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I. OBLIGATIONS

G.R. No. 169975 March 18, 2010PAN PACIFIC SERVICE CONTRACTORS, INC. and RICARDO F. DEL ROSARIO,Petitioners,vs.EQUITABLE PCI BANK (formerly THE PHILIPPINE COMMERCIAL INTERNATIONAL BANK),Respondent.

Facts:

Pan Pacific Service Contractors, Inc. (Pan Pacific) is engaged in contracting mechanical works on airconditioning system. On 24 November 1989, Pan Pacific, through its President, Ricardo F. Del Rosario (Del Rosario), entered into a contract of mechanical works (Contract) with respondent forP20,688,800. Pan Pacific and respondent also agreed on nine change orders forP2,622,610.30. Thus, the total consideration for the whole project wasP23,311,410.30. The Contract stipulated, among others, that Pan Pacific shall be entitled to a price adjustment in case of increase in labor costs and prices of materials under paragraphs 70.1and 70.2of the "General Conditions for the Construction of PCIB Tower II Extension" (the escalation clause). Pursuant to the contract, Pan Pacific commenced the mechanical works in the project site, the PCIB Tower II extension building in Makati City. The project was completed in June 1992. Respondent accepted the project on 9 July 1992. In 1990, labor costs and prices of materials escalated. On 5 April 1991, in accordance with the escalation clause, Pan Pacific claimed a price adjustment ofP5,165,945.52. Respondents appointed project engineer, TCGI Engineers, asked for a reduction in the price adjustment. To show goodwill, Pan Pacific reduced the price adjustment toP4,858,548.67. On 28 April 1992, TCGI Engineers recommended to respondent that the price adjustment should be pegged atP3,730,957.07. TCGI Engineers based their evaluation of the price adjustment on the following factors:1. Labor Indices of the Department of Labor and Employment.2. Price Index of the National Statistics Office.PD 1594 and its Implementing Rules and Regulations as amended, 15 March 1991.

Shipping Documents submitted by PPSCI.

Sub-clause 70.1 of the General Conditions of the Contract Documents.Pan Pacific contended that with this recommendation, respondent was already estopped from disclaiming liability of at leastP3,730,957.07 in accordance with the escalation clause.

Due to the extraordinary increases in the costs of labor and materials, Pan Pacifics operational capital was becoming inadequate for the project. However, respondent withheld the payment of the price adjustment under the escalation clause despite Pan Pacifics repeated demands.Instead, respondent offered Pan Pacific a loan ofP1.8 million. Against its will and on the strength of respondents promise that the price adjustment would be released soon, Pan Pacific, through Del Rosario, was constrained to execute a promissory note in the amount ofP1.8 million as a requirement for the loan. Pan Pacific also posted a surety bond. TheP1.8 million was released directly to laborers and suppliers and not a single centavo was given to Pan Pacific.Pan Pacific made several demands for payment on the price adjustment but respondent merely kept on promising to release the same. Meanwhile, theP1.8 million loan matured and respondent demanded payment plus interest and penalty. Pan Pacific refused to pay the loan. Pan Pacific insisted that it would not have incurred the loan if respondent released the price adjustment on time. Pan Pacific alleged that the promissory note did not express the true agreement of the parties. Pan Pacific maintained that theP1.8 million was to be considered as an advance payment on the price adjustment. Therefore, there was really no consideration for the promissory note; hence, it is null and void from the beginning.

Respondent stood firm that it would not release any amount of the price adjustment to Pan Pacific but it would offset the price adjustment with Pan Pacifics outstanding balance ofP3,226,186.01, representing the loan, interests, penalties and collection charges.

Pan Pacific refused the offsetting but agreed to receive the reduced amount ofP3,730,957.07 as recommended by the TCGI Engineers for the purpose of extrajudicial settlement, lessP1.8 million andP414,942 as advance payments.

On 6 May 1994, petitioners filed a complaint for declaration of nullity/annulment of the promissory note, sum of money, and damages against the respondent with the RTC.

Issue:

Whether the CA, in awarding the unpaid balance of the price adjustment, erred in fixing the interest rate at 12% instead of the 18% bank lending rate.

Held:

Under Article 2209 of the Civil Code, the appropriate measure for damages in case of delay in discharging an obligation consisting of the payment of a sum of money is the payment of penalty interest at the rate agreed upon in the contract of the parties. In the absence of a stipulation of a particular rate of penalty interest, payment of additional interest at a rate equal to the regular monetary interest becomes due and payable. Finally, if no regular interest had been agreed upon by the contracting parties, then the damages payable will consist of payment of legal interest which is 6%, or in the case of loans or forbearances of money, 12% per annum.It is only when the parties to a contract have failed to fix the rate of interest or when such amount is unwarranted that the Court will apply the 12% interest per annum on a loan or forbearance of money.

The written agreement entered into between petitioners and respondent provides for an interest at the current bank lending rate in case of delay in payment and the promissory note charged an interest of 18%.

To prove petitioners entitlement to the 18% bank lending rate of interest, petitioners presented the promissory note prepared by respondent bank itself. This promissory note, although declared void by the lower courts because it did not express the real intention of the parties, is substantial proof that the bank lending rate at the time of default was 18% per annum. Absent any evidence of fraud, undue influence or any vice of consent exercised by petitioners against the respondent, the interest rate agreed upon is binding on them.G.R. No. 172292 July 23, 2010ALIDA MORESPetitioner,vs.SHIRLEY M. YU-GO, MA. VICTORIA M. YU-LIM, and MA. ESTRELLA M. YU,Respondents.

Facts:

On January 21, 1998, plaintiffs-appellants Shirley M. Yu-Go, Ma. Victoria M. Yu-Lim and Ma. Estrella M. Yu ("appellants") filed aComplaint for Injunction and Damages with Prayer for Issuance of a Temporary Restraining Order and Preliminary Injunctionbefore the Regional Trial Court in Naga City against defendants-appellees, spouses Antonio and Alida Mores ("appellees"). Appellants alleged that they co-owned a parcel of land located in Sto. Tomas, Magarao, Camarines Sur on which a building of strong materials ("subject property") was built. In March 1983, appellees pleaded to appellants that they be allowed to stay in the subject property in the meantime that they did not own a house yet. Since appellee Antonio Mores used to be an errand boy of appellants family, they readily agreed without asking for any rental but subject only to the condition that the said stay would last until anyone of appellants would need the subject property. Forthwith, appellees and their children occupied the same as agreed upon.

In November 1997, appellants made known to appellees that they were already in need of the subject property. They explained that appellant Shirley Yu-Go needed the same and, besides, appellees already have their own house in Villa Grande Homes, Naga City. Yet, appellees begged that they be given a 6-month extension to stay thereat or until May 1998. However, even after May 1998, appellees failed to make good their promise and even further asked that they be allowed to stay therein until October 1998, which was again extended until the end of the same year. Thus, sometime in the first week of January 1999, appellants gave their final demand for appellees to vacate the subject property. However, instead of heeding such demand, appellees hired some laborers and started demolishing the improvements on the subject property on January 20, 1999.

Appellants protest fell on deaf ears because appellees continued their demolition and even took away and appropriated for themselves the materials derived from such unlawful demolition. Consequently, appellants instituted the said action for injunction where they also prayed for the reimbursement of the value of the residential building illegally demolished as well as for the payment of moral damages, attorneys fees, litigation expenses and costs of suit.

On February 5, 1999, appellees filed theirAnswerwhere they denied the material averments of the complaint. They claimed that appellee Antonio Mores, who was appellants uncle, used to be the assistant manager and cashier of appellants father at their Caltex Service Station until the laters death sometime in 1980. Appellants Caltex Filling Station had stopped operation and was just rented out toHerce Trucking Service. Upon the expiration of such lease contract, appellees were allowed to occupy the subject property as their dwelling places. They were the ones who caused its renovation consisting of a 3-bedroom annex, a covered veranda and a concrete hollow block fence, at their own expense, and with appellants consent, which renovation was made without altering the form and substance of the subject property. They denied that appellants made a demand for them to vacate the subject property, insisting that it was merely a sort of reminder that sooner or later appellees should yield possession thereof since, after all, they had already bought a second-hand house which was undergoing repair. Appellees argued that what they removed was merely the improvements made on the subject property, which removal had not caused any substantial damage thereto as, in fact, it remained intact. By way of counterclaims, they demanded payment of actual damages, attorneys fees and litigation expenses.

Issue:

Whether or not the Yus are entitled to moral damages

Held:

Alida Mores argues that in case of breach of contract between a lessor and a lessee, moral damages are not awarded to the lessor if the lessee is not shown to have acted in bad faith. She proves her and her husbands alleged good faith by quoting the appellate courts decision which stated that:

[The Spouses Mores] good faith is underscored by the fact that no one from appellants had objected or prevented appellees from effecting said improvements which, obviously, were undertaken in quite a span of time. Even if we believe appellant Victoria Yu-Lims testimony that they would only learn of the introduction of such improvements after each of such improvements had already been built, [the Yu siblings] never made known their objections thereto nor did they pose a warning against future introduction of any improvement. After all, the said improvements were not introduced simultaneously.

The good faith referred to by Alida Mores was about the building of the improvements on the leased subject property. However, tenants like the spouses Mores cannot be said to be builders in good faith as they have no pretension to be owners of the property.Indeed, full reimbursement of useful improvements and retention of the premises until reimbursement is made applies only to a possessor in good faith, i.e., one who builds on land with the belief that he is the owner thereof. It does not apply where ones only interest is that of a lessee under a rental contract; otherwise, it would always be in the power of the tenant to "improve" his landlord out of his property.

The appellate court is correct in ruling that Article 1678 of the Civil Code should apply in the present case. Article 1678 reads:

If the lessee makes, in good faith, useful improvements which are suitable to the use for which the lease is intended, without altering the form or substance of the property leased, the lessor upon the termination of the lease shall pay the lessee one-half of the value of the improvements at that time. Should the lessor refuse to reimburse said amount, the lessee may remove the improvements, even though the principal thing may suffer damage thereby. He shall not, however, cause any more impairment upon the property leased than is necessary.With regard to the ornamental expenses, the lessee shall not be entitled to any reimbursement, but he may remove the ornamental objects, provided no damage is caused to the principal thing, and the lessor does not choose to retain them by paying their value at the time the lease is extinguished.

G.R. No. 174096 July 20, 2010SPOUSES DIVINIA C. PUBLICO AND JOSE T. PUBLICO,Petitioners,vs.TERESA BAUTISTA,Respondent.

Facts:

Petitioners, spouses Divinia Publico (Divinia) and Jose Publico (Jose) obtained on April 12, 1996 aP200,000 loan from Teresa Bautista (respondent) which was secured by a real estate mortgage (REM) over a real property covered by Transfer Certificate of Title (TCT) No. T-244828.

The REM, "Kasulatan ng Pagkakautang na may Panagot" (Kasulatan), provides, inter alia, that the loan would bear interest and penalties to would be paid within one-and-a-half years, failing which the mortgaged property would be sold pursuant to Act 3135.Petitioners surrendered the owners copy of TCT No. T-244828 to respondent.

In September 1996, petitioners borrowed from respondent the owners copy of the title in order to re-mortgage the property covered thereby to secure another loan the proceeds of which would be used to pay respondent. Divina executed aPagpapatunayreading:

x x x x

Na, ang aking pagkakautang ay aking babayaran kung ang titulong ito ay mainsanla ko sa banko at kami ay nagkasundo din na sa P200,00.00 thousand [sic] na aking pagkakautang ay magbibigay muna ako ng P100,000.00 [sic]. At mag-iiwan ako ng rehistro ng aking sasakyan sa Taxi na may numero na MVMR 40693326 MVMT 36169691 para naman sa natitirang balanse na P100,000.00 thousand [sic] bilang prenda.

x x x x

Petitioners thereupon obtained aP200,000 loan from Hiyas Savings and Loan Bank, Inc. (Hiyas Bank).They, however, failed to settle their obligation to respondent. Respondent, fearing that Hiyas Bank might foreclose the mortgage, offered Hiyas Bank to pay petitioners loan. The bank agreed to the proposal, with the condition that respondent also pay the other obligations of petitioners that were secured by REMs on two other properties covered by TCT Nos. T-265662 (M) and T-265663.

In the presence of petitioner Jose, respondent settled petitioners obligations to the bank amounting toP697,714.58. The receipts of payment were in the name of Jose, however, albeit it contained annotations on the dorsal portions thereof that respondent advanced the payment of petitioners obligations. Both Jose and respondent affixed their signatures on the annotations.

Despite demands, petitioners failed to pay their obligations totalingP897,714.58, hence, respondent filed on February 1, 1999 a Complaintfor foreclosure of mortgage, sum of money and damages before the Regional Trial Court (RTC) of Bulacan.

Issue:

WHETHERTHERE WAS A VALID SUBROGATION UNDER ARTICLE 1294 [OF THE] CIVIL CODEHeld:

The Pagpapatunay was not a new obligation which could have extinguished the Kasulatan since the condition of payment that was set out in the Pagpapatunay was never fulfilled. The trial court found that no competent evidence was introduced, except the bare assertion of Divinia, to prove petitioners payment of the obligation or that they complied with the conditions set out in the Pagpapatunay. As did the appellate court, the Court sustains the trial courts finding.

Petitioners invocation of Article 1236 of the Civil Code does not help them. They cannot deny their indebtedness to respondent on the basis of said Articlesince the payment advanced by respondent on petitioners behalf redounded to their benefit and Divinia never objected to it when she came to learn of it. It is thus immaterial that Divinia was unaware of respondents action for the law ultimately allows recovery to the extent that the debtors-petitioners were benefited.G.R. No. 179441 August 9, 2010ST. JAMES COLLEGE OF PARAAQUE; JAIME T. TORRES, represented by his legal representative, JAMES KENLEY M. TORRES; and MYRNA M. TORRES,Petitioners,vs.EQUITABLE PCI BANK,Respondent.

Facts:

Petitioners-spouses Jaime (now deceased) and Myrna Torres owned and operated St. James College of Paraaque (St. James College), a sole proprietorship educational institution. Sometime in 1995, the Philippine Commercial and International Bank (PCIB) granted the Torres spouses and/or St. James College a credit line facility of up to PhP 25,000,000. This accommodation or any of its extension or renewal was secured by a real estate mortgage(REM) over a parcel of land situated in Paraaque covered by Transfer Certificate of Title (TCT) No. 74598in the name of St. James College, particularly described as:

A parcel of Land (lot 2 of the cons. and subd. plan Pcs.-13-0008777, being a portion of the cons. of Lots 4654-B and 5654-C Psd.-13-002266. L.R.C. Rec. No. N-21332), situated in the Bo. of San Dionisio, Mun. of Paraaque, Metro Manila. x x x containing an area of NINETEEN THOUSAND TWO HUNDRED TWENTY FIVE (19,225) SQ. METERS.

St. James College used to occupy the above lot.

PCIB eventually merged with Equitable Bank with the surviving bank known as Equitable PCI Bank (EPCIB) (now Banco de Oro). The credit line underwent several annual renewals, the last being effected in 2001. As petitioners had defaulted in the payment of the loan obtained from the secured credit accommodation, their total unpaid loan obligation, as of September 2001, stood at PhP 18,300,000.

In a bid to settle its loan availment, petitioners first proposed to EPCIB that they be allowed to pay their account in equal quarterly installments for five years. This payment scheme was apparently not acceptable to EPCIB, as another written letter later followed, this time petitioners proposing that their outstanding credit be converted into a long term loan payable in 10 equal annual installments.

EPCIB responded via a letter of January 9, 2003.In it, EPCIB informed petitioners that it is denying their request for the reinstatement of their credit line, but proposed a restructuring package with a soft payment scheme for the outstanding loan balance of PhP 18,300,000. Under the counter-proposal, the bank would book the accumulated past due loans to current status and charge interest at a fixed rate of 13.375% per annum, payable in either of the ensuing modes and level, at petitioners options: payment of the PhP 18,300,000 principal either at a monthly rate of PhP 508,333.33; or equal annual amortizations of PhP 6,100,000 payable every May. Petitioner Jaime Torres chose and agreed to the second option, i.e., the equal annual amortizations of PhP 6,100,000 payable every May, by affixing his conforme signature at the bottom portion of EPCIBs letter, writing the words "on annual amortization."

May 2003 came, but petitioners failed to pay the stipulated annual amortization of PhP 6,100,000 agreed upon. Whereupon, EPCIB addressed to petitioners a demand letter dated June 6, 2003 requiring them to settle their obligation. On June 23, 2003, petitioners tendered, and EPCIB accepted, a partial payment of PhP 2,521,609.62, broken down to cover the following items: PhP 1,000,000 principal, PhP 1,360,881.62 interest due on June 15, 2003, and PhP 160,728.00 insurance premium for the mortgaged property. In the covering June 23, 2003 letter,which came with the tender, petitioners promised to make another payment in October 2003 and that the account would be made current in June 2004. They manifested, however, that St. James College is not subject to the 10% value-added tax (VAT) which EPCIB assessed against the school in its June 15, 2003 statement of account. Petitioners accordingly requested the deletion of the VAT portion.Vis--vis the PhP 2,521,609.62 payment to which it issued an official receipt (OR)dated June 30, 2003, EPCIB made it abundantly clear on the OR that: "THE RECEIPT OF PAYMENT IS WITHOUT PREJUDICE TO THE BANKS RIGHT AND CLAIMS ARISING FROM THE FACT THE ACCOUNT IS OVERDUE. NOR SHALL IT RENDER THE BANK LIABLE FOR ANY DAMAGE BY ITS ACCEPTANCE OF PAYMENT." And in answer to petitioners cover letter of June 23, 2003, EPCIB, through counsel, reminded and made it clear to petitioners that their first partial payment did not detract from the past due character of their outstanding loan for which reason it is demanding the remaining PhP 5,100,000 to complete the first PhP 6,100,000 principal payment. On August 27, 2003, EPCIB again sent another demand letter to petitioners, but to no avail.On September 15, 2003, petitioners requested that the bank allow a partial payment of the May 2003 amortization balance of PhP 5,100,000. Two days later, EPCIB responded denying petitioners request, but nonetheless proposed a new repayment scheme to which petitioners were not amenable.

Petitioners made a second check remittance, this time in the amount of PhP 921,535.42,the PhP 500,000 portion of which represented payment of the principal and PhP 421,535.42 for interest due on October 15, 2003. By letter dated November 5, 2003, EPCIB again reminded petitioners that its receipt of the check payment for the amount of the PhP 921,535.42 is without prejudice to the banks rights considering the overdue nature of petitioners loan.

On November 6, 2003, petitioners issued a Stop Payment Orderfor their PhP 921,535.42 check. And in a November 8, 2003 letter, petitioner Jaime, adverting to EPCIBs November 5, 2003 letter, told the bank, "You cannot just unilaterally decide/announce that you did not approve our proposal/request for restructuring of our loan after receiving our payment, which was based on said proposal/request."

On November 10, 2003, EPCIB, through counsel, demanded full settlement of petitioners loan obligation in the total amount of PhP 24,719,461.48. Appended to the demand letter which went unheeded was a statement of account showing detailed principal obligation, interest, and penalties as well as payments petitioners made and how they were applied.

On November 27, 2003, EPCIB filed before the Office of the Clerk of Court andEx-OfficioSheriff of the RTC in Paraaque City its Petition for Saleto extra-judicially foreclose the mortgaged property covered by TCT No. 74598. After due publication, the foreclosure sale of the mortgaged property was set for January 9 and 16, 2004.

On December 8, 2003, in the RTC, Branch 266 in Pasig City, petitioners instituted against EPCIB a complaint for Declaratory Relief, Injunction and Damages, with application for a temporary restraining order (TRO) and/or writ of preliminary injunction,docketed as SCA No. 2569.

On the very day of the scheduled foreclosure sale, January 9, 2004, the Pasig City RTC issued a TRO,enjoining EPCIB from proceeding with the scheduled foreclosure sale, and set a date for the hearing on the application for a writ of preliminary injunction.

Issue:

Whether or not there is a novation of the contract

Held:

Petitioners admit the existence of their unsettled loan obligation to EPCIB. They would insist, however, that the full amount is still not due owing to the implied novation of the terms of payment previously agreed upon. As petitioners assert in this regard that the acceptance by EPCIB, particularly of the June 23, 2003 PhP 2,521,609.62 payment, without any objection on the new terms set forth in their June 23, 2003 complementing covering letter, novated the terms of payment of the PhP 18,300,000 secured loan. To petitioners, EPCIB veritably acquiesced to the new terms of payment being incompatible with the terms of the January 9, 2003 counter-proposal of EPCIB affecting petitioners obligation of PhP 18,300,000.

We are not persuaded.

As a civil law concept, novation is the extinguishment of an obligation by the substitution or change of the obligation by a subsequent one which terminates it, either by changing its objects or principal conditions, or by substituting a new debtor in place of the old one, or by subrogating a third person to the rights of the creditor.Novation may be extinctive or modificatory. It is extinctive when an old obligation is terminated by the creation of a new one that takes the place of the former; it is merely modificatory when the old obligation subsists to the extent that it remains compatible with the amendatory agreement.Novation may either be express, when the new obligation declares in unequivocal terms that the old obligation is extinguished, or implied, when the new obligation is on every point incompatible with the old one.The test of incompatibility lies on whether the two obligations can stand together, each one with its own independent existence.

For novation, as a mode of extinguishing or modifying an obligation, to apply, the following requisites must concur:

1) There must be a previous valid obligation.

2) The parties concerned must agree to a new contract.

3) The old contract must be extinguished.

4) There must be a valid new contract.

As correctly determined by the appellate court, certain circumstances or their interplay militates against the application of novation.First. The parties did not unequivocally declare, let alone agree, that the obligation had been modified as to the terms of payment by the partial payments of the obligation. Petitioners indeed made known their inability to pay in full the PhP 6,100,000 principal obligation due in May 2003 and tendered only partial payments of PhP 1,000,000 on June 23, 2003 and PhP 500,000 on November 5, 2003. It should be stressed, however, that EPCIB lost no time in demanding payment for the full PhP 6,100,000 principal obligation due in May 2003. The following acts of EPCIB readily argue against the idea of its having agreed to a modification in the stipulated terms of payment: (a) its letter-reply to petitioners June 23, 2003 letter; (b) the August 27, 2003 demand-letter of EPCIB for the full principal balance of PhP 5,100,000 from petitioners; (c) the September 17, 2003 letter of EPCIB denying petitioners request for a partial payment; (d) the OR dated June 30, 2003 EPCIB issued where the following entries were written: "THE RECEIPT OF PAYMENT IS WITHOUT PREJUDICE TO THE BANKS RIGHTS AND CLAIMS ARISING FROM THE FACT THE ACCOUNT IS OVERDUE. NOR SHALL IT RENDER THE BANK LIABLE FOR ANY DAMAGE BY ITS ACCEPTANCE OF PAYMENT"; and (e) the letter of November 5, 2003 EPCIB sent reiterating that the receipt of the second partial payment is without prejudice to the banks rights on the overdue loan.

The underlying arrangement between petitioners and EPCIB, respecting the terms of payment of the loan drawn against the credit facility, was that set forth in the January 9, 2003 agreement, which, for reference, required petitioners to remit to the lending bank an annual amortization of PhP 6,100,000 payable every May until the entire loan obligation shall have been covered. Any suggestion that EPCIB is precluded from asserting its legal rights after petitioners reneged on their part of the bargain etched in said January 9, 2003 agreement owing alone to its acceptance of an amount less than PhP 6,100,000, is too presumptuous for acceptance. Viewed otherwise, the notion of novation foisted by petitioners on the Court cannot be plausibly deduced from EPCIBs acceptance of such lesser amount.

Contrary to what petitioners would want the Court to believe, there is clearly no incompatibility between EPCIBs receipt of the partial payments of the principal amounts and what was due in May 2003, i.e., the PhP 1,000,000 and PhP 500,000 payments vis--vis the PhP 6,100,000 due. As it were, EPCIB accepted the partial payments remitted, but demanded, at the same time, the full payment of what was otherwise due in May 2003, as the parties agreed upon. As the CA observed correctly, precisely EPCIB was demanding the full payment of the PhP 5,100,000 principal due in May 2003 which had not yet been settled.

Second. Novatio non praesumitur, or novation is never presumed,is a well-settled principle. Consequently, that which arises from a purported modification in the terms and conditions of the obligation must be clear and express. On petitioners thus rests the onus of showing clearly and unequivocally that novation has indeed taken place. To us, petitioners have not discharged the burden. Moreover, we fail to see the presence of the concurring requisites for a novation of contract, as enumerated above. Indeed, petitioners have not shown an express modification of the terms of payment of the obligation.It has often been said that the minds that agree to contract can agree to novate. And the agreement or consent to novate may well be inferred from the acts of a creditor, since volition may as well be expressed by deeds as by words.In the instant case, however, the acts of EPCIB before, simultaneously to, and after its acceptance of payments from petitioners argue against the idea of its having acceded or acquiesced to petitioners request for a change of the terms of payments of the secured loan. Far from it. Thus, a novation through an alleged implied consent by EPCIB, as proffered and argued by petitioners, cannot be given imprimatur by the Court.G.R. No. 164538 August 9, 2010METROPOLITAN BANK and TRUST COMPANY,Petitioner,vs.ROGELIO REYNADO and JOSE C. ADRANDEA,Respondents.

Facts:

On January 31, 1997, petitioner Metropolitan Bank and Trust Company charged respondents before the Office of the City Prosecutor of Manila with the crime of estafa under Article 315, paragraph 1(b) of the Revised Penal Code. In the affidavitof petitioners audit officer, Antonio Ivan S. Aguirre, it was alleged that the special audit conducted on the cash and lending operations of its Port Area branch uncovered anomalous/fraudulent transactions perpetrated by respondents in connivance with client Universal Converter Philippines, Inc. (Universal); that respondents were the only voting members of the branchs credit committee authorized to extend credit accommodation to clients up toP200,000.00; that through the so-called Bills Purchase Transaction, Universal, which has a paid-up capital of onlyP125,000.00 and actual maintaining balance ofP5,000.00, was able to make withdrawals totalingP81,652,000.00 against uncleared regional checks deposited in its account at petitioners Port Area branch; that, consequently, Universal was able to utilize petitioners funds even before the seven-day clearing period for regional checks expired; that Universals withdrawals against uncleared regional check deposits were without prior approval of petitioners head office; that the uncleared checks were later dishonored by the drawee bank for the reason "Account Closed"; and, that respondents acted with fraud, deceit, and abuse of confidence.

In their defense, respondents denied responsibility in the anomalous transactions with Universal and claimed that they only intended to help the Port Area branch solicit and increase its deposit accounts and daily transactions.

Meanwhile, on February 26, 1997, petitioner and Universal entered into a Debt Settlement Agreementwhereby the latter acknowledged its indebtedness to the former in the total amount ofP50,990,976.27as of February 4, 1997 and undertook to pay the same in bi-monthly amortizations in the sum ofP300,000.00 starting January 15, 1997, covered by postdated checks, "plus balloon payment of the remaining principal balance and interest and other charges, if any, on December 31, 2001."

Issue:

Whether or not Novation and undertaking to pay the amount embezzled do not extinguish criminal liabilityHeld:

Novation not a mode of extinguishing criminal liability for estafa; Criminal liability for estafa not affected by compromise or novation of contract.

Initially, it is best to emphasize that "novation is not one of the grounds prescribed by the Revised Penal Code for the extinguishment of criminal liability.In a catena of cases, it was ruled that criminal liability for estafa is not affected by a compromise or novation of contract. In Firaza v. Peopleand Recuerdo v. People,this Court ruled that in a crime of estafa, reimbursement or belated payment to the offended party of the money swindled by the accused does not extinguish the criminal liability of the latter. We also held in People v. Morenoand in People v. Laderathat "criminal liability for estafa is not affected by compromise or novation of contract, for it is a public offense which must be prosecuted and punished by the Government on its own motion even though complete reparation should have been made of the damage suffered by the offended party." Similarly in the case of Metropolitan Bank and Trust Company v. Tondacited by petitioner, we held that in a crime of estafa, reimbursement of or compromise as to the amount misappropriated, after the commission of the crime, affects only the civil liability of the offender, and not his criminal liability.

Thus, the doctrine that evolved from the aforecited cases is that a compromise or settlement entered into after the commission of the crime does not extinguish accuseds liability for estafa. Neither will the same bar the prosecution of said crime. Accordingly, in such a situation, as in this case, the complaint for estafa against respondents should not be dismissed just because petitioner entered into a Debt Settlement Agreement with Universal. Even the OSG arrived at the same conclusion:

Contrary to the conclusion of public respondent, the Debt Settlement Agreement entered into between petitioner and Universal Converter Philippines extinguishes merely the civil aspect of the latters liability as a corporate entity but not the criminal liability of the persons who actually committed the crime of estafa against petitioner Metrobank. x x x

Unfortunately for petitioner, the above observation of the OSG was wittingly glossed over in the body of the assailed Decision of the CA.

Execution of the Debt Settlement Agreement did not prevent the incipience of criminal liability.

Even if the instant case is viewed from the standpoint of the law on contracts, the disposition absolving the respondents from criminal liability because of novation is still erroneous.

Under Article 1311 of the Civil Code, "contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law." The civil law principle of relativity of contracts provides that "contracts can only bind the parties who entered into it, and it cannot favor or prejudice a third person, even if he is aware of such contract and has acted with knowledge thereof."

In the case at bar, it is beyond cavil that respondents are not parties to the agreement. The intention of the parties thereto not to include them is evident either in the onerous or in the beneficent provisions of said agreement. They are not assigns or heirs of either of the parties. Not being parties to the agreement, respondents cannot take refuge therefrom to bar their anticipated trial for the crime they committed. It may do well for respondents to remember that the criminal action commenced by petitioner had its genesis from the alleged fraud, unfaithfulness, and abuse of confidence perpetrated by them in relation to their positions as responsible bank officers. It did not arise from a contractual dispute or matters strictly between petitioner and Universal. This being so, respondents cannot rely on subject settlement agreement to preclude prosecution of the offense already committed to the end of extinguishing their criminal liability or prevent the incipience of any liability that may arise from the criminal offense. This only demonstrates that the execution of the agreement between petitioner and Universal has no bearing on the innocence or guilt of the respondents.G.R. Nos. 173219-20 August 11, 2010ALC INDUSTRIES, INC.,Petitioner,vs.DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS,Respondent.

Facts:

On May 29, 1996 respondent Department of Public Works and Highways (DPWH) awarded to petitioner ALC Industries, Inc. (ALC) the construction of a 105-kilometer section of the Davao-Bukidnon Road from Calinan to Maramag. The parties signed the covering contract, Contract Package 09B, on January 28, 1997. ALC began work after receipt on March 3, 1997 of the notice to proceed. Subsequently, however, the parties discovered that the original design plans and drawings failed to reflect actual ground levels. Thus, they undertook a full-scale redesign of the project.

Because ALC had fallen behind schedule, it agreed with DPWH to reduce the scope of works by executing about a year later on July 17, 1998 a Reduction in Scope Agreement (RISA),shrinking the project from 105 kilometers to 46.2 kilometers and from a contract price ofP396,336,381.48 toP194,802,386.89. But, despite the reduction in scope of work, ALC continued to fall behind schedule. On August 7, 1998 the DPWH warned ALC about it, followed on August 13, 1998 by another warning from the project consultant, and a third warning from the DPWH on September 3, 1998.

But with the delay unabated, in March 1999 the DPWH proposed to ALC a Supplemental Agreement which required ALC, among other things, to pay the DPWH aboutP30 million to enable it to recoup its advances to ALC based on the original scope of the project. But ALC rejected the proposed supplemental agreement. This prompted the DPWH to send it another letter dated April 19, 1999, rescinding its the contract with ALC on the ground that it had incurred a negative slippage in excess of 15%, the threshold set under Presidential Decree (P.D.) 1870.

ALC sought reconsideration, claiming that what essentially delayed the project were actually the errors in the original design plans and drawings. It took the DPWH resident engineer eight months to approve the first sheet of the redesigned plans and drawings that covered a five-kilometer stretch of the project. Then it still had to be approved by the DPWH Bureau of Construction. ALC alleged that it in fact got no approved construction plan even after the rescission of the project. The delay of 14 months in the issuance of the notice to proceed and the inclement weather at the project site compounded the causes of the delay.

Since the DPWH did not act on its request for reconsideration, ALC submitted the matter for arbitration by the Construction Industry Arbitration Commission (CIAC).Appallingly, the DPWH did not adequately respond to the action. It did not file an answer, seek modification of the Terms of Reference, file its memorandum, or submit the required draft decision, despite several extensions and postponements. It also neither presented a witness nor cross-examined ALCs witnesses.

At any rate, ALC claimed that the target accomplishment of the project for December 1998 was 39.52% and it finished 30.80%. ALC pointed out that its negative slippage was, therefore, only 8.72%, which was still below the negative slippage threshold of 15%. But the CIAC had a different computation of the slippage. It reached 22.06% because ALC accomplished only 77.94% of the project as scheduled (30.80 divided by 39.52).

Surprisingly, despite this finding in the rate of ALCs negative slippage, the CIAC voided DPWHs order of rescission on the ground that, factoring in the delays attributable to bad weather, the slippage should be adjusted to 12.85% only. Further, the CIAC found that, while ALC was guilty of breach of contract, the DPWH was not without fault. It failed to give ALC the opportunity to refute its finding of negative slippage. It had moreover been shown that other contractors had incurred negative slippages of more than 15%, yet the DPWH did not resort to rescission. Thus, the CIAC modified the rescission to a mutual termination.

Out of theP655,647,869.82 that ALC originally claimed, the CIAC ruled that ALC was entitled only toP136,105,236.25. On ALCs urgent motion for partial correction, the CIAC modified its decision and increased the award toP190,355,820.84. From this amount, however, the CIAC offsetP64,732,536.75 representing payments that the DPWH already made or advanced, resulting in a net award ofP125,623,284.09 to ALC.

Both ALC and the DPWH appealed the decision of the CIAC to the Court of Appeals (CA).In a decision, the CA agreed with the CIAC that ALCs negative slippage did not exceed the 15% threshold. The CA, however, upheld the DPWH rescission order based on the ALCs other contractual breaches.

Regarding the monetary awards, the CA affirmed nearly all that the CIAC provided but eliminated its award for stand by costs for equipment and manpower that ALC allegedly incurred on account of the DPWHs late issuance of the notice to proceed. The CA also denied ALCs additional claims for stand by costs due to the redesign works and bad weather conditions. Ultimately, the CA reduced the award to ALC fromP190,355,820.84 toP45,687,595.25. But, offsetting prior payments that the DPWH already made, the CA ordered ALC to instead returnP19,044,941.50 to the DPWH. With the denial of its motion for reconsideration, ALC filed the present petition for review on certiorari.

Issue:

Whether or not the CA erred in upholding the DPWHs rescission of its contract with ALCHeld:

ALC insists that the DPWH premised its rescission of the contract solely on the basis of ALCs negative slippage. Since both the CIAC and the CA found ALCs negative slippage to be below the 15% threshold provided by P.D. 1870, the CA had no basis for affirming the DPWHs rescission order. ALC points out that the CA erred when it considered other factors supposedly constituting breach of the agreement other than the negative slippage.

But the DPWH rescission order did not cite only the negative slippage as ground for its action. The pertinent portion of its order of April 19, 1999 reads:

In view of your failure to comply with Clause 10 of the Reduction of Scope Agreement x x x and your continuing commission of acts amounting to breach of contract resulting to a negative slippage of twenty six point sixty nine (26.69%) percent to protect the interest of the Government we hereby forfeit/rescind your contract for the above-mentioned project pursuant to Clause 63.1 of the conditions of Contract (International) for Works of Civil Engineering Construction and Presidential Decree 1870.

Clearly, the DPWH gave two reasons for the rescission: 1) ALCs failure to comply with Clause 10 of the RISA; and 2) its continuing commission of acts amounting to breaches of contract, resulting in negative slippage in its performance.

The negative slippage, an evidence of the breach, is not itself the cause of the delay in the project but an evidence of it. And what were the acts that amounted to breaches of the contract? The CA found, based on a DPWH memorandum dated February 15, 1999, that ALC failed to perform several obligations that the RISA required of it. Specifically, ALC failed to: 1) submit a program of work; 2) submit its month-by-month cash flow summary; 3) complete the verification survey; 4) complete and maintain facilities for the resident engineer; 5) provide data for the resident engineer to process orders for power generators; 6) provide a service vehicle; and 7) delegate the necessary technical, financial and administrative authority to the Project Manager.

ALC argues that, in considering these breaches, the CA violated its right to due process since the DPWH did not specify them in its rescission order and since the same were not raised as issues on appeal. But these breaches of the contract were mentioned as the cause of the negative slippage. Since the parties raised this negative slippage as an issue between them, the breaches that caused the slippage are necessarily a part of that issue.

In any case, aside from those breaches of the contract, the DPWH based its rescission of the same on ALCs failure to comply with Clause 10 of the RISA, which provides:

10. The Contractor agrees that should he fail to achieve 90% of the progress shown on the bar chart programme given on Attachment 4 for the period up to end December 1998, then the Employer has the right to enter upon the site and expel the Contractor therefrom in accordance with Conditions of Contract Clause 63.

ALC undertook in the agreement to accomplish 43.91% of the reduced project by the end of December 1998.The RISAs threshold was, therefore, 39.52%. But ALC was only able to accomplish 30.80% which was only 70.14% of the schedule, well below the 90% progress required by Clause 10. And even if delay due to bad weather could be factored in, ALC would still fall below the 90% target.

On this score alone rescission was still justified. The 90% progress is a requirement imposed by the parties to the RISA. As a contractual obligation, this supersedes the threshold imposed by law. Since the parties entered into the RISA primarily due to initial delays in the project, the timetable instituted in it became an integral part of the agreement, an assurance that the project would be completed on time. ALCs failure to keep up with the rate of progress as contractually mandated is a substantial and fundamental breach which would defeat the very purpose of the RISA. Thus, the DPWH was entitled to terminate the project and expel ALC from it.G.R. No. 176479 October 6, 2010RIZAL COMMERCIAL BANKING CORPORATION,Petitioner,vs.PEDRO P. BUENAVENTURA,RespondentFacts:

Respondent Pedro P. Buenaventura and his first wife (now deceased) owned a townhouse unit in Casa Nueva Manila Townhouse, Quezon City. On December 27, 1994, they obtained a loan from petitioner. As security for the loan, they mortgaged the townhouse to petitioner. Under the loan agreement, respondent was to pay RCBC a fixed monthly payment with adjustable interest for five years. For this purpose, respondent opened an account with RCBCs Binondo branch from which the bank was to deduct the monthly amortizations.

On April 19, 1999, respondent received a Notice of Public Auction of the mortgaged townhouse unit. He wrote Atty. Saturnino Basconcillo, the notary public conducting the auction sale, demanding the cancellation of the auction sale. However, the notary public proceeded with the public sale on May 25, 1999, where RCBC emerged as the highest bidder. The Notary Publics Certificate of Sale was registered with the Register of Deeds on September 28, 2000.

On September 18, 2001, respondent filed with the Regional Trial Court (RTC) of Quezon City a complaint for Annulment of Sale and Damages against RCBC

Issue:

Whether or not there was payment

Held:

Art. 1176. The receipt of the principal by the creditor, without reservation with respect to the interest, shall give rise to the presumption that the said interest has been paid.

The receipt of a later installment of a debt without reservation as to prior installments, shall likewise raise the presumption that such installments have been paid. Respondents passbooks indicate that RCBC continued to receive his payments even after it made demands for him to pay his past due accounts, and even after the auction sale.

RCBC cannot deny receipt of the payments, even when it claims that the deposits were "not withdrawn." It is not respondents fault that RCBC did not withdraw the money he deposited. His obligation under the mortgage agreement was to deposit his payment in the savings account he had opened for that purpose, in order that RCBC may debit the amount of his monthly liabilities therefrom. He complied with his part of the agreement.

This bolsters the conclusion of the CA that respondent had no unpaid installments and was not in default as would warrant the application of the acceleration clause and the subsequent foreclosure and auction sale of the property.G.R. No. 190755 November 24, 2010LAND BANK OF THE PHILIPPINES,Petitioner,vs.ALFREDO ONG,Respondent.

Facts:On March 18, 1996, spouses Johnson and Evangeline Sy secured a loan from Land Bank Legazpi City in the amount of PhP 16 million. The loan was secured by three (3) residential lots, five (5) cargo trucks, and a warehouse. Under the loan agreement, PhP 6 million of the loan would be short-term and would mature on February 28, 1997, while the balance of PhP 10 million would be payable in seven (7) years. The Notice of Loan Approval dated February 22, 1996 contained an acceleration clause wherein any default in payment of amortizations or other charges would accelerate the maturity of the loan.

Subsequently, however, the Spouses Sy found they could no longer pay their loan. On December 9, 1996, they sold three (3) of their mortgaged parcels of land for PhP 150,000 to Angelina Gloria Ong, Evangelines mother, under a Deed of Sale with Assumption of Mortgage.

Evangelines father, petitioner Alfredo Ong, later went to Land Bank to inform it about the sale and assumption of mortgage.Atty. Edna Hingco, the Legazpi City Land Bank Branch Head, told Alfredo and his counsel Atty. Ireneo de Lumen that there was nothing wrong with the agreement with the Spouses Sy but provided them with requirements for the assumption of mortgage. They were also told that Alfredo should pay part of the principal which was computed at PhP 750,000 and to update due or accrued interests on the promissory notes so that Atty. Hingco could easily approve the assumption of mortgage. Two weeks later, Alfredo issued a check for PhP 750,000 and personally gave it to Atty. Hingco. A receipt was issued for his payment. He also submitted the other documents required by Land Bank, such as financial statements for 1994 and 1995. Atty. Hingco then informed Alfredo that the certificate of title of the Spouses Sy would be transferred in his name but this never materialized. No notice of transfer was sent to him.

Alfredo later found out that his application for assumption of mortgage was not approved by Land Bank. The bank learned from its credit investigation report that the Ongs had a real estate mortgage in the amount of PhP 18,300,000 with another bank that was past due. Alfredo claimed that this was fully paid later on. Nonetheless, Land Bank foreclosed the mortgage of the Spouses Sy after several months. Alfredo only learned of the foreclosure when he saw the subject mortgage properties included in a Notice of Foreclosure of Mortgage and Auction Sale at the RTC in Tabaco, Albay. Alfredos other counsel, Atty. Madrilejos, subsequently talked to Land Banks lawyer and was told that the PhP 750,000 he paid would be returned to him.

On December 12, 1997, Alfredo initiated an action for recovery of sum of money with damages against Land Bank in Civil Case No. T-1941, as Alfredos payment was not returned by Land Bank. Alfredo maintained that Land Banks foreclosure without informing him of the denial of his assumption of the mortgage was done in bad faith. He argued that he was lured into believing that his payment of PhP 750,000 would cause Land Bank to approve his assumption of the loan of the Spouses Sy and the transfer of the mortgaged properties in his and his wifes name.He also claimed incurring expenses for attorneys fees of PhP 150,000, filing fee of PhP 15,000, and PhP 250,000 in moral damages.

Testifying for Land Bank, Atty. Hingco claimed during trial that as branch manager she had no authority to approve loans and could not assure anybody that their assumption of mortgage would be approved.

According to Atty. Hingco, the bank processes an assumption of mortgage as a new loan, since the new borrower is considered a new client. They used character, capacity, capital, collateral, and conditions in determining who can qualify to assume a loan. Alfredos proposal to assume the loan, she explained, was referred to a separate office, the Lending Center.

During cross-examination, Atty. Hingco testified that several months after Alfredo made the tender of payment, she received word that the Lending Center rejected Alfredos loan application. She stated that it was the Lending Center and not her that should have informed Alfredo about the denial of his and his wifes assumption of mortgage. She added that although she told Alfredo that the agreement between the spouses Sy and Alfredo was valid between them and that the bank would accept payments from him, Alfredo did not pay any further amount so the foreclosure of the loan collaterals ensued. She admitted that Alfredo demanded the return of the PhP 750,000 but said that there was no written demand before the case against the bank was filed in court. She said that Alfredo had made the payment of PhP 750,000 even before he applied for the assumption of mortgage and that the bank received the said amount because the subject account was past due and demandable; and the Deed of Assumption of Mortgage was not used as the basis for the payment.

Issue:Whether the Court of Appeals erred in holding that Art. 1236 of the Civil Code does not apply and in finding that there is no novation.

RULING:

We affirm with modification the appealed decision.

Recourse is against Land Bank

Land Bank contends that Art. 1236 of the Civil Code backs their claim that Alfredo should have sought recourse against the Spouses Sy instead of Land Bank. Art. 1236 provides:

The creditor is not bound to accept payment or performance by a third person who has no interest in the fulfillment of the obligation, unless there is a stipulation to the contrary.

Whoever pays for another may demand from the debtor what he has paid, except that if he paid without the knowledge or against the will of the debtor, he can recover only insofar as the payment has been beneficial to the debtor. We agree with Land Bank on this point as to the first part of paragraph 1 of Art. 1236. Land Bank was not bound to accept Alfredos payment, since as far as the former was concerned, he did not have an interest in the payment of the loan of the Spouses Sy. However, in the context of the second part of said paragraph, Alfredo was not making payment to fulfill the obligation of the Spouses Sy. Alfredo made a conditional payment so that the properties subject of the Deed of Sale with Assumption of Mortgage would be titled in his name. It is clear from the records that Land Bank required Alfredo to make payment before his assumption of mortgage would be approved. He was informed that the certificate of title would be transferred accordingly. He, thus, made payment not as a debtor but as a prospective mortgagor. But the trial court stated:

[T]he contract was not perfected or consummated because of the adverse finding in the credit investigation which led to the disapproval of the proposed assumption. There was no evidence presented that plaintiff was informed of the disapproval. What he received was a letter dated May 22, 1997 informing him that the account of spouses Sy had matured but there [were] no payments. This was sent even before the conduct of the credit investigation on June 20, 1997 which led to the disapproval of the proposed assumption of the loans of spouses Sy.

Alfredo, as a third person, did not, therefore, have an interest in the fulfillment of the obligation of the Spouses Sy, since his interest hinged on Land Banks approval of his application, which was denied. The circumstances of the instant case show that the second paragraph of Art. 1236 does not apply. As Alfredo made the payment for his own interest and not on behalf of the Spouses Sy, recourse is not against the latter. And as Alfredo was not paying for another, he cannot demand from the debtors, the Spouses Sy, what he has paid.

Novation of the loan agreementLand Bank also faults the CA for finding that novation applies to the instant case. It reasons that a substitution of debtors was made without its consent; thus, it was not bound to recognize the substitution under the rules on novation.

On the matter of novation, Spouses Benjamin and Agrifina Lim v. M.B. Finance Corporationprovides the following discussion:

Novation, in its broad concept, may either be extinctive or modificatory. It is extinctive when an old obligation is terminated by the creation of a new obligation that takes the place of the former; it is merely modificatory when the old obligation subsists to the extent it remains compatible with the amendatory agreement. An extinctive novation results either by changing the object or principal conditions (objective or real), or by substituting the person of the debtor or subrogating a third person in the rights of the creditor (subjective or personal). Under this mode, novation would have dual functions one to extinguish an existing obligation, the other to substitute a new one in its place requiring a conflux of four essential requisites: (1) a previous valid obligation; (2) an agreement of all parties concerned to a new contract; (3) the extinguishment of the old obligation; and (4) the birth of a valid new obligation. x x x

In order that an obligation may be extinguished by another which substitutes the same, it is imperative that it be so declared in unequivocal terms, or that the old and the new obligations be on every point incompatible with each other. The test of incompatibility is whether or not the two obligations can stand together, each one having its independent existence. x x x (Emphasis supplied.)

Furthermore, Art. 1293 of the Civil Code states:

Novation which consists in substituting a new debtor in the place of the original one, may be made even without the knowledge or against the will of the latter, but not without the consent of the creditor. Payment by the new debtor gives him rights mentioned in articles 1236 and 1237.

We do not agree, then, with the CA in holding that there was a novation in the contract between the parties. Not all the elements of novation were present. Novation must be expressly consented to. Moreover, the conflicting intention and acts of the parties underscore the absence of any express disclosure or circumstances with which to deduce a clear and unequivocal intent by the parties to novate the old agreement.Land Bank is thus correct when it argues that there was no novation in the following:

[W]hether or not Alfredo Ong has an interest in the obligation and payment was made with the knowledge or consent of Spouses Sy, he may still pay the obligation for the reason that even before he paid the amount of P750,000.00 on January 31, 1997, the substitution of debtors was already perfected by and between Spouses Sy and Spouses Ong as evidenced by a Deed of Sale with Assumption of Mortgage executed by them on December 9, 1996. And since the substitution of debtors was made without the consent of Land Bank a requirement which is indispensable in order to effect a novation of the obligation, it is therefore not bound to recognize the substitution of debtors. Land Bank did not intervene in the contract between Spouses Sy and Spouses Ong and did not expressly give its consent to this substitution.

II. CONTRACTS

G.R. No. 169438 : January 21,ROMEO D. MARIANO,Petitioner, vs.PETRON CORPORATION, Respondent.

Facts:

On 5 November 1968, Pacita V. Aure, Nicomedes Aure Bundac, and Zeny Abundo (Aure Group), owners of a 2,064 square meter parcel of land in Tagaytay City (Property), leased the Property to ESSO Standard Eastern, Inc., (ESSO Eastern), a foreign corporation doing business in the country through its subsidiary ESSO Standard Philippines, Inc. (ESSO Philippines). The lease period is 90 years and the rent is payable monthly for the first 10 years, and annually for the remaining period. The lease contract (Contract) contained an assignment veto clause barring the parties from assigning the lease without prior consent of the other. Excluded from the prohibition were certain corporations to whom ESSO Eastern may unilaterally assign its leasehold right.

On 23 December 1977, ESSO Eastern sold ESSO Philippines to the Philippine National Oil Corporation (PNOC). Apparently, the Aure Group was not informed of the sale. ESSO Philippines, whose corporate name was successively changed to Petrophil Corporation then to Petron Corporation (Petron), took possession of the Property.

On 18 November 1993, petitioner Romeo D. Mariano (petitioner) bought the Property from the Aure Group and obtained title to the Property issued in his name bearing an annotation of ESSO Easterns lease.On 17 December 1998, petitioner sent to Petron a notice to vacate the Property. Petitioner informed Petron that Presidential Decree No. 471 (PD 471), dated 24 May 1974, reduced the Contracts duration from 90 to 25 years, ending on 13 November 1993. Despite receiving the notice to vacate on 21 December 1998, Petron remained on the Property.

On 18 March 1999, petitioner sued Petron in the Regional Trial Court of Tagaytay City, Branch 18, (trial court) to rescind the Contract and recover possession of the Property. Aside from invoking PD 471, petitioner alternatively theorized that the Contract was terminated on 23 December 1977 when ESSO Eastern sold ESSO Philippines to PNOC, thus assigning to PNOC its lease on the Property, without seeking the Aure Groups prior consent.

Issue:

Whether the Contract subsists between petitioner and Petron

Held:

PNOCs buy-out of ESSO Philippines was total and unconditional, leaving no residual rights to ESSO Eastern. Logically, this change of ownership carried with it the transfer to PNOC of any proprietary interest ESSO Eastern may hold through ESSO Philippines, including ESSO Easterns lease over the Property. This is the import of Petrons admission in the Joint Motion that by PNOCs buy-out of ESSO Philippines "[PNOC], x x x acquired ownership of ESSO Standard Philippines, Inc., including its leasehold right over the land in question, through the acquisition of its shares of stocks." As the Aure Group gave no prior consent to the transaction between ESSO Eastern and PNOC, ESSO Eastern violated the Contracts assignment veto clause.

Petrons objection to this conclusion, sustained by the Court of Appeals, is rooted on its reliance on its separate corporate personality and on the unstated assumption that ESSO Philippines (not ESSO Eastern) initially held the leasehold right over the Property. Petron is wrong on both counts.

Courts are loathe to pierce the fictive veil of corporate personality, cognizant of the core doctrine in corporation law vesting on corporations legal personality distinct from their shareholders (individual or corporate) thus facilitating the conduct of corporate business. However, fiction gives way to reality when the corporate personality is foisted to justify wrong, protect fraud, or defend crime, thwarting the ends of justice. The fiction even holds lesser sway for subsidiary corporations whose shares are wholly if not almost wholly owned by its parent company. The structural and systems overlap inherent in parent and subsidiary relations often render the subsidiary as mere local branch, agency or adjunct of the foreign parent corporation.

Here, the facts compel the conclusion that ESSO Philippines was a mere branch of ESSO Eastern in the execution and breach of the Contract. First, by ESSO Easterns admission in the Contract, it is "a foreign corporation organized under the laws of the State of Delaware, U.S.A., duly licensed to transact business in the Philippines, and doing business therein under the business name and style of Esso Standard Philippines x x x". In effect, ESSO Eastern was ESSO Philippines for all of ESSO Easterns Philippine business.

Second, the Contract was executed by ESSO Eastern, not ESSO Philippines, as lessee, with the Aure Group as lessor. ESSO Eastern leased the Property for the use of ESSO Philippines, acting as ESSO Easterns Philippine branch. Consistent with such status, ESSO Philippines took possession of the Property after the execution of the Contract. Thus, for purposes of the Contract, ESSO Philippines was a mere alter ego of ESSO Eastern.

G.R. No. 180374January 22,BIENVENIDO T. BUADA, ISAIAS B. QUINTO, NEMESIO BAUTISTA, ORLANDO R. BAUTISTA, FREDDIE R. BAUTISTA, CARLITO O. BUADA, GERARDO O. BUADA, ARMANDO M. OLIVA, ROGELIO F. RAPAJON, EUGENIO F. FLORES,Petitioners, vs.CEMENT CENTER, INC.,Respondent.

Facts:

Petitioners Bienvenido T. Buada, Isaias B. Quinto, Nemesio Bautista, Orlando T. Bautista, Freddie R. Bautista, Carlito O. Buada, Gerardo O. Buada, Armando M. Oliva, Rogelio F. Rapajon, and Eugenio F. Flores were tenant-farmers cultivating three parcels of agricultural land owned by respondent Cement Center, Inc.

On March 13, 1998, respondent filed a Complaintfor Confirmation of Voluntary Surrender and Damages against petitioners with the Department of Agrarian Reform Adjudication Board, Region 1 in Urdaneta City, Pangasinan. It claimed that on June 28, 1995, petitioners entered into a Compromise Agreement with respondent whereby the former, for and in consideration of the sum ofP3,000.00 each, voluntarily surrendered their respective landholdings. However, despite respondents repeated demands, petitioners refused to vacate subject landholdings.

In their Answer,petitioners alleged that their consent to the Compromise

Agreement was obtained through fraud, deceit, and misrepresentation. They claimed that sometime in 1995, respondent induced them to sign a Compromise Agreement by representing that the subject landholdings are no longer viable for agricultural purposes. Petitioners alleged that respondent assured them that they would only apply for the conversion of the land and that they would have to surrender the land only upon the approval of said application and that thereafter, they will be paid a disturbance compensation ofP3,000.00 each. Petitioners also claimed that respondent promised to hire them to work on the project that was planned for the converted land. But, should the application for conversion be denied, petitioners will continue to be tenants and could later become beneficiaries under the Comprehensive Agrarian Reform Law.

Issue:

Whether or not THE DEFICIENCY OF CONSIDERATION (which is not in accordance with ADMINISTRATIVE ORDER NO. 12) DOES NOT NULLIFY THE CONTRACT.

Held:

A perusal of the subject Compromise Agreement reveals that the parties considered the amount ofP3,000.00 together with the income from a single cropping as comprising the disturbance compensation package,viz:

4. The aforeindicated income derived from the properties and the financial assistance ofP3,000.00 shall beconsidered as the disturbance compensation packagein favor of the SECOND PARTY by reason or as a result of their vacating the premisesin accordance with Administrative Order No. 1, Series of 1990 of the Department of Agrarian Reform. (Emphasis supplied)

Petitioners, however, assail the disturbance compensation package provided in the Compromise Agreement as insufficient and contrary to Administrative Order No. 12, Series of 2004. They claim that they would not have acceded to such a measly amount were it not for the agreement that respondent will hire them as workers on the planned project on the subject land.

Despite the above contentions of petitioners, respondent failed to present evidence to show that the disturbance compensation package corresponds with the compensation required by the said Administrative Order. Neither was there any showing that said disturbance compensation is not less than five times the average annual gross value of the harvest on petitioners actual landholdings during the preceding five calendar years.

Moreover, it was not shown why petitioners as tenant-farmers would voluntarily give up their sole source of livelihood. There was likewise no showing that the money was indeed advantageous to petitioners families as to allow them to pursue other sources of livelihood. To stress, tenancy relations cannot be bargained away except for the strong reasons provided by law which must be convincingly shown by evidence in line with the State's policy of achieving a dignified existence for the small farmers free from pernicious institutional restraints and practices.

G.R. No. 161074 March 22, 2010MANUEL T. DE GUIA, for himself and as Attorney-in-Fact of FE DAVIS MARAMBA, RENATO DAVIS, FLORDELIZA D. YEH, JOCELYN D. QUEBLATIN and BETTY DAVIS,Petitioners,vs.HON. PRESIDING JUDGE, REGIONAL TRIAL COURT, BRANCH 12, MALOLOS, BULACAN; SPOUSES TEOFILO R. MORTE, ANGELINA C. VILLARICO; SPOUSES RUPERTO and MILAGROS VILLARICO; AND DEPUTY SHERIFF BENJAMIN C. HAO,Respondents.

Facts:

On August 8, 1973, Primitiva executed a document denominated asKasulatan ng Sanglaan(Exhibit "J"),a deed of mortgage, in favor of respondents spouses Teofilo R. Morte and Angelina C. Villarico (respondents Spouses Morte) over the subject property in consideration of Primitiva's loan in the amount ofP20,000.00.

On February 15, 1974, Primitiva executed another document,Kasunduan ng Bilihang Tuluyan(Exhibit "F"),a deed of sale, over the same subject property in favor of spouses Ruperto C. Villarico and Milagros D. Barretto (respondents Spouses Villarico) for and in consideration of the amount ofP33,000.00.

On February 14, 1977, respondents Spouses Villarico executed a document denominated asKasunduan ng Bilihang Tuluyan(Exhibit "G"),a deed of sale, wherein they sold back the subject property to Primitiva for the same amount ofP33,000.00.

On March 26, 1977, Primitiva executed another document,Kasunduan ng Bilihang Tuluyan(Exhibit"H"),a deed of sale, wherein she again sold the subject property to respondents Spouses Villarico for the amount ofP180,000.00.

On March 28, 1977, Primitiva executed aKasulatan ng Sanglaan(Exhibit "I"), a deed of mortgage, over the subject property in favor of respondents Spouses Morte in consideration of a loan in the amount ofP180,000.00.

Except for Exhibit "H," all documents were duly notarized and petitioner Renato was one of the instrumental witnesses in all these documents.

On November 10, 1979, Primitiva, respondents Spouses Villarico and Spouses Morte executed before Notary Public Mamerto A. Abao the following five (5) documents, each of which was signed by petitioner Renato as an instrumental witness, to wit:

1.Kasulatan ng Sanglaan(Exhibit "A")- executed by Primitiva mortgaging the subject property to respondent Spouses Morte in consideration of a loan in the amount ofP500,000.00 payable in one (1) year from date of contract at 12% interest;

2. General Power of Attorney (Exhibit "B")- executed by Primitiva appointing respondent Spouses Villarico as her attorney-in-fact in the exercise of general control and supervision over the subject property with full authority to act as her representative and agent, to lease, mortgage or sell said share, among other things, for and in her behalf;

3.Kasulatan ng Pagpapabuwis ng Palaisdaan(Exhibit "C")- executed between Primitiva, as lessor, and respondent Spouses Villarico, as lessees, over the same subject property atP10,000.00 per year as rental. Primitiva also acknowledged in the same document the receipt ofP150,000.00 as advance payment of the yearly rentals for a period of fifteen (15) years ;

4.Pagpapawalang Saysay ng Kasulatan ng Sanglaan(Exhibit "D")- executed by respondent spouses Morte canceling and rendering without any valid force and effect the "Kasulatan ng Sanglaan" (Exhibit "I") dated March 28, 1977 for a loan ofP180,000.00;

5.Kasulatan ng Pagpapawalang Saysay at Pagpapawalang Bisa ng mga Kasulatan(Exhibit "E")- executed by Primitiva and respondent Spouses Villarico canceling the following documents:

a)Kasunduan ng Bilihang Tuluyan(Exhibit "F") dated February 15, 1974;

b)Kasunduan ng Bilihang Tuluyan(Exhibit "G") dated February 14, 1977; and

c)Kasunduan ng Bilihang Tuluyan(Exhibit "H") dated March 26, 1977;

because the amounts stated in those deeds had already been returned by Primitiva to respondent Spouses Villarico.

Primitiva failed to pay her loan in the amount ofP500,000.00 to respondents Spouses Morte as secured by a real estate mortgage on the subject property (Exhibit "A") executed on November 10, 1979. Thus, the latter filed with the Office of the Provincial Sheriff of Bulacan, a petition for extrajudicial foreclosure of real estate mortgage. On January 16, 1986, a Notice of Sheriffs Sale of the property was published.

Issue:

Whether or not the court of Appeals erred on declaring that the Transactions executed in same date, November 10, 1979, are not void and simulated.Held:

As correctly ruled by the lower courts, the last paragraph of Article 1335 of the New Civil Code was applicable in this case, which provides that a threat to enforce one's claim through competent authority, if the claim is just or legal, does not vitiate consent. It has been held that foreclosure of mortgaged properties in case of default in payment of a debtor is a legal remedy afforded by law to a creditor. Hence, a threat to foreclose the mortgage would not per se vitiate consent.

G.R. No. 164703 May 4, 2010ALLAN C. GO, doing business under the name and style "ACG Express Liner,"Petitioner,vs.MORTIMER F. CORDERO,Respondent.

Facts:

Sometime in 1996, Mortimer F. Cordero, Vice-President of Pamana Marketing Corporation (Pamana), ventured into the business of marketing inter-island passenger vessels. After contacting various overseas fast ferry manufacturers from all over the world, he came to meet Tony Robinson, an Australian national based in Brisbane, Australia, who is the Managing Director of Aluminium Fast Ferries Australia (AFFA).

Between June and August 1997, Robinson signed documents appointing Cordero as the exclusive distributor of AFFA catamaran and other fast ferry vessels in the Philippines. As such exclusive distributor, Cordero offered for sale to prospective buyers the 25-meter Aluminium Passenger catamaran known as the SEACAT 25.

After negotiations with Felipe Landicho and Vincent Tecson, lawyers of Allan C. Go who is the owner/operator of ACG Express Liner of Cebu City, a single proprietorship, Cordero was able to close a deal for the purchase of two (2) SEACAT 25 as evidenced by the Memorandum of Agreement dated August 7, 1997.Accordingly, the parties executed Shipbuilding Contract No. 7825 for one (1) high-speed catamaran (SEACAT 25) for the price of US$1,465,512.00.Per agreement between Robinson and Cordero, the latter shall receive commissions totalling US$328,742.00, or 22.43% of the purchase price, from the sale of each vessel.

Cordero made two (2) trips to the AFFA Shipyard in Brisbane, Australia, and on one (1) occasion even accompanied Go and his family and Landicho, to monitor the progress of the building of the vessel. He shouldered all the expenses for airfare, food, hotel accommodations, transportation and entertainment during these trips. He also spent for long distance telephone calls to communicate regularly with Robinson, Go, Tecson and Landicho.

However, Cordero later discovered that Go was dealing directly with Robinson when he was informed by Dennis Padua of Wartsila Philippines that Go was canvassing for a second catamaran engine from their company which provided the ship engine for the first SEACAT 25. Padua told Cordero that Go instructed him to fax the requested quotation of the second engine to the Park Royal Hotel in Brisbane where Go was then staying. Cordero tried to contact Go and Landicho to confirm the matter but they were nowhere to be found, while Robinson refused to answer his calls. Cordero immediately flew to Brisbane to clarify matters with Robinson, only to find out that Go and Landicho were already there in Brisbane negotiating for the sale of the second SEACAT 25. Despite repeated follow-up calls, no explanation was given by Robinson, Go, Landicho and Tecson who even made Cordero believe there would be no further sale between AFFA and ACG Express Liner.

In a handwritten letter dated June 24, 1998, Cordero informed Go that such act of dealing directly with Robinson violated his exclusive distributorship and demanded that they respect the same, without prejudice to legal action against him and Robinson should they fail to heed the same.Corderos lawyer, Atty. Ernesto A. Tabujara, Jr. of ACCRA law firm, also wrote ACG Express Liner assailing the fraudulent actuations and misrepresentations committed by Go in connivance with his lawyers (Landicho and Tecson) in breach of Corderos exclusive distributorship appointment.

Having been apprised of Corderos demand letter, Thyne & Macartney, the lawyer of AFFA and Robinson, faxed a letter to ACCRA law firm asserting that the appointment of Cordero as AFFAs distributor was for the purpose of one (1) transaction only, that is, the purchase of a high-speed catamaran vessel by ACG Express Liner in August 1997. The letter further stated that Cordero was offered the exclusive distributorship, the terms of which were contained in a draft agreement which Cordero allegedly failed to return to AFFA within a reasonable time, and which offer is already being revoked by AFFA.

As to the response of Go, Landicho and Tecson to his demand letter, Cordero testified before the trial court that on the same day, Landicho, acting on behalf of Go, talked to him over the telephone and offered to amicably settle their dispute. Tecson and Landicho offered to convince Go to honor his exclusive distributorship with AFFA and to purchase all vessels for ACG Express Liner through him for the next three (3) years. In an effort to amicably settle the matter, Landicho, acting in behalf of Go, set up a meeting with Cordero on June 29, 1998 between 9:30 p.m. to 10:30 p.m. at the Mactan Island Resort Hotel lobby. On said date, however, only Landicho and Tecson came and no reason was given for Gos absence. Tecson and Landicho proposed that they will convince Go to pay him US$1,500,000.00 on the condition that they will get a cut of 20%. And so it was agreed between him, Landicho and Tecson that the latter would give him a weekly status report and that the matter will be settled in three (3) to four (4) weeks and neither party will file an action against each other until a final report on the proposed settlement. No such report was made by either Tecson or Landicho who, it turned out, had no intention to do so and were just buying time as the catamaran vessel was due to arrive from Australia. Cordero then filed a complaint with the Bureau of Customs (BOC) to prohibit the entry of SEACAT 25 from Australia based on misdeclaration and undervaluation. Consequently, an Alert Order was issued by Acting BOC Commissioner Nelson Tan for the vessel which in fact arrived on July 17, 1998. Cordero claimed that Go and Robinson had conspired to undervalue the vessel by around US$500,000.00.

On August 21, 1998, Cordero instituted Civil Case No. 98-35332 seeking to hold Robinson, Go, Tecson and Landicho liable jointly and solidarily for conniving and conspiring together in violating his exclusive distributorship in bad faith and wanton disregard of his rights, thus depriving him of his due commissions (balance of unpaid commission from the sale of the first vessel in the amount of US$31,522.01 and unpaid commission for the sale of the second vessel in the amount of US$328,742.00) and causing him actual, moral and exemplary damages, includingP800,000.00 representing expenses for airplane travel to Australia, telecommunications bills and entertainment, on account of AFFAs untimely cancellation of the exclusive distributorship agreement. Cordero also prayed for the award of moral and exemplary damages, as well as attorneys fees and litigation expenses.

Issue:

Whether or not there was an interference by a third person

Held:

Art. 1314. Any third person who induces another to violate his contract shall be liable for damages to the other contracting party.

The elements of tort interference are: (1) existence of a valid contract; (2) knowledge on the part of the third person of the existence of a contract; and (3) interference of the third person is without legal justification.

The presence of the first and second elements is not disputed. Through the letters issued by Robinson attesting that Cordero is the exclusive distributor of AFFA in the Philippines, respondents were clearly aware of the contract between Cordero and AFFA represented by Robinson. In fact, evidence on record showed that respondents initially dealt with and recognized Cordero as such exclusive dealer of AFFA high-speed catamaran vessels in the Philippines. In that capacity as exclusive distributor, petitioner Go entered into the Memorandum of Agreement and Shipbuilding Contract No. 7825 with Cordero in behalf of AFFA.

As to the third element, our ruling in the case of So Ping Bun v. Court of Appealsis instructive, to wit:

A duty which the law of torts is concerned with is respect for the property of others, and a cause of action ex delicto may be predicated upon an unlawful interference by one person of the enjoyment by the other of his private property. This may pertain to a situation where a third person induces a party to renege on or violate his undertaking under a contract. In the case before us, petitioners Trendsetter Marketing asked DCCSI to execute lease contracts in its favor, and as a result petitioner deprived respondent corporation of the latters property right. Clearly, and as correctly viewed by the appellate court, the three elements of tort interference above-mentioned are present in the instant case.

Authorities debate on whether interference may be justified where the defendant acts for the sole purpose of furthering his own financial or economic interest. One view is that, as a general rule, justification for interfering with the business relations of another exists where the actors motive is to benefit himself. Such justification does not exist where his sole motive is to cause harm to the other. Added to this, some authorities believe that it is not necessary that the interferers interest outweigh that of the party whose rights are invaded, and that an individual acts under an economic interest that is substantial, not merely de minimis, such that wrongful and malicious motives are negatived, for he acts in self-protection. Moreover, justification for protecting ones financial position should not be made to depend on a comparison of his economic interest in the subject matter with that of others. It is sufficient if the impetus of his conduct lies in a proper business interest rather than in wrongful motives.

As early as Gilchrist vs. Cuddy, we held that where there was no malice in the interference of a contract, and the impulse behind ones conduct lies in a proper business interest rather than in wrongful motives, a party cannot be a malicious interferer. Where the alleged interferer is financially interested, and such interest motivates his conduct, it cannot be said that he is an officious or malicious intermeddler.

In the instant case, it is clear that petitioner So Ping Bun prevailed upon DCCSI to lease the warehouse to his enterprise at the expense of respondent corporation. Though petitioner took interest in the property of respondent corporation and benefited from it, nothing on record imputes deliberate wrongful motives or malice in him.

G.R. NO. 170530 July 5, 2010SARGASSO CONSTRUCTION & DEVELOPMENT CORPORATION/PICK & SHOVEL, INC.,/ATLANTIC ERECTORS, INC. (JOINT VENTURE),Petitioner,vs.PHILIPPINE PORTS AUTHORITY,Respondent.

Facts:

Plaintiff Sargasso Construction and Development Corporation, Pick and Shovel, Inc. and Atlantic Erectors, Inc., a joint venture, was awarded the construction of Pier 2 and the rock causeway (R.C. Pier 2) for the port of San Fernando, La Union, after a public bidding conducted by the defendant PPA. Implementation of the project commenced on August 14, 1990. The port construction was in pursuance of the development of the Northwest Luzon Growth Quadrangle. Adjacent to Pier 2 is an area ofP4,280 square meters intended for the reclamation project as part of the overall port development plan.

In a letter dated October 1, 1992 of Mr. Melecio J. Go, Executive Director of the consortium, plaintiff offered to undertake the reclamation between the Timber Pier and Pier 2 of the Port of San Fernando, La Union, as an extra work to its existing construction of R.C. Pier 2 and Rock Causeway for a price ofP36,294,857.03. Defendant replied thru its Assistant General Manager Teofilo H. Landicho who sent the following letter dated December 18, 1992:

"This is to acknowledge receipt of your letter dated 01 October 1992 offering to undertake the reclamation between the Timber Pier and Pier 2, at the Port of San Fernando, La Union as an extra work to your existing contract.

"Your proposal to undertake the project at a total cost of THIRTY SIX MILLION TWO HUNDRED NINETY FOUR THOUSAND EIGHT HUNDRED FIFTY SEVEN AND 03/100 PESOS (P36,294,857.03) is not acceptable to PPA. If you can reduce your offer to THIRTY MILLION SEVEN HUNDRED NINETY FOUR THOUSAND TWO HUNDRED THIRTY AND 89/100 (P30,794,230.89)we may consider favorably award of the project in your favor,subject to the approval of higher authority.Please signify your agreement to the reduced amount ofP30,794,230.89 by signing in the space provided below. (emphasis in the original)

On August 26, 1993, a Notice of Award signed by PPA General Manager Rogelio Dayan was sent to plaintiff for the phase I Reclamation Contract in the amount ofP30,794,230.89 and instructing it to "enter into and execute the contract agreement with this Office" and to furnish the documents representing performance security and credit line. Defendant likewise stated [and] made it a condition that "fendering of Pier No. 2 Port of San Fernando, and the Port of Tabaco is completed before the approval of the contract for the reclamation project." Installation of the rubber dock fenders in the said ports was accomplished in the year 1994. PPA Management further set a condition [that] "the acceptance by the contractor that mobilization/demobilization cost shall not be included in the contract and that escalation shall be reckoned upon approval of the Supplemental Agreement." The award of the negotiated contract as additional or supplemental project in favor of plaintiff was intended "to save on the mobilization/demobilization costs and some items as provided for in the original contract." Hence, then General Manager Carlos L. Agustin presented for consideration by the PPA Board of Directors the contract proposal for the reclamation project.

At its meeting held on September 9, 1994, the Board decided not to approve the contract proposal, as reflected in the following excerpt of the minutes taken during said board meeting:

"After due deliberation, the Board advised Management to bid the project since there is no strong legal basis for Management to award the supplemental contract through negotiation. The Board noted that the Pier 2 Project was basically for the construction of a pier while the supplemental agreement refers to reclamation. Thus there is no basis to compare the terms and conditions of the reclamation project with the original contract (Pier 2 Project) of Sargasso."

It appears that PPA did not formally advise the plaintiff of the Boards action on their contract proposal. As plaintiff learned that the Board was not inclined to favor its Supplemental Agreement, Mr. Go wrote General Manager Agustin requesting that the same be presented again to the Board meeting for approval. However, no reply was received by plaintiff from the defendant.On June 30, 1997, plaintiff filed acomplaintfor specific performance and damages before the Regional Trial Court of Manila alleging that defendant PPAs unjustified refusal to comply with its undertaking, unnecessarily leading to the delay in the implementation of the award under the August 26, 1993 Notice of Award, has put on hold plaintiffs men and resources earmarked for the project, aside from effectively tying its hands in undertaking other projects for fear that plaintiffs incapacity to undertake work might be spread thinly and it might not be able to function efficiently if the PPA project and other projects should require simultaneous attention. Plaintiff averred that it sought reconsideration of the August 9, 1996 letter of PPA informing it that it did not qualify to bid for the proposed extension of RC