
not to the designated consignee. It asserts instead that it was authorized to release the package
without the signature of the designated recipient and that the neighbor of the consignee, one
identified only as "LGAA 385507," received it. This fails to impress.
The assertion that receipt was made by "LGAA 385507" amounts to little, if any, value in proving
petitioner's successful discharge of its duty. "LGAA 385507" is nothing but an alphanumeric code
that outside of petitioner's personnel and internal systems signifies nothing. This code does not
represent a definite, readily identifiable person, contrary to how commonly accepted identifiers,
such as numbers attached to official, public, or professional identifications like social security
numbers and professional license numbers, function. Reliance on this code is tantamount to
reliance on nothing more than petitioner's bare, self-serving allegations. Certainly, this cannot
satisfy the requisite of extraordinary diligence consummated through delivery to none but "the
person who has a right to receive" the package.
Given the circumstances in this case, the more reasonable conclusion is that the package was not
delivered. The package shipped by respondents should then be considered lost, thereby
engendering the liability of a common carrier for this loss.
Petitioner cannot but be liable for this loss. It failed to ensure that the package was delivered to the
named consignee. It admitted to delivering to a mere neighbor. Even as it claimed this, it failed to
identify that neighbor.
Page 12 of 31
D. KINDS OF CIVIL OBLIGATIONS
3. AS TO RIGHTS AND OBLIGATIONS OF MULTIPLE PARTIES
b. SOLIDARY
6. CITYSTATE SAVINGS BANK V. TERESITA TOBIAS
AND SHELLIDIE VALDEZ, G.R. NO. 227990,
MARCH 07, 2018, (SECOND DIVISION)
REYES, JR., J.:
NATURE OF THE ACTION: This is a petition for review on certiorari under Rule 45 of the Rules of
Court seeking to annul and set aside the Decision dated May 31, 2016 and Resolution dated October
10, 2016 issued by the Court of Appeals (CA) in CA-G.R. CV No. 102545.
FACTS: Rolando Robles (hereinafter referred to as Robles), a certified public accountant, has been
employed with Citystate Savings Bank (hereinafter referred to as the petitioner) since July 1998
then as Accountant-trainee for its Chino Roces Branch. On September 6, 2000, Robies was promoted
as acting manager for petitioner's Baliuag, Bulacan branch, and eventually as manager. Sometime in
2002, respondent Teresita Tobias (hereinafter referred to as Tobias), a meat vendor at the Baliuag
Public Market, was introduced by her youngest son to Robies, branch manager of petitioner's
Baliuag, Bulacan branch. Robies persuaded Tobias to open an account with the petitioner, and
thereafter to place her money in some high interest rate mechanism, to which the latter yielded.
Thereafter, Robies would frequent Tobias' stall at the public market to deliver the interest earned by
her deposit accounts in the amount of Php 2,000.00. In turn, Tobias would hand over her passbook
to Robies for updating. The passbook would be returned the following day with typewritten entries
but without the corresponding counter signatures. Tobias was later offered by Robies to sign-up in
petitioner's back-to-back scheme which is supposedly offered only to petitioner's most valued
clients. Under the scheme, the depositors authorize the bank to use their bank deposits and invest
the same in different business ventures that yield high interest. Robies allegedly promised that the
interest previously earned by Tobias would be doubled and assured her that he will do all the paper
work. Lured by the attractive offer, Tobias signed the pertinent documents without reading its
contents and invested a total of Php 1,800,000.00 to petitioner through Robies. Later, Tobias
became sickly, thus she included her daughter and herein respondent Shellidie Valdez (hereinafter
referred to as Valdez), as co-depositor in her accounts with the petitioner.
In 2005, Robies failed to remit to respondents the interest as scheduled. Respondents tried to reach
Robies but he can no longer be found; their calls were also left unanswered. In a meeting with
Robies' siblings, it was disclosed to the respondents that Robies withdrew the money and
appropriated it for personal use. Robies later talked to the respondents, promised that he would
return the money by installments and pleaded that they do not report the incident to the petitioner.
Robies however reneged on his promise. Petitioner also refused to make arrangements for the
return of respondents' money despite several demands. On January 8, 2007, respondents filed a
Complaint for sum of money and damages. against Robles and the petitioner. In their Complaint,
respondents alleged that Robles committed fraud in the performance of his duties as branch
manager when he lured Tobias in signing several pieces of blank documents, under the assurance as
bank manager of petitioner, everything was in order.
ISSUE: WHETHER OR NOT CITYSTATE IS JOINTLY AND SOLIDARILY LIABLE WITH ROBLES TO PAY
FOR THE DAMAGE SUPPOSEDLY SUFFERED BY RESPONDENTS.
RULINGS: YES. Petitioner is solidarily liable under Article 1911 of the Civil Code, to wit:
Art. 1911. Even when the agent has exceeded his authority, the principal is solidarity liable with the
agent if the former allowed the latter to act as though he had full powers.
The case of Prudential Bank v. CA lends support to this conclusion. There, this Court first laid down
the doctrine of apparent authority, with specific reference to banks, viz.:
Page 13 of 31
Conformably, we have declared in countless decisions that the principal is liable for obligations
contracted by the agent. The agent's apparent representation yields to the principal's true
representation and the contract is considered as entered into between the principal and the third
person,
A bank is liable for wrongful acts of its officers done in the interests of the bank or in the course of
dealings of the officers in their representative capacity but not for acts outside the scope of their
authority. A bank holding out its officers and agent as worthy of confidence will not be permitted to
profit by the frauds they may thus be enabled to perpetuate in the apparent scope of their
employment; nor will it be permitted to shirk its responsibility for such frauds, even though no
benefit may accrue to the bank therefrom. Accordingly, a banking corporation is liable to innocent
third persons where the representation is made in the course of its business by an agent acting
within the general scope of his authority even though, in the particular case, the agent is secretly
abusing his authority and attempting to perpetrate a fraud upon his principal or some other person,
for his own ultimate benefit.
Application of these principles in especially necessary because banks have a fiduciary relationship
with the public and their stability depends on the confidence of the people in their honesty and
efficiency. Such faith will be eroded where banks do not exercise strict care in the selection and
supervision of its employees, resulting in prejudice to their depositors.
Petitioner, in support of its position, cites Banate v. Philippine Countryside Rural Bank (Liloan,
Cebu), Inc., this Court finds however that the case presents a different factual milieu and is not
applicable in the case at bar.
In Banate, this Court ruled that the doctrine of apparent authority does not apply and absolved the
bank from liability resulting from the alteration by its branch manager of the terms of a mortgage
contract which secures a loan obtained from the bank. In so ruling, this Court found "[n]o proof of
the course of business, usages and practices of the bank about, or knowledge that the board had or
is presumed to have of its responsible officers' acts regarding the branch manager's apparent
authority" to cause such alteration. Further, "[n]either was there any allegation, much less proof"
that the bank ratified its manager's acts or is estopped to make a contrary claim.
In contrast, in this controversy, the evidence on record sufficiently established that Robles as branch
manager was 'clothed' or 'held out' as having the power to enter into the subject agreements with
the respondents.
The existence of apparent or implied authority is measured by previous acts that have been ratified
or approved or where the accruing benefits have been accepted by the principal. It may also be
established by proof of the course of business, usages and practices of the bank; or knowledge that
the bank or its officials have, or is presumed to have of its responsible officers' acts regarding bank
branch affairs.
As aptly pointed by the CA, petitioner's evidence bolsters the case against it, as they support the
finding that Robles as branch manager, has been vested with the apparent or implied authority to
act for the petitioner in offering and facilitating banking transactions.
The testimonies of the witnesses presented by petitioner establish that there was nothing irregular
in the manner in which Robles transacted with the respondents. In fact, petitioner's witnesses
admitted that while the bank's general policy requires that transactions be completed inside the
bank premises, exceptions are made in favor of valued clients, such as the respondents. In which
case, banking transactions are allowed to be done in the residence or place of business of the
depositor, since the same are verified subsequently by the bank cashier.
Moreover, petitioner admitted that for valued clients, the branch manager has the authority to
transact outside of the bank premises. In fact, Robles previously transacted business on behalf of
the petitioner as when it sought and facilitated the opening of respondents' accounts. Petitioner
acknowledged Robles' authority and it honored the accounts so opened outside the bank premises.
To recall, prior to the alleged back-to-back scheme entered into by the respondents, Robles has
consistently held himself out as representative of the petitioner in seeking and signing respondents
as depositors to various accounts. It bears to stress that in the course of the said investment, the
practice has been for Tobias to surrender the passbook to Robles' for updating. All of which
accounts have been in order until after the respondents was lured into entering the back-to-back
scheme.
Page 14 of 31
In this light, respondents cannot be blamed for believing that Robles has the authority to transact
for and on behalf of the petitioner and for relying upon the representations made by him. After all,
Robles as branch manager is recognized "within his field and as to third persons as the general
agent and is in general charge of the corporation, with apparent authority commensurate with the
ordinary business entrusted him and the usual course and conduct thereof."
Consequently, petitioner is estopped from denying Robles' authority. As the employer of Robles,
petitioner is solidarity liable to the respondents for damages caused by the acts of the former,
pursuant to Article 1911 of the Civil Code.
E. BREACH OF OBLIGATIONS
Manner of Breach
Fraud
7. PARADIGM DEVELOPMENT CORPORATION OF
THE PHILIPPINES, VS. ,BANK OF THE PHILIPPINE
ISLANDS, G.R. NO. 191174, JUNE 7, 2017 (THIRD
DIVISION)
REYES, J., J.:
NATURE OF THE ACTION: This is a Petition for Review on Certiorari filed under Rule 45 of the
Rules of Court assailing the Decision dated November 25, 2009 and Resolution dated February 2,
2010 of the Court of Appeals (CA) in CA-G.R. CV No. 89755, which granted respondent Bank of the
Philippine Islands' (BPI) appeal and accordingly dismissed the complaint filed by petitioner
Paradigm Development Corporation of the Philippines (PDCP).
FACTS: Sometime in February 1996, Sengkon Trading (Sengkon), a sole proprietorship owned by
Anita Go, obtained a loan from Far East Bank and Trust Company (FEBTC) under a credit facility
denominated as Omnibus Line in the amount of P lOO Million on several sub-facilities with their
particular sub-limits denominated as follows: (i) Discounting Line for P20 Million; (ii) Letter of
Credit/Trust Receipt (LC-TR) Line for P60 Million; and (iii) Bills Purchased Line for PS Million. This
was embodied in the document denominated as "Agreement for Renewal of Omnibus Line."
On April 19, 1996, FEBTC again granted Sengkon another credit facility, denominated as Credit Line,
in the amount of ₱60 Million as contained in the "Agreement for Credit Line." Two real estate
mortgage (REM) contracts were executed by PDCP President Anthony L. Go (Go) to partially secure
Sengkon's obligations under this Credit Line. One REM, acknowledged on April 22, 1996, was
constituted over Transfer Certificate of Title (TCT) No. RT-55259 (354583) and secured the amount
of P8 Million. The other REM, acknowledged on December 19, 1997, was constituted over TCT Nos.
RT-58281, RT-54993 (348989) and RT-55260 (352956) and secured the amount of ₱42,400,000.00.
In a letter dated September 18, 1997, FEB TC informed Sengkon regarding the renewal, increase
and conversion of its ₱l00 Million Omnibus Line to ₱l50 Million LC-TR Line and P20 Million
Discounting Line, the renewal of the ₱60 Million Credit Line and P8 Million Bills Purchased Line.
Eventually, Sengkon defaulted in the payment of its loan obligations. Thus, in a letter dated
September 8, 1999, FEBTC demanded payment from PDCP of alleged Credit Line and Trust Receipt
availments with a principal balance of ₱244,277, 199 .68 plus interest and other charges which
Sengkon failed to pay. PDCP responded by requesting for segregation of Sengkon's obligations under
the Credit Line and for the pertinent statement of account and supporting documents.
Upon verification with the Registry of Deeds, PDCP discovered that FEBTC extra-judicially
foreclosed on June 20, 2000 the first and second mortgage without notice to it as mortgagor and
sold the mortgaged properties to FEBTC as the lone bidder. 14 Thereafter, on August 8, 2000, the
corresponding Certificate of Sale was registered.
Consequently, on July 19, 2001, PDCP filed a Complaint for Annulment of Mortgage, Foreclosure,
Certificate of Sale and Damages with the RTC of Quezon City, against BPI, successor-in-interest of
FEB TC, alleging that the REMs and their foreclosure were null and void.
In its Amended Complaint, PDCP alleged that FEB TC assured it that the mortgaged properties will
only secure the Credit Line sub-facility of the Omnibus Line. With this understanding, PDCP
President Go allegedly agreed to sign on two separate dates a pro-forma and blank REM, securing
the amount of ₱42.4 Million and P8 Million, respectively. PDCP, however, claimed that it had no
intent to be bound under the second REM, which was not intended to be a separate contract, but
only a means to reduce registration expenses.
Page 15 of 31
Moreover, PDCP averred that sometime in September 1997, FEBTC allegedly requested it to sign a
document which would effectively extend the liability of the properties covered by the mortgage
beyond the Credit Line. Because of its refusal to sign said document, it surmised that this must have
been the reason why, as it later discovered, FEBTC registered not only the first but also the second
REM, contrary to the parties' agreement.
In asking for the nullity of the REMs , PDCP alleged that although the REM of April 22, 1996 for Php
8.0 Million was not a separate security but was merely intended to reduce registration expenses,
FEBTC, [BPI's] predecessor-in-interest, fraudulently and in violation of the original intent and
agreement of the parties, made it appear that said REM of April 22, 1996 was separate and distinct
from that of December 18, 1997 and caused the registration of both mortgages with separate
considerations totaling Php 50.4 Million;
ISSUE : WHETHER OR NOT THERE IS FRAUD IN THE EXECUTION OF THE REAL ESTATE
MORTGAGE.
RULINGS: No fraud existed in the execution of the real estate mortgage.
PDCP argued that what its President signed is a pro-forma REM whose important details were still
left in blank at the time of its execution. But notably, nowhere in PDCP's Amended Complaint did it
anchor its cause of action for the nullity of the REMs on this ground. While it indeed alleged this
circumstance, PDCP's Amended Complaint is essentially premised on the supposed fraud employed
on it by FEBTC consisting of the latter's assurances that the REMs it already signed would not be
registered. In Solidbank Corporation v. Mindanao Ferroalloy Corporation, the Court discussed the
nature of fraud that would annul or avoid a contract, thus:
Fraud refers to all kinds of deception - whether through insidious machination, manipulation,
concealment or misrepresentation- that would lead an ordinarily prudent person into error after
taking the circumstances into account. In contracts, a fraud known as dolo causante or causal fraud
is basically a deception used by one party prior to or simultaneous with the contract, in order to
secure the consent of the other. Needless to say, the deceit employed must be serious. In
contradistinction, only some particular or accident of the obligation is referred to by incidental
fraud or dolo incidente, or that which is not serious in character and without which the other party
would have entered into the contract anyway.
Under Article 1344 of the Civil Code, the fraud must be serious to annul or avoid a contract and
render it voidable. This fraud or deception must be so material that had it not been present, the
defrauded party would not have entered into the contract.
In the present case, even if FEB TC represented that it will not register one of the REMs, PDCP
cannot disown the REMs it executed after FEB TC reneged on its alleged promise. As earlier stated,
with or without the registration of the REMs, as between the parties thereto, the same is valid and
PDCP is already bound thereby. The signature of PDCP's President coupled with its act of
surrendering the titles to the four properties to FEBTC is proof that no fraud existed in the
execution of the contract. Arguably at most, FEBTC's act of registering the mortgage only amounted
to dolo incidente which is not the kind of fraud that avoids a contract.
Page 16 of 31
2. Negligence
8. AL DELA CRUZ VS. CAPT. RENATO OCTA VIANO
AND WILMA OCTA VIANO, G.R. NO. 219649, JULY
26, 2017 (SECOND DIVISION)
PERALTA, J.:
NATURE OF THE ACTION: Petition for Review on Certiorari under Rule 45 of the Rules of Court,
dated August 12, 2015, of petitioner Al Dela Cruz that seeks to reverse and set aside the Decision
dated January 30, 2014 and Resolution dated June 22, 2015 of the Court of Appeals (CA) reversing
the Decision dated February 24, 2009 of the Regional Trial Court (RTC), Branch 275, Las Pinñ as City
in a civil case for damages.
FACTS: Around 9:00 p.m. on April 1, 1999, respondent Captain Renato Octaviano, a military dentist
assigned at the Office of the Chief Dental Service, Armed Forces of the Philippines, Camp Aguinaldo,
Quezon City, respondent Wilma Octaviano, Renato's mother and Janet Octaviano, Renato's sister,
rode a tricycle driven by Eduardo Y. Padilla. Respondent Wilma and Janet were inside the sidecar of
the vehicle, while Renato rode at the back of the tricycle driver. They then proceeded to Naga Road
towards the direction of CAA and BF Homes. Renato was asking his mother for a change to complete
his ₱l0.00 bill when he looked at the road and saw a light from an oncoming car which was going
too fast. The car, driven by petitioner, hit the back portion of the tricycle where Renato was riding.
The force of the impact caused the tricycle to tum around and land on the pavement near the gutter.
Thus, Renato was thrown from the tricycle and landed on the gutter about two meters away. As
consequence, Renato was severity injured, suffered bone infection, and spent a total of ₱623,268.00
for his medical bills and prosthetics.
Petitioner, on the other hand, testified that on April 1, 1999, he borrowed the car of Dr. Isagani
Cirilo, a Honda Civic registered under the name of the latter, to bring his mother to church. Thus, he
then brought his mother to the Jehovah's Witness church in Greenview which was about 20 to 25
minute drive from their house in Naga Road, Pulanlupa. Around 6:25 p.m., he went home directly
from the church and waited for the call of his mother. Thereafter, he left the house around 8:30 p.m.
and went to pick up fish food that he previously ordered before fetching his mother. When he was
along Naga Road, he noticed a tricycle from a distance of about 100 to 120 meters away and was
going the opposite direction. He also noticed an Elf van parked along the road on the opposite side.
He flashed his low beam and high beam light to signal the tricycle. The tricycle then slowed down
and stopped a bit, hence, he also slowed down. Suddenly, the tricycle picked up speed from its stop
position and the two vehicles collided. He then stopped his car a few meters away from the collision
site and made a u-turn to confront the driver of the tricycle. He also noticed that there were already
about a dozen people around the site of the collision. He saw a man sitting on the gutter and
proceeded to move the car towards the former and asked him and his companions to help board the
injured man and the latter's co-passengers of the tricycle in the car he was driving. Thereafter, he
drove them to Perpetual Help Hospital where the man was treated for his injuries.
ISSUE: WHETHER DELA CRUZ FAILED TO OBSERVE THE DILIGENCE REQUIRED AS DRIVER.
RULINGS: YES. Dela Cruz failed to observe the diligence required as driver.
The concept of negligence has been thoroughly discussed by this Court in Romulo Abrogar, et al. v.
Cosmos Bottling Company, et al.,thus: Negligence is the failure to observe for the protection of the
interests of another person that degree of care, precaution, and vigilance which the circumstances
justly demand, whereby such other person suffers injury.[8] Under Article 1173 of the Civil Code, it
consists of the "omission of that diligence which is required by the nature of the obligation and
corresponds with the circumstances of the person, of the time and of the place."[9] The Civil Code
makes liability for negligence clear under Article 2176,[10] and Article 20.
To determine the existence of negligence, the following time-honored test has been set in Picart v.
Smith: The test by which to determine the existence of negligence in a particular case may be stated
Page 17 of 31
as follows: Did the defendant in doing the alleged negligent act use that reasonable care and caution
which an ordinarily prudent person would have used in the same situation? If not, then he is guilty
of negligence. The law here in effect adopts the standard supposed to be supplied by the imaginary
conduct of the discreet paterfamilias of the Roman law. The existence of negligence in a given case is
not determined by reference to the personal judgment of the actor in the situation before him. The
law considers what would be reckless, blameworthy, or negligent in the man of ordinary
intelligence and prudence and determines liability by that.
The question as to what would constitute the conduct of a prudent man in a given situation must of
course be always determined in the light of human experience and in view of the facts involved in
the particular case. Abstract speculation cannot here be of much value but this much can be
profitably said: Reasonable men govern their conduct by the circumstances which are before them
or known to them. They are not, and are not supposed to be, omniscient of the future. Hence, they
can be expected to take care only when there is something before them to suggest or warn of
danger. Could a prudent man, in the case under consideration, foresee harm as a result of the course
actually pursued? If so, it was the duty of the actor to take precautions to guard against that harm.
Reasonable foresight of harm, followed by the ignoring of the suggestion born of this prevision, is
always necessary before negligence can be held to exist. Stated in these terms, the proper criterion
for determining the existence of negligence in a given case is this: Conduct is said to be negligent
when a prudent man in the position of the tortfeasor would have foreseen that an effect harmful to
another was sufficiently probable to warrant his foregoing the conduct or guarding against its
consequences.[13]
The police report prepared by the traffic investigator SPO2 Vicente Soriano detailed what happened
on the night of April 1, 1999, to wit:
xxxx
On the Spot Investigation conducted by the undersigned, showed that Vehicle 2 while moving ahead
and upon arriving in front of said motor shop, Vehicle 2 avoided hitting another tricycle which
vehicle (Tricycle) was standing while waiting for a would-be passenger. Said Veh-2 driver swerved
the car to the left and it was at this instance when said Veh-1 was sideswiped by said Veh-2.
xxx
Weather Condition: Fair

Road condition: Concrete and Dry
Driver's Condition: Veh-1, Normal; Veh-2 Positive for Alcoholic Breath (AB)"
For a clearer understanding of the said police report, Vehicle-1 referred to by Soriano is the tricycle
where plaintiffs were riding, and Vehicle-2 is the Honda Civic driven by Dela Cruz.
Was the statement in the police report that Al Dela Cruz was positive for alcoholic breath
substantiated/corroborated?
Yes. Two witnesses testified that Dela Cruz appeared to be drunk on that fateful night. Joey Lacuesta
and Antonio Fernandez were there on the spot when the incident happened. They were the first
ones to assist the victim Renato Octaviano who was slumped unconscious in the gutter. Lacuesta
was the one who boarded the injured Renato into the front seat of the car and he noticed that the
driver was drunk:
Q: You said that you placed the injured person in front of the Honda Civic, the driver was there in
the car, what, if anything did you notice about the condition of the driver of the car?
A: Nakainom, I noticed that because when I boarded the injured person into the front passenger
seat, I noticed that he is drunk.
Antonio Fernandez heard his friend Aries Sy shout at the driver of the car to stop when it appeared
to by continuously moving. Fernandez also noted that the driver appeared to be drunk, thus:
Q: Now you said that the driver of the car was drunk. Did you say that when you testified?
A: Yes, sir. Lasing yung driver.
Q: What made you think that this driver of the car was drunk?
A: Because of his actions and he was also mad.
Q: Because he was mad, then you thought that he was drunk, x x x?
Page 18 of 31
A: No, Sir. You can see or you can observe the actions of a person if he is drunk.
xxxx
More importantly, the law prohibits drunk driving. Republic Act No. 4136, Chapter IV, Article V,
Section 53 known as Land Transportation and Traffic Code provides that no person shall drive a
motor vehicle while under the influence of liquor or narcotic drug. It is established by plaintiffs
evidence that defendant Dela Cruz drove the Honda Civic while under the influence of alcohol thus
proving his negligence.
3. Delay
9. SPOUSES FRANCISCO ONG AND BETTY LIM ONG,
AND SPOUSES JOSEPH ONG CHUAN AND
ESPERANZA ONG CHUAN VS. BPI FAMILY SAVINGS
BANK, INC., G.R. NO. 208638, JANUARY 24, 2018
(SECOND DIVISION)
REYES, JR., J:
NATURE OF THE ACTION: This is a Petition for Review under Rule 45 of the Rules of Court, as
amended, seeking to reverse and set aside the Decision dated January 31, 2013 and Resolution
dated August 16, 2013 of the Court of Appeals (CA) in CA-G.R. CV No. 92348
FACTS: Spouses Francisco Ong and Betty Lim Ong and Spouses Joseph Ong Chuan and Esperanza
Ong Chuan (collectively referred to as the petitioners) are engaged in the business of printing under
the name and style "MELBROS PRINTING CENTER.
Sometime in December 1996, Bank of Southeast Asia's (BSA) managers, Ronnie Denila and Rommel
Nayve, visited petitioners' office and discussed the various loan and credit facilities offered by their
bank. In view of petitioners' business expansion plans and the assurances made by BSA's managers,
they applied for the credit facilities offered by the latter.
Sometime in April 1997, they executed a real estate mortgage (REM) over their property situated in
Paco, Manila, covered by Transfer Certificate of Title No. 143457, in favor of BSA as security for a
P15,000,000.00 term loan and P5,000,000.00 credit line or a total of P20,000,000.00.
With regard to the term loan, only P10,444,271.49 was released by BSA (the amount needed by the
petitioners to pay out their loan with Ayala life assurance, the balance was credited to their account
with BSA).
With regard to the P5,000,000.00 credit line, only P3,000,000.00 was released. BSA promised to
release the remaining P2,000,000.00 conditioned upon the payment of the P3,000,000.00 initially
released to petitioners.
Petitioners acceded to the condition and paid the P3,000,000.00 in full. However, BSA still refused
to release the P2,000,000.00. Petitioners then refused to pay the amortizations due on their term
loan.
Later on, BPI Family Savings Bank (BPI) merged with BSA, thus, acquired all the latter's rights and
assumed its obligations. BPI filed a petition for extrajudicial foreclosure of the REM for petitioners'
default in the payment of their term loan.
In order to enjoin the foreclosure, petitioners instituted an action for damages with Temporary
Restraining Order and Preliminary Injunction against BPI praying for P23,570,881.32 as actual
damages; P1,000,000.00 as moral damages; P500,000.00 as attorney's fees, litigation expenses and
costs of suit.
ISSUE: WHETHER OR NOT BSA INCURRED DELAY IN THE PERFORMANCE OF ITS OBLIGATIONS.
RULINGS: YES. BSA INCURRED DELAY IN THE PERFORMANCE OF ITS OBLIGATIONS. Loan is a
reciprocal obligation, as it arises from the same cause where one party is the creditor and the other
the debtor. The obligation of one party in a reciprocal obligation is dependent upon the obligation of
the other, and the performance should ideally be simultaneous. This means that in a loan, the
creditor should release the full loan amount and the debtor repays it when it becomes due and
demandable.
Page 19 of 31
In this case, BSA did not only incur delay in releasing the pre-agreed credit line of P5,000,000.00 but
likewise violated the terms of its agreement with petitioners when it deliberately failed to release
the amount of P2,000,000.00 after petitioners complied with their terms and paid the first
P3,000,000.00 in full. The default attributed to petitioners when they stopped paying their
amortizations on the term loan cannot be sustained by this Court because long before they sent a
Letter to BSA informing the latter of their refusal to continue paying amortizations, BSA had already
reneged on its obligation to release the amount previously agreed upon, i.e., the P5,000,000.00
covered by the credit line.
It bears stressing that petitioners entered into a credit agreement with BSA to enable them to buy
machineries and equipment for their printing business. On its face, it can be gleaned that the
purpose of the credit agreement with BSA was indeed to assist and finance petitioner's business by
way of providing additional funds as working capital or revolving fund.
The direct consequences therefore of the acts of BSA are: the machinery and equipment that were
essential to petitioners' business and requisite for its operations had to be procured so late in time
and had crippled the printing of school supplies, hence, petitioners were constrained to cancel
purchase orders of their clients to petitioners' damage.
BSA claims that the release of the amount covered by the credit line was subject to the "availability
of funds" thus only a part of the proceeds of the entire omnibus line was released.
Assuming for the sake of discussion that the funds at the time were insufficient to cover the entire
P5,000,000.00, BSA should have at least informed petitioners in advance so that the latter could
have resorted to other means to secure the amount needed for their printing business. The omnibus
line was approved and became effective on January 1997 yet BSA did not allow petitioners to draw
from the line until November 1997. Moreover, BSA downgraded petitioners' drawdown to only
P3,000,000.00 despite the clear wordings of their credit agreement whereby petitioners were
allowed to draw any portion or all of the omnibus line not to exceed P5,000,000.00. The almost 10
months delay in releasing the amount applied for by petitioners negates good faith on the part of
BSA.
Page 20 of 31
4. Any other manner of contravention
10. SWIRE REALTY DEVELOPMENT CORPORATION V.
(THIRD DIVISION)
REYES, JR., J:
Court seeking to annul and set aside the Decision dated February 24, 2009 and Resolution dated
May 25, 2009 issued by the Court of Appeals (CA) in CA-G.R. CV No. 84706.
respondents).
FACTS: The Complaint alleges breach of an Agreement to Undertake Waterproofing Works [4] (the
calendar days from the execution of the Agreement or until April 6, 1997. The amount agreed upon
is to be paid to the respondents as follows: 20% as down payment, and the balance of 80% payable
through monthly progress billings based on accomplished work, subject to a 10% retention fee and
1% withholding tax. The Agreement likewise provided that the parties are liable for penalty in case
of delay in the performance of their respective obligations and that retention fee shall be released to
the respondents within 90 days from turnover and acceptance by the petitioner of the completed
work.
After due proceedings, the Regional Trial Court (RTC) of Quezon City, Branch 224, on July 9, 2004,
rendered its Decision, ordering [the respondents] to pay [the petitioner] the following: 1.)
P400,000.00 representing actual damages moneys advanced by defendant Specserve without
completion of waterproofing works; 2.) P124,931.40 representing the contract price paid by [the
petitioner] to Esicor for the unfinished works of Specserve; 3.) P100,000.00 as attorney's fees.
The matter was elevated to the CA. Finding proof that additional works were performed by the
respondents, the CA in its Decision dated February 24, 2009, reversed and set aside the RTC's
decision, directing the [petitioner] to pay the defendant Specserv the amount of P157,702.06 with
legal interest of six (6) percent per annum form October 10, 1997 until paid.
ISSUE: WETHER OR NOT THERE IS A BREACH OF CONTRACTUAL UNDERTAKING; AND THAT THE
PURPORTED "ADDITIONAL WORKS" WERE NOT INCLUDED IN THE SCOPE OF WORKS UNDER THE
PARTIES' AGREEMENT
RULINGS: YES. There is a breach of undertaking and the purported "Additional Works" were
included in the scope of works under the parties' agreement.
A plain reading of the Agreement reveals that the works performed and accomplished are included
in the Scope of Works therein agreed upon.
As correctly pointed out by the petitioner, a mere statement in the Site Information Form that
"2nd waterproofing after lightweight concrete topping" should be done on the swimming pool, does
not automatically mean that the same constitutes additional work. In the absence of evidence to the
Page 21 of 31
contrary, it is implied that such work is deemed included in the enumeration of the Swimming Pool
as a covered area in the Agreement. Article I enumerates the scope of works and covered area under
the Agreement, to wit:
ARTICLE I
SCOPE OF WORKS
1.1 The CONTRACTOR hereby agree[s] to perform for the OWNER the following scope of works for
the Waterproofing requirements of the PROJECT:
a. Supply of materials, tools and equipment, labor and supervision for the satisfactory completion of
the Proj[e]ct.
b. Surface preparation by removal of dust, dirt, loose cement particles and other foreign material
including acid etching.
c. Cleaning/floodtesting.
d. The covered [area] under this Agreement are as follows:
Approx.
Level Area Description Area System
in (sq.m.)
xxxx
Ground
Entire Ground Floor 1087.88 Xypex
Floor
Driveway above B-01 374.46 Xypex
Ramps Down to B-01 215.00 Xypex
Lagoon 112.70 Xypex
Swimming Pool 234.20 Xypex
Shower/Sauna/Filter
32.37 Xypex
Rm.
Slop Sink 0.76 Xypex
xxxx
Note: The agreed price for the abovementioned covered area for Xypex is P 246.776 per sq.m. and
for Epoxy is P 607.456 per sq.m.
By entering into the Agreement and signifying their acceptance thereto, it is understood therefore
that the respondents undertook to perform all works necessary to accomplish the waterproofing
requirements in the entire 234.20 square meters of the swimming pool.
Had the respondent really believed the same to be an additional work to be performed, it should
have, prior to performing the same, raised the matter with the petitioner and sought the
implementation of Article VII of the Agreement which provides:
ARTICLE VII
CHANGE ORDERS
7.1 If the OWNER shall, upon written notice to the CONTRACTOR, order change or deviation from
the plan or specification either by omitting or adding works, the corresponding charges for
deductive works shall be based on the unit cost abovementioned. However, the unit prices for
additive works shall be subject to further agreement between the OWNER and the CONTRACTOR.
As to the other factual matters, there being no inconsistency between the findings of the RTC and
the CA, the Court sees no reason to disturb the same, especially since they are supported by the
evidence on record.
Therefore, the Court adopts the following facts which are affirmed by both the RTC and the CA:
the extent of work accomplished by the respondents is only at 90% and that despite demand
a) they failed to deploy their workers, until the 100-day period for the works to finish has already
expired;[21]
the respondents' allegation that they refused to continue with the works because the sum pit
b) area was not free from debris has not been substantiated [22] and, thus, cannot justify their non-
performance nor absolve them from liability for damages; and
c) there is no basis for the respondents' claim for short payments considering that the records are
replete with evidence establishing that all progressive billings are accepted by them; and that the
alleged short payments are adjustments made by the petitioner to conform to the actual extent
Page 22 of 31
of the work accomplished.
Evident from the foregoing facts, there being a clear breach of contract on the part of the
respondents when they failed to fully comply with their obligation under the contract, having
accomplished only 90% of the waterproofing works within the time agreed upon, and failing to
perform the necessary repairs, they are liable for damages and are bound to refund the excess in
payment made by the petitioner.
F. REMEDIES FOR BREACH OF OBLIGATIONS

2. JUDICIAL REMEDIES
11. SWIRE REALTY DEVELOPMENT CORPORATION V.
(THIRD DIVISION)
REYES, JR., J:
Court seeking to annul and set aside the Decision dated February 24, 2009 and Resolution dated
May 25, 2009 issued by the Court of Appeals (CA) in CA-G.R. CV No. 84706.
respondents).
FACTS: The Complaint alleges breach of an Agreement to Undertake Waterproofing Works [4] (the
calendar days from the execution of the Agreement or until April 6, 1997.
However, the respondents' breach their contractual undertaking, having accomplished only 90% of
the waterproofing works within the time agreed upon, and failing to perform the necessary repairs.
As such, the remaining work to be done had to be performed by Esicor, who accomplished the same
on April 5, 1998.
ISSUE: WON THE PETITIONER IS ENTITLED TO DAMAGES ON ACCOUNT OF THE RESPONDENTS'

DELAY IN THE PERFORMANCE OF THEIR OBLIGATION.
RULINGS: YES. Petitioner is entitled to damages on account of the respondents' delay in the
performance of their obligation.
The amount of penalty is governed by Article V of the Agreement, which provides:
ARTICLE V
TIME OF COMPLETION
5.1 It is agreed that time is of the essence and therefore the CONTRACTOR shall not unjustly delay
the completion of the PROJECT by delaying the performance of their contracted work. In case the
CONTRACTOR fails to finish their undertakings within 100 calendar days from date of the signing of
this Agreement, the CONTRACTOR shall be liable to pay a penalty of P10,000.00 per day of delay
incurred unless such delay is excused due to the fault of the OWNER or by fortuitous events or force
majeure.
Pursuant to settled jurisprudence and Article 1229,[28] in relation to Article 2227,[29] of the New
Civil Code, the Court deems it proper to reduce the penalty involved.
Page 23 of 31
The respondents are obligated under the Agreement to complete the waterproofing works on April
6, 1997, but failed. The remaining work to be done had to be performed by Esicor, who
accomplished the same on April 5, 1998] In light of these, the respondents are then liable for delay
for a period of 365 days, which corresponds to the amount of Php 3,650,000.00 as penalty under
the Agreement. Without doubt, taking into consideration that the respondents have completed 90%
of the project and the absence of any showing of bad faith on their part,[32] as well as the fact that
the waterproofing works have already been completed at the respondents' expense, the amount of
Php 3,650,000.00 as penalty is exorbitant under the premises. Therefore, the Court reduces the
same and imposes the amount of Php 200,000.00 as liquidated damages, by way of penalty.
Petitioner hired the service of Esicor to complete their unfinished work, amounting to Php
124,931.40. As such, respondents shall be held liable which is in consonance with Article 1167 of
the New Civil Code, which provides:
Likewise, the respondents are liable for the costs incurred by the petitioner in hiring the services of
Esicor to complete their unfinished work, amounting to Php 124,931.40, in consonance with Article
1167 of the New Civil Code, which provides:
Page 24 of 31
G. MODES OF EXTINGUISHMENT OF OBLIGATIONS
6. Novation
12. PARADIGM DEVELOPMENT CORPORATION OF
THE PHILIPPINES VS. BANK OF THE PHILIPPINE
ISLANDS, G.R. NO. 191174, JUNE 7, 2017 (THIRD
DIVISION)
REYES, J., J.:
NATURE OF THE ACTION: This is a Petition for Review on Certiorari filed under Rule 45 of the
Rules of Court assailing the Decision dated November 25, 2009 and Resolution dated February 2,
2010 of the Court of Appeals (CA) in CA-G.R. CV No. 89755, which granted respondent Bank of the
Philippine Islands' (BPI) appeal and accordingly dismissed the complaint filed by petitioner
Paradigm Development Corporation of the Philippines (PDCP).
FACTS: Sometime in February 1996, Sengkon Trading (Sengkon), a sole proprietorship owned by
Anita Go, obtained a loan from Far East Bank and Trust Company (FEBTC) under a credit facility
denominated as Omnibus Line in the amount of P lOO Million on several sub-facilities with their
particular sub-limits denominated as follows: (i) Discounting Line for P20 Million; (ii) Letter of
Credit/Trust Receipt (LC-TR) Line for P60 Million; and (iii) Bills Purchased Line for PS Million. This
was embodied in the document denominated as "Agreement for Renewal of Omnibus Line."
On April 19, 1996, FEBTC again granted Sengkon another credit facility, denominated as Credit Line,
in the amount of ₱60 Million as contained in the "Agreement for Credit Line." Two real estate
mortgage (REM) contracts were executed by PDCP President Anthony L. Go (Go) to partially secure
Sengkon's obligations under this Credit Line. One REM, acknowledged on April 22, 1996, was
constituted over Transfer Certificate of Title (TCT) No. RT-55259 (354583) and secured the amount
of P8 Million. The other REM, acknowledged on December 19, 1997, was constituted over TCT Nos.
RT-58281, RT-54993 (348989) and RT-55260 (352956) and secured the amount of ₱42,400,000.00.
In a letter dated September 18, 1997, FEBTC approved the request of Sengkon to change the
account name from SENGKON TRADING to SENGKON TRADING, INC. (STI).
PDCP filed a Complaint for Annulment of Mortgage and alleged that without the knowledge and
consent of PDCP, obligation of SENGKON has been transferred to STI, a juridical personality separate
and distinct from SENGKON, a single proprietorship. This substitution of SENGKON as debtor by STI
x x x effectively novated the obligation of PDCP to FEBTC.
ISSUE: WHETHER OR NOT THE SUBSTITUTION OF SENGKON AS DEBTOR BY STI EFFECTIVELY

NOVATED THE OBLIGATION OF PDCP TO FEBTC.
RULINGS: No novation took place.
Novation is a mode of extinguishing an obligation by changing its objects or principal obligations, by

substituting a new debtor in place of the old one, or by subrogating a third person to the rights of
the creditor. Article 1293 of the Civil Code defines novation as "consists in substituting a new debtor
in the place of the original one, [which] may be made even without the knowledge or against the
will of the latter, but not without the consent of the creditor." However, while the consent of the
creditor need not be expressed but may be inferred from the creditor's clear and unmistakable acts,
Page 25 of 31
to change the person of the debtor, the former debtor must be expressly released from the
obligation, and the third person or new debtor must assume the former's place in the contractual
relation.
Thus, in Ajax Marketing and Development Corporation v. CA, 43 the Court had already ruled that:
The well-settled rule is that novation is never presumed. Novation will not be allowed unless it is
clearly shown by express agreement, or by acts of equal import. Thus, to effect an objective novation
it is imperative that the new obligation expressly declare that the old obligation is thereby
extinguished, or that the new obligation be on every point incompatible with the new one. In the
same vein, to effect a subjective novation by a change in the person of the debtor it is necessary that
the old debtor be released expressly from the obligation, and the third person or new debtor
assumes his place in the relation. There is no novation without such release as the third person who
has assumed the debtor's obligation becomes merely a co-debtor or surety.
In the present case, PDCP failed to prove by preponderance of evidence that Sengkon was already
expressly released from the obligation and that STI assumed the former's obligation. Again, as
correctly pointed out by the CA, the Deed of Assumption of Line/Loan with Mortgage (Deed of
Assumption) which was supposed to embody STI's assumption of all the obligations of Sengkon
under the line, including but not necessarily limited to the repayment of all the outstanding
availments thereon, as well as all applicable interests and other charges, was not signed by the
parties.
Contrary to PDCP's claim, the CA's rejection of its claim of novation is not based on the absence of
the mortgagor's conformity to the Deed of Assumption. The CA's rejection is based on the fact that
the non-execution of the Deed of Assumption by Sengkon, STI and FEBTC rendered the existence of
novation doubtful because of lack of clear proof that Sengkon is being expressly released from its
obligation; that STI was already assuming Sengkon's former place in the contractual relation; and
that FEBTC is giving its conformity to this arrangement. While FEBTC indeed approved Sengkon's
request for the "change in account name" from Sengkon to STI, such mere change in account name
alone does not meet the required degree of certainty to establish novation absent any other
circumstance to bolster said conclusion.
Page 26 of 31
II. CONTRACTS
B. FUNDAMENTAL CHARACTERISTICS/ PRINCIPLES OF CONTRACTS
1. Consensuality of Contracts
Contract of Adhesion
13. ENCARNACION CONSTRUCTION & INDUSTRIAL
CORPORATION, V. PHOENIX READY MIX
CONCRETE DEVELOPMENT & CONSTRUCTION,
INC., G.R. NO. 225402, SEPTEMBER 04, 2017
(SECOND DIVISION)
PERLAS-BERNABE, J.:
NATURE OF THE ACTION: A petition for review on certiorari assailing the Decision dated July 22,
2015 and the Resolution dated June 29, 2016 of the Court of Appeals (CA) in CA-G.R. CV No. 102671,
which affirmed the Decision4 dated December 4, 2013 of the Regional Trial Court of Imus, Cavite,
Branch 20 (RTC) in Civil Case No. 3547-10 granting the complaint for sum of money filed by
respondent Phoenix Ready Mix Concrete Development and Construction, Inc. (Phoenix) against
petitioner Encarnacion Construction & Industrial Corporation (ECIC), and dismissing the latter's
counterclaim for damages.
FACTS: On January 27 and March 25, 2009, Phoenix entered into two (2) separate Contract
Proposals and Agreements (Agreement) with ECIC for the delivery of various quantities of ready-
mix concrete. The Agreement was made in connection with the construction of the Valenzuela
National High School (VNHS) Marulas Building. ECIC received the ready-mix concrete delivery in
due course. However, despite written demands from Phoenix, ECIC refused to pay. Hence, Phoenix
filed before the RTC the Complaint for Sum of Money against ECIC for the payment of P982,240.35,
plus interest and attorney's fees.
In its Answer with Counterclaim, ECIC claimed that it opted to suspend payment since Phoenix
delivered substandard ready-mix concrete, such that the City Engineer's Office of Valenzuela (City
Engineer's Office) required the demolition and reconstruction of the VNHS building's 3rd floor. It
contended that since the samples taken from the 3rd floor slab failed to reach the comprehensive
strength of 6,015 psi in 100 days, the City Engineer's Office ordered the dismantling of the VNHS
building's 3rd floor, and thus, incurred additional expenses amounting to P3,858,587.84 for the
dismantling and reconstruction.
ISSUE: WHETHER OR NOT THE AGREEMENT ECIC SIGNED WITH PHOENIX, PARTICULARLY
PARAGRAPH 15 THEREOF, IS VOID FOR BEING A CONTRACT OF ADHESION.
RULINGS: NO. The Agreement ECIC signed with Phoenix, particularly Paragraph 15 thereof, is not
void for being a contract of adhesion.
A contract of adhesion is one wherein one party imposes a ready-made form of contract on the
other. It is a contract whereby almost all of its provisions are drafted by one party, with the
participation of the other party being limited to affixing his or her signature or "adhesion" to the
contract. However, contracts of adhesion are not invalid per se as they are binding as ordinary
contracts. While the Court has occasionally struck down contracts of adhesion as void, it did so
when the weaker party has been imposed upon in dealing with the dominant bargaining party and
Page 27 of 31
reduced to the alternative of taking it or leaving it, completely deprived of the opportunity to
bargain on equal footing. Thus, the validity or enforceability of the impugned contracts will have to
be determined by the peculiar circumstances obtained in each case and the situation of the parties
concerned.
In this case, there is no proof that ECIC was disadvantaged or utterly inexperienced in dealing with
Phoenix. There were likewise no allegations and proof that its representative (and
owner/proprietor) Ramon Encarnacion (Encarnacion) was uneducated, or under duress or force
when he signed the Agreement on its behalf. In fact, Encarnacion is presumably an astute
businessman who signed the Agreement with full knowledge of its import. Case law states that the
natural presumption is that one does not sign a document without first informing himself of its
contents and consequences. This presumption has not been debunked.
Moreover, it deserves highlighting that apart from the January 27 and March 25, 2009 Contract
Proposals and Agreements, ECIC and Phoenix had entered into three (3) similar Agreements under
the same terms and conditions for the supply of ready-mix concrete. Thus, the Court is hard-pressed
to believe that Encarnacion had no sufficient opportunity to read and go over the stipulations of the
Agreement and reject or modify the terms had he chosen to do so.
Further, the Court finds that the terms and conditions of the parties' Agreement are plain, clear, and
unambiguous and thus could not have caused any confusion. Paragraph 15 of the Agreement
provides that:
x x x x Any claim on the quality, strength, or quantity of the transit mixed concrete delivered must be
made at the time of delivery. Failure to make the claim constitutes a waiver on the part of the
SECOND PARTY for such claim and the FIRST PARTY is released from any liability for any
subsequent claims on the quality, strength or [sic] the ready mixed concrete.
Based on these terms, it is apparent that any claim that ECIC may have had as regards the quality or
strength of the delivered ready-mix concrete should have been made at the time of delivery.
However, it failed to make a claim on the quality of the delivered concrete at the stipulated time, and
thus, said claim is deemed to have been waived.
In this relation, the Court clarifies that the absence of the signature of Encarnacion on the second
page of the Agreement did not render these terms inoperative. This is because the first page of the
Agreement - on which the signature of Encarnacion appears - categorically provides that the terms
and conditions stipulated on the Agreement's reverse side form part of their contract and are
equally binding on them, viz.:
No terms and conditions shall be valid and binding except those stipulated herein and/or the
reverse side thereof. No modifications, amendments, assignments or transfer of this contract or any
of the stipulation herein contained shall be valid and binding unless agreed by writing between the
PARTIES herein.
Thus, by having its representative affix his signature on the first page of the Agreement and thereby
accepting Phoenix's proposed contract, ECIC likewise signified its conformity to the entirety of the
stipulated terms and conditions, including the stipulations on the Agreement's reverse side. Verily,
ECIC positively and voluntarily bound itself to these terms and conditions and cannot now claim
otherwise.
Page 28 of 31
LEONEN, J.:
62nd St., New York, United States.7 In November 2003, monthly common charges on the Unit
became due. These charges were for the period of July 2003 to November 2003, and were for a total
amount of US$9,742.81.
FedEx claimed that it was absolved of liability as Luwalhati and Eliza shipped prohibited items and
misdeclared these items as "documents." It pointed to conditions under its Air Waybill prohibiting
the "transportation of money (including but not limited to coins or negotiable instruments
equivalent to cash such as endorsed stocks and bonds)."
ISSUE: WHETHER OR NOT RESPONDENTS VIOLATED THE TERMS OF THE AIR WAYBILL BY
SHIPPING CHECKS.
RULINGS: NO.
Petitioner asserts that respondents violated the terms of the Air Waybill by shipping checks. It adds
that this violation exempts it from liability.
This is untenable.
Petitioner's International Air Waybill states:
Page 29 of 31
Items Not Acceptable for Transportation. We do not accept transportation of money (including but
not limited to coins or negotiable instruments equivalent to cash such as endorsed stocks and
bonds). We exclude all liability for shipments of such items accepted by mistake. Other items may be
accepted for carriage only to limited destinations or under restricted conditions. We reserve the
right to reject packages based upon these limitations or for reasons of safety or security. You may
consult our Service Guide, Standard Conditions of Carriage, or any applicable tariff for specific
details.
The prohibition has a singular object: money. What follows the phrase "transportation of money" is
a phrase enclosed in parentheses, and commencing with the words "including but not limited to."
The additional phrase, enclosed as it is in parentheses, is not the object of the prohibition, but
merely a postscript to the word "money." Moreover, its introductory words "including but not
limited to" signify that the items that follow are illustrative examples; they are not qualifiers that are
integral to or inseverable from "money." Despite the utterance of the enclosed phrase, the singular
prohibition remains: money.
Money is "what is generally acceptable in exchange for goods." It can take many forms, most
commonly as coins and banknotes. Despite its myriad forms, its key element is its general
acceptability. Laws usually define what can be considered as a generally acceptable medium of
exchange. In the Philippines, Republic Act No. 7653, otherwise known as The New Central Bank Act,
defines "legal tender" as follows:
All notes and coins issued by the Bangko Sentral shall be fully guaranteed by the Government of the
Republic of the Philippines and shall be legal tender in the Philippines for all debts, both public and
private: Provided, however, That, unless otherwise fixed by the Monetary Board, coins shall be legal
tender in amounts not exceeding Fifty pesos (P50.00) for denomination of Twenty-five centavos and
above, and in amounts not exceeding Twenty pesos (P20.00) for denominations of Ten centavos or
less.
It is settled in jurisprudence that checks, being only negotiable instruments, are only substitutes for
money and are not legal tender; more so when the check has a named payee and is not payable to
bearer. In Philippine Airlines, Inc. v. Court of Appeals, this Court ruled that the payment of a check to
the sheriff did not satisfy the judgment debt as checks are not considered legal tender. This has been
maintained in other cases decided by this Court. In Cebu International Finance Corporation v. Court
of Appeals, this Court held that the debts paid in a money market transaction through the use of a
check is not a valid tender of payment as a check is not legal tender in the Philippines. Further, in
Bank of the Philippine Islands v. Court of Appeals,61 this Court held that "a check, whether a
manager's check or ordinary check, is not legal tender."
The Air Waybill's prohibition mentions "negotiable instruments" only in the course of making an
example. Thus, they are not prohibited items themselves. Moreover, the illustrative example does
not even pertain to negotiable instruments per se but to "negotiable instruments equivalent to
cash."
The checks involved here are payable to specific payees, Maxwell-Kates, Inc. and the New York
County Department of Finance. Thus, they are order instruments. They are not payable to their
bearer, i.e., bearer instruments. Order instruments differ from bearer instruments in their manner
of negotiation:
Under Section 30 of the [Negotiable Instruments Law], an order instrument requires an

indorsement from the payee or holder before it may be validly negotiated. A bearer instrument, on
the other hand, does not require an indorsement to be validly negotiated.
There is no question that checks, whether payable to order or to bearer, so long as they comply with
the requirements under Section 1 of the Negotiable Instruments Law, are negotiable instruments.66
The more relevant consideration is whether checks with a specified payee are negotiable
instruments equivalent to cash, as contemplated in the example added to the Air Waybill's
prohibition.
This Court thinks not. An order instrument, which has to be endorsed by the payee before it may be
negotiated, cannot be a negotiable instrument equivalent to cash. It is worth emphasizing that the
instruments given as further examples under the Air Waybill must be endorsed to be considered
equivalent to cash:
Page 30 of 31
Items Not Acceptable for Transportation. We do not accept transportation of money (including but
not limited to coins or negotiable instruments equivalent to cash such as endorsed stocks and
bonds).
What this Court's protracted discussion reveals is that petitioner's Air Waybill lends itself to a great
deal of confusion. The clarity of its terms leaves much to be desired. This lack of clarity can only
militate against petitioner's cause.
The contract between petitioner and respondents is a contract of adhesion; it was prepared solely
by petitioner for respondents to conform to.70 Although not automatically void, any ambiguity in a
contract of adhesion is construed strictly against the party that prepared it. Accordingly, the
prohibition against transporting money must be restrictively construed against petitioner and
liberally for respondents. Viewed through this lens, with greater reason should respondents be
exculpated from liability for shipping documents or instruments, which are reasonably understood
as not being money, and for being unable to declare them as such.
Ultimately, in shipping checks, respondents were not violating petitioner's Air Waybill. From this, it
follows that they committed no breach of warranty that would absolve petitioner of liability.
Page 31 of 31

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Sunday Civil Law Review 2

(1:00 – 5:00 pm)

Submitted by: ESCOL, HANZEL GRACE C.N.

5. FEDERAL EXPRESS CORPORATION V.

ISSUE: WHETHER OR NOT PETITIONER FEDERAL EXPRESS CORPORATION EXERCISED THE

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

RULINGS: No fraud existed in the execution of the real estate mortgage.

Weather Condition: Fair

Q: Because he was mad, then you thought that he was drunk, x x x?

F. REMEDIES FOR BREACH OF OBLIGATIONS

ISSUE: WON THE PETITIONER IS ENTITLED TO DAMAGES ON ACCOUNT OF THE RESPONDENTS'

The amount of penalty is governed by Article V of the Agreement, which provides:

REYES, J., J.:

ISSUE: WHETHER OR NOT THE SUBSTITUTION OF SENGKON AS DEBTOR BY STI EFFECTIVELY

RULINGS: No novation took place.

Novation is a mode of extinguishing an obligation by changing its objects or principal obligations, by

Petitioner's International Air Waybill states:

Under Section 30 of the [Negotiable Instruments Law], an order instrument requires an

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